More than 100,000 manufacturers, retailers, brokers and buyers gathered in Miami for one of the largest boating industry events in the world.
Each year, the Miami International Boat Show and the luxury Yacht and Brokerage Show in Miami Beach take place simultaneously. Showboat events feature thousands of personal watercraft and accompanying water accessories, all of which are up for grabs.
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Whether aluminum fishing boats or mega yachts, one theme prevails in all price categories of both shows: boat sales are back.
“Almost everything sells,” says Thom Dammrich, president of the National Marine Manufacturers Association (NMMA). “Pontoons, ski and wakeboard boats – both are growing in double digits, and saltwater fishing boats are very strong.”
This is good news for an industry rocked by the recession. Like other types of big-ticket discretionary items, demand for recreational boats has plunged dramatically in the economic downturn. New boat sales have fallen 60% from their pre-recession peak, remaining sluggish for years as the much larger second-hand market held steady. The wave of struggling supply attracted enterprising bargain hunters, who dominated the market.
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Still, if the buzz at the Miami shows is any indication, the tide seems to be turning.
The NMMA estimates that new boat sales rose 7-8% last year and forecasts similar momentum for 2015. While sales activity is still about a third below the mid-2000s peak , consumer spending on boats, marine accessories and other related goods jumped. back to pre-recession levels, according to the data. In 2014, spending on recreational boating in the United States approached $40 billion.
The wealth effect
A yacht on display at the Miami Boat Show in Miami, Florida.
Jodi Gralnick | CNBC
It is perhaps no coincidence that boat sales have followed a booming Wall Street, which is perched near all-time highs.
“Over the past couple of years we’ve seen a slow improvement, and that’s directly tied to the stock market,” says Mark Elliott, yacht consultant at International Yacht Collection.
“As the stock market goes up, our phone calls go up, so with the stock market in uncharted territory and pent-up demand, people are buying yachts,” he added.
Elliott says demand from European and Russian buyers has started to subside, but wealthy Americans are making a comeback. He expects to see some of Russia’s 250-400ft mega yachts hitting the market this year, given the far-reaching effects of Western sanctions and the steep drop in the rouble.
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At the Yacht & Brokerage show, the yacht consultant is selling a series of used yachts moored along Collins Avenue, including a 2003 125-footer that sleeps 10 plus a crew of eight, has a hot tub and of a call for tenders.
The price is $8.4 million, although it can be chartered for $85,000 per week. Maintenance costs about a million dollars a year and it costs $40,000 to fill the gas tank.
The recovery is also rooted in low-cost personal watercraft. Entry-level ships are also benefiting from an increase in demand. Industry leader Brunswick Corporation has tripled its pontoon boat production to meet demand.
“Our larger models have been fully sold for over a year. The pontoons and fishing boats – which generally have a smaller and different income level – have now started to reach pre-recession levels,” said said Dusty McCoy, general manager of Brunswick.
“So one end of the market and the other end … are very strong and developing very healthily,” he said.
Experts report an improving job market, rising consumer confidence and rising disposable income, spurred in part by cheaper gasoline prices.
NMMA’s Dammrich notes that when gross domestic product increases by 3% or more, boat sales tend to do well. In the last quarter of 2014, annualized growth was just below this threshold.
Another key reason: Manufacturers rolled out more models with more bells and whistles, at lower prices. Take Brunswick: the company has launched 11 new boat models each of the past two years, doubling its offerings in previous ones.
“The used market is our biggest competitor and it’s bigger than it was before the recession…so for us to be able to bring the used boater into the new market, we need to do some things,” McCoy said. “Get the right price for new boats so the gap between new and used starts to narrow, but more importantly…we need new boats with new innovation features.”
This approach seems to work. Brunswick recently reported earnings above consensus estimates, as growth in its boat segment jumped 23%.
Still, the industry faces headwinds that could frustrate the recovery. The stronger US dollar is already reducing overseas sales, with US-made boats now more expensive in other currencies.
If slowing growth at home and abroad starts to weigh on the US rebound, that could have an effect as well. The slow and choppy recovery in the US real estate market could affect recreational boating, as new home sales and new boat sales are directly correlated.
Nonetheless, Miami brokers say business is looking buoyant. And buyers certainly have their picks, including a $3 million 110-foot sailboat with a 125-foot mast and a $1.2 million 50-foot cigarette racing boat inspired by the new road car. Mercedes-AMG GT S 2016.
The latter goes up to 135 miles per hour and it is painted with the same yellow solar beam. Unfortunately the car is not included.