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07-23-2006, 09:01 AM
! Mayday!
Why the powerboat industry is sinking.
By Daniel Gross
Posted Tuesday, July 18, 2006, at 4:55 PM ET
Gas prices and interest rates are still going up, which means Wall Street is guessing which companies are going to suffer. Wal-Mart? Check. General Motors and Ford, where SUV and truck sales are dropping? Check and check. In the coming weeks, we'll know if seasonal businesses such as theme parks, campgrounds, and summer resorts will likewise suffer.
But the industry that's taken on the most water may be the powerboat business. Brunswick Corp., a big publicly held suburban leisure conglomerate (it makes bowling and billiards equipment, too), cut earnings and production projections for the year. The company's boat manufacturing (Sea Ray, Hatteras, Boston Whaler, etc.) and boat-engine units, which account for the lion's share of revenues, are floundering. In the second quarter, when about 40 percent of the expensive units are sold, Brunswick "experienced significant declines in retail demand." CEO Dusty McCoy said on a conference call that he expects substantial production declines in the second half of this year.
Brunswick's stock, which fell 14 percent last week, is off more than 40 percent since last summer. And the company has taken the rest of the industry down in its wake. MarineMax, the huge boat dealer that derives 60 percent of its revenues from Brunswick brands, has fallen by about a third since April. Marine Products Corp., which makes Chaparral power boats and Robalo fishing boats, in April reported that unit sales fell nearly 20 percent; its stock is off sharply. And boating-supply company West Marine earlier this month reported disappointing same-store sales for the second quarter.
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Does the high cost of gasoline have anything to do with the fact that boating stocks are dead in the water? Probably. The National Maritime Manufacturers Association is trying to put a cheery face on the high gas prices. "People are very passionate about boating," said Thom Dommrich, president of the NMMA. "They wait all winter to get out on the water. Paying a little more for gas isn't going to stop them." Indeed, most people who own and buy the expensive boats made by Brunswick and Marine Products are well-off. And as I've noted (subscription required), spending on gasoline, which accounts for less than 5 percent of overall consumer expenditures, becomes a smaller burden as you rise up the income ladder.
Clearly, however, paying more for gas is a deterrent to boaters. In a report issued in May, NMMA noted that 25 percent of boaters surveyed said they would reduce the amount they would go boating because of high gas prices. And that was before the summer season started in earnest. Since then, gas has stayed high, and is up about 30 percent from last summer. What's more, for people who own powerboats—and who are thinking about buying the powerboats produced by Brunswick and Marine Products—gas is a potentially large expense. Powerboats get the sort of mileage that makes a Hummer look like a Prius. Gas use obviously varies widely. President Bush's new powerboat, Fidelity III, a 34-footer powered by three efficient outboard engines, gets 1.5 miles per gallon. Marine surveyor Rob Scanlan says a 29-foot Sea Ray powerboat with two engines burns 36 gallons per hour at cruising speed—that's about $400 in gas for a three-hour tour. Smaller boats, like this 19-foot runabout available at Lake Powell, go through 14 gallons per hour. Sure, if you have enough coin to own and maintain one of the world's largest megayachts, expensive gas won't put a dent in your water time. But for everybody else, filling up a boat's gas tanks can be a significant expense.
What's more, there are some key differences between gas consumption for boats and for cars. Unlike driving, boating is entirely discretionary. Very few people need to use their boats to get to work. Given the rising cost of everything else—gas for cars, real estate, higher interest rates—even well-off people may think twice about deciding to spend several hundred dollars on gas to take a long trip across the sound. The NMMA's Dommrich says that if you hang out at marinas, you'll find examples of people buddying up instead of taking out their own boats, running boats at half-speed, or spending more time floating than motoring. But, he adds, compared with the cost of owning a boat, the gas required to fuel it remains a pittance.
Still, it's the high price of gas combined with everything else going on that makes this a horrible boating summer. Boating-industry people are less likely to blame gas but rather the macroeconomic climate, the one the White House touts as being so strong. "Looking back, we find that when the Federal Funds rate is 5 percent or more, it has an impact on boat sales," said Thom Dommrich of the NMMA. "And of course, last month the Fed raised the rate to 5.25 percent." Most boats, like houses and cars, are bought on credit. Boats aren't just more expensive to operate, they're more expensive to buy.
Consumer anxiety is clearly drifting from Wal-Mart and General Motors up the economic ladder. "Our products aren't necessities," Brunswick CEO Dusty McCoy said on the conference call. "Customers have to be financially able to complete the purchase, but feel comfortable making the purchase." Thanks to higher interest rates and concerns about employment, the types of people who would be expected to buy these luxury items aren't pulling the trigger. All but the wealthiest of the wealthy are feeling the pinch in some way. McCoy noted that sales of large yachts that its Hatteras unit makes have been strong, but the cruisers, the midsized boats that cost in the low six figures and are the most profitable line, have been particularly weak. The economic tide may still be rising. But it's not lifting all boats.

