June | July 2020
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>> A perfect storm? More subtle forces are at play
The consensus I am getting from talks I have had with industry leaders over the last few weeks is that the current crisis is not similar to 2008 – that companies are generally less indebted compared to the financial meltdown, that market liquidity is not a problem, oil prices are close to historic lows and financial institutions are considerably more robust, all of which tells us we can tear up the 2008 playbook.
We’ve also seen an unprecedented global response – in the last three months, as much money has been pumped into markets as was spent in three years after the Lehman Brothers collapse – and an unprecedented level of government support in the form of easy access loans and furloughing schemes.
The global pandemic has filled the market with fear perhaps more akin to post-9/11, amplified by the fact that global travel is only just beginning again, having severely disrupted one of the key engine rooms for our industry – boat shows. The question that haunts all industries is just how long the ‘tail’ of the pandemic will be. Will the shows from September onwards in 2020 take place? What will they look like if they go ahead and will people travel to them and boat owners free up their boats for display?
Without key shows, builders and dealers are bound to see an impact in sales, whatever the success of virtual alternatives. In theory, serial producers of boats from 30ft-60ft, power and sail, are more likely to be at risk, given the need to shift higher volumes of product to buyers who often are more dependent on finance.
But here’s where we diverge from the 9/11 scenario. Talking to builders and dealers, the mantra in March and April was that customers were desperate to get their boats – and now, as lockdowns lift and marinas open, people are eager to get out on the water. With holidays abroad out for now, we’re already seeing a mini boom in ‘staycations’ and we’re hearing anecdotal evidence of buyers settling for a smaller boat they can take delivery of now to use at home, deferring the bigger boat purchase in the Med for next year.
On paper we’re due a perfect storm of reduced demand, high unemployment, higher taxes and GDP slumps across the globe – a toxic mix for a discretionary spend business such as ours. On the ground, however, more subtle forces are at play. RV sales that should have tanked in the US are taking off, and cancelled orders – though there have been some – don’t seem to have happened at the rate one might have expected, and importantly boating’s beneficial appeal as a healthy place in which to escape, has been spotlighted. Our industry could be a significant benefactor, for instance, of cruise ship industry woes as wealthy families turn to leisure boating for fear of being caught aboard these floating colossi if another outbreak occurs.
The devil’s in the detail as always. Evidence suggests lockdowns have actually spurred individuals to go ahead and buy the boat of their dreams, but conversely will someone put down a seven figure deposit on a large motoryacht that they won’t be able to take delivery of for a year, with so many questions about second waves and more lockdowns? If we can get the boat shows up and running soon with all the social distancing protocols in place and if we don’t have a second wave, then I think, with the limited view we currently have, that the market could suffer a 20-25% hit this year – significant, but less perhaps than we might have once feared – followed by a bullish recovery in 2021. Agree, disagree? E-mail me your views.
IBI will be discussing the market and offering predictions in a series of presentations online at IBInews.com in the coming weeks.The major threat facing our industry during this difficult period is allowing it to come to a complete stop. With no doubt, ensuring employee safety and complying with government instructions should be an absolute priority.
Ed Slack | IBI Editor
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