For a year that started out with some ominous economic signals — and still faces some substantial challenges — the summer forecast for RV shipments issued this week by Richard Curtin of the University of Michigan’s Consumer Survey Research Center on behalf of the Recreation Vehicle Industry Association presents a relatively comforting view of the year at hand.
Looking at the first quarter’s wholesale shipment results — totaling 65,100 units, an 8.7% year-to-year gain — Curtin concludes that the industry has shown “remarkable strength” during the past year and will continue to do so by posting a 7.4% gain in 2011 shipments.
“Following 2010, which recorded the largest annual percentage gain since the mid-1960’s, total RV shipments are expected to post a solid annual gain of 7.4% in 2011, rising to 260,200 units,” wrote Curtin in RVIA’s quarterly RV Roadsigns forecast. “Seasonally adjusted RV shipments are expected to remain unchanged through most of 2011, showing some renewed strength at year-end and into the start of 2012.
“The positive RV outlook is based on favorable economic factors that outweigh the negative,” added Curtin. “There is no doubt that consumers suffer under the weight of rising food and fuel prices, minuscule wage increases, high unemployment and the threat of higher taxes at all levels of government. The primary impact of increased fuel prices, along with higher food prices, is to diminish consumers’ discretionary incomes. On the positive side, RV demand will benefit from improving credit conditions, employment gains, stabilization of the housing market and a strong preference to continue in the RV lifestyle.”
All in all, Curtin posits, RV manufacturers should continue to thrive throughout 2011 and into 2012 based on “their ability to deliver the right selection of RVs at the right location at the right time, providing the same treasured experiences to families who now have more restricted budgets.”
Even somewhat higher fuel prices won’t likely be enough to slow growth in the RV industry, the South Bend (Ind.) Tribune reported.
In fact, RV shipments could increase 9% to 263,100 units from 242,300 units in 2010, according to the latest prognostication by Richard Curtin, an economist at the University of Michigan.
The expected gains in 2011 will follow the recovery that took hold last year when shipments increased 46% to 242,300 units and northern Indiana RV plants began bringing back workers.
Curtin said sales growth, which will be across all segments of the industry, will be aided by an improving economy, the extension of income tax cuts and the reduction in payroll taxes. He cautioned that there will be a few factors that will moderate the growth pace of RV sales, including slow job and income growth and continued weakness in the housing market.
Bill Baker, director of communications for the Recreation Vehicle Industry Association (RVIA), said the rebound won’t be hampered by moderate increases in fuel prices. “Fuel isn’t that big of a factor as long as it’s available,” he said, adding that most owners take RVs to a destination and then park them.
However, if fuel breaks price points never reached before — say $5 — all bets are off since the economy will likely also suffer, Baker said.
The continuing rebound in the industry is good news in Elkhart County and surrounding areas, where thousands of workers are employed in the industry. Officials have had their fingers crossed that the rebound is sustainable.
Baker said annual sales in the neighborhood of 300,000 are very good. The industry hit its modern-day peaks of 353,500 in 2007 and 390,500 in 2006.
Richard Curtin, the University of Michigan economist who issues wholesale shipment forecasts quarterly under contract with the Recreation Vehicle Industry Association (RVIA), does better than most weather forecasters when it comes to accurately predicting what’s going to happen in his chosen field.
He’s usually right on or very close with his predictions.
That was the case this week when the RVIA released its year-end shipment totals for towable and motorized RVs. The actual shipment total was 242,300 units.
Curtin’s final forecast, issued in December, was 236,700.
That’s a difference of 5,600 units, or about a 2.3% deviation from Curtin’s forecast.
As for 2011, Curtin projected in December a total of 246,000 shipments this year, which would be a 4% increase over his 2010 forecast. But with the final tally coming in higher than expected, his 2011 forecast is now just about 1.5% over 2010 actual.
Increases are expected for every type of RV in 2011, with seasonally adjusted shipments slowly rising from the start to the end of 2011. Importantly, the gains in the year ahead will be mainly due to improvements in retail sales rather than the restocking needs of the dealer networks.
