San Diego Magazine / January 2004 / Boating Bash

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Boating Bash

shhhhh. The traditional opening day of boating season is in May. But don’t tell that to the folks gearing up for the San Diego Boat Show. The yearly gathering of the recreational marine industry is at the San Diego Convention Center January 8 through 11.

The 16th annual show kicks off the 2004 season with 200 exhibits ranging from boats of all sizes to boating services and accessories to fishing tackle. The Marriott Hotel’s marina hosts the in-the-water portion of the event, where yachts up to 85 feet are on display.

Going into the four-day exhibition, the mood along the waterfront is guarded optimism. Local marine businesses are looking for the show to jump-start what many believe could be their best year since the heydays of the late 1990s, as they pull out of the slump that has plagued the economy the past three and a half years.

Nationally, recreational boating is a $30 billion industry, boasting an estimated 17.4 million boat owners. The locals are looking for a healthy slice of that pie.

Signs in recent months point to rising sales of boats and accessories, which didn’t weather the downturn as well as other segments of the industry. Boatyards and marinas fared comparatively well, but their owners acknowledge that if boat sales don’t continue to rise, they could feel the pinch.

That said, the recent recession hasn’t dinged the boating industry anything like the damage of the early ’90s when San Diego was dealt a triple whammy: recession, military cutbacks and General Dynamics, then the region’s largest private employer, pulling up stakes. Sales plummeted, boats pulled out of San Diego, and marina vacancies rose faster than a bore tide.

The boatyard business, which also had costly environmental issues to contend with, went through a period of painful consolidation. After more than a half-century in Point Loma, stalwart Kettenburg Marine closed, as did several of the smaller yards around the bay. Knight & Carver YachtCenter combined its Mission Bay and Hancock Street operations at the National City Marine Terminal, and Driscoll Boat Works took over several of the vacated waterfront leaseholds. Meanwhile, boating accessories giant West Marine Inc. gobbled up the Kettenburg retail store.

As one yacht broker said at the time, “We are a leading economic indicator.”

It wasn’t until the stock market skyrocketed into the stratosphere that San Diego’s boating business recovered—only to be confronted with another recession after the bubble burst in 2000. This time around, though, the hit wasn’t nearly as hard.

“No one will say that business couldn’t be better today, but it’s clearly been a healthy rebound from the early ’90s, attested to by marina occupancy rates, the boatyards and the new boats being purchased,” says Richard Cloward, president of the San Diego Port Tenants Association.

Bill Roberts, who owns Shelter Island Boatyard, admits business has been good. A number of trends have contributed to the continued strength, he says, including an increased Navy presence, growth in healthcare research and the biotechnology industry, and upwards of 11,000 boats in the region’s marinas and yacht clubs.

“Ten years ago we were shipping 10 to 12 boats a week out of here,” Roberts says. “Now we’re ahead of the game, unloading more than we load.” Last year’s boat show was good for him and his tenant businesses, and he believes this year will be better.

Sam Brown, president and CEO of Knight & Carver, concurs. Since reorganizing three years ago, the boatyard has focused on repairs and modifications of large, oceangoing yachts and is landing business throughout the United States and Europe. “It’s a global marketplace. These bigger boats can travel anywhere,” Brown says. The boatyard is also looking inland, building and repairing the huge blades that power electricity-generating wind turbines.

But making broad generalizations
about the relative health of the industry can be misleading, business owners say. Some segments, particularly the sales of boats and accessories, are more sensitive to economic cycles than the maintenance and repair side.

Randy Spicer, owner of Yacht Doctor, modifies and repairs the interiors of large yachts and says business has been good despite the recent recession. “A lot of boats I do are high-end,” he says, “so as far as a dip in the economy, it’s not even a ripple in their pond.”

Adds Chris Frost, owner of the Downwind Marine chandlery in Point Loma: “The high-rollers are doing fine. It’s the middle-class boaters, the working guys, who are affected. They still haul out [using a boatyard for maintenance], but they won’t buy that new cockpit autopilot.”

Sales in marine retail stores have been flat or down since 1999 and 2000, he says. “This year, I’m having an average cruising season, but not spectacular.”

West Marine, the nation’s largest boating accessory retailer and operator of three stores in the San Diego region, saw same-store sales drop in recent years but reported stronger sales in the second half of 2003 and projected continued growth in 2004.

Boat sales, the industry’s barometer, have shown a similar trend. After peaking in 1999, the number of units sold fell almost across the board in 2000, 2001 and 2002, according to figures from the National Marine Manufacturers’ Association.

In the second half of 2003, the industry began turning around, says Laurie Fried, spokeswoman for the NMMA. “The first quarter, we were hit hard by the war in Iraq, but things are looking up,” she says.

Gary Marow, the general manager of Olympic Boat Centers in Pacific Beach, characterizes the current environment as flat but looks for a marked improvement in 2004. The boat dealer sells trailerable runabouts and fishing boats as well as cruising yachts. “We had a strong showing from yachts last year, and we anticipate a brisk yacht business this year,” Marow says. “We have a niche boat, the Meridian, that’s been wildly successful.”

According to Statistical Surveys in Grand Rapids, Michigan, third-quarter sales volume in fiberglass boats 14 feet and up, the industry’s bread and butter, was running 7.3 percent ahead of 2002.

In the big-boat arena, sales in the third and fourth quarters of 2003 were better than expected, says Doug Ament, proprietor of H&S Yachts, whose boats range in price from $100,000 to more than $1 million. “It’s not like 1999 and 2000, but I don’t think that was healthy anyway; it was too good,” he says. “It feels very solid now, and sailboats have been particularly strong.”