Growing up on an island, I’ve always been intrigued by the boating world.
Many friends and neighbors have boats, and while I’ve spent time sailing and powerboating, I’ve never owned one. Mrs. Big Picture grew up with sailboats, as both her dad and two brothers liked to sail lightnings — affordable, family fun. I, on the other hand, don’t have that out of my system.
I don’t know a single boat owner who has been able to justify the costs of ownership. And yet, there is a two year waiting list at any of the local marinas for slips (but moorings are available 100 yards from our home).
Why all of this boating chatter? I am tracking two interesting data points regarding recreational products: Sales and financing. We know that Boating sales began slip as far back as Summer 2006, when Oil prices were in the $50 – $70 range. Those with existing boats, however, continue to enjoy their usage. Even with Marine gasoline at $5, its only a marginal price increase relative to their total sunk costs.
Peter Greenberg — the TODAY’s show Travel editor — notes the schism between two groups of boating enthusiasts: those who already own, and those who want to:
"If you already own a boat or an RV, chances are good that you’re planning to put your boat in the water and you’ve made plans for road trips in your RV.
That would seem counterintuitive, but the numbers speak otherwise. While retail sales for recreational boating topped $39 billion in 2006 — an increase of nearly six percent from 2005 — the last two years have not been as buoyant. In 2007, the industry saw a drop of 14 percent in unit sales, and nine percent in dollar sales. And this year will be worse. In fact, at the recent Miami boat show, many new boat dealers were downright depressed. "See that brand-new boat over there?" said the president of one upscale boat manufacturer. "I’ve sold it four times this week."
Translation: The prospective buyers couldn’t close financing."
And indeed, that is what we see from several capital lending firms that used to finance boat purchases. The most recent firm to exit the business? None other than GE Capital:
"General Electric Co’s (GE) decision this week to no longer lend consumers money to buy motorhomes and boats was more bad news for the recreational vehicle and boat industry.
While the move by GE Money is likely to prompt the many other lenders in this sector to tighten credit standards and push borrowing costs higher, analysts say it won’t significantly worsen the industry’s admittedly dismal fundamental outlook.
Even before GE, which operates one of the country’s biggest and most sophisticated finance companies, announced its intention to exit the retail RV market, rising gasoline prices, falling home values and tightening consumer credit had taken their toll on motorhome and boat sales."
File this under obscure economic indicators: Boating is (obviously) a nonessential activity. This is only one tiny aspect of the enormous US economy. But how Americans spend our leisure dollars, speaks volumes about the availability of credit, as well as the overall economy.
Stay tuned . . .
Our Local Marina
Morgan Park, donated by J.P. Morgan
UPDATE: May 12, 2008 9:14am
On the train in this morning, I chat with Bob — whose 42 footer is moored off of Centre Island.
Bob notes that there are two boating worlds — bigger than 100 feet,
and everything else. The > 100 foot world is doing just fine, thank
you. Even more amazing, there have been more 300+ footers sold over the
past 3 years than in all of previous history.
GE exit from boat lending bad, but won’t sink sector
James B. Kelleher
Fri May 9, 2008 12:23pm EDT
WHY THE POWERBOAT INDUSTRY IS SINKING
Slate, Tuesday, July 18, 2006, at 4:55 PM ET
Even with pricey gas, travelers won’t abandon ship
Boaters and RV’ers don’t plan to retire their gas-guzzling toys this summer
TODAYShow, 5:12 p.m. ET, Wed., May. 7, 2008