Curtin’s next forecast is due in the spring.
It’s going to be a good year for recreational vehicle sales, say RV dealers and manufacturers and the RV trade organization.
“We had an excellent year in RV sales in 2010. We feel that 2011 is going to be the best year we have ever seen in the RV industry,” Gary Miller, owner of Wana RV in Shipshewana, Ind., told The Goshen (Ind.) News.
Miller’s expectations are for his growing RV sales business. As a whole, the industry is expecting an increase of 3.9%. That number is based on a consumer survey by Richard Curtain of the University of Michigan. Curtain has been an analyst from the Recreation Vehicle Industry Association (RVIA) for many years.
After three years of declines, the RV industry rebounded in 2010 with a 47.7% gain in shipments. As of November, the year’s total shipments reached 224,000 units.
This month, retail shows are beginning across the country and manufacturers and dealers are trying to gauge if Curtain’s prediction for another year of gains will come true.
“… If I can go by my two days of sales, we are up compared to last year,” said Joe Weider, operations manager for General RV Center in North Canton, Ohio. Weider’s sales staff was at the RV show in Cleveland, the biggest indoor sales event in the country. “My crystal ball says we should have a pretty good year.”
Weider said his sales center is the largest motorhome dealership in Ohio and also sells fifth-wheels and travel trailers. They have added some new manufacturers and products this year. But Weider said the sales year is too young to gauge if there will be any trends this year.
Phil Sarvari, executive vice president of Gulf Stream Coach Inc. in Nappanee, Ind., said the year’s sales will depend on consumers’s attitudes.
“As long as people feel good and they know they are going to have jobs, they will be willing to spend,” Sarvari said.
Americans have embraced RVs, he said, and want to continue camping and using that outdoor experience to bond with their family and friends. “It is a way of life. It is relaxing. They support each other, they tell stories and play games. You know, that is important,” Sarvari said.
At Jayco Inc. in Middlebury, the storage lots have many newly made units ready to be shipped.
“We’ve garnered a lot of momentum with the introduction of new products,” said Jim Jacobs, a vice president at Jayco.
Jacobs said the company has added new products and new price points to generate business. “That is what is going to carry our momentum. You have to be innovative to survive in this industry,” he said.
Motorhome sales dipped drastically when the recession began, and since it has ended the RV segment has continued to struggle. In 2010, Class A luxury motorcoaches averaged around 1,000 units shipped each month. The Class C motorhomes averaged even less.
But if manufacturers offer a quality product, Jacobs said there are buyers wanting them.
“In the Class A line, we have been extremely happy with the performance of the Entegra line,” Jacobs said. “Not only from the response from the dealer network, but the response from the consumer network. There are a lot of consumers out there still buying high-end diesel products. That customer is still there.”
To the east of Jayco’s Middlebury complex, Miller is getting ready for the upcoming RV show at the Century Center in South Bend. He plans to take 24 units and his son Justin will help with sales.
Miller has added units from Forest River Inc.’s Rockwood line made in Millersburg. He also has Dutchmen Manufacturing Inc. and CrossRoads RV products.
He expects a good show in South Bend as financing is more available for buyers this year.
“As far as retail financing RVs, it definitely has gotten better than it was a year ago,” Miller said. But financing has changed. He said two years ago buyers could make a purchase without a down payment. Now a 10% down payment is standard practice.
“It really is a good thing because people will pay that 10% so when they are ready to sell it or trade it in they are not upside down on the unit. They don’t feel like they are taking such a loss,” Miller said.
University of Michigan Economist Richard Curtin’s latest forecast for 2010 and 2011 wholesale shipments have been scaled back from his most recent forecast, published in September.
Curtin forecasts wholesale RV shipments to finish 2010 at 236,700 units, a 43% increase over the 165,700 units shipped in 2009.
Looking ahead to 2011, Curtin sees RV shipments climbing by 4% to 246,000 units.
