The luxury buyer is back, but guess who isn’t
Hard as it is to believe, it appears that the new-boat market is still trying to find a bottom. Maybe it’s about to bounce out of the trough. Maybe it’s just a soft patch as we move at long last toward a nascent recovery.
Numbers for the first quarter and early second quarter show the fiberglass new-boat market still struggling. Coming out of the first half of this year with a combination of bad weather and natural disasters, political uncertainty, near-record fuel prices and sagging housing and employment numbers it is somewhat surprising that we’ve hung in there as well as we have. The gains experienced by some of the dealers we spoke to recently likely have come at the expense of competitors still exiting the market. (Look for an in-depth report by Reagan Haynes on market conditions in the July issue of Soundings Trade Only.)
In terms of categories, there have been exceptions to the downward trend. Looking at the broad market, pontoon boats and aluminum boats are selling. Typically, they are a leading indicator of recovery for our industry — an industry that, unfortunately, is a lagging indicator of recovery. First in, last out … an old story.
Yesterday I spoke about the luxury segment of the boat market as part of a panel discussion at a Yacht Brokerage University conference in Providence, R.I., presented by the Yacht Brokers Association of America and YachtWorld.com. That category represents another bright spot.
Unlike the brokers and dealers at the conference (a full house of 100-plus attendees) I don’t sell boats for a living. But working with my team at Soundings Trade Only we see a lot of numbers, process a lot information and talk with a lot of people. We are constantly trying to connect the dots — spot trends, figure out what’s going on in the overall market, as well as its various segments, separate wheat from chaff. Not easy to do, given how uneven the current business landscape is.
In general, luxury brands, niche brands, character boats — call them what you like — are holding their own, and then some. And that has everything to do with the kind of buyer they attract.
I want to give you a shorthand description of today’s luxury buyer, as well as a brief look at the consumer who is missing from the market. The synopsis is courtesy of Larry Russo Sr., president and CEO of Russo Marine, a smart, veteran, successful businessman.
A Brunswick dealer, Russo says his Boston Whaler business has been very strong for the past year. Think luxury-brand. The market he is awaiting is the one for Sea Rays in the 24- to 44-foot range. (Sea Rays 44 feet and over have been selling.) I interviewed Russo last week, and he also spoke on a YBU panel yesterday.
So just what is the profile of today’s luxury-brand buyer? They’re smart and well-educated. They have a high net worth. They’re not underwater with their homes or their existing boats. They were properly invested before the crash. They never left the market, and what losses they suffered they more than recovered in this bull market. And they are back buying with new money.
Who’s missing? The guy who is overleveraged, who bought everything on credit — houses, cars, boats, vacations. They were never good savers or investors. They watched their 401(k)s turn into 201(k)s and then fled the market. They thought they were rich, but they weren’t.
They were rich with things, Russo says, but it turns out they owned nothing. The guy would like to sell his boat, but can’t write a check for the deficiency, for the amount he’ll owe the bank after the sale. So he doesn’t even enjoy using it.
“He’s screwed,” Russo says. That, unfortunately, is an understatement.
As an aside, if you haven’t attended one of the YBU sessions you should consider doing so, especially given the current state of things. It’s valuable continuing education and a good opportunity for networking. YBBA and YachtWorld.com run a tight program, and the subjects that the panelists and speakers address are topical and relevant. You’ll get something out of it. I did.
In the spirit of full disclosure, YachtWorld.com and Soundings Trade Only are owned by the same parent company, Dominion Enterprises.