framer1
07-23-2006, 10:00 AM
Throw in the cost of ins. and you really got a problem.

Trailer Park Casanova
07-23-2006, 10:27 AM
Boats aint cheap either.
Fun boats start at about $40K last we hit the Boat Show.

framer1
07-23-2006, 10:47 AM
Boats aint cheap either.
Fun boats start at about $40K last we hit the Boat Show.
Wake board boats are 50 grand plus now :cool: It didn't seem that long ago they were in the high 20's low 30's. Crazy :skull:

MBlaster
07-23-2006, 10:51 AM
If the economy turns down or interest on heloc's go any higher lot of guys with big boat payments will be heading for the exit and buying jet boats.

Not So Fast
07-23-2006, 11:06 AM
So now its starting to happen huh? I've been saying this for the past six months or so, also that the housing market is going to drop and now both are coming to fruition, all the while R.E. people kept denying it. This country depends on oil just as humans depend on water, period. Of course Havasu is as busy as ever, so far anyway. Boats I'm talking about, the R.E. market is dead. :idea: NSF

doesitfloat?
07-23-2006, 12:07 PM
So now its starting to happen huh? I've been saying this for the past six months or so, also that the housing market is going to drop and now both are coming to fruition, all the while R.E. people kept denying it. This country depends on oil just as humans depend on water, period. Of course Havasu is as busy as ever, so far anyway. Boats I'm talking about, the R.E. market is dead. :idea: NSF
Agreed...you, I, and some others had some debating with the optimistic (or should I say naive?) hot boat crowd who kept saying that real estate values "would climb indefinitely". This was as recently as 6 months ago. I even remember one thread title sarcastically called, "The sky is falling, the sky is falling..." which was obviously a dig at us realists.
Two of my favorite reasons posted for the RE values to always go higher:
There isn't any more land. Everyone wants to live in California. My favorite: Just because it's happened in the past doesn't mean it'll happen again. :messedup:
Man, as I've said before, some of you guys must be sh!ting yourself right now as you're losing value on your fully financed house AND your interest rates are climbing (on your int. only loans). But hey, the new car, truck, boat, and Rhino all look great...so no worries right? :rollside:

ROZ
07-23-2006, 12:23 PM
There isn't any more land.
Well, I kinda have to agree with this... We gotz whatz we gotz ... Not like we can make it :D
* this post is not an economic statement :D

doesitfloat?
07-23-2006, 12:28 PM
Well, I kinda have to agree with this... We gotz whatz we gotz ... Not like we can make it :D
* this post is not an economic statement :D
This is true but this fact, in itself, will not solely keep home values rising indefinitely. Way too many other factors....

572Daytona
07-23-2006, 12:32 PM
I don't understand what Wal-Mart has to do with this story unless the writer just wanted to get a dig in at them. I can't see how high gas prices and interest rates would affect them. Typically they've been pretty recession proof, as money gets tight more peope tend to shop at discount stores.