His forecasts were released today (Nov. 30) at the National RV Trade Show in Louisville, Ky.
In September, Curtin projected that shipments would reach 239,900 units by the end of 2010 and 259,600 units in 2011.
As for his 2011 forecast, he sees increases spread across all vehicle types:
- Travel trailer shipments are expected to climb 3% to 145,600 units.
- Fifth-wheels are expected to jump 5% to 57,200 units.
- Folding camping trailers will increase by 2% to 14,000 units.
- Truck campers will see an 8% rise to 2,900 units.
Motorized segments are also expected to see gains:
- Class A motorhome shipments are set to rise 2% to 13,300 units.
- Class B motorhomes will hit 1,900 units on 19% growth.
- Class C motorhomes will increase by 8% to 11,100 units.
Armed with spreadsheets and sales projections, Derald Bontrager and key executives at Jayco Inc. huddled in the fall of 2008 to figure out how their recreational vehicle manufacturing company could reduce costs enough to survive the depths of the recession.
Again and again, they met during the next several months, each time realizing more jobs held by local workers had to be eliminated. And in a family-owned business such as Jayco, which is based in the Northern Indiana town of Middlebury, laying off people is personal, the South Bend Tribune reported.
“That was the most difficult and challenging part of the downturn,” said Bontrager, president and COO at Jayco, which laid off more than half of its work force, or about 1,300 people, between late 2008 and mid-2009.
Like Jayco, RV manufacturers across the country dramatically slowed production after consumers, many of whom lost their jobs or access to credit, stopped buying.
At least seven manufacturers closed Indiana production facilities or closed completely, pushing unemployment last year in Elkhart County to nearly 19%.
Indiana’s RV industry was among the first economic sectors to tumble into recession, experts agree. Whether it can be the first to emerge from the economic depths remains to be seen.
Industry leaders say time will tell whether higher shipment figures in recent months are actually the result of more consumer purchases or dealers replenishing their inventories.
Most plants in Elkhart County and across the country had been running at near capacity in 2006 and 2007 as recreational vehicles and customers filled retail lots.
Dealers reported brisk sales until banks and lending institutions stopped lending money to consumers and dealers that year, which consequently halted purchases, as well as RV orders.
After years of shipment growth that culminated with a high of 390,500 shipments in 2006, inventory levels dropped to historic lows in 2009, according to statistics from the Recreation Vehicle Industry Association (RVIA).
That year, RV shipments plummeted to 165,700 vehicles. Indiana RV manufacturers produce about 75% of all RVs made in the U.S. The state ranks eighth or ninth in overall RV retail sales, with about 6% of all RV dealers based in Indiana.
“When the credit markets locked up and froze in the last half of 2008, industry shipments really dropped because consumers weren’t able to get credit,” said Kevin Broom, RVIA director of media relations. “Even consumers who were well qualified with cash and high credit scores could not get loans. People got nervous, and they postponed large discretionary purchases like RVs.”
Dealers decided to replace the few RVs that were selling off their lots much more slowly, which also affected suppliers and their work forces, and the lack of activity dropped inventory levels to historic industry lows for most of 2009.
Broom said the slowdown forced most — if not all — RV manufacturers to lay off workers.
About 15 U.S. companies filed for bankruptcy in 2008 or 2009, including Monaco Coach Corp., Fleetwood Enterprises Inc., Country Coach, Travel Supreme and Rexhall RV.
The slowdown also negatively affected RV dealers. About 10% of total dealerships nationwide — an estimated 180 — closed during this period, said Phil Ingrassia, a spokesman for the national Recreation Vehicle Dealers Association (RVDA).
It was not until mid-2009 that the credit market loosened a little, which lured some consumers back to dealers’ lots. The industry has started feeling a level of normalcy again as people adjust to new financial situations, Broom said.
Total shipments are expected to reach 239,000 units in 2010, slowing during the second half of the year, according to Richard Curtin, an RV industry analyst and director of consumer surveys at the University of Michigan.
