Boat, RV makers to buyers: Don't worry, be happy

By James B. Kelleher - Analysis

CHICAGO (Reuters) - When the Chicago Boat, RV & Outdoors Show opens this week, exhibitors have a ready answer for consumers spooked by the deep economic downturn and surging unemployment.

Stop worrying. You can afford this.

Faced with one of the most significant recessions in decades, manufacturers and retailers of pleasure boats, campers and other recreational products are setting aside two areas inside the vast McCormick Place convention center to showcase the less-expensive ends of their lines.

Inside these so-called "Affordability Pavilions," would-be buyers with "smaller budgets" will find an array of boats and RVs they can finance for $300 a month or less, according to the National Marine Manufacturers Association trade group, which produces the show.

If the industry seems to be encouraging people to whistle past the graveyard, Rochdale Research analyst Hayley Wolff predicts it is not would-be buyers who are headed for the cemetery. She is more worried about retailers and manufacturers.

After enduring three consecutive years of rapidly falling boat sales, and four years of declining RV sales, retailers and manufacturers now face what Wolff predicts will be a "precipitous" decline in sales again in 2009. Many are unlikely to survive the first half the year, the industry's key selling season.

"You are about to see a huge contraction in the industry," Wolff said. "Over the next four months you are going to see retailers closing their doors at a pace the industry has not ever experienced."

DESPERATE DISCOUNTS

That loud sucking sound coming from the industry is not just the watercraft side of the business. At last month's Recreational Vehicle Industry Association trade show in Louisville, Kentucky, Craig Kennison, an analyst at Robert W. Baird & Co, estimated attendance was down 40 percent.

"We expect the winter to take more casualties as dealers and manufacturers face liquidity problems," Kennison said. The good news? "Desperate manufacturers are discounting aggressively to convert inventory to cash -- sometimes below cost."

So the emphasis on affordability at the Chicago show is not disingenuous. There really are deals out there, with retailers cutting prices and manufacturers throwing in a lot of their own incentives.

The question is: Will middle-income consumers, faced with skyrocketing unemployment and unprecedented economic uncertainty, buy?

Tom Dammrich, the head of the NMMA, says yes. "It's not as many people as we'd like to have buying," he said. "But they're buying."

Middle-income buyers matter most. Although one-of-a-kind, multimillion-dollar mega-yachts provide the eye candy at the boat shows, this is an industry that lives or dies by volume.

Its best-selling products are much more affordable watercraft. The average price of a new boat is $13,944, according to the latest NMMA figures. The average boat, motor and trailer package is somewhere near $27,000.