Boozer
07-23-2006, 12:56 PM
I don't understand what Wal-Mart has to do with this story unless the writer just wanted to get a dig in at them. I can't see how high gas prices and interest rates would affect them. Typically they've been pretty recession proof, as money gets tight more peope tend to shop at discount stores.
I could see rising costs having an affect on Wal-Mart's bottom line. The main reason for WalMart's success is not that it is a discount store but rather that Wal-Mart knows more about their customers then their customers know about themselves. Wal-Mart uses the information they posess to drive impulse buys through the roof. How many times have you gone to Wal-Mart to buy some laundry detergent and toilet paper and wind up buying a bunch of other stuff because it was a good deal? I know I have and know many other people who also have and do the same thing. Based on the current state of the economy and my own financial situation I no longer make the impulse buys that I use too.
That $20 great deal item WalMart has all over the store seems like a great deal but in reality that $20 is $20 last year I had left over after filling up the truck, boat, etc. that I no longer have and would rather put in the boat, truck, bikes, etc. instead of spending it on some item I am probably only going to use 4 or 5 times then throw on the kitchen shelf to never retrieve it again.
Luckily for WalMart they collect enough customer data that they can reinvent themselves at any given time if need be.

framer1
07-23-2006, 01:02 PM
I could see rising costs having an affect on Wal-Mart's bottom line. The main reason for WalMart's success is not that it is a discount store but rather that Wal-Mart knows more about their customers then their customers know about themselves. Wal-Mart uses the information they posess to drive impulse buys through the roof. How many times have you gone to Wal-Mart to buy some laundry detergent and toilet paper and wind up buying a bunch of other stuff because it was a good deal? I know I have and know many other people who also have and do the same thing. Based on the current state of the economy and my own financial situation I no longer make the impulse buys that I use too.
That $20 great deal item WalMart has all over the store seems like a great deal but in reality that $20 is $20 last year I had left over after filling up the truck, boat, etc. that I no longer have and would rather put in the boat, truck, bikes, etc. instead of spending it on some item I am probably only going to use 4 or 5 times then throw on the kitchen shelf to never retrieve it again.
Luckily for WalMart they collect enough customer data that they can reinvent themselves at any given time if need be.
Gas prices will also hurt Wal-Mart botton line, just by the fact that people have less money to spend on those great deal items you were talking about. You have to drive to work :)

ROZ
07-23-2006, 01:26 PM
This is true but this fact, in itself, will not solely keep home values rising indefinitely. Way too many other factors....
That's why I wrote this:
* this post is not an economic statement :D

572Daytona
07-23-2006, 01:34 PM
By why would Wal-Mart be affected any more than any other retailer? I would think they would be less affected than higher end luxury retailers. I did some searches on the author and he seems to have an anti big business agenda which in my mind would make anything he writes to be suspect. More based on opinion than fact.

Desert Rat
07-23-2006, 02:38 PM
higher end luxury retailers have shoppers that on the whole are less affected by anything less then a major down turn in the economy. Wal mart has MANY shopers that are just getting buy from pay check to pay check and as stated before are less apt to spend on the impluse.

Not So Fast
07-23-2006, 03:48 PM
Lets get back to how gas prices are affecting boating. I'm retired and I think I'll be OK because I planned it pretty well and was able to move from So Cal and buy a new house here, boat,car, furniture ect and pay cash, no debt to speak of. BUT while my wife and I were working (Construction & CSR Ins.) and raising a family we could not have survived another bill in the amount gas would add to our monthly expenses when you total it all up. We dont drive much now but when I fill up the boat alone at around 75 gals, well you figure it out. Now add the price of gas to get to your destination & back plus the everyday cost of driving to and from work and I dont know how some people cannot be seriously impacted by these prices. I know there are a lot of ballers on here but there are a lot of shall we say "common folk" also. Now add the price increases retailers are passing on to the consumer and it's a little scary, something to think about. Like the author said "boating is optional" and not a necessity although a great stress reliever which I love to do but if and when it gets unwise finacially to continue, Boating would be the first thing to go for me. I'd sell it and build a pool, JMO :chi: NSF

