The NMMA Advantage is an exclusive online, interactive inventory showcase available to a dealer or NMMA boat manufacturer member who exhibits at an NMMA show.   They can feature the boats they’re selling at the show on the show website – before, during and after the show.  Introduced during the 2009 boat show season, NMMA Advantage allows prospective boat buyers to “pre-shop” the show and download information, request contact and/or schedule show or showroom appointments. NMMA Advantage had nearly 3,500 boats featured on their show websites that were “pre-shopped” hundreds of thousands of times!  Those who take part receive reports that detail the number of times each boat at the show was researched thus enabling them to see how popular their boats were.  Over time the same information each year will provide critical insight into the size and types of boats popular in a particular geographic area.  Carl Blackwell, Vice President, Marketing & Communications, NMMA puts it this way “We are combining the power and metrics of online research with the romance of touching and feeling a boat at a show.”

Blackwell says that individual NMMA shows, (Miami and Minnesota for example) are using Facebook to stay in touch with show visitors plus ask them “what would you think about this type of exhibit at our show?” (Discover Boating also makes good use of Facebook and just added a “Making Waves” game and the chance to win $25,000 towards the purchase of a new NMMA Certified boat).  Twitter, according to Blackwell, is a very powerful tool they are using to “push” show information to the media.  It appears that digital marketing is gathering momentum.

Murray says that the biggest impact is on the owners of and dealers for the bigger sport fishing yachts because their fishing grounds are right where the disaster happened and fishing in that area has been shut down.  He says that the majority of sailboat and smaller powerboat owners can use their boats because they normally stay within about 12 miles from shore.  Here, he says, while boaters might run into a surface sheen, they are not likely to run into thick oil.  He is concerned about the negativity being created by stories urging boaters to get their boats out of the water now to avoid damage.  So much so that he included “A Voice of Reason concerning the oil spills effect on your boat” within his blog.  Murray asked Ed Sherman, a recognized technical journalist, to answer the question The Gulf Oil Spill; will it destroy your boat?    The short answer to the question was, “No, it won’t.  Messy, you bet! Environmental impact, for sure! Smell funny, absolutely! But will the spill kill your boat? No way, it’ll just give you an excuse to do a really thorough clean up job.”  Readers who want up-to-date information about the whereabouts and trajectory of the oil spill and associated news should visit www.boatus.com/oilspill/

Substitute Knopfler for the visible leaders in our industry because most of them are around his age, then substitute his audience for those who attend marine trade shows and conferences and you get a similar effect.  The majority of today’s industry leaders, members and boat owners are “Baby Boomers”.  The good news is that because we are all “Boomers” each of us understands where the other is coming from and how the industry has changed over time.  The bad news is that all of us will exit the industry around the same time.

Here’s the real catch – “Generation X” (birth dates 1965 – 1976) is the group following the “Boomers” and they are reaching or have reached their maximum earning potential.  “Generation X” is also 35% smaller.  There are 51 million of them versus 78 million “Boomers” that were around on July 1, 2005 according to the Census Bureau.  All manner of reasons are being given for the decline of boat sales today but the drop in buying population numbers is not one of them.

If buying population numbers are a key indicator then this industry is in decline until the “Millennials” (born 1977 – 1998) hit their stride – there are 75 million of them!

6,055 boats were built in the under 20ft category (down from 9,160 in 2008) while only 1,021 boats over 20ft were built (down 1,246 boats from 2267 in ’08).  Imports suffered as well with only 240 boats over 20ft coming in versus 358 in 2008.  The one bit of “good” news, depending on which side of the Atlantic you sit, was that 113 multihulls over 20ft in length were imported in 2009 down only 1 boat from the 114 in 2008.  In comparison 62 multihulls over 20ft were built in North America in 2009.

Small wonder then that Sally Helme, the new President of Sail America and Publisher, Sailing Company, announced a new initiative by Sail America to reach out to the sailing industry at large and ask what Sail America can do to better support their businesses.  Sally was unusually blunt in the announcement when she said “This new initiative is critical for all of us. “Business as usual” won’t cut it, and we are all challenged to re-invent our business models in order to survive and prosper.”  The intent is to conduct a series of roundtable discussions by industry segment in order that Sail America can focus on the unique challenges and concerns of those segments.  Highlights of the overall findings will be shared at the Sail America Industry Conference slated to be held in Annapolis in June of this year.

