A View from Here

Bill's Sisson's weekly Trade Only blog

The affordability challenge

If you want to get on the water, you’ll find a way to get on the water. Small boat. Project boat. Begged, borrowed or banged-up boat. But if you’re not among the upper middle class — say, the top 20 percent — you’re probably not buying a new premium brand.

Hasn’t that always been the case with boats? Boats have never been cheap, but the gap between those who can afford a new select brand and those who can’t appears to be widening. Part of the reason is the rising cost of new boats. And it can partly be attributed to the steadily eroding middle class, wage stagflation and related issues.

Affordability is a hurdle to faster growth of new-boat sales. The fact that it’s being discussed as much as it has, I think, is a good thing. Solutions, including new ways of getting people on the water, are in the works. Reducing the cost of boating is one thing; reducing the actual cost of a new boat is another.

Next Friday, Boating Writers International is hosting a panel discussion on “how to make boating more affordable and attractive” during the Miami International Boat Show.

It’s a strong group. The four panelists are Brunswick chairman and CEO Dusty McCoy; SunTrust Bank senior vice president Don Parkhurst; Legendary Marine managing partner Fred Pace; and Freedom Boat Club CEO John Giglio.

The moderators will be BWI board member Michael Sciulla, who is producing the program, and yours truly.

It should be an interesting discussion. We’ll carry a report in both Trade Only Today and the print magazine.

Grow Boating Chairman Joe Lewis discussed affordability in a recent column updating the Discover Boating initiative. The column is well worth reading. Joe makes a number of good points.

Here is a brief excerpt: “The common thread throughout is not to convince people boating is inexpensive, but that it’s worth it — how boating delivers a value in family recreation. This does not lessen the importance for each of us to do our part to control the cost of participation and keep it as reasonable as we can. This is important to the future of boating. We cannot forget what boating delivers — freedom, fun, excitement and an opportunity to connect. Boating delivers memories that last a lifetime. And that’s not a cliché — it’s a fact.”

Well said.

For a sobering assessment of what’s happening to the middle class today, read The New York Times story “The Middle Class is Steadily Eroding. Just Ask the Business World.

Here’s a snippet from the recent piece: “The post-recession reality is that the customer base for businesses that appeal to the middle class is shrinking as the top tier pulls even further away.”

It quotes John Maxwell, the head of global retail and consumer practice at PricewaterhouseCoopers, saying: “Those consumers who have capital like real estate and stocks and are in the top 20 percent are feeling pretty good. … As a retailer or restaurant chain, if you’re not at the really high level or the low level, that’s a tough place to be. You don’t want to be stuck in the middle.”

Comments

7 comments on “The affordability challenge

  1. Marc DePeel

    Affordability has long been an issue, just one that most people talked about and shrugged their shoulders. We know that our average buyer has aged to 58. Is this group the only people who can afford boating? The fact of the matter is that we have to be able to make boating affordable AND increase interest among the younger generations.

    Used boats sales have been on the increase based upon everything I have been reading, even Brunswick has acknowledged this fact. The problem is that good used boats are harder to find, and will not become more plentiful until we start selling more new boats.

    Financing is also a problem, since the used boat market is heading toward an older product. Most lenders do not want to lend on a boat over 5-7 years old. The average used boat sold is probably over 10 years old.

    These are problems we need to fix and soon. Manufacturers seem intent on making their boats with more bling, which makes them more expensive. What we really need is a good boat at an affordable price. Lenders need to be educated to stop thinking like a car lender and accept the fact that buyers of older boats can be an attractive customer for the loan portfolio.

  2. Michael

    In polling sailors that don’t own boats in the Northwest the most common reason for not owning a boat, is the cost of moorage. A used boat is still in the price range that many of the remaining middle class could afford, it’s the $12.00/ft/month that is keeping them from buying. As waterfront property values continue to skyrocket this is going to become even a greater issue in making boating less affordable.

  3. Douglyss Giuliana

    Like Freedom Boat Club, SailTime has greatly increased access to affordable boating. Their model not only gets members on the water for a flat yearly fee, but it also generates income for the boat owners, allowing them to purchase a new boat when it otherwise would not have been possible. There is great potential in this model to make boating affordable. And SailTime uses new boats, which helps manufacturers and dealers, and then provides the used market with young, professionally maintained boats as well (and in far better shape than charter boats).

  4. Ed McKnew

    The marine industry is tying itself in knots these days over this affordability issue. Sure, boats are expensive, but so are RVs and I don’t see the RV industry struggling with their customer base. Priced out a 40-foot diesel motorhome lately? Big RV dealers market the hell out of their products — their annual TV ad budgets must be in the millions. Unless the marine industry can find a way to aggressively market itself I think we will have to accept an ever-smaller customer base going forward. Recreational dollars are in short supply following the recession, and the RV guys are kicking our butts as they pursue it. Just my 2 cents.

  5. Greg Proteau

    Another way to measure “affordability” is “value” and Bill Sisson’s and Joe Lewis’s comments are spot on. When the boat delivers what the user wants and needs, regardless of price or whether it’s new or pre-owned or rented, then it has worth and value. It will be different for every user.

    The RV industry has probably done a better job in maintaining the value of “bread and butter” towables than marine has done in trailerables, the lion’s share of both markets. A parallel in marine is pontoons, where the value really is or is perceived to be high. And RV has had more success raising promotional funds, likely because it is more familiar with the auto industry’s practice of assessing pass through charges which promote the brands.

  6. Joe

    I’ve both worked in the marine industry for a long time and been a boat owner. When I was younger and went to the boat shows I used to look at 30-footers and think to myself, “In a few years I’ll be able to afford one of those.” But, as I grew older the price of similar boats increased at a much faster rate than my income did to the point I don’t even bother to think about a new boat except from the industry perspective. Larger boats cost more than very nice homes where I live. I see this playing out in popular harbors I have been going to for more than 30 years. The typical boating group in the “old days” included a lot more middle class people, families, working people, etc. Now, it is mostly retired doctors, lawyers, executives, etc. It is much rarer to see a young family with children–they can’t afford the boats. Sure, boats may offer great “value,” but you still need a lot more money than the average person has to even consider purchasing one. The median household income in the USA is in the $50s.

  7. Marc DePeel

    Greg Proteau is right. Value must be part of the picture. I disagree with the price comment though. If it is too expensive, the customer will not buy, regardless of the “value”. Budgetary constraints are always part of a buyers decision. If they cannot afford it,they will do without. This is especially true with a luxury item such as a boat.

    Let me be clear. My biggest concern is with trailerable power boats, which is the biggest share of the market. This is the mainstay of the marine industry.

    My dealership’s best seller is a pontoon line that people perceive as a great value. It is not the fanciest boat, but it is our “bread and butter” boat. The fact that it also less expensive helps.

    The RV market, while related to the Marine industry, does a better job of marketing. It also does not sell those $100,000 motor homes very often. A few years ago I talked with someone I know in the RV business. Their average sale was about $10,000 less than ours, and we do not sell top line, expensive brands. At the time they were complaining that the market for those expensive motor homes had dried up.

    Boat clubs provide access to boating for people, but are not going to sell boats. Remember, boating is a life style. Renters use it as a hobby. Boat clubs will never provide dealers with volume and I doubt that they will save us as an industry.

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