Almost half the people in the United States live in a county
that touches a coastline. And every year about a third of
Americans spend at least some time on a boat, and many of them
can't seem to get enough. In the landscape of traditional power
sports, which includes boats some categories like motorcycles
have seen their fair share of struggles in recent years. Boat
industry revenues have mostly been growing since the US began
to lift itself out of the wreckage of the financial crisis
of 2008. Boats can be used for fishing, skiing and socializing,
and their appeal is widening. Boat customers are skewing
younger and more diverse.
Changes that boating manufacturers have made over the
past few years has really changed the landscape and the
demand level.
Improvements in technology now allow boaters to easily navigate
and dock the boat. Boat sales have seen a boost during COVID
which leads some to fear that demand will crater if and when
life returns to normal. But some analysts think the growth is
poised to continue in part because of how boats are sold
from one customer to another.
The extent that consumer confidence remains healthy, we
think that the boat demand will remain so as well.
Companies are also experimenting with membership programs and
similar concepts. It is another way to lure customers especially
cash strapped ones without having to convince them to pay
for something that costs as much as a new car.
Typically, industry analysts break up recreational
powerboating into three categories. Saltwater fishing
boats, such as those sold under the Boston Whaler and
Grady-White brands. As the name suggests, these boats are
typically marketed for fishing and cruising in the ocean. Then
there are recreational fiberglass boats such as the Sea
Ray brand. These are generally boats that will be used for a
range of activities including waterskiing, fishing, or
cruising. Fiberglass construction generally makes a
boat more stable in the water and less likely to drift.
Fiberglass boats can also be formed in to many different
shapes to either enhance performance or looks. Aluminum
boats include both fishing and pontoon boats. Aluminum boats
tend to be a lot cheaper than fiberglass and are also more
resistant to damage. They're good for those who want to
travel down rivers or through shallow waters where rocks or
boulders might be a problem. Pontoon boats basically consist
of two big aluminum pontoons with a deck thrown over them.
These boats are intentionally simple and practical and for
maximizing seating and storage space and offering a stable
comfortable ride.
We have a boat business that basically ranks number three
against all boat companies and you know specifically in the
pontoon segment, we are a clear number one and that pontoon
segment has been growing at a very rapid pace. And we're also
number one in deck boats with our Hurricane brand.
Some of the major publicly traded companies in this area
include manufacturers such as Mastercraft, Brunswick, Malibu
and Polaris, and retailers such as Marine Max and One Water.
Analysts often refer to boats as big ticket discretionary items
or something similar. This means they tend to cost a pretty big
chunk of money and are not necessarily purchases for most
of the people who buy them. Boat buyers do tend to have
relatively high incomes. That said boating is not exclusively
a pursuit for the rich. About 100 million Americans, almost a
third of the US population go boating each year. A 2018 report
from the US Coast Guard showed that 52.3% of people who spent
time on a boat that year had a household income of $75,000 or
less. About 43% of boaters in that survey spent time on a boat
that was owned by someone in their household but another 41%
opted for a rental the remainder was nearly evenly split between
those who either jointly owned a boat with someone else or those
who chartered boats.
A new aluminum boat package which includes trailer engine
and other accessories costs on average about $36,000. A new
personal watercraft the types of things sold under brand names
like Jet Ski, Sea-Doo, and WaveRunner averages about
$13,000.
93% of the boat products we sell are under $100,000. So you know
it is people that love to fish for a living. These are anglers
these are people that get out on their boats with their family.
The US market bottomed out right after the financial crisis. In
2010, there were just shy of 178,000 boats sold in the US
totaling $27.3 billion. But since 2012, the industry has
been in growth mode. Total boat sales hit 286,000 units in 2018.
Where they held relatively steady in 2019 despite some
damage from poor weather during the late spring early summer
period. Then, as was the case in many other industries,
recreational boating took some hits for about a six to eight
week period in April and May of 2020 when stay at home measures
and concerns over the covid 19 virus disrupted production and
kept buyers away from dealerships. The trouble was the
surge in demand coupled with the production shutdowns really
tightened inventory.
All the inventory out there in the dealer channels got
purchased by consumers and there's nothing out there. And
so this demand surge has continued into 2021 with people
who couldn't get boats last year and still trying to find them
dealers trying to catch up manufacturers trying to catch up
so it's ended up being a big boon for the industry that
should continue for a number of years.
New boat sales then hit a 13 year high of 318,550 units in
2020. 1,048,500 used boats sold that year, total retail
expenditures reached a high of $49.4 billion. For the first
time in more than a decade, the number of first time boat buyers
rose, about 100,000 people bought their first boat in 2020,
about 30% of all buyers. A lot of these buyers went for smaller
boats typically less than 26 feet that can be towed behind a
vehicle and are versatile enough for very different types of
activities.
As the market is growing, it is undergoing some of the same
changes seen elsewhere, both in terms of who is getting into
boats and how they are doing it.
So the typical book buyer has definitely evolved over time
you're seeing the buyer become younger, they're becoming more
female, we're seeing more minorities buy boats, so the
typical boat buyer has definitely changed.