Riomouse911
07-23-2006, 06:11 PM
I know we all figured 3 dollar, 4 dollar and eventually 5 dollar a gallon gas was going to hurt the leisure industries.. just a matter of time before the giant diesel pushers, our boats, and the popular 3-axel toy haulers drop their resale values to pennies on the dollar. I've noticed a lot more beached and parked boats staying stopped for longer hours, and a lot fewer boats mashing up and down stream "burning gas" like in years past.. I figure it's because every river trip is now a 500 dollar weekend excursion for the average family. Oh well, I guess it's the price we're now paying for the "good times" we've all had in years past.

Old Texan
07-23-2006, 06:29 PM
Simple solution: Cruise less, raft up and drink more. :cool:

bchbum
07-23-2006, 07:46 PM
Our new boat fund has now become a pool fund . We decided to have a pool built . We just can't get out of town enough to warrent a boat . We will get a boat later , but it will be for the ocean & lake . This will be best for us since we are only 6 miles from Davies ramp . The fuel saved will pay for more ocean boating . :cool:

25dic
07-23-2006, 07:56 PM
The biggest difference I see is the length of the trips. A couple of years ago it was busy during the week (not like a Saturday) and this year it feels like I have had the river to myself up until Saturday. Saturdays seem to be just as busy as the past years. All of the variables, intrest only, seconds on the house for down payments on the boats and vacation houses are coming due at the same time. The gas prices are just the kicker to the whole thing. If gas is up .50 cents from last year and you use 400 gallons over the course of the trip, the $200 increase should not be a deal breaker unless you have more going on than just gas increases.

Havasu_Dreamin
07-23-2006, 07:57 PM
So, a bad time to be selling a boat, huh? :220v:

MBlaster
07-23-2006, 09:00 PM
By why would Wal-Mart be affected any more than any other retailer? I did some searches on the author and he seems to have an anti big business agenda which in my mind would make anything he writes to be suspect. More based on opinion than fact.
Home Depot stockholders are shitting bricks too.

jbtrailerjim
07-24-2006, 08:35 AM
I know for a fact that Chaparral sales have slowed. I'm friends with the owners of the Chaparral dealer here (Sun Country Marine) in So. Cal. He is Chaparral's largest dealer in the U.S. and he told me boat sales have slowed down a lot this year.

BowTie Rick
07-24-2006, 10:10 AM
I know for a fact that Chaparral sales have slowed. I'm friends with the owners of the Chaparral dealer here (Sun Country Marine) in So. Cal. He is Chaparral's largest dealer in the U.S. and he told me boat sales have slowed down a lot this year.
You know Mike? He's good friends with my Dad and his buddy Al. Small world. My bro-in-law works at the Ontario location and yes, it has slowed down. I'm waiting for prices to drop and pick me up a big ocean yacht :wink: :D

Froggystyle
07-24-2006, 11:02 AM
So, a bad time to be selling a boat, huh? :220v:
Yes. Worse time to be entering a crowded market.
At the end of the day, people are going to want more for less. There are going to be a lot of high-dollar boats on the market here soon for sale prices, and as a new boat manufacturer I need to find a way to compete with used boats at great prices...
Unfortunately, that means probably eliminating the dealers for now. We will be starting to sell factory direct here shortly and dropping the prices accordingly. It is a shame because I feel that dealers are the best means of getting boats to people, but they are very expensive to operate and will be costing our end client quite a bit of money once they are up and running.
I am fortunate to be delivering more boat for the money in any configuration, and that alone is probably going to allow us to prosper during this time of decline. We have the money to weather it, and the will to survive the decline.
I will tell you that for while we thought the phone got unplugged. Seems to have picked back up though and we sold two boats in two weeks. I can't wait to start stacking them up though.

jbtrailerjim
07-24-2006, 11:25 AM
You know Mike? He's good friends with my Dad and his buddy Al. Small world. My bro-in-law works at the Ontario location and yes, it has slowed down. I'm waiting for prices to drop and pick me up a big ocean yacht :wink: :D
Mike and Donna are good friends with my folks. They are about the nicest people I have ever met. I spent the weekend with them up in Pismo Beach last month. Mike's a cool cat and a lot of fun to hang out with. He's an old school west coast hot boater. He's got lot's of cool old stories about the west coast custom boat builder scene.