It will be interesting to see which companies, if any, are listening and truly re-invent their businesses.

The Official Committee of Unsecured Creditors for Genmar objected to all of the sales “on the grounds that the Genmar estates will be left insolvent, and unable to pay chapter 11 administrative claims, including litigation to recover dollars that its financial investigation revealed should be a part of the estate.  If the sales are approved without amendment, over $140,000,000 of claims filed by over 4,000 unsecured creditors will be left behind by Genmar.”  This objection was overruled and the sales approved.

Many in the industry including boat dealers with unpaid warranty, boat show and retail promotional reimbursements plus equipment and accessory manufacturers have been hit by this bankruptcy, some severely.  How they will fare given the impact to their cash flows and how they will choose to deal with the new entities remains to be seen.  Boat owners are also affected with some now having warranty implications to deal with.   The outcome of the Genmar bankruptcy is still murky and will be for some time yet.

One “old” market is that affluent segment of the population that can still afford to buy new boats and always have been but their buying habits are different – they carefully consider their major purchases and are rarely likely to purchase on impulse.  They do not need a dealer to stock a boat in their neighborhood, they can afford to travel to view as well as wait until the right deal comes along to purchase.

More boat builders will bypass the now traditional dealer network and revert to custom or semi-custom production.  They will communicate directly with prospective owners and build relationships with them.  These same builders will forge relationships with independent brokers who will take care of moving the trade-ins.  This will result in specific websites and venues whose sole purpose is to move these trade-ins.  This in turn will result in a few powerful regional brokers who are mutually dependent with the small coterie of builders they support.  In some instances a group of boat builders may start or acquire those brokers.

The other “old” market is that of the 16 million plus existing boats.  Their owners are more likely to sell them directly via the Internet and how long can it be before Amazon and eBay fulfill their accessory and clothing needs in a more economic fashion than the existing chandlery network?  New routes to old markets indeed!

One succinct explanation of the “new reality” for the trade is given by Bill Thompson, a veteran of the marine finance industry and President, Cardinal Points Network who described it in the following manner “The Ft Lauderdale Show reflected an industry where fewer dealers and manufacturers exist, boat production is dictated by orders more than stocking, and those that survive do so by being nimble and having cash.”

While the drop in the number of exhibitors was noticeable, especially in the Convention Centre, the show organizers said “Compared to last year, attendance was up 10%+ through Friday. We had a small dip in ‘family’ attendance on Saturday and Sunday with Monday about even.  Overall, attendance was up 1%.  This is very good news as we were budgeting down 8% in attendance.  The Thursday and Friday strong showing indicates serious buyers attended the show.”

The statement about the strong showing Thursday and Friday is also indicative of the “new reality.”  These are the days that committed and experienced boaters attend shows.  They know what they want and what they can afford.  Everglades, a builder of luxury family fishing boats from 21ft retailing at around U$75,000 to 35ft retailing for U$400,000, knows exactly what that means.  They sold 14 boats across the range at the show, one more than last year, and only one of the 14 was to a buyer that they had been speaking to before the show.

While there will still be newcomers to boating our industry, for the foreseeable future, will be building fewer boats for knowledgeable owners.  Therein lies the other aspect of the “new reality” – brand awareness and brand loyalty.

There were fewer boats on display this year than last year but there was still a good number to be seen including nine new ones.  Most of the new were at the larger end of the range, the Hodgdon Yacht’s Tripp 65ft Café Racer, Passport Vista 615, Jeanneau 57 and Morris 52 followed by the Maine Cat P-47 and Fountaine Pajot’s 41 Lipari.  Sunsail premiered their 384 catamaran, Sensei Yachts world – premiered their sexy Sensei 9M while Topaz Sailing Systems introduced the Topaz Sailing Dinghy.

Talk on the docks was that business was better than last year although that would not have been hard and that some boats were sold.  Almost everyone said there was a lot of good interest in their boats but that there was no urge to buy immediately.  Similar views were expressed by the exhibitors in the tents.

There was also a contemplative mood in evidence at the manufacturer level about how best to address the US market going forward.

