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Going into 2007 everything still looks rosy in most major marine leisure markets. The only real exceptions are Germany and the USA, says Phil Draper.

JANUARY 2007

Here we go again!
Another New Year begins. So what will this one hold in store? Will the marine leisure business internationally remain as good or is it likely to contract?
Luckily, for the past decade or more, the answers to such perennial questions in most major markets around the world have usually been the same — flat at worst or perhaps a little better. The only real exceptions have been Germany, which has been ‘dead’ for well over a decade anyway, and the USA, which has had a few problems to deal with over the past couple of years.
Certainly Europe’s biggest and brightest builders, the truly international players, have been accurately predicting more growth every time for years now and most have delivered to or beyond expectation. Their risks are so well spread geographically these days. The ‘Euro-Majors’ all seem to agree that, barring biblical-proportion disasters, there should be no nasty surprises in 2007 — not least because most of the year’s sales are already in the bag. Consequently just about all are predicting better results — not huge growth, more more positive movement nonetheless.

“The ‘Euro-Majors’ are pretty much all agreed that, barring biblical-proportion disasters, there should be no nasty surprises in 2007...” 

But why is it still so good out there?
Don’t this industry’s fortunes still rise and fall? They always used to, didn’t they? Aren’t we due a fall?
Cyclicality is certainly always a key question for potential new investors into this industry and, thanks to the management consultant’s hat I have to don occasionally, I am increasingly required to provide just such commentary. A decade ago it would have been much easier to talk of cyclicality and predict the next hump on the rollercoaster — although as it happens the best guesses I’d have offered back then would have been wrong. But I wouldn’t have been alone. I don’t believe anyone a decade ago could have foreseen just how good things were going to be in this industry between ’97 and ’07.
For instance, David king, the boss of UK motorcruiser and motoryacht builder Princess, suggested to me recently that but for his natural pessimism his company could well have expanded even faster over the past few years — and by any standards Princess has done incredibly well regardless.
“It used to be that every 10 years or so there was a major turndown, a major shake-up,” he says. “There were recessions around the early ‘70s, early ‘80s and early ‘90s. And I was certainly expecting to see the same again around 2000, but it didn’t happen... And it hasn’t happened in the past six years or so either, despite all manner of potential catalysts, natural and man-made... Things have just continued to improve year on year ever since... Had I not been quite so cautious, we would have grown much faster and we would probably not have the capacity problems that we face today.”
So what has changed?
I would suggest cyclicality is still with us. It’s just perhaps we’re not really noticing it at the moment. Low interest rates around the world have had a lot to do with this more stable scene. It’s not been a question of many national boom-and-bust cycles coinciding to create one long sinusoidal wave – the troughs being the global ‘crash and burn’ scenario – but rather much reduced amplitudes and hence much, much shorter pitches. Modern macro-economic management now seems to favour interest rate frequent tweaking to stop overheating and too-rapid cooling; that’s why we see small but often interest rate adjustments being made, rather than the big jumps of the past. I guess there’s an analogy to be made with marching troops having to break strides crossing bridges to stop the big swings and wobbles.
But does this mean an end to serious global slumps? Long-term, I hardly think so. After all, economics is as much about politics as anything and we all know about the fallibility of those that represent us; but, having said that, it still could take several years before they muck it up. So ‘enjoy it while you can’ is my advice.

© Phil Draper