World Leisure Boating Market Update August 2016 By Mike Derrett Marine
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The leisure boating industry world-wide is still struggling to recover from the deep industry down turn of 2008 caused by the global financial crisis which forced leisure boating business levels down to unprecedented levels. Global Boat Manufacturing dropped by over 50 %, after 2008, while equipment and service industry sectors were more dependent on the replacement and maintenance market. While the industry recovery started post 2012, no real sustained growth has been seen other than in the US market which is now anticipated to slow down.
Current headwinds working against a sustained global industry recovery include:
- Low oil prices which have been a mixed blessing, making boating more affordable but many economies that are oil suppliers around the world are now in recession, some of these, such as Africa and South America were growing leisure boating markets.
- The European economy has a low confidence factor with the UK having decided to come out of the EU and several EU countries still suffering from sovereign debt issues. The continuing refugee crisis coupled with acts of terrorism by Isis has brought security issues to the fore.
- The increasing tensions between the West and Russia are also affecting confidence and the previously growing market for recreational boating in Russia.
- The Middle East has been badly hit by economic downturn caused by low oil prices and political instability and ensuing wars.
- The boating market in China has been affected by the crackdown on corruption which has considerably reduced sales of larger yachts. This has also affected the market for boating in South East Asia.
Some good things have come from the industry down turn, namely:
- Customers have become far more discerning about purchasing boats and equipment forcing the industry to be leaner and more efficient through increased research and development.
- Service and distribution is improving with the realisation that boating customers expect car industry levels of service.
- The importance of building a strong brand has become paramount and is clearly being addressed by leading companies.
The boating market in the USA has proven to be the strongest in the world since recovery from the Global Financial Crisis in 2012 and matches the return to strength of the US economy. The latest statistics show a growth in new boat sales in 2015 of 8%, these have been mainly in power boats with sailing boats declining in the number of sales. While the business has been strong it still lags considerably behind sales recorded in the years prior to 2007. The future also looks uncertain with business confidence and the economy waiting on the outcome of the Presidential elections in November 2016.
The market has only marginally recovered since the 2008 crisis and now seems set for a prolonged period of static or possibly negative growth driven by the fears of EU break-up and more sovereign debt and banking crisis issues.
The referendum leave result in June in the UK to has shocked Europe and brings fears of years of uncertainty although stock markets and real estate markets have yet to feel the full impact.
The boat building industry in the UK is not very strong with two of the three major boat builders in the UK Princess and Sunseeker all reporting large financial losses in the last financial year and the third builder Fairline entering bankruptcy in late 2015.
The most successful boat builder in Europe is Beneteau, who have continually invested strongly in product and market development and are the dominant builder globally in the small to medium power and sail boat sector. They have also developed new brands such as Monte Carlo Yachts which is stretching their product reach into the lower end of the larger yacht sector.
The Italian boating market was the most affected by the global recession and has only experienced marginal recovery. There are continuing problems for the Italian economy and its inability to recover, this is likely to stifle any domestic boating market growth. The main boat manufacturers such as Ferretti Group and Azimut are completely export focussed on the USA and Asia.
The industry in South Africa is very innovative and adaptable and is strong in the power and sailing catamaran sector. Recent issues for the local industry have been the decline in the African market in Nigeria and Angola due to a drop in oil price and the problems of finding a skilled work force for the industry.
Key problems for the Middle East market have been terrorism and political instability resulting in on going wars in Syria, Libya and the Yemen and the drop in the oil price. The much vaunted Arab Spring of 2012 has not brought the results that many hoped for. The dominant problems are seen as the Sunni and Shia differences and the many mistakes made by the intervention of US, UK and allied forces post the 2003 invasion of Iraq.
The key boating markets in the Gulf of The United Arab Emirates, Kuwait and Qatar are still active but face security issues on the use of leisure boats and higher costs of fuel due to the reduction in Government subsidies. Local boat builders continue to increase their market share as they improve quality and design.
Despite being cited as the best developing economy in the world over the next five years and a high interest in leisure boating, the industry in India is held back by the lack of marinas and high import taxes of over 40%. If these issues can be resolved India will prove to be a very good market. Boat manufacturing has not developed in the country other than suppling the local market and the considerable workboat and para-military sector.