Visits to discover boating, a consumer resource run by the
National Marine Manufacturers Association saw a 90% growth
year over year in the 18 to 24 segment. And the largest user
segment to the website is 25 to 34 years old. Visits to the site
by women are up 41% year over year. Part of what has enabled
this is changing technology. Boats are a lot more
sophisticated than they were decades ago and as a result have
become a lot easier to own.
Boating has gotten easier, it's joystick controlled, it's
integrated in cars, you have automatic docking, everything's
connected to your phone so you know the health of your boat,
when to replace the battery, the gas level, you can start it up
from somewhere else and just technology's gotten so much
better it's attracted younger generations into an industry
that used to be thought of as more of a stodgy retired kind of
industry.
There have also been some trends that have fueled interest in
boating one segment of boats that seems to be doing
especially well is towboats. Boats intended to be used
specifically for waterskiing, wakeboarding, wake surfing, and
similar sports.
Back in the day where you waterski you had to control the
ballast and have people switch to one side of the boat, you're
not going to lean over. Those days are gone, you push your
button now, and it changes everything to what the choices
of the user in a heartbeat.
Pontoon boats large, hardy, and relatively simple are especially
liked by first time buyers. Paths to boating have also
smoothed there are boats subscription services such as
Freedom Boat Club, the oldest and largest such service which
was acquired by manufacturer Brunswick in May of 2019.
Customers sign up online, pay an initial down payment which
averages about $5,000 and monthly dues that average $300
to $400. This gives them access to a fleet of boats at a local
club.
Really as easy as you drive your friends or your family to the
marina, you park your car, the boat is waiting for you gassed,
cleaned, ready, you get on the boat, you enjoy your day, you
bring the boat back, you throw the keys to the harbor, to the
dock assistant, and you get in your car and you go home.
The company is seeing record growth adding 40 new locations
in 2020 and nearly 10,000 new members a 36% increase in
memberships year over year.
When we bought it, it had 170 locations, you know under 20,000
members, and there were a couple thousand boats in the fleet. Two
years later, there is now over 310 locations including
international locations in Spain and in England. And 40+
thousand members. The growth years certainly outpacing the
overall normal boating market.
There's also a company called Boatsetter, a boater to boater
rental and charter marketplace on track to more than double
business in 2021. 50% of the company's renters are
millennials and 43% are female.
Even bullish investors and analysts highlight a few risks.
One is the question of whether these companies can maintain or
build on their success, especially after the recent
spike in sales from COVID. Industry analysts do think that
wide vaccine distribution and a desire among many consumers to
return to normal life will at least slightly slow sales
growth. This risk is a bit greater to dealers in part
because strong recent demand means manufacturers still have
the task of refilling dealer inventories to keep them busy in
the short term.
For a lot of manufacturers, the OEMs, Mastercraft, Malibu,
Brunswick, those companies Just to get inventory channel back to
where it needs to be to satisfy normal demand. They're looking
at least two to three years of manufacturing at full capacity.
Analysts who follow the industry say these risks are probably
pretty well understood by investors and priced into
shares. The wider risks analysts consider are factors such as
higher interest rates or changes to tax and economic policy. This
especially includes hikes and corporate taxes and personal
income and capital gains tax hikes on high earners who make
up a considerable portion of boat owners.
This is a highly discretionary big ticket purchase. And so you
know, when consumer confidence takes a hit, boat buying can be
an easily deferrable purchase. And so that's something we watch
very, very closely, you know, with, with oil prices starting
to move higher, with inflation moving higher, with commodity
costs moving higher. That's something definitely definitely
worth watching.
Brunswick has been trying to reposition its portfolio to
protect against downturns Models like Freedom Boat Club are one
example. But the company is also leaning into things like parts
and service to capture customers with boats who need to maintain
them year in and year out.
People still need to upkeep their product and a lot of it's
just a function of usage. It's oils and lubes and boat parts
and systems that over time just wear down and need to be
replaced. That business even in a an economic downturn, we
believe will function much different than then a kind of a
more cyclical part of of the economy.
In fact, supply is a greater concern for the industry in the
short term than demand. Boat makers have been affected by
challenges in securing resins and plastics for example.
You as a boat manufacturer can build as many boats as you want.
But if you can't get a steering wheel, that's a problem. Or you
can't get an engine. That's a problem. Well you can't get
seats. That's a problem.
However companies say they are managing.
We're dealing with the supply chain disruptions extremely
well, we expect to meet our production forecast for this
year. And although as you mentioned, labor is tight, we're
being very creative in our various areas to get the labor
we need. So I think we're producing very efficiently and
very effectively and we're adding capacity to try and help
alleviate that backlog issue.
About 40% of Americans live in counties abutt a coast acco
ding to the National Ocea ic and Atmospheric Admi
istration. That includes ocea ic shorelines, major estu
ries, like the Chesapeake Bay nd even large landlocked bodi
s of water like the Great Lake . The trick is getting cons
mers to consider the day on the ater is within reach.