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The leisure boating industry worldwide is going through the worst downturn in business it has ever experienced. Essentially driven by consumers discretionary spending power, leisure boating is always affected by economic downturns and the global financial crisis we are now experiencing is the worst since the depression of the early 1930’s.
An additional factor (not evident in previous industry recessions) is that all boating markets are being affected to varying degrees, as our regional market comments below make clear. This means that cushioning of any global downturn by some markets remaining stronger than others is not taking place. A big change in this current situation is the attitude of all banks in all markets to the industry risk as evidenced by the short notice withdrawal across the industry of new boat dealer stock finance facilities and banks not renewing term loans for manufacturers
With industry cycles historically lagging some 12 months behind the global economy the upturn for the industry in my opinion will be in 2011/2012.
Boat Shows that have occurred during the past three months have had a varying outcome. Those held during September had only small reductions in exhibitors and public attendance and reports of business done, although down, was better than expected. Shows held during October and November were effected more. The Barcelona show was reported as being down (no official figures available). Other shows still to be held are experiencing late cancellations from exhibitors. It is expected that shows to be held during late December and January 2009 will show a marked downturn in both exhibitors and public visitors. It is hard to find any positive news at this time.

Worldwide up to date statistics on boat and equipment production are difficult to ascertain as they are usually reported annually by Marine Industry Associations (MIA’s) and are subject to a lag of some 12/18 months. The most reliable statistical indicators come from the United States where the National Marine Manufacturer Association (NMMA) is able to obtain more current statistics. The latest data for May 2008 established that boat manufacturer’s shipments to dealers were down on 2007 by 22%, since then the situation has become considerably worse in line with the weakening global financial situation with industry business in the US probably down to at least 50% of 2007 levels. The world’s largest boat manufacturer Brunswick, based in the US, has cut production levels considerably and closed some its manufacturing plants.
A colleague, Tim Coventry recently visited the Fort Lauderdale Boat Show and his account of the industry situation is as follows:
The US boating industry is in a state of shock at the severity and speed of the downturn in sales. Most current reports from the Fort Lauderdale show were of year to date sales down by 40% to 50 %. The most worrying aspect for dealers and manufacturers has been the immediate removal of dealer finance plans for new unsold stock boats in dealer hands. This was removed on 30 days repayment notice across the industry. The impact of this is that dealers will default, manufacturers will not be able to borrow to re finance the returned stock and the finance companies will end up owning the stock. This will result in fire sales of the stock at huge discounts with much of the stock remaining unsold. This will damage the market for some considerable time.

Most European marine industry boat and equipment manufacturers started to experience weakening markets in early 2007 which quickly resulted in the failure of some large boat dealers who were ill financed or over stocked. Nearing the end of 2008 the situation in Europe is considerably worse with many boat builders going out of business or cutting production levels considerably. This has been particularly felt in the small boat sector under 12 meters in length and in the northern European markets of Norway, Sweden and Finland which have large small boat markets and many manufacturers.
The main boat manufacturers in Europe such as Azimut, Beneteau Group, Fairline, Ferretti Group, Princess and Sunseeker are all cutting back production and investment plans to varying degrees and are also actively seeking new markets, mainly in the Gulf and Asia. These companies are large with turnovers between 200 to 800 million US$, generally profitable and well financed, they are well placed to survive the downturn and emerge to have larger market shares than previously with the demise of many small and medium sized boat manufacturers.

Tim Coventry also visited the large Marine Equipment Trade Show (METS) in Amsterdam, here is his account:
The general mood at METS is that Equipment Manufacturers with OEM customers are suffering with large cancellations of orders as their customers cut back on production of new boats. There is evidence that the super yacht builders are less affected although cancellations of build orders not yet commenced are being reported. Those who supply the retail after market are doing better with only single figure percentage downturn in business to date. This follows previous recessionary trends in that existing boat owners continue to use their boats until circumstances make them stop. Recreational boating activity for those already involved is the last thing to stop.

