The buyers are back. Consumers, enticed by an unprecedented run of low interest rates and inspired by a highly diverse, amenity-loaded product mix, are seeing RVs as an attractive option for their discretionary dollar.
The crowds that converged at this year’s flurry of consumer shows offered repeated testimony that RVers are in a buying mood. And, as the retail community convened in Louisville, Ky., last week for the 52nd running of the National RV Trade Show, the consensus was decidedly bullish as dealers talked of record 2014 results and the carryover that will propel sales next year.
“We had a tremendous year in terms of sales volume, and in profitability,” Andy Heck, co-owner and president of Alpin Haus in upstate New York, told RVBUSINESS.com during the Louisville Show. “Unlike previous years, there were no peaks and valleys. We stayed busy the whole year. We had an increase in motorized, but our strength continues to be towables, probably because of our clientele. Sales in towables ran from entry-level to high-end fifth-wheels and we’re really seeing a nice mix from the manufacturers across all categories. The problem is, and it’s a good problem, that we can’t stock everything so we need to figure out what we’re lacking and what product areas need tweaking.
“Right now,” he added, “we’re figuring on a 10% increase for next year. I think there is still a lot of upside heading into 2015 – in the economy, and the industry.”
While dealers’ unit volume hit impressive highs, the most telling difference in 2014 was the spike in margins, lifted by a resurgence in motorized RV sales coupled with consumers shedding their entry-level mentality and stepping into higher-end profit pieces.
“This was hands down our most profitable year in our 26 years of business,” reported Aaron Johnston, president of New York-based Johnston RV Center, echoing a sentiment heard consistently from dealer principals navigating the floor at the Kentucky Exposition Center. “There was a shift on the towable side to units within each class that were more premium and better equipped, trending away from the entry-level trailers. We also saw a solid rebound in interest for new motorhomes.”
While dealers anticipate a robust 2015, in some cases that outlook is tempered by caution – perhaps a reflection of the fallout and attrition among the retail ranks in the aftermath of the Great Recession.
“A lot of dealers had the pedal to the metal when the bottom fell out, and they got caught with a glut of inventory and no sales,” Johnston said. “I think that period reinforced the fact that this business is about partnerships between dealers and the manufacturers. If your partnerships weren’t strong prior to the recession, they just don’t exist now. Dealers need to remember that.
“That said, because 2014 was so profitable, we’re in a position to be more aggressive next year. We’re going to add sales and business development people, and we’ll take on more product, taking advantage of that heightened interest from RV consumers.”
Dan Pearson, president of PleasureLand RV, reported that the longtime Minnesota dealership was also priming for growth in 2015 coming off the heels of “our best year in terms of profit in the last 40 years.”
“The factor that was really different about 2014 was that the Midwest finally experienced what the rest of the country was seeing – the rebound in motorhome sales,” said Pearson. “That was a big plus for our business and the increase in profits coincided with the increase in motorized. It boosted margins, and we also took in trade-ins that were high-margin units.”
The company also mined a new marketplace with the opening of a “budget lot” earlier this year and added another store Monday (Dec. 8) targeting a lower-priced market with the acquisition of Hart Trailer Sales (see related story.)
“That new store also pushed sales higher this year,” he said. “The budget concept was very successful for us, creating a whole new business for PleasureLand.”
Looking ahead, Pearson is anticipating another strong year for sales while also taking into account a couple of economic variables.
“We’re planning for a 6% increase,” Pearson said. “We’re seeing all types of good things, including gas prices, that point toward another big year. But I am also avoiding what I call irrational exuberance. For one thing, northern retailers are going to deal with the devaluation of the Canadian dollar versus the U.S., which means a reduction in the number of people crossing the border to buy RVs. I also think that the Fed is going to move quickly to lower interest rates next year. That will require an adjustment, affecting consumer loans and floorplanning. It’s easy to overload on inventory when lenders are offering free interest programs.
“On the up side, I see motorhome sales generating the most growth in terms of percentage. Towables may level off, which is in line with what the auto industry is predicting.”
Other dealers interviewed by RVBUSINESS.com offered:
Loren Baidas, president of General RV, an 11-store, Wixom, Mich.-based dealer: “Our 2014 was a better year than 2013 on many levels. We saw growth in lots of different segments and in lots of different markets, so it wasn’t just one section of the country. It was across the whole country. And although inventories are up at dealerships, I think that’s based off of retail sales being up, so I don’t see that as part of a bigger problem. I think interest rates are holding at a very, very sustainable level, and gas prices are probably a big surprise to everyone – the fact that they’re doing as well as they are right now. So, if these things can continue, there’s no reason that 2015 can’t be a better year.”
Mike Regan, president of Crestview RV with two Texas stores: “We sell everything, and our sales were up across the board. Our service and parts business was also very busy, so the back end operations helped push profits. Overall, it was one of our best years. One of the factors that really helps us is being Texas. It’s just a great business climate and our numbers in the state continue to outpace the industry. We’re certainly anticipating growth in 2015. I think motorhomes are going to see strong sales percentagewise, and towables will just keep cranking along. In response, we’re expanding by hiring new people and building inventory, but it’s still what I would call slow, methodical growth. We still need to keep a close eye on that bottom line.”
Josh Schmutz, general manager of Carthage, Mo.-based Mid American RV: “We had a very good year, one of our best, although it wasn’t quite as strong as we expected because of some production issues that have been fixed. We’re strictly towables – heavy on fifth-wheels – and our sales showed customers are trending toward the luxury fifth-wheel market. That certainly helped improve profits, but it’s also an indication that the economy is in good shape, which is why we’re looking for an even better year in 2015. Consumer confidence, interest rates and now gas prices are all leaning in the industry’s favor. Our goal is to bring in inventory that will fill in some gaps and also better address that high-end market. We’re not only looking to add new product categories, but also to replace some of our lines that have become obsolete.”
Joe Bullyan Jr., vice president of Duluth, Minn.-based Bullyan RV: “We had a slow start for the year because of weather, but once the weather broke we really got rolling. It was a fantastic motorhome year for us, but our sales were across all segments of the market. The crossover motorhome segment really took off, and we also experienced steady sales in toy haulers and mid-profile fifth-wheels. The rebound in motorized is really exciting, because they had been slow in our area, and it made a big difference in profits. It kind of took us by surprise, so we didn’t buy enough units this year, but we’re taking care of that in 2015. Our order forecast for next year is an increase in sales, and we’re planning accordingly. We’re adding five to eight people over the winter and bulking up our inventory.”