Friday, Aug. 1, 2008

Boat industry takes on water

High fuel prices, tight credit, slumping economy blamed for lower sales and related spending

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Brian Lewis⁄The Gazette
‘‘We’ve definitely seen things slow down this summer,” says Stephen Ripley of Fawcett Boat Supplies in Annapolis. ‘‘People are reluctant to make big purchases.” Nearly 35 percent of dealers are seeing new boat sales decline by more than 30 percent, according to a survey of 250 U.S. dealers by RBC Capital Markets of New York.
Yachtsman Dan Grove has forgone his annual boat trip to Nantucket, Mass., this year, opting instead to cruise to closer locations such as St. Michaels on the Eastern Shore.

The Annapolis man is among an increasing number of boaters cutting back their water time this summer as the price of fuel sold at marinas has soared to nearly $5 a gallon. With fewer boaters, the overall boating industry in Maryland – from retail stores to dealers – is also facing a severe downturn.

On a recent Friday afternoon at Annapolis Yacht Basin near Pusser’s Caribbean Grill, Grove filled only 300 gallons of his boat’s 1,300-gallon tank. Still, at $4.81 per gallon, compared with $3.88 at a nearby land gas station, Grove’s bill totaled about $1,140. Had he topped off the tanks, he would have dropped $6,253.

‘‘In normal years, we would be boating seven times as much,” Grove said.

Boat sales are ‘‘extremely poor” this year, according to a recent report from RBC Capital Markets of New York. Nearly 35 percent of dealers are seeing new boat sales decline by more than 30 percent, according to the company’s survey of 250 U.S. dealers.

In Maryland, that trend is reflected in fewer watercraft registrations in recent years. In 2007, there were 205,838 registered watercraft, a decline of 3,922 boats from 2004, according to the Maryland Department of Natural Resources.

Yachts, yes;smaller boats, no

At Annapolis Landing Marina on Spa Creek downtown, fuel sales have fallen by close to 15 percent from last summer, said dock master Doug Smith. He said smaller motorboats especially are absent from the waters this year.

‘‘People with mid- to bigger-sized boats are out on the water just as frequently,” Smith said. ‘‘It’s the smaller, fishing-type boats you don’t see as many of. ... The people with the 50-foot yachts have more disposable income.”

Across the creek on Compromise Street, Fawcett Boat Supplies co-owner Stephen Ripley said that while foot traffic at the shop has been on par with years past, boaters have simply been spending less since the spring. For now, Ripley is focusing on controlling expenses such as payroll while increasing the prices of some products and anticipating a turnaround next year.

‘‘Boat users are feeling it in two ways — in gas prices and in products,” Ripley said. ‘‘We’ve definitely seen things slow down this summer. ... We really started seeing a big drop-off in demand. People are reluctant to make big purchases.”

Sales of some Fawcett products have plummeted as much as 30 percent.

Fawcett, which caters to owners of larger sleep-on boats 30 feet or longer, has been selling fewer luxury items such as onboard grills and fancy kitchen accessories and is instead moving parts and supplies for repairs or necessities. Fawcett’s customers view their boat as a second home, Ripley said, and ‘‘are more conservative” with expensive upgrades when money is tight.

Like many dealers and retailers in the state, Ripley remains optimistic that the industry will bounce back with the economy.

‘‘People are drawn to the water,” Ripley said. ‘‘The industry might be hurting, but people still love the water and will keep coming.”

Party timein Baltimore

Dockmaster Scott Anderson is holding more pool parties and events on land at the bar and restaurant to keep the Baltimore Marine Center financially afloat.

‘‘We’re actually [fuller] than last year, but people don’t seem to be going out as much,” Anderson said of his slips for a range of boat sizes. ‘‘We work hard to keep our customers. We know this is their disposable income, and we try to give them a good value for it and offer good amenities. ... We’re having to entertain.”

The nearby Baltimore Inner Harbor Marine Center caters mainly to transient boaters, who travel from port to port each summer, but business has dropped by as much as 25 percent, said manager Ben Ayres.

With 100 transient boat slips, Baltimore Inner Harbor Marine Center welcomes up to 5,000 boaters in an average summer, or roughly 50 each weekend. This year, some weekends have drawn between 25 and 30 boaters, and sometimes as few as 10, Ayres said.

‘‘We really rely on travel boaters for income,” Ayres said. ‘‘When the price of fuel jumps from $3 one summer to $5 the next, it really hurts people. You might put $40 in your tank with a car, but most boats have 100- to 200-gallon tanks. You can pay as much as $800 for one fill-up. ... We’re going day-to-day and getting by. There’s not much we can do about it.

‘‘Marinas are going to be the first thing to suffer,” he said. ‘‘Right now people are trying to hold onto their homes – the boats will go first.”

Fuel prices run higher at marina stations because they pay higher insurance premiums for being on the water, are open fewer months of the year and have fewer customers than gas stations on land, said Kevin Little, national sales director for marine sales with Mansfield Fuel Supply of Gainesville, Ga.

‘‘Historically, marina consultants ... try to achieve a 20 [percent] to 25 percent markup over on-land gas stations to cover costs.” Little said. ‘‘With today’s market, that’s not possible.”

‘Boat salesdefinitely down’

Boat dealers throughout Maryland are shouldering a larger inventory that is becoming outdated as newer models are introduced. Like dockmasters, dealers blame rising energy prices and sagging consumer confidence as the primary reasons for the weakness, but are also concerned about the financing market.

‘‘Boat sales are definitely down in Maryland,” said Susan Zellers, executive director of the Marine Trades Association of Maryland, and dealers are hungry for other revenue-generating ideas. One dealer started carrying cigars to pump up profits, she said.

At the association’s September meeting, members are scheduled to discuss money-producing ideas for marinas and boat sales, such as encouraging boaters to picnic on the water.

‘‘Marinas are getting creative with their slip holders,” Zellers said. ‘‘The name of the game is to keep people boating. The last thing we want to see is people not using their boats. We’re worried everyone will grab their golf clubs and head to the country club because it’s cheaper.”

Resorts see more interest in rentals, smaller watercraft

At the state’s western- and eastern-most points — Deep Creek Lake and Ocean City — boat rentals and sales of personal watercraft are bucking the downward trend, dealers say.

Gary Pfirrmann, owner of Deep Creek Lake Boat Rentals, said that while he’s noticed fewer boats on the water, rentals of pontoons, ski boats and fishing boats have remained steady.

‘‘I don’t know if they spend $200 or $500 on gas, but they still are renting,” Pfirrmann said.

In Ocean City, Eric Fiori is expanding his Action Watersports Jet Ski sales and rental shop to about 9 miles south, to Berlin. The business has been absorbing the fuel increases instead of passing the costs on to customers.

‘‘When money’s tight, we really try to boost our customer service, so people keep coming back year after year,” Fiori said. ‘‘Our sales are about same as last year – better in some ways. Jet Skis are a little more fuel-efficient” than boats.

Maryland boating industry

Registered power boats in 2003: 176,842

Registered power boats in 2007: 172,245

An estimated 6.5 registered boats creates more than one full-time job.

In 2006, the boating industry was responsible for 31,755 jobs.

The boating industry contributed $1.8 billion to the gross state product in 2006, $1.04 million more than farming, fishing and hunting combined that year.

Source: Maryland Department of Natural Resources, University of Maryland Sea Grant Extension, RBC Capital Markets

Boat registrations in Maryland decline

2004: 209,760

2005: 209,302

2006: 207,279

2007: 205,838

Source: Maryland Department of Natural Resources

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