MSNBC.com spent time in Elkhart, Ind., last year as part of The Elkhart Project to study how that community struggled with the recession and RV downturn. Read a brief MSNBC.com story below, view today’s Featured Video #2 or click here.
In the depths of the recession, Elkhart, Ind., held an unenviable title: The metropolitan area was suffering from the highest year-over-year increase in its unemployment rate in the nation.
Now, it can claim a much more optimistic mantle: On Wednesday (Nov. 3), the Bureau of Labor Statistics reported the Elkhart metropolitan area saw the biggest improvement in its unemployment rate in the nation in September, as compared to a year earlier.
Of course, Elkhart – like the rest of the nation – isn’t out of the woods yet.
The area’s unemployment rate stood at 13% in September, 3.1 percentage points lower than in September of 2009. That’s still well above both the national unemployment rate, which is hovering around 9%, and far from where community would like to be in order to see its economy fully rebound.
But it’s a vast improvement over 2009, when the metro area’s unemployment rate hit a high of 20.1%.
The community had been devastated by the recession and economic crisis, which dealt a fierce blow to the area’s all-important RV industry. The hardship drew national attention after President Obama made several visits to the area.
A team of editors, writers and multimedia producers from msnbc.com also spent a year in Elkhart, following the community’s struggles closely. The Elkhart Project covered everything from the city’s efforts to reinvent itself to the devastating effect the economy has had on everyone from teens to the elderly.
Chances are, many in Elkhart aren’t surprised by the reversal of fortunes. Even back in 2009, many there said the area tends to be the among the first in the nation to go into recession, and also among the first to lead us out of recession.
That’s because RVs are the type of big-ticket discretionary item that people tend to stop buying soon as the economy starts to turn sour. The credit crunch, which made it hard for people to get financing for things like RVs, made matters even worse for companies in Elkhart this time around.
These days, many in Elkhart are feeling cautiously optimistic.
Editor’s Note: This is a recent installment of MSNBC.com’s Elkhart Project examining the impact of the recession on the RV industry.
Bill and Esthermay Brooks are nomads of the Interstate system. They’ve crossed the continental United States five times over the last 15 years, chalking up visits to all the lower 48 states in their national roving. They plan to steer their 35-foot-long Georgie Boy Pursuit motor home north to visit the 49th state, Alaska, in 2011.
“Our longest trip was five and a half weeks – we drove 10,000 miles and visited 22 states and Canada,” said Bill Brooks, a police officer from Cobb Island, Md. “Eventually, we have a goal of spending a whole month in every state. We want to do it while we’re still young enough.”
The Brooks, both 55, are living a peculiarly American dream. They are fierce adherents of the RV lifestyle, a strange blend of individualism and wanderlust that drives thousands of Americans to spend their summers barreling down the nation’s highways and back roads, stopping at campgrounds and meeting up at gatherings of other recreational vehicle enthusiasts.
But the RV lifestyle has stalled in recent years.
While a record 8.2 million RVs are crisscrossing the nation’s roads, it has been a terrible year for the industry. RV sales have plunged 65% from their peak just a few years ago, and the deep recession has hit the core RV demographic of those aged 40 to 60 particularly hard. They have endured sharp losses in their home values, stock portfolios and household wealth. Experts don’t expect much of a sales rebound for years to come.
“These factors have really hit the industry hard, and I think 2009 will be a tough one for the industry,” said University of Michigan economist Richard Curtin, who studies the RV industry. “I think we’ll see fewer RVs sold than at any time since 1980.”
When gas prices hit $4 a gallon last summer, many RVers left their motorhomes in the driveway rather than shoulder the cost of a vehicle that might get only, at best, 10 miles per gallon.
RV sales have cratered since hitting a peak of 390,000 units in 2006. Curtin expects sales of just 136,500 units this year, down 65% from the peak. Sales could rise to about 169,500 units in 2010, Curtin said, although given the uncertain economic outlook the figures could change by 15% in either direction, he said.