Sail America featured market researcher Nick Hayes and his forthcoming book “Saving Sailing” at their members meeting during the show.  Hayes says sailing participation has dropped 70% since 1979 and 40% since 1997.  His book provides an action plan he believes is necessary to reverse the downward trend.  Euphoria, like “Painkillers”, will have to wait another year.

     It was the boat builders who killed IMTEC in their efforts to sell more boats.  They knew that most of their dealers stocked more than one brand.  Some brought their model year forward to earlier in the year and held their own private dealer shows so that the dealer was not distracted by what the other boat builders offered.  This led other builders to do the same and IMTEC dwindled away.

     On September 3^rd the NMMA announced that “it will move its Marine Aftermarket Accessories Trade Show (MAATS) to combine with the fall 2010 International Boatbuilder’s Exhibition and Conference (IBEX) making the industry’s single largest trade event, following IBEX’s 2009 introduction of Dealer Development Days, even bigger.”  The announcement goes on to describe Dealer Development Days as “the innovative boat building stimulus program added in 2009 to assist boat manufacturers and dealers in conducting crucial in-person business at minimal cost by allowing them to premier new boat models on land and in-water.”

     MAATS was held in July while IBEX is held in October.  One is not so sure about history but it does look as if IMTEC is recreating itself!

             The primary reason for this move is clearly that there are too many boat shows with too few boat and accessory exhibitors to support them.   This is especially true of boat dealers.  They provide the core component of a boat show but their rapidly dwindling numbers literally means there are not enough to ensure the success of any particular show. 

Ben Wold, Executive Vice President – Shows, NMMA, points out that the “NMMA has produced 8 shows that include other exhibits/activities in addition to boats and accessories for a number of years.   One of the better known ones is the Louisville Boat, RV & Sportshow where some 40 to 50 percent of exhibitors are marine, 20 percent Recreational Vehicle (RV) and the rest fishing, hunting and the like.  The Chicago Boat, RV & Outdoors Show is another good example”.  Wold sees a future where there will be fewer, bigger shows like the New Orleans show that people will be prepared to travel further for because of the multi-sport approach and that the 2^nd and 3^rd tier shows will fade away.

                The move to add other outdoor activities to boat shows makes sense on a number of levels.   Almost 40% of boating participants also go camping and/or biking while some 24% of them golf, 13% go hunting and so on plus the people whose primary sporting activity is one of these other activities will now be introduced to boating.           

                Look for a number of big brands in the outdoor industry that are virtually unknown in the marine industry to make their presence felt.       

                When bankrupt companies reorganize they do so in part by negotiating down the debt they owe their suppliers.  The suppliers most of whom are unsecured creditors are some big names in the supply side of the industry and it is these companies (and there are many of them) that are likely to get hurt.  The engine manufacturers take the brunt of it with Volvo Penta of the Americas being owed U$5.2 million, Mercury Marine (a Brunswick subsidiary) U$1.89 million and  Bombardier Motor U$1 million.  Finance providers GE Commercial and Textron are owed U$1.5 million and U$0.5 million respectively. 

                There is a cruel irony to the fact that Volvo Penta of the Americas is one of the largest unsecured creditors.   Their CEO, Clint Moore was on a panel of “industry giants” in November last year as was the Chairman of Genmar Holdings, Irwin Jacobs, discussing the state of the boating industry.  When the subject got round to predictions for 2009 and beyond Moore said “…this is only going to get worse.  We don’t see it getting better.”  Jacobs responded by saying “About 30 days ago, I would have agreed with Clint, but I have changed my mind and frankly there are some things going on out there right now that are changing.”  Jacobs went on to add that he “was convinced there would positive changes late in the first quarter and that they would only be felt by those who have the tools and the product”.

