Nevada boat market faces difficulties

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Boat dealers ride out choppy market

Boat dealers in the Reno-Sparks area are struggling to stay afloat.

In 2005, Custom Boat & Marine set revenue and volume records on sales of new boats previously thought impossible at the 33-year-old dealership. But fast-forward five years to the depths of the recession, and Custom and other boat dealerships in the Truckee Meadows have seen sales decline by 75 to 80 percent.

The rapid fall in revenue has prompted widespread changes in operations and staffing levels. Custom Boat and Marine, Z-Marine of Reno and Marine Specialties of Sparks each laid off sales staff, with each store’s general manager now handling all sales duties. Dealerships are relying on revenues from service and accessory sales to weather the rough waters until sales volumes spike with increased consumer confidence. Jim Canepa, sales manager at Marine Specialties, which has operated from its Steneri Way location in Sparks for several decades, says new boat sales peaked in 2005 and really began tapering off in 2008. Several years of weak sales led to drastic changes in inventory levels as well. Boat dealerships typically order close to two dozen or more new watercraft in late fall to fill showrooms for the following summer, but Marine Specialties ordered just seven new boats last year.

Most boat dealerships work with floor-plan credit financing and can order as many boats as they like providing they pay the interest on the craft. The longer a boat sits in the showroom, the more in interest it costs the dealership.

“We have to keep our inventory light,” Canepa says. “That stuff costs us money to sit there, and to have it get old, it loses big money.”

Steve Zinio of Z-Marine has stayed away from stocking new inventory for several years to keep overhead low. He now sells new boats on an order-only basis. Service and consignment sales currently make up the largest portion of his revenue stream.

Zinio says he socked away savings from flush times that have helped buoy his business during the economic downturn. Seeing storm clouds on the horizon he also trimmed his staff; the dealership once had six employees, but currently the owner is the only employee at Z-Marine.

“I restructured the business to keep the overhead down, and worked at that 20 percent level of what we had before; that is what is saving us,” Zinio says.

Ryan Glover of Custom Boat and Marine says dealerships have been hit especially hard because many former boat buyers were well-paid construction workers. Northern Nevada for several years has experienced the largest drops in construction employment in the nation, the Association of General Contractors reports.

However, dealerships are hoping this year’s banner snowfall totals — expected to fill severely depleted regional lakes — spur buyer interest, along with increased consumer confidence brought about by a decrease in residential foreclosures, stabilizing home values and lack of widespread job cuts.

“The lake levels have created a lot of excitement, particularly for people who already own boats,” Glover says. “There is a lot of pent-up demand.”

Service departments have helped keep the lights on at Custom Boat and Marine and Marine Specialties as boat owners began servicing their craft more rather than trading them in for newer, costlier models, the dealerships say.

Glover says the only drop-off in service has been from income generated from readying new boats for the showroom floor, which along with warranty service typically accounted for a large chunk of service revenues. Custom employs three service technicians, down from a peak of five.

Marine Specialties formerly banked on service revenues during wintry off-sales months, but with dwindling sales of new watercraft the company has depended on its service department year-round.

“(Service) is 100 percent of the reason why we are surviving,” Canepa says. “We have definitely keyed in on it more and relied on it more than in the past.”

Boat sales at Lake Tahoe have held up slightly better, says Doug Wilsey, president of Tahoe Vista Sports, primarily because many Lake Tahoe residents enjoy much higher income levels than residents of Reno or the Sacramento valley.

Sales have dipped between 40 and 50 percent at Tahoe Vista Sports, but those declines are offset by revenues generated from the dealership’s full-service marina.

“We can’t say it’s been all bad, but for the most part it’s been a very slow grind to get through,” Wilsey says.

Also, the scenic lake helps spur boat buying, Wilsey notes. Proximity to such a large and pristine body of water accounts for about three-quarters of all boat sales, he says. Although most boat buyers typical must plan for and budget their purchases, Tahoe boat aficionados can afford impulse spending — even for boats costing several hundred-thousand dollars. “Our customers can come by after lunch and be boating that afternoon if they want to,” Wilsey says.

The largest declines in boat sales at Lake Tahoe have been on big boats costing north of $300,000. Buyers over the last few years are purchasing craft that costs about half that amount, Wilsey says.

“The average boat costs between $100,000 to $150,000, and in most markets that is the crème de la crème, but that is the average cost of a boat on Lake Tahoe.”

By Rob Sabo, 5/16/2011 in the Northern Nevada Business Weekly.