A new year generally breeds a fresh outlook in the recreational vehicle industry. The outset of 2006 is no exception.
As the sector sheds some of the lingering effects of last year – interest rates show signs of stabilizing while consumer confidence improves – many in the industry are predicting an upswing in the market for 2006.
That optimism surfaced in our latest RVBUSINESS.com Industry Poll as 60% of the respondents said this year would result in an across-the-board turnaround for the marketplace.
One RV supplier noted: “While the housing sector will decline and interest rates will top out, the underlying U.S. economy is very strong. Productivity growth has been extremely strong. Energy costs are stabilizing, budget deficits are declining, both of which provide a more stable business environment, which encourages investment. Corporate profits are through the roof, which will eventually lead to higher incomes and a rising stock market. These tides should help every sector, but especially the Class A business, which generally leads the overall economy best.”
When asked just how much of an improvement will be achieved this year, 66% of those anticipating a turnaround forecasted between 5% and 10% gains while 28% look for a less than 5% increase and 6% expect to exceed 2004.
“Although we had a record breaking year in 2005, I look for 2006 to be even stronger,” said an RV retailer. “The overall economy is strong, retail interest rates have remained steady, fuel prices have stabilized, and the Baby Boomer market keeps growing.”
For those anticipating a strong 2006, other poll results showed:
• The majority (77%) felt that the market will experience its most significant upturn in the second quarter, while 12% indicated the first quarter and 11% pointed to the third quarter. No participants expect marked growth in the fourth quarter, perhaps due to the influx of “emergency living units” for hurricane victims produced last year during a period when the industry traditionally downsizes.
• When asked to specify what areas of the market will most benefit, 35% indicated the Class A market, followed by: travel trailers (26%), fifth-wheels (10%), Class C (9%), folding camping trailers (3%) and Class B (1%). Another 15% answered “all of the above,” which included truck campers, and 1% said “none of the above.”
While many in the industry are upbeat about 2006, a healthy 40% of the respondents remain cautious with regard to the coming year, foreseeing some of the same variables in play that impacted 2005.
“I think consumer confidence will remain unstable and thus the RV discretionary spending will also be unstable,” offered an RV manufacturer. “The war in Iraq, the see-sawing gas prices, the massive layoffs in Detroit and climbing interest rates will keep the consumer uncomfortable. Motorhomes will continue to feel the pinch more then towables. Niche markets will revolve around specialty towables, ie: toy haulers, small light-weight, highly versatile quality trailers designed for today’s smaller tow vehicles, and smaller fifth-wheels. The RV market will be steady, shipping in the 290,000 to 300,000 range. Another record-setting shipping year is three years away. ”
According to many of the responses, the wild card in the mix is gas prices.
“I think that gas prices will be the biggest economic hurdle that the RV industry will face again in 2006,” said a member of the campground sector. “If the prices reach anywhere near the records we saw this year, the two-year increase in prices will have a dramatic effect on sales.”
One RV retailer even suggested the need for new technology when it comes to fuel efficiency, noting, “…gas prices will still drive the downward swing on RV sales until they come out with a hybrid motorhome.”
As in 2005, a volatile crude oil market may pose the greatest impact in the motorhome sector.
“I believe there will continue to be an erosion of the motorhome sector,” predicted a dealer. “I have just heard too many people say that once they get the chance they will exit that market. I believe the towable market will be good for those providing unique and quality built units.”
A member of the supply side observed, “As a supplier to the diesel-powered motorhome segment, we’re projecting a decrease in our revenues this upcoming year by 15%.”
Perhaps the most predominant sentiment among responses was that the industry’s fortunes, again, will be dependent on factors largely out of its control.
“As long as interest rates remain within a point of current rates, all signs are positive,” said a member of the dealer body. “Excluding outside catastrophes (Iraq, hurricanes, etc.), consumer confidence should remain strong and on the increase.”