                The real cause of the problem was that boat builders like Genmar and their dealer networks were selling boats to people that could not afford them.  Banks made it too easy to borrow up to 110% of the purchase price and then pulled out of retail financing because of the default of large numbers of boat owners on their loans.   With banks credit requirements for boat loans becoming much more severe fewer people qualified.  This resulted in fewer buying boats thus more inventory being financed by dealers who, in turn, could not pay off their inventory loans.   This has lead to repossession of dealer inventories that are today being liquidated below wholesale prices.  This in turn means that dealers cannot sell their current inventory leading to more repossession and so the spiral continues……

     Both headlines are accurate.  The first reflected the information from Statistical Surveys that said “Sales of all fiberglass boats, including PWCs, were down 35.2% in April”.  This information is corroborated by the Bellwether Report from Info-Link (www.info-link.com/bellwetherreport.asp).  The second headline reflected the information contained in a report from The Conference Board (A not-for-profit organization that creates and disseminates knowledge about management and the marketplace) which says their Consumer Confidence Index “is at its highest level in eight months” (www.conference-board.org/economics/ConsumerConfidence.cfm).

     The likelihood is that there will not be an up-turn in boat sales any time soon.  There are a number of reasons for this.  One is that boats are a discretionary purchase and American’s are saving more and spending less.  Another is that three out of four current boat owners have household incomes of less than U$100,000 (NMMA 2007 Statistical Abstract), a demographic hurt by the current recession.   The key reasons however are that the normal seasonality of boat sales where they start increasing in January peaking in May simply has not happened in 2009 and that boat loans are much harder to obtain. 

     One of the more compelling statements that we should all be planning on lower levels of boat sales is that quoted on the front page of the June issue of Soundings Trade Only from Brunswick chairman and CEO, Dustan McCoy.  He says “We’re not planning for the market to come back to 2005 levels likely within my working career, and I plan to be around for a while.”

     There is however room for focused optimism for a good number of businesses for two primary reasons.  First, there are still some 17 million boats over here and most of them will be used and/or worked on.   Second, nearly 60 million adults (that’s more than one quarter of adults in the U.S) went boating in 2007.  There is no reason to suppose they will not want to go again or own something to enhance their experience.

     While the numbers above should not be considered a business’s total addressable market they are large enough to provide a basis for optimism.  A business that knows its total addressable market (the total amount of revenue it could generate if it acquired every potential customer for its products) is going to be in a much better position than those that do not.  Having that knowledge should spur businesses to focus their efforts on new ways of reaching and selling to those customers.   New ways are required because if a business’s existing products, promotion and distribution were really compelling and effective they would have reached market domination already.  Since very few businesses or brands can claim such domination there is room for focused optimism for others.  There is room in the existing market for determined businesses to make considerable gains.

     The second and arguably more important announcement from the NMMA is that the New York Boat Show, the world’s first and longest-running boat show is moving out of its Christmas holiday dates back into its traditional time frame in late January.   Having the show start just after Christmas and running over the New Year irritated exhibitors by disrupting family holidays and, according to the NMMA, caused attendance to drop off for the same reasons.  The 105^th New York boat show will take place January 20-24, 2010 and will change from a nine day show to a five day show. 

     There is no dispute that there are too many boat shows here in the U.S.  The argument has always been which ones to support.  With the large number of key exhibitors (boat dealers) exiting the market boat builders will have a greater influence over that debate.  Look for more boat show initiatives from the NMMA including the Internet and virtual boat shows in support of their boat builder constituents.

     Small sailboats 11ft and under were down by 486 units while the 12ft to 19ft range was down by 1,619 units.  Boats in the 20ft to 29ft size range fell by 201 units with only 940 boats built in 2008.  The 30ft to 35ft range was off by a similar 224 units for a total production of 426 boats.  Bigger boats in the 36ft to 45ft range saw a decline of 157 boats to a new low of 695 boats built while the 46ft plus range shrank by 43 units to 206 boats built.

     While the adverse economic conditions in 2008 undoubtedly influenced the fall off in production in 2007 the fact that that production has steadily declined over the past 8 years clearly suggests sailing has lost its appeal.   The difficult questions are why and what to do about it.  The “normal” reasons given for the decline are that sailing is expensive, time consuming and something that requires a high skill level.  The expense and time consumption issues are being dealt with to a certain extent by the growing popularity of fractional ownership.  The skill level requirement can and is being met by the sailing schools.  It is likely therefore that unspoken (or unknown) issues are behind the decline.  Our industry normally relies on insiders for solutions – perhaps it is time they asked outsiders!