Shipments are expected to rise moderately to 259,600 units in 2011, and job and industry growth should remain subdued as the industry feels the lingering effects of the economic downturn, Curtin said in a September news release from the RVIA.
“Consumers are reconsidering their spending and saving habits,” Curtin recently told the RVIA.
Several headwinds face the RV industry in an overall economic rebound: unemployment, consumer confidence, the financial markets, housing and credit.
Although shipments have been up since mid-2009, Mark Bowersox, executive director for the Indiana Manufactured Housing Association/Recreation Vehicle Indiana Council (IMHA/RVIC), said that does not mean the industry is leading the country out of the recession.
Many Indiana manufacturers still do not have enough RV orders to keep their plants going all day, every day, Bowersox said, which means their fall shutdowns between product lines might be longer than usual.
“There are a lot of dealers wrestling with how much inventory to have on their lot for the spring selling season — five or 500,” he said about future vehicle orders that must be placed this fall in time for spring sales.
RVIA leaders cannot be certain about the length of time it will take the sector to rebound to record shipment levels seen in 2006.
“The industry is recovering, but we’re not to our destination yet,” Broom said. “It has given the RV maker an opportunity to go back and redesign and to refocus on the product, on where consumers will be in the future.”
He said smaller, lighter, more environmentally friendly and fuel-efficient recreational vehicles are ways the industry is moving.
Jayco, which is being cautious as it adds personnel and other overhead costs back into its Elkhart County manufacturing plant, is focused on “greening” its vehicles, Bontrager said.
“We need to figure out a way as a company and industry to provide a high-quality product with all the features the consumer has come to expect at a lower price point,” Bontrager said.
Most of the 500 employees who have been called back to work are in production. In other parts of the company, processes are becoming more efficient with a smaller work force, he said.
Bontrager thinks the RV industry and the economy have reached recovery mode but said he cannot be sure the recession is over. Not yet.
“I certainly would say that we’ve reached the bottom of the recession. Now we’re talking about how we can meet the demand rather than cutting costs,” he said.
“At the same time, we’re very cautious. This has been a prolonged recession compared to others. And consumers are spending less but expecting the same.”
Richard Curtin, director of the Surveys of Consumers at the University of Michigan, told the Recreation Vehicle Industry Association (RVIA) board of directors the national economy will avoid a double-dip recession but continue its recovery at a slower pace that will moderate wholesale RV shipments in the upcoming year.
Curtin made these projections in a presentation to the RVIA board at its annual September meeting today (Sept. 21) at the Hotel Park City in Park City, Utah, according to an RVIA news release.
Focusing on the national economic outlook, Curtin said that among the scenarios for 2011, there was the greatest probability for a “slow growth” model. He defined this as GDP increasing by 2.5%, unemployment at 9.6%, job creation hitting 100,000 jobs per month, personal income growth at 2.4%, housing starts at 780,000, and slight gains in consumer confidence and credit conditions.
Curtin said that there is only a one-in-10 chance that the economy will slip back into a double-dip recession.
Gradually rising consumer sentiment, a modest gain in consumer spending and an improved credit market will accompany this slower growth. However, continued high rates of unemployment and sluggish income gains will continue to be a drag on the economy.
Curtin also said that the greater probability for the “slow growth” model would put wholesale RV shipments in the 259,000-unit range that was projected in the Fall 2010 issue of RV Roadsigns. In that projection, shipments are expected to reach 239,900 units by the end of 2010 and 259,600 units in 2011.
In his remarks, Curtin also discussed the new consumer mindset that businesses need to consider as a result of the economic hardships of the past several years.
“Consumers are reconsidering their spending and saving habits,” Curtin said. “Given the strong underlying demand for the RV lifestyle, consumers will gravitate toward products that offer an equivalent experience at a price that meets new economic constraints.”
He advised companies to “rightsize” rather than “downsize” as they move forward. “Rightsizing means delivering an optimal mix of size, convenience, and features to meet the new realities facing consumers,” he added. “This may mean smaller units with fewer features.”
