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2nd Attempt-Coronavirus Covid 19 and the Marine Industry

Discussion in 'General Yachting Discussion' started by olderboater, Apr 6, 2020.

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  1. olderboater

    olderboater Senior Member

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    Please, people, this is not to discuss the politics or what any leader of any country should or should not have done or whose fault any of this is. This is only to discuss the impact of things as they are or we anticipate them being on the Marine Industry.

    I'm only restarting this after communication with Carl. I will also be quick to report posts taking this off into politics and other discussions as I think this topic is very important to Yacht Forums. We're talking about the industry and it's future and in many cases it's very survival. I hope those who are in the industry and those in contact with people in key positions in the industry will add input to this topic. Now following is what I've learned or been told from the many people I've talked to in the various areas of the industry.

    First, talking to yacht builders. On the record, they all say they're fine but others may not be. Off the record a bit less confidence. Talking to Italian builders they anticipate another round of elimination of small Italian builders, those without the capital to survive. In their own businesses, they've received cancellations of recent orders and have had some clients talking about how to escape from boats already started. The large Italian builders expect this to be equal to or worse than 2008 but feel like they're positioned to work their way through it. They also feel their ownership and investors will stay the route because they really don't have much of a choice.

    British Builders. I'm not close to anyone with a British builder so the only person I talked to says "Everything is Fine." Now, the Italian builders and US observers are quick to say otherwise. Between Brexit and Covid 19 and self induced issues they already have, plus the ownership of one builder, most others see serious problems and the likelihood of a sale at a huge discount or bankruptcy. Now the problem is that both sides I'm hearing from have their own agendas. I personally think one British builder already had problems and Covid 19 will be so convenient for them to blame for their failure.

    US Builders. There are three major US builders that are financially strong. They're shut down now and they believe a large percentage of future orders on hand will be cancelled. They don't know if it will be as bad as 2008 or not. The one that is owned by investors is much like the Italian builders said, the investor can't go anywhere, it's part of being an investor today. Now, everyone I talked to fully expects one of the other builders to go into bankruptcy again. One thing I heard from US builders was also that even before they shut down, the supply chain was about to cause them serious issues with China and much of Europe shutting down ahead of them. They feel we'll likely resume last so that shouldn't be an issue going forward.

    US representatives of Asian builders don't foresee a problem with the finances of their businesses although they do with at least one American owned Asian builder. Again, that may be their own prejudice. Now, they all see problems getting orders. First, just shortage of funds for luxury purchases. Second, due to an anti-Chinese mood.

    US small boat manufacturing. The one thing I heard most was brand consolidation. They said most of them had been through the recession and could handle it again but where single owners have multiple brands they expected some to be eliminated. It makes sense if you have 4 brands and your business drops 80%, then to go to two or three brands, build fewer SKU's just is logical. One question I did ask is what they expected from Brunswick. Note, no one I spoke to works for Brunswick. Many saw this as the death or start toward the death of Sea Ray. Everyone saw smaller brands in serious trouble.

    Keep in mind that this is the key shipping and selling season for the US boat market. The season starts with pre-season boat shows. The big selling months are March to May. June is weak and no boats sell after June in most parts of the country. This year is lost for the most part. Most expect a great attrition of boat dealers.

    One comment as a general observation on this and all other industries. We've had many years now of increased sales and profits and success. Theoretically, companies would have accumulated reserves to help them through this. That's just not how it happens though. Those profits went to owners and many of those owners are not willing to reinvest. They're willing to bankrupt their business but not themselves.

    No one saw engine builders in any trouble.

    Now what about those servicing boaters such as West Marine, Bass Pro, Cabela's, Outdoor World. Their situations are much the same as all other retailers. Those in trouble before are now likely to be in serious trouble. Those healthy before will find a way through it. Since they went private, the finances of West Marine are not known. However, I think they like nearly every national retailer will use this as an opportunity to at least reduce locations. Whether overall they can survive, I know nothing of their debt situation.

