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Just as Baby Boomers cruise into retirement, their plans of buying a motorhome or travel trailer have run into speed bumps such as higher interest rates and unstable fuel prices, according to a report in the Milwaukee (Wis.) Journal Sentinel.
Nationally, motorhome sales have been down every month since February 2005, according to Statistical Surveys Inc., a Grand Rapids, Mich., firm that tracks the industry.
Instead of taking out a $300,000 mortgage for a Class A motor coach, more consumers are turning toward smaller units or used ones. Some are holding out until next year, hoping that the cost of borrowing money will edge down a little.
“We have had a lot of people who are going to wait,” said Ron Peterson, owner of Scenic Traveler RV Centers in Slinger and Baraboo.”We think they are ready to buy, and they just sort of back off.”
Sales of motorhomes and travel trailers generate millions of dollars for Wisconsin’s economy.
About 5,300 motorhomes and travel trailers are sold a year in the state, with 20% of those sales made in the metropolitan Milwaukee area. Also, manufacturers such as Actuant Corp. of Glendale make components for the RV industry.
People come here from the Chicago suburbs to shop for recreational vehicles, partly because of large nearby dealerships.
“About a third of our business is now coming from northern Illinois,” said Tim Wegge, owner of Burlington RV Superstore, in Racine County.
Motorhome and travel trailer sales are strongest early in an economic growth cycle when interest rates are low and consumer confidence is improving. Sales languish when the cost of borrowing money rises and the economy sputters.
It’s like the housing market, said Craig Kennison, a Robert W. Baird & Co. analyst who follows the RV industry.
In a recent survey of 96 RV dealers, Kennison found that motorhome sales were down 13% from a year ago and travel trailer sales had slipped 8%. Dealers, on average, expected motorhome sales to be flat for the year.
“I think like most RV dealers, we got sucked into thinking the (boom) market would last,” a Baird survey respondent said.
There are a lot of credit issues with customers at this time, another dealer said in the survey.
“We are in a panic mode, and are going into the winter with more inventory than we wish to carry,” a third dealer said.
The Journal Sentinel reported that some RV dealerships have slashed prices to stimulate sales and lower inventories of big rigs that cost them thousands of dollars in finance charges. Motorhome sales have picked up in recent weeks, according to dealers, and the sales outlook for 2007 is more upbeat.
“It’s still not 100%, by any stretch, but it’s good to see people coming in the door this late in the year,” said Don Dosch, sales manager at Wisconsin RV World in Madison.
“This market seems to have picked up, and I am absolutely tickled to death to see it,” he added.
Long term, the RV industry ought to benefit from a swell of Baby Boomers reaching retirement age. People between 55 and 64 are more likely to buy motor homes than any other age group, according to industry research.
By 2010, the industry expects to sell 500,000 motorhomes and travel trailers a year, up from 350,000 now.
“The bullish case is that interest rates continue to decline and, sometime in the second half of 2007, RV dealers will start to see growth again,” Kennison said.
Used motorhomes are selling well, whether they’re late models with low miles or older ones with high mileage, according to Dosch.
“They disappear almost as fast as I get them,” he said.
At the other end of the size spectrum, a Necedah company makes travel trailers small enough to be towed by almost any vehicle. The Camp-Inn brand is styled after teardrop-shaped trailers from the 1940s.
According to the Journal Sentinel, retro teardrops are a hot item on the West Coast, where camper clubs get together in them on weekends.
“We are the oddity in Wisconsin,” said Cary Winch, co-owner of Petenwell Industries LLC, which builds Camp-Inn trailers.
In 2002, their first full year, they sold 15 trailers. Since then, they have averaged about 35 trailers a year.
Many younger families are attracted to lightweight trailers that can be pulled behind their everyday vehicles, said Dosch with Wisconsin RV World.
“We have put trailer hitches on small SUVs that we never used to see,” he said.
More people are also renting travel trailers and motor homes, said Mike Prosser, owner of Cruise America Motor Home Rental & Sales.
Cruise America, in Milwaukee, has added 10 motorhomes to its rental fleet, for a total of 31 vehicles. Even with high fuel prices, rentals for motor homes that get 10 mpg were up about 25% this summer.
“We had many weeks when everything was out for rent,” Prosser said.
Daily rental rates range from $80 to $200, depending on the time of the year and the size of the units.
Someone shopping for a $300,000 diesel motor coach isn’t likely to change his or her mind because fuel prices go up. That’s more of an issue for buyers of less expensive motorhomes and travel trailers, according to area dealers.
“It’s just enough to put the edge on things,” Peterson said.
Sales peaked in 2004 when interest rates were low. It could be a few years before those buyers are ready to trade their motor homes for new ones.
“It’s just like a home,” said Kennison with Robert W. Baird. “Anyone who financed a home and got a really low interest rate in 2003 would not be that interested in selling that home and buying another one when rates are higher.”