Freak
07-24-2006, 11:47 AM
Yes. Worse time to be entering a crowded market.
At the end of the day, people are going to want more for less. There are going to be a lot of high-dollar boats on the market here soon for sale prices, and as a new boat manufacturer I need to find a way to compete with used boats at great prices...
Unfortunately, that means probably eliminating the dealers for now. We will be starting to sell factory direct here shortly and dropping the prices accordingly. It is a shame because I feel that dealers are the best means of getting boats to people, but they are very expensive to operate and will be costing our end client quite a bit of money once they are up and running.
I am fortunate to be delivering more boat for the money in any configuration, and that alone is probably going to allow us to prosper during this time of decline. We have the money to weather it, and the will to survive the decline.
I will tell you that for while we thought the phone got unplugged. Seems to have picked back up though and we sold two boats in two weeks. I can't wait to start stacking them up though.
First...your boat is killer. With that being said...with gas going in one direction...
Any possible way your boat could be setup for fuel efficient outboards?
Say 2 250xs mercs?
You could get more seat/storage space out of the boat also..

Froggystyle
07-24-2006, 12:52 PM
First...your boat is killer. With that being said...with gas going in one direction...
Any possible way your boat could be setup for fuel efficient outboards?
Say 2 250xs mercs?
You could get more seat/storage space out of the boat also..
Possible, but would require a crazy redesign. I don't know what I would do with the engine compartment, and everyone hangs out on the swimstep... I just think it would be a square peg round hole.
Plus, we are more efficient than a sterndrive if you don't drive around at full throttle. The cruise is great, mashed down is pretty bad though.
From Echo Bay to Callville we averaged about 70mph and boated a total of 38 miles on 33 gallons of gas. Not particularly fuel efficient when getting after it, but far more efficient than my old 21 with a much smaller motor going slower.

Froggystyle
07-24-2006, 12:53 PM
First...your boat is killer. With that being said...with gas going in one direction...
Any possible way your boat could be setup for fuel efficient outboards?
Say 2 250xs mercs?
You could get more seat/storage space out of the boat also..
Better yet, how about I just save you enough off of the purchase price to pay for an increased gas bill for five years? :D

Wicky
07-24-2006, 03:45 PM
Regular gasoline....about $3 bucks a gallon and almost double the cost over last year.
Trick Fuel 110....still about 5 bucks a gallon and no change over the last several years. At least here in Idaho.
I bet Trick fuel drops in price if the law of supply and demand holds true.
Time to start running Trick in the tank I guess.
I'm sure glad I have an outboard that gets 5mpg. 10 gallons and I play all day.

Tom Brown
07-24-2006, 03:58 PM
I'm sure glad I have an outboard that gets 5mpg. 10 gallons and I play all day.
I like my outboard too. My boat gets 10 mpg. The tank was dry and I didn't have time to go for fuel so I stuffed an oily rag into the fuel filler and cruised all weekend. :cool:

Ziggy
07-24-2006, 04:43 PM
Makes me seem smart to get that 6.2 3 yrs ago........... :D So what if I get there 5 minutes later. ;)

Raylar
07-24-2006, 09:11 PM
Looks like I gotta get our planned all aluminum V-8 high performance diesel motor through development a little quicker. Hell it will only take about another mil to get it into production, but the future of performance boating seems to hang on the performance diesel for its future survival if gas stays at $3.50 per gallon or higher! As for Wal-Mart, I refuse to shop there. Wal-Mart has killed more US jobs and shipped more work to China than any other company in the US. Besides, most of what they sell is junk and their service is non-existant! How do you spell value, trust me it ain't spelled Wal-Mart!!
I hope their sales stay in the toilet and some decent US companies get the sales. Can you spell Target! The other thing we can do is convince all the enviromentalists in Californa to buy and drive Toyota Prius's, then a lot of fuel will be left over to lower the demand and maybe the cost, so the rest of us can have it for our boats!!