The practical implication of this is that 85% of the assessments will be redirect to manufacturer-specific marketing efforts to assist dealers in moving products while the remaining 15% will be invested in the public relations program, support of DiscoverBoating.com, interactive and online efforts, Marine Industry Dealer Certification plus other core programs.  Only the television advertising has been cancelled and if you ask Thom Dammrich about the implications of this he says “Grow Boating is more than just a 30-second commercial.  The ads are important but so are the other elements of the campaign which will keep spreading the message.” There is some evidence that the industry will step up to help spread the message as is evidenced by the Boats.com and YachtWorld.com recent announcement that they have donated 1 million banner advertising impressions per month to Discover Boating.

One of the big consequences of all of this is that what happens in 2009 really does not matter; all activities are going to be compared to 2008.  The primary comparison will not be whether a business did better or worse than in 2008 and to what degree, but whether it survived or not.

This is not as apocalyptic as it sounds.  There will still be some seventeen million boats here in the U.S and the majority of them will still be used and be in need of products and services.   The big questions that need answering therefore are “how do I reach these owners in an efficient manner, give them the compelling reasons why they need to use my products and an incentive to purchase them and do all of this in a manner in which my competitors cannot compete?”  Businesses that achieve these objectives efficiently are almost certainly going to need to do things differently than they have done before.  In doing so they will ensure their survival.

Anecdotal evidence suggests about 10% or some 500 boat dealers have already closed their doors with another 10% likely to do so.  The Minneapolis based Crystal-Pierz Marine announced at the end of July it was closing six of its 12 stores.  The Sacramento Bee newspaper reported at the end of October that “more than a half-dozen Northern California boat dealers have sunk into bankruptcy or closed their doors this year.”  Talk to marine bankers involved in inventory finance and floor plans and they tell of large repurchases of boat dealer inventory by the builders.  Read Brunswick’s third quarter earnings report and see they have marine receivables owing to them of U$ 275 million.  It is not a pretty picture and it is likely to get uglier so what does it portend for 2009?

Boats will still be sold in 2009 but they will include a disproportionate amount of 2007 and 2008 models.  Boat builders are already experiencing the consequences of this as is evidenced by the number of plant closures and temporary closures.  Brunswick has reduced their pipeline by about 1600 boats compared with this time last year but now have 31 weeks of inventory in the pipeline compared with 26 a year ago.     The unavoidable consequence of this year’s dealer casualties is collateral damage to boat builders next year.  It is no wonder then that the funds destined for the Discover Boating campaign have been re-routed to builders and their dealers.

The realization had begun to sink in that there were banks that were still making boat loans to credit worthy individuals.  Yes these individuals have to make a down payment of 15% to 20% on the boat of their choice, have a good debt to equity ratio, good credit score history together with some liquidity.  In short they have to show the banks they could afford the boat – what a concept!  There was a pervasive attitude throughout the show there would never be a better opportunity to make a deal and deals were made, boats big and small were sold. 

Perhaps the best example of the positive attitude was that of Stanton Murray, owner of Murray Yacht Sales, a major Beneteau and J Boat dealer.  He said that shortly before the show when his sales team started telling him that prospects were pulling back from their purchase “I called every one of them myself.  I pointed out to them that the reason that caused them to want to buy the boat in the first place were the benefits it would bring to their lives as a whole, not the fact that could afford it. Those reasons still exist.”

The NMMA states that as of September 16 Discover Boating has generated more than 15,000 hot prospects (prospects that give permission to pass their names on to manufacturers and dealers) and that more than 75,000 ‘Get Started in Boating’ DVDs have been sent to consumers this year.  This surpasses their goal of 65,000 and is approximately 18,000 more than last year’s total.   These numbers are interesting because NMMA research shows that just over 5,000 people who received the same DVD in the period March ’06 to January “08 bought a boat after receiving the DVD.  (It should be noted that there were other people who got into boating for the first time who did not get the DVD)       

In April 2008, Michigan State University, at the request of Grow Boating Inc., was asked to determine the lifetime value of a single new boater to the industry.  Their preliminary findings were that:  The average boater has purchased 4.1 boats (new and used) and that the average value of each boat/engine was U$32,084 excluding finance & insurance.  This does not seem like a lot of money until you do the math.  Each new boater will spend a minimum of U$131,544 over their boating lifetime.  5,000 new people getting into boating a year will spend U$657 million.  5,000 people a year for 10 years will generate some U$6.57 billion.  That seems like real money!

