Set against COVID-19-related closures that have left many business sectors struggling, the recreational boating industry and its financial infrastructure appear to be weathering the storm better than most, at least in the short term.
“Industry people are still moving forward. The lending is still there. All of the components are there but I don’t know how we’re going to evolve down the road. It’s all dependent on how the disease progresses,” said Jim Desnoyers, an agent with boatloan.com who works in conjunction with Intercoastal Financial Group Company in Noank.
Desnoyers, who has more than 20 years of experience on the lending side of the industry, said the public appetite for boating has been strong despite the pandemic, and perhaps partly because of it.
“The great positive is people are still buying boats and financing, planning on it, still looking ahead. I think that’s the most optimistic and a great sign. Because the boat is a little bit of a sanctuary, it really makes sense,” he said.
Evan Cusson, sales manager at Atlantic Outboard in Westbrook, said that when the pandemic shutdowns started, sales were “kind of slow,” but that trend has reversed itself.
“Lately sales have picked up, and have been picking up ever since because boating is really the only thing you can do with social distancing besides sitting at home in the house. You can’t go shopping, you can’t go to the movies, so I think a lot of people are realizing that boating is a great way to social distance with your family,” he said.
Atlantic Outboard has two marinas with about 100 slips total and “nobody is cancelling,” said Cusson. Customers are also asking to put their boats in the water now instead of waiting for the traditional end of the school year.
“People are saying I want my boat in now instead of for Memorial Day, which is usually the big rush,” he said.
The boat buying and selling business has a long cycle that starts as early as the fall when owners take their boats out of the water or send them to warm climes, like Florida, for the winter. The fall is the time to begin to sell this year’s boat and look for a new one, or a new-used model, for the next season.
Jonathan Smith, a certified yacht broker at Prestige Yacht sales in Mystic, said that since many customers ordered boats last fall for delivery this spring, his flow of business hasn’t changed dramatically.
“If people want a new boat, they order it in the fall and have the manufacturer build it to receive it in the spring,” he said. “One of our suppliers is from Europe and they shut down. But we had boats ordered in the fall for this season and we haven’t had any of them held up. The boats were completed and the last boat we were expecting coming in next week or so.’
Customers also buy new at boat shows during the first three months of the year. This year’s volume of business was nearly equal to last year, partly due to the timing of the pandemic, said Desnoyers.
“Usually April, May and June are the busiest three months of the year and it’s the same as last year,” he said. “It’s a hopeful sign in the market. The application flow may obviously taper off the longer we’re into it. But, we had a very busy January, February and March.”
Next year’s inventory
Boat manufacturers have been shut down since the end of March and that will impact the supply chain for boat dealerships mostly likely through the rest of the year, said Cusson.
“The biggest thing for our industry is that we’re selling inventory and we’re not able to replace that inventory,” he said. “We’re selling what we have in stock. The boat manufacturers are very aware of this and I personally think they’ll be all caught up by the end of 2020.”
There will likely be a greater demand for used boats this summer because there won’t be as many new boats available. And Cusson said he’s already strategizing about how to replenish what’s in stock.
“This fall, we definitely are thinking about ways to increase inventory sooner than we usually do, to be able to offer inventory to our clients. Usually we start to run out of boats toward the end of the summer into the fall and then replenish with the new models for the spring and summer, so I think we’ll be looking to get more inventory than we usually do.”
The 2007-2008 recession resulted in tighter requirements for borrowing in the marine industry, said Desnoyers. Before 2006, borrowers with good credit could borrow up to $350,000. Now banks require a 700 credit score or above, a down payment of 20 percent over $100,000 and will analyze a customer’s debt-to-credit ratio, income level and available collateral.
The marine sector is now benefiting from these changes, he said.
“The banks are operating as usual. My average loan is probably about $100,000 to $125,000. If you get a smaller loan for $35,000 or $50,000 and if there’s no survey required then it’s just a matter of getting the paperwork into the bank, getting the approval, doing the due diligence on the collateral and then we can close,” he said. “ That process is still intact and still moving forward.”
With the pandemic, banks are working with customers more on deferment or interest-only programs, though Desnoyers said he hasn’t had any defaults on loans so far.
Boat registrations expire each year on April 1, but this year the Department of Motor Vehicles, which handles the registrations, has extended the deadline for 90 days to accommodate the statewide shutdown to slow the spread of COVID-19.
Yolanda Cooley, of the Boating Division of the Connecticut Department of Energy and Environmental Protection, said that although active registrations had dropped from 74,210 on May 1, 2019 to 67,092 on May 1, 2020, she saw it as a positive sign.
“I thought that was great considering that COVID started mid-March. I feel like it’s a good pulse that [so] many people, considering the circumstances, still registered and renewed their boats,” said Cooley. “Honestly, as a boater, it’s the only way to social distance.”
The number of boats registered in Connecticut has decreased steadily over the last three years, according to Cooley. 94,691 boats were registered in 2017, which dropped to 93,271 in 2018 and to 92,175 boats in 2019.
Ned Sawyer, north east manager of Maritime Insurance International in Mystic, said the pandemic has caused a slowdown in the transportation of boats by land and sea.
“This time of year we see a lot of boats that get purchased in Florida and the southeast that are to be brought to northeast area normally by tractor trailer, but that seems to have been delayed and there seem to be some hardships on that side of it,” Sawyer said. “We’re seeing some of the navigation restrictions changed because of COVID-19. We also have boats that are stuck in the Caribbean that can’t get out of the Caribbean or can’t get into certain islands or the Bahamas, we’re seeing navigation that’s a big part of this that’s being changed.”
Rather than penalizing boat owners, insurance companies are granting extensions to “lay-up” time, or the time the boat is out of the water, and the state insurance departments are placing moratoriums on cancellation of policies for nonpayment.
Sawyer said his main worry is the duration of the pandemic.
“If it’s 60 to 90 days, then things are somewhat back to normal and everyone is having a good boating season, then we’ll be fine. But, if this extends into the fall, I don’t know with the boating industry how long it can sustain the closures,” he said.
John Miklus, president of the American Institute of Marine Underwriters, said he was looking at the longer term implications.
“I’m not sure what you call longer term — I’m talking six to 12 months out. I’m not sure where people are going to be vis-a-vis recreational boating because I think there’s got to be a hit on the industry just from the economic difficulties that COVID-19 has brought on.”
He said it was too soon to tell how the recreational boating industry will fare.
“I would come at it from an economic angle. Owning a boat is a bit of a luxury. If you’ve lost your job or you’re struggling to make ends meet, your boat is going to be something that you’re going to let go. You’re going to want to keep your house before you keep your boat,” he said.