While the weak economy has dented the RV business, it’s not a complete write-off, Curtin said. He says campgrounds and national parks are reporting strong RV visits, with some completely booked for the summer. This underscores the strong American desire to camp and travel, and it’s why he thinks the RV industry eventually will bounce back.
“The RV industry follows the cycles in the economy. When times are good, RV sales are good, but when the economy goes bad, RV sales are terrible,” he said. “It will take time for the industry to fully recover.”
The slow recovery means trouble for the nation’s RV manufacturers and dealers. When industry sales peaked, the market was saturated with vehicles, said Curtin. Dealers are now trying to sell many of those vehicles at deep discounts, making new sales especially challenging, he said. In addition, credit is still hard to get for RV buyers.
That means more bad news for Elkhart, Ind., the center of the nation’s RV manufacturing business, where massive job cuts in the region’s manufacturing sector have helped to push the area’s unemployment rate to 17.5%, nearly twice the national average. Other RV manufacturing centers like Forest City, Iowa, where motorhome manufacturer Winnebago Industries Inc. is based, also are likely to suffer, said Curtin.
And RV dealers are feeling the pain. More so than cars, RVs are a luxury item that most consumers will put off buying during harsh economic times. In an industry research report published in April, market analysis company IBISWorld forecast that hundreds of RV dealers will go under as operators cut staff and reduce costs. IBISWorld expects the number of RV dealers to fall by 12% in 2009.
Industry revenue was down 22.5% to $15.5 billion in 2008, and a further decline of 19.6% is expected in 2009, with revenue sliding to $12.5 billion, according to IBISWorld.
Over the next five years RV sales are expected to rebound, supported by a stronger economy, with the biggest improvement expected in 2011 and 2012, according to IBISWorld.
Curtin is also bullish on the RV life, with its opportunities for camping, fishing and visiting national monuments. Many younger RVers are taking up the pastime, and the industry is moving forward with more lightweight, fuel-efficient and “greener” RVs, he said.
Greener, lighter RVs
“The buzz in the industry is how can we adapt and change to deal with the poor sales,” he said. “After all, this is essentially a small house on wheels and it uses a lot of energy, primarily for driving and cooking, so there are lots of opportunities to save and conserve energy. For this reason I think the industry is determined to make sure they can have green and more energy efficient units all round.”
Earlier in the decade, when large sport utility vehicles were the rage, there was strong demand for large, towable travel trailers and “fifth-wheel” trailers, which make up about 80% of RV sales. With a trend toward more sales of smaller, more fuel-efficient cars, RV manufacturers are going to have to find ways to make their vehicles lighter and more easily towed, said Curtin.
The RV industry has developed few new products in recent years, slowing the industry’s growth. Only when RV manufacturers produce a vehicle that is green and fuel efficient will the industry see another group of strong growth years, noted IBISWorld in its report. This will be especially true if gas prices rise.
Demand from retiring Baby Boomers, broadly defined as those born between 1943 and 1965 and the largest market segment for RVs, also is expected to spur growth in sales.
According to an estimate from the Recreation Vehicle Industry Association (RVIA), up to 30 million people consider themselves RV enthusiasts. A typical RV owner is in his or her mid-50s, married, owns a home and has an annual household income of over $70,000.
For the Brookses, an RV trip is quite simply the cheapest vacation around. When they weighed an RV trip against taking an airplane and staying at a hotel, the RV option worked out to be about 50% cheaper.
Bill Brooks figures he saves close to $100 a day in food alone by cooking in the RV instead of eating out.
Then there are the intangible benefits of being on the open road, he said.
“When you’re sleeping in a RV, you know who slept in that bed last night, and you know who washed those dishes or cleaned that glass,” said Bill Brooks. “So having that peace of mind, that’s the mindset of many campers. They like to be in their own space with their own things.”
“My sister’s idea of roughing it is a hotel without room service – she wants to jet to wherever she’s going and get there and back as quickly as possible, but RV-ers like to stop and smell the roses,” he said. “They like to pull over and read a road sign, or see a historic market; they want to travel the blue roads, meet the locals and talk to them.”