    Marinas. This one sort of came from nowhere in hearing talk. Seems like the boats are still in slips even though no fuel sales to speak of. However, the marina world has had a huge amount of acquisitions over the last few years and consolidation into fewer hands. Those type acquisitions involve debt. One of the larger chains of marinas evolved after the bankruptcy of it's predecessor during the recession. The predecessor was unable to weather the reduction in business. However, there's a difference this time. They are now owned by investors and the largest is Koch. However, in January it was widely rumored that the two largest marina groups were both either looking for a buyer or "exploring strategic options." I'd expect those activities to have been halted but would think they both remain open to being sold. The issue with being sold is it may be to someone undercapitalized, we just can't know in advance. For now, I'd think they'll protect their marinas to protect their sale price.

    Now, we've seen regular closure of mom and pop marinas and I'd expect a year like this one will lead to more just saying it's time to go.

    Crews. Talking to a crew agency in Fort Lauderdale and Antibes, as they also charter and provide other services, their business right now is 95% closed. However, they estimate that 80% of all yachts have laid off some crew. Many have kept up to half of their crew but some have laid off all but perhaps two. I know many local captains with greatly reduced work right now.

    Brokers. If 50% fewer boats are sold then 50% fewer brokers is likely. One broker I spoke to welcomed that eliminating the less professional and less serious brokers. Another worried greatly about maintaining their business as they have built overhead based on more brokers and more sales so saw it impacting themselves greatly.

    I'd say to any boat buyers, be very careful about who you advance any money to. It will be very hard to know who is in financial trouble. I'm speaking largely about builders, but also to a lesser extent about dealers, brokers and affiliates of the builders.

    I'm personally very worried about the industry. First, we're talking a shutdown of as little as one month and as long as three or more. However, more threatening is we're talking fewer buyers, fewer boaters, less money to spend on luxury. Every major company I know of faces severe financial challenges. Your boat buyers are often executives or business persons or they may be investors who are losing too. Will a recession impact the industry more or less than it does other industries? Last time it hit the marine industry harder. Most believe it will hit luxury buying harder this time as well. Just a small taste of perspective for today. It is estimated that 50% of all retailers did not pay their full April rent.
  2. Oscarvan

    Oscarvan Senior Member

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    This is important. And the rest of the post is quite sobering.
  3. RER

    RER Senior Member

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    Certainly more unknown than known at this time. First of which is when and how the world will be brought out of what is essentially a medically induced coma. One thing is certain. This is a major re-set.

    The recreational marine industry is closely aligned to the hospitality industry ...travel and leisure, which is expected to be the hardest hit business segment. Most boaters will have priorities that come before getting back on the water.

    I've read that 50% of restaurants may not survive - and possibly 50% of all retail. I think we can expect at least the same happening to the recreational marine industry.

    Eventually there will be a recovery but how long will it take and will it be the same all over the world? I think the large yacht sector will be the first to recover - the super wealthy have deep pockets. But I wonder how many large yacht owners would keep their boats if six figure charters dry up?

    The greater volume of employment and economic activity is in boats under 60 feet - with the majority being under 35 feet. As people get back to work, 35 feet and under being the most affordable may crawl back slowly. But I think this shut down could be the straw that breaks the camels back for middle class ownership of 35' to 60' boats. I doubt the mid sized boat category comes back in any significant numbers in our lifetime.
    Last edited: Apr 6, 2020
  4. motoryachtlover

    motoryachtlover Senior Member

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    As a commercial RE owner I will confirm the 50% of retailers are not paying their full rent for April. Although there are a couple more days for rent to come in. Even industrial space is being hit. A defense contractor says the government has cut his payments off. I wasn’t expecting that and don’t know whether to believe it or not.
  5. Brian G

    Brian G Member

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    Thank you, OB, for opening this topic back up. I find it very helpful and eye opening. And thank you for sharing your extensive knowledge with us and taking the time to keep us informed.
  6. Capt J

