The market has improved for expensive leisure products — including motorcycles, snowmobiles and motorhomes — despite the fragile economic recovery, a new report from Robert W. Baird & Co. says.
As the Milwaukee Journal Sentinel reported, during the recession, motorcycle demand was cut in half and sales of motorhomes and all-terrain vehicles fell 70% from their peak, according to the report from Baird analyst Craig Kennison.
“Although unemployment remains stubbornly high and housing may remain depressed for years, many consumers maintain a brighter outlook now. This trend is especially true for wealthier consumers with a college education and a 401(k)” retirement account, Kennison says in the report.
In recent calls to leisure-product dealerships, Kennison said he found that inventories were lean and there was strong demand for used products.
“We see signs of a recovery,” he wrote. “Harley-Davidson, for example, has slashed production to limit supply, driving used bike prices higher recently. As the gap between new and used narrows, trade-in buyers have the currency to buy again, stimulating demand. We expect this dynamic to play out in several markets — from motorcycles to RVs to automobiles — but limited data makes it difficult to prove.”
After a period of tight credit, banks are loosening up their lending standards a bit for leisure products.
Consumers also are feeling more confident about their personal wealth, Kennison said.
“Failure to extend the Bush-era tax policy might have spelled disaster for discretionary spending, but a lame-duck congressional compromise leaves money in the hands of consumers,” he said. “A permanent extension would have stimulated more spending, but the two-year extension is bullish, in our view.”
Leisure-product sales are big business in Wisconsin, where manufacturers including Harley-Davidson Inc., Mercury Marine Inc. and BRP USA are among the biggest names in the products they sell.
Leisure-product market trends also affect hundreds of Wisconsin dealerships and help drive the state’s tourism industry.
Currently, the market for used snowmobiles and all-terrain vehicles is especially strong, said Dan Burdett, general manager for Action Power Sports in Waukesha.
“I cannot get enough of them right now,” he said. “When I do get them, they are gone in hours.”
The surge in used product sales has been driven by people wanting to spend less but still enjoy snowmobiling and other sports, Burdett said.
“I think there are a lot of people who want to get out and do something, but they’re not going to spend $13,000 for a new snowmobile,” he said. Used snowmobiles in the $2,000 to $5,000 range are selling well, he said.
Motorhome and camper sales also improved this year after a dismal 2009, according to local dealerships.
Consumers remain cautious with large purchases, but sales were up about 25% this year at Scenic Traveler RV Centers in Slinger and Baraboo, owner Ron Peterson said.
“It’s headed in the right direction,” Peterson said. He expects that RV shows in February will give dealerships a better indication of consumer spending patterns in 2011.
Camp-Inn Trailers, a custom travel-trailer manufacturer in Necedah, said it had a strong year in 2010, with a return to order backlogs and hiring.
Camp-Inn makes small towable trailers, a step up from tent camping.
The recession may have driven some business the company’s way as people scaled backed vacation plans and decided against buying cabins and time-share properties, said Cary Winch, Camp-Inn co-owner.
“We do see a trend of people hitting retirement age and wondering what they are going to do next,” Winch said.
Camp-Inn has orders for campers through May.
“Even in December, which is normally a complete nothing month for us, we have been getting orders every week,” Winch said.