Valdosta Daily Times

May 2, 2014

Still digging out from recession, boat industry focuses on value

John Ewoldt
Associated Press

- — Luke Hellier and his wife have been shopping for two years for their first boat.

They’ve researched online and shopped Craigslist and auctions. But one place they haven’t set foot is the showroom. “We’re trying to find a deal,” said Hellier, a 29-year-old from Edina, Minn. “We think we can save 20 percent or more from a private seller.”

Used boats have always outsold new, but five years after the recession, powerboat buyers of every stripe are still focusing on value, value, value. Boat manufacturer Brunswick surveyed 15,000 people and found that the majority liked boats but saw cost as a deterrent.

That’s causing manufacturers to rethink the way they do business, including maintaining or lowering the cost of every new boat from entry-level to high-end. Manufacturers are not only offering new boats below the $20,000 threshold, but even under $5,000 in a few cases.

Mark Niforopulos, general manager of St. Boni Motor Sports in St. Bonifacius, Minn., said that he’s been begging manufacturers for years to change their “exclusionist” thinking. “We went through this fancy phase with all these expensive bells and whistles,” he said. “The industry is badly in need of a reset.”

Boat buyers choose used over new by a factor of 5 to 1, a ratio that retailers and manufacturers would like to narrow. In 2007, used boats outsold new by only 3 to 1, according to the National Marine Manufacturers Association.

Part of the reason for new boats’ sinking sales was an abundance of bargains after 35 percent of boat dealers closed during the recession, said Matt Gruhn, president of the Marine Retailers Association of the Americas in Brooklyn Park, Minn.

“There was a lot of repossessed product back then,” Gruhn said. “We hope those days are behind us.”

Recovery continues to ebb and flow. The number of new powerboats sold in the United States prerecession had been cut in half by 2010. In 2013, the number grew to more than 160,000, but it still doesn’t qualify as a recovery.

Irwin Jacobs, who owned 16 boat companies in the 1980s and still owns Larson Boat Group in Little Falls, Minn., said the growth in new boat sales, while not stellar, is at sensible levels. “We’re the first business to go in a recession, and the last to come back,” he said.

To rev sales, manufacturers and retailers say they’re putting value front and center. At Brunswick — which owns nearly a dozen brands, including Mercury, Bayliner, Lowe, Sea Ray, Crestliner and Lund — Chairman and CEO Dusty McCoy said, “Every new model made should cost the same or less than the model it replaces.”

But it’s not about stripping a model to make it affordable. McCoy said many new models come standard with features that today’s buyers expect, such as joystick docking for easier maneuverability, state-of-the-art dash systems and fuel-efficient engines.

“Consumers want more but expect to pay less,” McCoy said. “They want more standard features without a higher price. It’s happening across the industry.”

Dan Chesky Jr., co-owner of Dan’s Southside Marine in Bloomington, Minn., said that he’s completely changed his customer approach. He’s added an affordability page on his website so customers can see how a new boat fits in their budget.

“If someone is spending $150 a month on a cellphone, we can show them how to own a new boat for about the same amount,” Chesky said.

The monthly payment on a 16 1/2-foot new Alumacraft with a 50-horsepower, four-stroke engine with fish finder, trolling motor, cover and trailer is $159, assuming a $17,628 purchase price, 10 percent down and financing for 12 years at 5.49 percent.

“We say that you could own that boat for less than $200 a month instead of throwing out an $18,000 price tag,” Chesky said. (Interest rates vary from 4.99 to 18.95 percent, depending on a customer’s credit.)

Chesky said most buyers make extra payments to pay the boat off faster, but they still negotiate hard to get the original selling price down. “The wife says, ‘We really don’t need this,’ and the husband says, ‘If I can get it for this price, let’s do it.’ ”

Jake Jacobson, general manager of Rapid Marine Group in Minnesota, said there’s a lot of value to be found in boats priced under $20,000. New boats are more affordable, interest rates are low and values are holding. “You can get a Lund 16-footer with side steering, a fish finder, pedestal seats, a 40-horse, four-stroke motor and trailer for under $15,000,” he said.

Even high-buck buyers spending up to $100,000 are seeing changes in their market. At Midwest MasterCraft in Crystal, Minn., owner Andy Larson said that MasterCraft just released a high-end but less expensive line.

“Most MasterCraft boats start at $80,000, but the new NXT will start in the high $50s,” he said.

A year ago Larson added the Moomba line for the value customer looking at boats costing $40,000 and up. The strategy of adding lower price points has worked. Business is up 20 percent so far this year, he said.

For most buyers, a $20,000 floating party busts their budget. According to the NMMA, most boat owners have a household annual income of less than $100,000, making a used boat a likelier option. Hellier said that he and his wife are searching for boats in the $5,000 to $10,000 range, a common price point for used powerboats.

St. Boni Motor Sports found a way to attract the buyer with $5,000 to spend. At the Minneapolis Boat Show in January, the motor sports dealer featured the Sea-Doo Spark for $4,999, a small personal watercraft that rides like an ATV but with a much quieter motor than a JetSki.

Niforopulos, the general manager, sold his entire 2014 allotment of 60 during the show. “We’ve been begging manufacturers for something like this. It’s great fun on Minnesota’s pothole lakes.”

The vessel can transport one to three people, which makes it a good hybrid for a teenager’s first boat or mothers who want to pull their kids on the inner tube.

The family aspect has always ranked high in the boating industry. It’s an activity that provides shared fun and experiences, for those who can afford it. So the industry is taking steps to secure the next generation of boaters. “We’re creating a database of youth boating programs across the nation. We hope to launch it mid-May,” said Kruhn.

For this season, retailers are cautiously optimistic. Sales of new boats are expected to rise 5 to 7 percent in 2014, according to the NMMA.

But consumers are in the captain’s seat. They’re expecting the best products at the best prices, Jacobs said. “This will be a good year. There’s a lot of pent-up demand,” he said. “People have got cabin fever like I’ve never seen.”