Sri Lanka is on the developing track as a growing boating market with plans for marinas and the third edition of a new boat show scheduled for October this year. Boat manufacturing has always been a sizable industry in Sri Lanka with a large focus on exports to Europe, this has contracted in recent years with the downturn of the European market.
There is a considerable boating market in the Indian Ocean Islands such as the Maldives, Seychelles and Mauritius where boats are intensively used in the marine tourism sector.
South East Asia
The South East Asia boating market comprising Thailand, Malaysia, Singapore, Indonesia and the Philippines has suffered from the anti-corruption contagion spreading from China, highly visible luxury items such as leisure boats are hard to disguise. Singapore, as an offshore finance hub has the strongest economy of the five countries, the other countries still suffer from basic economic problems, lack of investment, government focus and the direction of their economies. Both Thailand and Singapore have high levels of expatriate involvement in leisure boating with Phuket in Thailand being the major regional hub for regionally based expatriates to berth their boat or hire.
China and Hong Kong
The China boating market while long acclaimed as a major developing boating market has failed to deliver. The recent crackdown on corruption which has been running for over two years has scared away buyers of medium and large size yachts where the market has virtually stopped.
While China has long been a strong boat manufacturing centre with exports going all over the world the global downturn in the boating market since 2008 has reduced demand and this coupled with increasing labour costs has driven some builders to re-organise and become more efficient. There has been a rise in the use of western boat designers and the quality and design details of many manufacturers has improved. There are an estimated 20/25 boat builders in China who can build to International export standards.
Hong Kong has survived the market downturn in China and South East Asia surprisingly well with many dealers still recording good sales despite the additional problem of lack of marina berths in Hong Kong.
North East Asia
The leisure boating market in Japan carries on as it has always done, relatively unaffected by the neighbouring markets but clearly affected by the lack of the Japanese economy to develop growth in the last 25 years. The number of boats in the Japanese market has reduced substantially as many boats are scrapped under a national scheme to dispose of unwanted boats. According to the Japanese Boating Industry Association the market suffers from the lack of interest in boating by the younger generation.
Taiwan has only allowed leisure boating on its waters to take place some six years ago. Historically Taiwanese boat builder have been very strong in building boats for export for 40 years mainly for the US markets and as third party boat builders for other brands and despite the global industry recession still have a high output of medium and larger yachts that are recognised as high quality. The recent Taiwan International Boat Show this year showed that there are fewer boatbuilding yards but they are building larger boats.
The boating market in South Korea has developed considerably since the Government launched a program in 2008 to promote leisure boating as a pastime for the population. Initiatives by both National and Provincial Governments have included a large program of building marinas that now number twenty, whereas only one marina was active in 2008, alongside boat shows led by the Korea International Boat Show launched in 2008 by the Gyeonggi Provincial Government. South Korea is fast developing as the only truly middle class boating market in Asia with the main focus on boats up 40’. This has been enabled by a successful economy, now the 13th largest in the world, a large coastline and a strong interest in fishing.
Australia and New Zealand
Latest industry reports from Australia post the ASMEX conference at the Sanctuary Cove International Boat Show in May this year, indicate a reasonably buoyant local market with increases in sales over 2015. Australia while having a strong local boat manufacturing industry does not have major export markets, most boat builders focus on designs that suit the local market with a strong emphasis on sports fishing style boats.
The economy in New Zealand has produced consistent growth since 2012 and like Australia has a high boat per capita figure, being far from other boating markets most boat builders focus on the local market.
The South American boating market has suffered from economic decline and issues on building marinas that have held back the development of the market to larger leisure boats.
ConclusionsOverall the business outlook for the marine leisure industry globally is rather bleak with few positive areas amongst a raft of negative issues.
Rising stars are mainly in Asia and the Indian Ocean Islands where the much underestimated market is the one for marine tourism which remains strong, there is always demand for boats for passenger transport, diving and other specialist roles. With new tourism markets opening up in Asia such as Myanmar, Cambodia and Vietnam there is considerable potential for this niche market area which will be the catalyst to develop a domestic leisure boating market.
© Mike Derrett Marine 2nd August 2016