The six Gulf States have seen strong growth in their boating markets in the past five years and with high revenues from oil have invested in substantial infrastructure projects in all of the countries. Until recently it was felt that the Gulf was largely immune from the global financial downturn. However, in the past two months business confidence has fallen in line with a collapse of crude oil prices, especially in the highly leveraged Emirate of Dubai which in recent years has seen explosive growth in real estate projects. The result has been a considerable slow down in leisure boat sales which is also apparent in other Gulf countries; a recent visit to Kuwait has revealed that boat sales have virtually stopped. There are over 100 marina developments under construction or planned in the Gulf, making it the most concentrated area of marina development in the world. The viability of some of these projects will be affected in the short term, although it is difficult to predict the long term affects or the duration of the current Gulf downturn.

Asian boating markets have gradually recovered from the financial crash of 1997 with business peaking in 2006/7, since then sales have declined in 2008 in line with weakening business confidence although the situation is better than in the US and Europe.
China has not yet proved to be the major boat consumer market that many companies had anticipated with the reality that only some 100 leisure boats were imported into China in 2007. Cultural blocks to the acceptance of leisure boating by the population are considerable and the law for owning and operating a leisure boat in China is not transparent. .
Key consumer boating markets in Asia are India, Thailand, Singapore, Hong Kong and Japan with Hong Kong having proved to be the most consistent market in the long term. India has performed well from a very low boat numbers level over the past five years. New emerging markets include South Korea and Vietnam which are likely grow quickly when the global economy picks up.
The major area for the industry growth in Asia is manufacturing of boats and equipment with China the largest player in the industry leveraging on its low cost of labour and flexible manufacturing skills. Other Asian countries such as Sri Lanka and Vietnam offer good potential for manufacturing with highly reliable and motivated work forces and lower costs than China. As the Leisure boating industry around the world is forced to restructure and look at more flexible and lower cost manufacturing solutions, out sourcing of boat production is likely to be a growing opportunity as recovery starts.
Asia will recover much faster from the world wide recession as it is much less indebted than Europe and the US and this in turn will offer the best prospects in the world for long term growth of the marine industry both as a consumer and a manufacturer.
YP Loke, my Singapore based industry colleague has made the following comments with regard to the Asian market situation:
Some Asian governments will prime pump their economy and if this extends to marina and waterfront projects the industry will benefit from increased berth availability in the longer term. Many marginal boat builders & suppliers will close shop in the downturn as they become unprofitable. But countries that are likely low cost manufacturing centers (China, South Korea, Vietnam & Thailand) may pick up some business as boat manufacturers in Europe and the USA are forced under the economic circumstances to explore offshore manufacturing in lower cost countries
SE Asian countries that restructured their economies in the aftermaths of the 1997 Asian crisis are somewhat more resilient this time round. The protection they have instituted to avert a recurrence of a similar crisis are shielding them the worst of the current downturn. Who would have thought the 1997 Asian crisis could be a blessing in disguise?

The current global leisure marine market downturn brings opportunities as well as problems; some of these are identified as follows:
For boat manufacturers and agents who have a presence in the work boat and Para-military sector there are opportunities. The high jacking of ships in the Gulf of Aden and the recent terrorist attack launched from the sea in Mumbai has highlighted the vulnerability of many cities and leisure resorts to the security at sea problem and has increased the demand for suitable small craft to combat the threat.
The opportunity for the marina industry for those prepared to invest for the medium term is to build at much lower contracting costs and be ready for the upturn and we are seeing clients already seizing this opportunity.
The region from the Gulf to East Asia will continue to offer the best prospects for existing and new business in the boating industry. Because of the lessons learnt from the Asian Financial downturn of 1997 many regional countries are less indebted and in a much stronger position to survive and recover from the global downturn, these will be the rising stars for the industry in two to three years time.
Asia will grow in attractiveness as a base for boat manufacturing as companies identify the need to be closer to new consumer markets as well as taking advantage of lower manufacturing costs and fewer regulations.
For the next two years 2009 /10 business is going to be challenging and much will focus on cost cutting and preserving cash, we need to introduce innovative ideas and strategies to attract new business. Mike Derrett Marine will focus on aiding its clients in the most cost effective way possible concentrating on identifying new opportunities and markets for growth in future years.

Telephone + 44 1371 856366 UAE mobile +97150 6842437 GSM Mobile + 44 7860440336 or e-mail us at: mderrett@mikederrett.com