It comes as a surprise therefore that so little seems to be said or done regarding innovative ways to deal with the situation.  Many believe all that needs to be done is to cut their cost of doing business to an absolute minimum and wait for the downturn to end because the market will return to normal.  A growing number, however, are beginning to believe that the market will never return to normal.  They have come to realize that the cost of boating is becoming prohibitively expensive and not because of the cost of fuel.  It is beginning to sink in that there are too many industry mouths trying to feed from the supply chain and that this is the primary pressure forcing prices upwards.  The primary culprits are the costs of promotion (magazines and boat shows) and distribution (inventory, warranty and service).   The announcement that the Ferretti Group will acquire the Allied Richard Bertram Marine Group is indicative of the innovation required.  Ferretti now has a powerful distribution platform that it owns to sell and service its products in Florida and the U.S.   American boat builders might consider emulating this example.

On June 26 Brunswick announced that they have taken immediate action to reduce their headcount by another 1,000 employees (they had reduced it by some 1,250 employees earlier in the year) and more are contemplated.  When all the actions have been completed Brunswick believes they will have reduced their marine operations and staff functions by some 4,000 hourly and salaried employees (largely concentrated in their marine operations) or 25% from the levels at January 1st, 2008. 

You could be forgiven for thinking that with all of this specific and draconian activity Brunswick will be well positioned when the market picks up.  The reality is that Brunswick is still not yet in charge of its destiny.   This belongs in the hands of their dealers.  The full impact of this year’s decline in dealer sales will not be known until the end of the summer and there are some knowledgeable people in the industry who are very worried about the number of dealer bankruptcies that could then take place.  Brunswick’s helplessness here is highlighted in their June 26 statement which said “We will continue to support and more importantly improve our relationships with our distribution partners through continued investments in growth and in such efforts as our Dealer Advantage program”.  Nothing specific, just ‘happy talk’. 

Many companies stay out of this market because of the perceived cost of being involved.  They believe that the expense of representation, advertising and distribution is simply more money than they (or their products) can afford.  This used to be the case when success meant advertising in all the big name “national “publications and product availability in every retail store.  Not anymore.  Awareness and Availability are the two words that now drive sales in this market. 

Awareness is not only the boating consumers knowing about a product, why they should own it and where they can find it.  It is also about the manufacturing company being aware of those products strengths/limitations in the different climatic regions of the U.S and adjusting their strategic thinking and income expectations accordingly.

Availability is not about a product being in every store and lost in the clutter.  It is about being received at an affordable price within a reasonable period of time that can be quickened for an additional charge. 

The reality is that companies exporting to the U.S need to think of it as a collection of regional markets like the E.U.  No single E.U. publication reaches all boating enthusiasts and neither do any in the U.S.  Regional advertising supported by specific retail and product fulfillment strategies is the way of the future.  Need more convincing?  Consider this; large “national” boating magazines in the U.S have paid circulations of some two hundred thousand when there are 18 million boats in use.

A total of 8,000 television advertisements, an increase of approximately 1,000 over 2007, will air from March through May on several major cable TV networks throughout the country.  “Eight thousand spots that run nationally translates to 8,000 spots running in every city, big and small, across the country, with no skew to any particular region” said Carl Blackwell, VP Marketing/Communications for both the NMMA and Grow Boating Inc.  Discover Boating print advertising will run in the March through May issues of 14 national magazines ranging in titles from Automobile through Ladies Home Journal to Science Illustrated.  In addition a total of 19 million business reply cards will be inserted in the May editions of these 14 magazines.  Banner advertising will take place on some 700 websites and keywords will be bought year round on search engines such as Google, Yahoo! and MSN.  A new initiative this year is mobile phone advertising.  According to the NMMA “there are 60 million internet-enabled phones in the U.S., and research indicates that information about weather conditions is the most sought-after content.  As a result, Discover Boating will advertise with the Weather.com, a top-ranked mobile content provider.” 

While the economic and weather forecasts might be dismal the thought and promotion of boating clearly is not!