Editor’s Note: The following release, contained in the fall issue of Roadsigns, comes courtesy of the Recreation Vehicle Industry Association (RVIA) based on research by Richard Curtin from the University of Michigan.
RV Shipments totaled 76,000 units in the second quarter of 2010, the largest year-to-year gain the past quarter century. The outsized increase followed record-setting declines due to the recession and credit freeze. The second quarter gains were shared by travel trailers and motorhomes, while folding camping trailers and truck campers posted more modest increases.
The rapid pace of increase will moderate during the year ahead. Total shipments are expected to reach 239,000 in 2010 and 259,600 in 2011. On a seasonally adjusted basis, RV shipments will slow in the second half of 2010 and then rebound by the end of 2011. It will take one year for the seasonally adjusted total to again equal the level recorded in the second quarter of 2010.
(As the towable RV market has improved, Curtin has repeatedly upgraded his 2010 year-end forecast each quarter from 169,500 units in mid-2009 up to 185,800, 203,500, 215,900 and 230,300 earlier this summer — a 39% gain over 2009’s total shipments of 165,700. The industry shipped 237,000 units in ‘08.)
RV sales face continued challenges from the slowdown in prospects for economic growth. Uncertainty about future taxes, depressed home values and tight credit conditions will restict motorhome sales, and lackluster income growth and high unemployment will limit gains in folding camping trailers and truck camper sales.
Conventional and fifth-wheel travel trailers are expected to maintain their 83% share of the RV market, while motorhomes will account for 10% of the total. The trailer share us up by 20 percentage points from a decade ago, half coming from folding camping trailers, a close substitute, and half from motorhome sales.
Downsizing Versus Rightsizing
The Great Recession has been followed by a recovery only an economist could recognize. Lackluster economic growth, falling wages and high unemployment do not signify a recovery to most people. Importantly, consumers have come to expect that dismal economic prospects will persist for years to come. These new constraints have caused consumers to reconsider their spending and saving habits. Postponement works well to bridge a brief recession, but a more thorough rightsizing of consumption is required when the slowdown is expected for an extended period. Given the strong underlying demand for the RV lifestyle, consumers will gravitate toward products that offer an equivalent experience at a price that meets their new budget constraints. Downsizing will not be as successful as rightsizing RVs. Rightsizing means delivering the optimal mix of size, convenience and features to meet the new constraints facing consumers. While the challenges in developing new products will be as great as the economic hurdles now facing the industry, rightsized RVs will reap the long-term payoff from consumers.
Richard Curtin has revised upward his already optimistic forecast for wholesale RV shipments for 2010.
His latest forecast, appearing in the Summer issue of RV Roadsigns, predicts shipments will total 230,300 units this year, a 39% gain over 2009. RV Roadsigns is published quarterly by the Recreation vehicle Industry Association (RVIA).
In February, he forecast shipments in 2010 would total 215,900 units, a 30% increase over 2009. In December, Curtin projected 2010 shipments to reach 203,500 units. That was a step up from Curtin’s previous 2010 prognostication of 185,800 units and, before that, 169,500 units, the last of which was issued last June.
Curtin will be speaking on Wednesday (June 9) at a luncheon in the Century Center in South Bend, Ind., as part of the RVIA’s Committee Week.
Here is Curtin’s latest forecast:
“Total RV shipments rose to 59,900 in the first quarter of 2010, up from just 30,500 a year ago. This year-to-year gain in shipments was 96%, the largest ever recorded. The extraordinary gain was widely shared by conventional and fifth-wheel travel trailers, as well as all types of motorhomes.
“RV shipments are expected to total 230,300 in 2010, an anticipated gain of 39% above the 2009 total of 165,700 units. The expected percentage gain will be the largest for Class A and Class C motorhomes, closely followed by conventional and fifth-wheel travel trailers. While the initial surge in shipments was due to restocking depleted dealer inventories, sales of RVs to consumers will also improve in 2010.
