Come Rain Or Shine...

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What will the new season bring. Fair weather? Or foul? Phil Draper weighs the evidence.

JULY 2005

On the whole, as of summer ’05, international demand for new European-built motorcruisers and motoryachts appears to remain remarkably bright. Most of the majors — the biggest brand players like Azimut-Benetti, Bavaria, Fairline, Ferretti Group, Groupe Bénéteau, Princess, Sealine and Sunseeker — are all predicting new turnover records for their current financial years; and, moreover, their forecasts for ’06 are similarly upbeat.
What that means is that, far from storm clouds gathering, virtually all market sectors, perhaps save only for smaller sailboats and motorboats, and perhaps a few of the more wacky niches, are basking in sunshine and have probably never had it so good. Indeed only the 24m (80ft) plus or superyacht sector seems to have contracted significantly from ’04 through into ’05, but then regardless it is still doing okay.
So having looked hard, questioned and probed, for signs of a major downturn recently among the biggest and brightest players, you will all be relieved to hear that I can find no real evidence that things are about to take a sinister turn for the worse. Of course, that is not to say change is not just round the corner, it simply means I have not found a significant problem yet and that neither have the major players, as none of the aforementioned companies have begun to adjust forecasts down — even though a few of them admit that they can’t quite get their heads round the fact that things are still as good as they are, principally because we all know this business is cyclical!
So why are things still so good? Well all this growth globally is still locked into low interest rates, which remain low or very low in virtually all the world’s key marine leisure markets. Not that the industry particularly relies on boats being bought with credit — credit is but one part of complicated jigsaw — but rather the impact such low interest rates have on economic wealth as a whole… Low interest rates also discourage savings. And there doesn’t seem to be much changing on that score internationally, at least in the short to medium terms.

“Having looked hard, questioned and probed, for signs of a major downturn recently among the biggest and brightest players, you will all be relieved to hear that I can find no evidence that things are about to take a sinister turn for the worse!” 

Only in the UK have interest rates been nudged up over the past couple of years to quell an obvious overheat situation, particularly as regards consumer credit. That policy is now deemed to have done its job and cooled things off — and hopefully not too much. And as a result boat sales just recently have begun to slow. Most predictions now suggest rates will be dropped once again in the UK in the near future.
Elsewhere in Europe things are also better than okay at the retail level. Only Germany is suffering badly, but then that is not because things have changed recently — just the opposite. Things there have been bad for a dozen years or more since its hugely expensive unification with East Germany. The rest of the continent is in very good shape. Spain, France and Italy, despite the less than perfect economic backdrops in those countries, remain strong for mid-size boats, power and sail, and the same can be said of the Scandinavian markets. Then further afield demand has picked up to more than compensate for slowdowns in markets like the UK. Russia and Australia particularly are said to be growing well.
The USA has also improved significantly over the past 12 months or so — and all despite a weak dollar that has made buying from the ‘Euro-Zone’ rather expensive. Indeed things there are so good that there is talk of interests being nudged up in the near future. That will certainly impact sales, but hopefully for those European exporters such a knock to their sales may well end up being compensated by the likely strengthening of the US dollar that will result from an interest rate hike. Most people in the pleasureboat business with interests in the USA suggest that the exchange rate is not as important an issue as many people would perhaps think. The most important point is stability in terms of currencies.
So overall, when it comes to forecasts, one would have to say keep the sunshade up! But by the same token down through away that umbrella.

© Phil Draper