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A host of economic pressures strained the recreational vehicle marketplace this year. Climbing gas prices and interest rates combined with retreating consumer confidence to challenge an industry largely dependent on discretionary dollars, particularly in the motorized sector.
Then came Hurricane Katrina, tossing another set of dynamics into the mix, including an industrywide ramping up by towable makers to supply the Federal Emergency Management Agency (FEMA), and the dealer body with temporary housing for evacuees.
In our latest RVBUSINESS.com Industry Poll, we asked our visitors to consider all these external variables affecting the market while also offering a bottom line assessment of 2005.
Interestingly, 36% of the respondents felt the year would yield modest growth in wholesale shipments of 5% or less. Another 27% are looking for a marginal decline of less than 5%, matching the current prognostication by University of Michigan economist Richard Curtin. Rounding out the responses, 21% anticipate a flat, no-growth year while 16% see a decline of more than 5%.
“The industry faces a crossroads in the near future as the FEMA impact goes away and we try to sort out the true retail demand for our products,” said a participant from the supply side. “Motorized vehicles are already feeling the impact of higher fuel and interest rates as well as the difficulties in some parts of the overall economy, and the towable business will face similar issues when FEMA subsides. I hope the industry doesn’t forget to size their companies based on the true level of the retail market and if so we will make it through this adjustment period and move forward in the future.”
When asked to choose which factor had the most influence on business, 40% answered “all of the above.” Specific choices included direct or indirect influence of hurricanes (8%), gas prices (17%) and general consumer confidence (31%).
“Consumer confidence is low, gas prices fluctuating, natural disasters, war…it all contributes to a wait and see attitude that is evident in all economics – housing, retail, and commercial development,” according to a respondent involved in marketing.
A member of the RV financing community offered, “The principal reason for the decline is fuel prices. As the consumer adjusts, you will see a gradual comeback.”
The question that evoked the most feedback, particularly from the dealer ranks, dealt with potential changes in product development stemming from this year’s economic influences. The majority of the responses settled in two categories – a renewed interest in product development (33%) and a move to more affordable products in general (35%).
“The RV industry has consistently ‘fed off the land’ and the grazing seems to be coming to an end,” a retailer responded. “More proactivity and less reactivity to market needs and trends is needed. Remember the auto industry in the late 70’s to the early 80’s. We are there now, except the consumer doesn’t HAVE to have our product. More quality is needed.”
A fellow retailer offered: “We need to bring the price to the public down. Many customers are looking for a coach that is affordable. If the industry is to grow it needs to meet these expectations.”
Other optional answers on the issue of product development included: More companies growing their towable business (17%) and a move toward smaller and more fuel-efficient motorhomes (15%).
“Yes, they have to build more fuel-efficient vehicles” one retailer succinctly responded. “How many gas problems do we have to have before they will get to work on this?”
“We saw a dramatic change in consumer purchases around this time last year when fuel prices took a real jump,” reported another retailer. “Those that saw the trend coming were able to stock up on the low-price trailer, high-end fifth-wheel, and diesel-powered motorhomes. I believe that the gas-powered sector of the RV industry is going to have to change the 8 mpg, weak-powered stigma to catch up to the other markets. I further believe that RVs are moving too far into the luxury category and not the useful category they started out as being.”
Offering an overall assessment for 2005, a member of the manufacturing sector summarized: “Inconsistent is the word that best describes this year. Not bad, but inconsistent, unpredictable, and next to impossible to project. Katrina did save a couple manufacturers and a number of dealers.
“I believe that we will have a good spring selling season, and gain momentum as the year progresses. Inventory has to be right-sized, both at the dealer and manufacturer level. Dealers’ confidence is shaken, and I think the message needs to be ‘stay the course.’ Keep doing the things that have proved results and stop the waste. Those who plan for the long haul will still come out on top.”