“The industry is firmly on the road to recovery, although the overall pace of progress will slow in the second half of 2010. While improved, job and income growth will remain subdued, and the availability of credit will slowly improve in the year ahead. Volatility in financial markets, lackluster trends in home prices, and prospects for higher inflation, interest rates and taxes in the year ahead will keep consumers in a defensive spending posture. The lingering effects of the economic downturn on the lower end of the RV market will push shipments of folding camping trailers and truck campers as a share of the total market to the smallest level on record.”
Curtin’s forecast includes the following category shipment figures:
- Travel trailers, 140,600.
- Fifth-wheels, 50,000.
- Folding camping trailers, 14,700.
- Truck campers, 2,400.
- Class A motorhomes, 11,200.
- Class B motorhomes, 1,600.
- Class C motorhomes, 9,800.
The New Normal
“A recovery that is slower and more variable will be the new normal for the RV industry. This means that keeping inventories in line with sales is both more important and more difficult than during past recoveries. It is more important since a costly mismatch between inventories and sales is more likely when variations in the pace of upward market growth are more common. It is more difficult to assess given the wide array of economic, financial and new regulations that will influence market trends in our increasingly globalized economy. Inventory management is about timing, and poor timing means either lost profits or lost sales. There is no doubt that it was necessary to restock depleted dealer inventories in advance of renewed strength in retail sales. A customer centric approach is now required, however, to closely align production with sales so as to provide the right selection of RVs at the right locations at the right time. The financial health of the entire industry, including manufacturers, suppliers and dealers, depends on the deployment of advanced inventory management techniques.”
RV Roadsigns is published quarterly and available to RVIA members at a password-protected link. Those who aren’t RVIA members can subscribe to the newsletter in the RVIA Store at www.rvia.org. Richard Curtin is affiliated with the University of Michigan Consumer Survey Research Center.
Rich Karlgaard, publisher of Forbes magazine and a regular panelist on the business show ”Forbes on Fox,” will be the keynote speaker at the Recreation Vehicle Industry Association (RVIA) annual meeting June 9 during RVIA’s Committee Week at the Century Center in South Bend, Ind., according to RVIA Express.
In a talk titled, “U.S. Outlook: Is the Recovery Durable?” Karlgaard will give an outlook for stocks, home prices and asset classes while also discussing which sectors of the economy will benefit from increased government intervention and which will lose ground. He will examine how the results of the 2010 midterm elections might change the business landscape and which products and services, growth models and economic regions are likely to perform best in the immediate future and in the long-term.
Also at the meeting, RVIA Chairman Jim Sheldon and RVIA President Richard Coon will discuss the state of the association and speak on a wide range of topics including government relations, standards, industry education and RVIA-sponsored trade shows. RVIA Treasurer Bob Olson will detail the association’s finances.
In a presentation titled, “RVIA Public Relations: The New Consumer and the Road Ahead,” RVIA Public Relations Committee Chairman B.J. Thompson and Gary LaBella , vice president and chief marketing officer, will provide an analysis of the post-recession consumer, examine the new Harris survey findings on the factors that influence RV purchase decisions and give an overview of the media exposure created for the RV industry through the association’s public relations programs.
In “Go RVing: We’re Back in the Saddle Again,” Go RVing Co-Chairman Bob Olson of Winnebago Industries Inc. and LaBella will provide a briefing on the award-winning ad campaign. RVIA will also honor industry and association leaders by presenting a host of awards.
At a luncheon immediately following the membership meeting, economist Richard Curtin, director of the Consumer Research Center at the University of Michigan, will provide his outlook for the RV market for the upcoming year. Curtin has directed RVIA’s RV Consumer Demographic Profile research for 30 years and authors the association’s quarterly RV Roadsigns newsletter.
For more information on the RVIA Membership Meeting and the industry forecast luncheon, contact RVIA’s Meetings and Shows Department at (703) 620-6003 ext. 305 or visit www.rvia.org.