Boat sales data is an important indicator of marine industry health, providing insights to consumer sentiment which can translate to demand at marinas down the line. The marine industry is turning the page on an exceptional ~24-30 months of boat buying demand as we face continued expectations of sales volume and pricing normalization throughout 2023. Buyer sentiment is expected to cool as well, which was first noted in late 2022 as the Fed was well into Quantitate Tightening, at a pace and level that severely disrupted the economy. We expect interest rates to continue to play an influential role in forcing “would-be” boat buyers to the sidelines until 1) price points normalize; and 2) household finances allow for the purchase to fit into the equation. Translation: prices may drop on new boats, but that does not exactly mean buyers will be rushing to purchase, which will only stagnate sales volume1.
Boat Sales are Normalizing
Whereas the year started off strong on the tailwinds of 2021, the second half of 2022 was noticeably negative with dealers around the country reporting weakening demand, growing inventory, and declining performance. New boat sales started showing signs of weaker performance compared to pre-pandemic years as early as Q3 2022. Estimates pin 2022 boat sales results at 15-18% lower than those years2. While 2020 and 2021 realized a severe supply/demand imbalance that favored dealers, with limited inventory (even reduced orders as manufacturers worked tirelessly to meet demand) and an explosion of new boat demand that pushed sale prices above sticker prices.
Fast forward to Q1 2023, the supply chain has normalized and showrooms have product. In fact, too much product that is staying on the floor for a longer period. The changing demand environment is in large part due to the combination of higher interest rates and inflation. Putting aside the 2022 rise in gas prices (which have subsided from the ~$5/gallon average felt by most Americans), interest rates impacted the largest boat-buying demographic (boats 26’ and under range), much like demand slowed in residential real estate. This is not only the segment that comprises 95% of boats sold in the U.S., but it is also the segment where boats are more likely to be financed. Thus, higher interest rates make boat ownership more costly, and at a time where other day-to-day household expenditures have risen.
Shifting Demographic
While headlining news is focused on gloomy projections, there are several positives that came out of the recent boom period that marinas can benefit from – primarily as it relates to their customer service and the marina experience for existing boaters, non-boaters and other marina guests. Millennials are reported to now make up 31% of boat owners; Generation X leads at 37%, and Baby Boomers trail Millennials at 28%. These new owners are younger, and largely first-time boat owners with over 800,000 of which started their boating journey in 2020 and 2021 (entering years three and four of boat ownership). As the average boater shifts towards the younger generation, it is important to look at ways to engage this customer “pre-purchase” through rental boats, boat clubs and other marina-centric events/activities that make water recreation a prominent part of their life. Educational courses and experiential opportunities for non-boat owners to operate a vessel with appropriate guidance and safety measures are additional ways marina owners can pique the interest “could-be” boaters, and eventually transition them to “will-be” boaters.
Dealer Sentiment
Dealers are equally important to the retention equation – they are the front line of boat sales success and the “go-to” for a boat owner’s needs when they sold that owner the boat. Maintaining great relationships and providing excellent customer service cannot be neglected, especially when the economy may delay, if not prevent, consumers from purchasing boats in the coming months. The 2022 Annual Market Index by Boats Group quoted Mark Beeden, President of Trident Funding, in that “borrowers are feeling the elevated boat prices and rate increases, yet are looking to continue their adventures on the water, just in a more affordable way”. This could be better through a dealer’s strong financing relationships, a marina’s rental boat fleet or boat club membership, or even through personal watercraft that introduce “would-be” boaters to the lake life, for example.
Further evaluating the dealer side of the new boat sales, Baird Research and the Marine Retailers Association of the Americas (MRAA) provide excellent resources that reflect current boat inventory levels and correlating dealer sentiment. Recent reports show that inventory was gauged as “too high” – that dealers have too many boats on the showroom floor. Compared to pandemic years, inventory was “too low”, which most notable causes being the supply chain issues and competitive buyer demand. The boat show season kicks off each year in Q1, however, with shows such as Fort Myers, St. Petersburg, Naples, Houston, Miami and Palm Beach. This is one reason for inventory levels to be higher than normal in the winter months, as boat show sales must have product to deliver to customers. Data is still being collected from these shows, and will be monitored throughout the year, to which we can learn more about how new boat demand is shaping up in 2023.
2023 Outlook
As we continue to update our outlooks and adjust to new information throughout 2023, it is important to note that stalled boat buying activity is not entirely negative as it drives renewed focus and creativity for retaining existing customers and attracting “would-be” boaters as they seek access to the water. Marina owners can find great success with boat rentals, boat clubs, personal watercraft, boat sharing, charter fishing, and more. These are avenues for non-boaters to get on the water, and experience the lifestyle in a cost-effective way that is also more immediate than boat ownership. While attracting new boaters to the space should always be an objective for dealers and marina owners, the leading theme of 2023 is undoubtedly retention, and specifically ways in which marinas and dealers can provide excellent customer service, reliability, and communication so boat owners want to stay involved. Macroeconomic factors are expected to limit new boat owner growth as “would-be” buyers focus on their household finances and other core areas of spending. Boat prices will also need to adjust, as prices elsewhere continue to normalize (marinas, real estate, cars, etc.). As buyers sort through the various factors influencing their own purchase decision, 2023 can be another excellent year that capitalizes on boating interest in new ways that are not only profitable for marinas, but critical to developing the future purchase decision of the younger generation.
