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Monday
Feb062012

Drop in New Boat Sales Affecting Marinas

This article, by Dennis Kissman, was published in Marina Dock Age – November 2009. 

How much of an impact is the precipitous drop in new boat sales having on marinas?  I think it is safe to say that the impact varies from one marina to another.  For this article, we are going to define three categories of marinas and see how the decline in new boat sales affects each.  The three categories for marinas include:

• full service marinas with a boat sales operation

• marinas with both wet slips and dry stack storage but without boat sales

• new marinas that have recently opened or are presently under construction.

There is one general assumption that we can all agree on and that is without new boats coming into the marketplace, the demand for wet slips and dry stack storage is not increasing.  Thus, the marina owner is competing for existing business, which is more difficult and requires a different strategy.

New or renovated marinas

Of the three identified categories, the one having the most difficulty in these economic times is the marinas that have recently opened or are currently under construction.  Unless a new marina has a superior location in the marketplace, the only way for it to gain market share in this economy is by having the lowest rates.  The problem with trying to compete on rates is that a new marina will usually have the highest per slip or rack investment of any of its marina competitors.  If a marina cannot cover the return on its investment, it is only prolonging the inevitable.  In the end, it is not only hurting the rest of the marinas in the marketplace but also itself. 

Under this scenario, the best advice I can offer is to charge rates that will make a marina financially viable when competing in a good economy.  In the meantime attempt to renegotiate your agreement with your lender until the economy turns around.  Remember that the boating public is hurting as much as marinas are, so boaters are making decisions based strictly on price because there is no loyalty in this economy.

Marinas with dealerships

I have often said in the past that the boat sales business is completely different from that of marinas.  Therefore, a marina that includes a dealership needs to identify itself as either a boat dealership with a marina or a marina with a boat dealership.

With this economy, however, I am rethinking my position and believe that having boat sales as part of a marina may be a positive for marina occupancy.  There are several of the combined entities that seem to be successfully weathering this crisis.

I had the opportunity to discuss the situation with Jeff Olson, general manger of Saratoga Boatworks, who operates two combined boat dealerships and marinas in upstate New York.  I asked Olson how he is coping with these economic times, and he told me that his business model is evolving.  As a result, he is packaging his product differently than he did a couple of years ago.  His focus is on selling more than boats by offering his customers a total boating experience called “Worry Free Boating,” which includes everything from dockage to winter storage and all the services required for his customers to have a peace-of-mind boating experience.

This is not a new idea, but the execution of the plan makes the difference between success and failure.  People are still buying boats, both new and used, but not in record numbers, and buyers are much more conscious of the value they are receiving for their money.  Programs that appear to be a sham without adding real value to the deal are falling by the wayside.  Now is not the time for marinas to cut corners to save a few pennies because in the future that could cost them dollars in potential business.

Olson estimates about five percent of his customers have left boating due to the economy.  But thanks to his new and used boat sales, Olson has been able to keep his marinas at 100% occupancy without being pressured to cut dockage rates.  This is an example of how a marina can benefit from a dealership that manages its costs.

Marinas without dealerships

Now the question is how a full service marina without a dealership copes with this economy.  It appears that most marinas in stabilized markets are not cutting or raising rates; although there is indications that individual, deals on rates are being made.  This is a very bad practice because boaters do like to talk, and the quickest way to alienate customers is by charging different rates for the same service.

If a marina needs to make a rate reduction, then that reduction should be universal.  The decision to reduce rates should be made carefully though because if a marina reduces rates by 20 percent, it will take several seasonal cycles to get the rates back to where they were regardless of how fast the economy recovers.

Besides focusing on the rate reduction question, marinas also need to focus on accounts receivable.  Remember that boats do not disappear, but owners often do.  Marinas need to stay vigilant and watch their accounts receivable closely to ensure they are paid and to ensure that boat owners don’t just take off and leave marinas with the headache of disposing of some old boat.  Marinas should immediately look into any change in a customer’s payment pattern.

Conclusion

There is no doubt that a decline in new boat sales will have a long term impact on the demand for slips at new and existing marinas.  This means that marinas must upgrade their facilities now so they stand out in the boater’s mind.  Furthermore, marinas that include dealerships need to make themselves into one-stop shops that offer customers everything they may need.  As Olson has shown, such a setup can keep occupancy rates up at a time when other marinas have empty slips.  

Dennis P. Kissman, president of Marina Management Services Inc. in Boca Raton, FL can be reached by phone at 561-338-5800 or via e-mail: dennis@marinamanagement.com.

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