Troubled waters seen for pleasure-boat industry

updated 5:23 p.m. ET Jan. 14, 2007

CHICAGO - The annual North American boat show season kicks into high gear this week with five major expos, from Atlanta to Toronto, opening nearly simultaneously, including one of the year's biggest inside the McCormick Place convention center here on Lake Michigan.

The next eight weeks will be critical for marine manufacturers and retailers. Experts say between 40 percent and 60 percent of the industry's annual sales come from deals signed or leads generated at these events.

"The shows are really the No. 1 marketing tool for the industry," said Thom Dammrich, the president of the National Marine Manufacturers Association, a Chicago-based trade group.

But coming into this year's crunch show season, the boating industry finds itself in troubled waters, beset by rising interest rates, a slowing economy and the sharpest housing slump in 15 years, which has U.S. consumers nervous.

As a result, the industry saw unit sales decline last year — a trend expected to continue in 2007, according to Dammrich.

In an interview with Reuters ahead of the Chicago show, Dammrich said his members hold out little hope that 2007 is going to be any better. The reason? Historically, boat sales take a dip any time the Fed funds rate gets above 5 percent, as it is now, or when U.S. economic growth fall below 3 percent, as it did in the third quarter, according to the Commerce Department.

"I was just talking with a pretty large group of manufacturers earlier ... and, if we get a flat year in '07, they'll be very happy," Dammrich told Reuters.

But there are signs that even hopes for a flat year may be wishful thinking. MarineMax Inc., the largest U.S. boat retailer, has slashed its earnings forecast for the fiscal year ending September 30, 2007.

And Tim Conder, a leisure industry analyst at AG Edwards, thinks that, as bad as the story is at MarineMax, it is even worse for other retailers because the Clearwater, Florida-based company is "the largest and best dealer network" in the business and "significantly outperforming the marine industry."

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