With Scarcity: Prices Go Up, Up And Away - 10/22/2009

In case you haven’t noticed, airplane tickets for Thanksgiving and Christmas periods are skyrocketing, in many cases, doubling. How could that be happening in the Great Recession? Easy. The major U.S. airlines are taking planes out of service to scale back seats available by just 5%, according to the New York Times. With scarcity comes price increases. If you want a seat you pay-up or stay at home. Next year we are going to see much the same thing happen to new boat prices because there will be a scarcity of new product.

Who can forget that old song, “Up, up and away in my beautiful balloon,” by the Fifth Dimension? That is likely to happen to new boat prices next year.

As most people know by now, the boating industry has endured its worst 12 months since the Big D. What consumers may not realize is that all -- that’s right, ALL -- boat companies closed production operations for much of 2009 -- even those great old names who you thought were as solid as Gibraltar. On the other hand, most of these companies are surviving, and they are doing it by NOT building unless they have an order. Virtually no company is building for stock.

90% Cut-Back in Production

No stock means scarcity. Now we are not talking about a 5% cutback like the airlines are doing to juice up ticket prices for Christmas, we’re talking about something on the order of a 90% cut back! The only boats being built for stock are very small boats to service large outlets, but even their units will be severely cut back to insure orderly liquidation, and perhaps the three largest boat builders (which also build the cheapest boats) will be building short runs of the most popular models. Otherwise, it’s don’t build until you see the whites of George’s eyes.

Sales Forecasts?

Since no one knows what demand will be next year for new boats, few companies are betting on the come. Pollyanna managers and cockeyed optimists have all been thrown overboard and boat builders have gotten fiscal religion, and in some cases the genuine article.

It is too early to tell if all of the 2007 and 2008 models will be cleared from dealer inventories for next spring, but one thing is for sure – you won’t find many 2010s.

Your Game Plan

    So if you were planning on buying a new boat next spring, what do you do? Here are some suggestions—

    1. If you are planning on a large boat, say anything over 28’ or so, you should go to a dealer and order it now. This has several advantages:

  • You will be assured that the boat you want is ready when you want it.

  • You are in the strongest position possible to negotiate a good price. Wait until the spring when production is backed up and you have lost your leverage – and possible your season.

    2. If you are planning on buying a boat under 28’, or there about, you probably can wait until this winter to order, but after that point you will be rolling dice with your intended brand’s production schedule. There are some small boat exceptions—

  • Bass boats traditionally have a huge surge is new boat sales in January and February. If you want a new one then, you better talk to your dealer soon.

  • Specialty boats and even cuddys which in normal times might not sell particularly well, may be completely eliminated from a builder’s new line unless you order early.

    3. If you would be happy with a non-current new boat, then your best time to buy is right now. Here’s why—

  • Boat dealers’ lean cash flow season is the fall and winter. That’s when they need cash flow and that’s when they are most likely to make you the best deal.

  • As non-current inventory is sold off and the prime buying season of spring approaches, and there are now new 2010 boats available without waiting, non-current boat prices will actually go up. In many cases, they will be the only game in town.

    Crystal Ball?

    No one has a crystal ball, but we can tell you that next spring will be a new ball game when it comes to buying new boats. The great discounts and rebates we have seen the last couple of years on new product will simply not exist. That’s what scarcity does to pricing.