    Capt J Senior Member

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    This is also putting a hamper on yacht shipping companies. Some yachts are trapped in places like the Bahamas/Carribbean and no way to get them to Florida or another island with a port to get them on a ship to ship them...….
  7. Norseman

    Norseman Senior Member

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    I am at 33%: Sitting on mortgages, all my customer have been really good, except one guy panicked 2 weeks ago and gave me the keys back to a condo he bought from me 18 months ago, after having paid $22k in principal/interest and a small down payment. Good customer and I stand to flip it with a healthy pay day. Not marine related but Fort Lauderdale water front condo.
    Got another one owned by a boat mechanic at LMC, not sure if he is laid off or not, will find out at the end of the month..:confused:
  8. f3504x4ps

    f3504x4ps Member

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    I just got email saying the Palm Beach boat show is rescheduled for May 14-17. Time will tell if this will actually happen.

    Worried for all the smaller Dealers, Service and Electronics companies not being able to handle the shutdown or lack of work coming in.
  9. olderboater

    olderboater Senior Member

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    I can't imagine they'll have the show on those dates.
  10. YachtForums

    YachtForums Administrator

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    Under these circumstances, Informa should skip the PB Show and refund deposits. Smaller companies will need the funds to hold them over. It’s the right thing to do. We all know the show won’t be well attended.

    I know webmasters running other forums that are automotive and recreational vehicle based. Attendance at their industry shows has been down too. They mostly attribute it to the Internet.

    I believe the new boat show is online.
  11. olderboater

    olderboater Senior Member

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    There are some things that it's just not the time for. I know Informa is trying to hold on to the revenue, but we're not going to be out of this in mid May and even if we are, to think that a boat show will be a priority is hard for me. I think travel will be one of the last things opened back up fully.
    YachtForums likes this.
  12. Kevin

    Kevin YF Moderator

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    I don't know how the situation is progressing there in the US, but here in Montreal things that were supposed to be happening in June and July have either been pushed out to Sept/Oct, or canceled completely. The mandatory shutdown of all non-essential business was extended to May 4th just yesterday.

    Having anything happening in May seems awfully optimistic.
  13. f3504x4ps

    f3504x4ps Member

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    Agree not sure why they even sent out the update when we're still up in the are with how this is goong to play out.

    I still prefer a boat show or car show as apposed to online, you just can't really get a feel layout, size and build quality.
  14. T.T.

    T.T. Senior Member

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    Carl- thank you for sanctioning the reopening of this topic (on point)
    OB- thank you for your well spoken thoughts and perspective
  15. sgawiser

    sgawiser New Member

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    Let me add my thanks for the opening of this forum. I find the information extremely useful and thank you all very much for keeping to the topic at hand.
  16. bayoubud

    bayoubud Senior Member

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    We have commercial rentals, all service sector and contractor business owners. For April 50% have paid their rent, will know more by the 15th. Still a lot of service type activity going on. Talking to a few boat tech's we use say they have had some big jobs put on hold, but still doing service work.
  17. Rodger

    Rodger Senior Member

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  18. Ken Bracewell

    Ken Bracewell Senior Member

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  19. dennismc

    dennismc Senior Member

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    Here in the PNW B.C. the tracker shows we hit the peak of cases on Mar 23 and are seeing a reduction in reported cases every 4 days, very optimistic we are on the right track, Marinas discouraging transit boaters, fuel docks mostly open, Marine stores seem to be hanging in really well but some difficulties in getting work done at yards and with contractors due to the potential close contacts between customer and workers etc.
    Be safe everyone and lets hope summer time is a good time for all.
  20. LM Viking

    LM Viking Member

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    Just talked with the marina on Lake Charlevoix where my boat slip is. They are closed for now until the restrictions are lifted on non essential businesses during the Michigan order to stay at home. At this time they are ready but uncertain when they will be able to open their marinas, sales and service there or in Harbor Springs for the season.
    Like everyone else we are trying to stay hopeful for our summer boating season.
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