DeeCandyBar
07-24-2006, 09:17 PM
we have seen the peak of performance gas powered boating in terms of sales and we won't be back again

Wicky
07-25-2006, 04:49 AM
:) I like my outboard too. My boat gets 10 mpg. The tank was dry and I didn't have time to go for fuel so I stuffed an oily rag into the fuel filler and cruised all weekend. :cool:
Don't forget the bilge for reserve!!

Red Horse
07-25-2006, 05:36 AM
People that are finacially set correctly; no bad debt, money in the bank, invest wisely, no second or third mortgage and live with in their means will not change their boating habits much or at all in my opinion. Higher gas prices will mean a little more rafting up, drifting, shore time, but that is about it. Raising the interest rate for someone that WANTs to finance a boat to write it off will still buy. Damn the interest rates. All this new ecomomy will do is separate the equity loan money rich people (second mortgage) from the weathly. Froggy has got it right. Good product for a good price. What level of product do you want to buy? Personally I would entertain the idea of a Trident closed bow that would sleep at least 3 with an enclosed head, microwave and dockside AC...but that is a different thread. The boating industry will become out of reach to some that are psuedo rich, but to those are wealth it will still be here. I tend to think that the media sometime has to look for a story that is somewhat tied to the current BIG story. Granted, sales will be down, used prices will plunge, but some will boat no matter the cost!!
I am in the military, a predominatly underpaid career. I am doing just great. I know how to manage my money!
Sorry for some of the spelling...I have had SEVERAL Crown and Cokes!!!!!

Seadog
07-25-2006, 08:41 AM
What is not menationed in the story, is that boats require towing in most cases. That requires a tow vehicle whic will burn a lot of fuel to haul the boat and a higher fuel usage getting around in normal usage. If you do not buy the boat, you can get a 40 mpg car for gettibng around.
The 63 Newman I am restoring is changing in my plans. I had planned on keeping the 78 115 hp OMC and just rebuilding it. Now I am thinking about spending the money and getting a 60-90 hp E-tec and making it my main ride. Build a shop on Grand lake to store my pontoon and save it for when I haul a group. The Newman would cost a lot less to tow and run.

Freak
07-25-2006, 08:45 AM
Better yet, how about I just save you enough off of the purchase price to pay for an increased gas bill for five years? :D
LOL...a man with a plan....I like it.
My problem is your so far away. Soooo who could I trust to work on the drive combo if something would arise? I'm not saying it will cause I know it's top shelf equipment. That's the fight in my head.

Freak
07-25-2006, 08:56 AM
Looks like I gotta get our planned all aluminum V-8 high performance diesel motor through development a little quicker. Hell it will only take about another mil to get it into production, but the future of performance boating seems to hang on the performance diesel for its future survival if gas stays at $3.50 per gallon or higher! As for Wal-Mart, I refuse to shop there. Wal-Mart has killed more US jobs and shipped more work to China than any other company in the US. Besides, most of what they sell is junk and their service is non-existant! How do you spell value, trust me it ain't spelled Wal-Mart!!
I hope their sales stay in the toilet and some decent US companies get the sales. Can you spell Target! The other thing we can do is convince all the enviromentalists in Californa to buy and drive Toyota Prius's, then a lot of fuel will be left over to lower the demand and maybe the cost, so the rest of us can have it for our boats!!
High energy costs will kill globalization. WE will get our wish---made in the USA baby. F..K Wal-Mart.