Beginning Q2 2020, recreational boating took the nation by storm and continues to be the underlying driver for marine industry growth to date. Recently hitting the milestone of accounting for 2.1% of national GDP ($460B), recreational boating specifically has an annual economic impact of $170.3B, supporting approximately 700k jobs and 35k businesses (according to the BEA). Data shows that boating and fishing activities have the largest economic impact of all conventional outdoor activities, followed by RVing (another sector that faired very well during the pandemic). This is important to note because there is speculation that the increased demand will drop off very soon. While in the long run sales are likely to decline from the banner year that was 2020, the attitude towards, and lifestyle changes in favor of, boating are likely to persist.
Demand for boats both new and used was incredibly high in 2020, hitting a 13-year high for boat sales, according to the NMMA. More boaters sought out wet slips and dry rack storage resulting in exceptional marina performance nationwide, with record-level occupancies, rate increases, higher fuel sales and additional profits through ancillary income streams. When the world took a pause, families found solace in boating, fishing and recreating outdoors with friends – for many of which this has turned into a newfound lifestyle.
Typically boat dealership profit margins average in the high single digits to low double digits. With more than 310,000 new powerboats sold in 2020 (NMMA) – a 12% increase from 2019 – a shortage of inventory resulted which led to buyers paying over asking price on new and used inventory in 2020. Thus, margins were driven higher as each unit left the floor and overall inventory compressed. The nation-wide demand for boats not only overwhelmed manufacturers in the front office, but the backlog of new orders and shipments were met with equal troubles from an input/supplier perspective with various parts and materials unavailable to complete boats. While these supply chain issues were occurring behind the scenes, boat buyers could very easily see the lack of supply on the show room floor, which served as motivation to get in now while product is available versus waiting for months indefinitely for a vessel to become available.
As the economics will have it, the combination of these factors created fantastic 2020s for boat dealers with many recording their best year ever. Overall, the combined sales volume of boats, marine services and other marine-related products is up 9% from 2019, for a combined total of $47B (and up 30% in 2021), according to NMMA. Plus, boat options such as fishing boats and pontoons (accounting for 50% of all new powerboats sold in 2020) offer favorable entry-level price points, making recreational boating an attractive investment for long-term fun with family and friends. In fact, 61% of boat owners have an annual income of $75k or less, according to the U.S. Coast Guard.
High demand is always a positive, but it can come with disadvantages when we look at sustainable output. Many dealers found themselves with empty showrooms and a long list of deposits for inventory they would not be delivered for several months. While today’s demand could not have been predicted, dealers all over the US would have no problem selling additional boats if the inventory was available. Since learning how the boating industry would be affected by the pandemic, manufacturers have adapted by expanding boatbuilding capabilities, creating better administrative and logistics systems, and increasing focus on communication. Included in this new operating style is adjusting to the various vendor constraints – specifically a few key parts/materials that are needed to complete a new build (e.g. engines, chrome, foam, resin, etc.). While these challenges are being worked through as quickly as possible, there is still a resultant lag time and lack of inventory that filters down to boat dealers and ultimately the customer.
We believe that the shock of heightened demand felt in 2020 has subsided and that manufacturers are now better equipped strategically and operationally to accommodate demand. Supply chain issues will continue to be an impediment to the boat sales segment throughout 2021 and well into 2022, and this will impact both current inventory levels, as well as inventory allotted to each dealer. While there are several challenges facing the boatbuilding segment, it is encouraging to see continued expansion and consolidation by dealers and manufacturers; each player striving to capitalize on the demand and growth that the industry is realizing today.
“For the first time in more than a decade, we saw an increase in first-time boat buyers, who helped spur growth of versatile, smaller boats – less than 26 feet – that are often towed to local waterways and provide a variety of boating experiences, from fishing to watersports”, according to NMMA President Frank Hugelmeyer. Most recent data reported by NMMA shows us that runabout boats, pontoons, wake sport boats and cruisers were the leading boat types for new powerboats in April 2021 (on a trailing twelve-month basis these lines were up 40-50% YOY!).
The NMMA reports the following statistics for new powerboat retail unit sales in 2020:
Inboard Wake Boats: Up 21% in 2020
New Fishing Boats: Up 10% in 2020
Pontoon Boats: Up 17% in 2020
New Cruisers: Up 20% in 2020
PWC: Up 8% in 2020 (Up 46% through May 2021)
As we look at marinas around the country, it is no secret that wet slips and dry racks are being built new or upgraded to accommodate larger vessels (especially coastal facilities). This is a persistent trend and one that is here to stay, which we most recently saw in May 2021 as the 41’ to 65’ and 66’+ categories increased 290% and 44%, respectively, for the month (according to Statistical Surveys). Furthermore, sales in 2021 YTD are overall higher than the same time in 2020 – a promising report for the outlook of boat sales over the next 12-18 months. While available data is incomplete, the general trend shows underlying optimism as a result of new and existing boater demand, even amidst supply chain challenges.
Is it fair to say the good times are coming to an end? Not at all. Vicky Yu of NMMA reports that while recording a deceleration in boat sales at the start of 2021, there is still strong demand for boating. In fact, even with “falling” boat registrations, the greater likelihood is that registration decline is the result of inventory shortages and the inability for registrations to take place (NMMA). Our conversations with marina owners that have boat dealerships on-site share similar sentiments – they have taken numerous deposits for boats that manufacturers have yet to deliver, and virtually every dealer is confident that if he or she had been provided more inventory, those boats would be sold too.
As lifestyles change, new jobs are taken, and new families are started outside of major cities, more households are turning to boating in one form or another – be it ownership, boat club or weekend/vacation rental. It is very possible that registrations will maintain current levels well into the future as “pre-paid” boats hit the water in the coming years (i.e. boats already paid for, just yet to be launched) and supply chain issues diminish so boat builders can more readily accommodate demand. Looking forward to the rest of 2021 and into 2022, we are optimistic about the macro-sentiment towards boating, how lifestyle changes are a positive force for the overall marine industry, and what these factors ultimately mean for marinas and marina owners.