Saturday, June 23, 2018
The Changing Nature of RVing
RVs are back, baby! But not the same as it was a decade ago...
More than a decade ago, the RV business was experiencing a renaissance. RVs were flying off the lots, and people were going everywhere in their new bus motorcoaches, or big 5th-wheel trailers with four slide-outs. Today, people are still doing this, but it seems to me the real growth in recent years has been in the lower-end towable units. And I think how people are using their RVs has changed as well - people are not driving nearly as far as before.
In the 1960's, the idea of travelling across America was a norm. "See the USA in your Chevrolet!" Dinah Shore exhorted us to do since the 1950's. And my parents did just that - my Dad saving up a month's worth of vacation, buying a new Dodge station wagon (with air conditioning, no less!) and taking the family on a vacation through the Southwest, idiotically in the summer, of course. We didn't have an RV, but back then, taking a "dream trip" across America by RV was a thing.
Because flying was so expensive. I also recall in the mid-1960's, going to Chicago's O'Hare airport and waiting in the American Airlines "Admiral's Club" while our plane taxied to the gate. Dad flew the whole family - first class, no less - using the frequent flyer miles he accumulated from business travel. We had to dress up to go to the airport - as if it were church, which in a manner of speaking, it was.
Today? Well, the airport is the new bus station, and thanks to low fares, everyman can fly - and does, unfortunately, making air travel a toxic experience. Can I bring my service flamingo on board? He helps calm my flying anxieties by squawking loudly every three minutes. And thanks to HIPPA, you can't say no!
But the upshot is, you can take the whole family to Disney by plane for a lot less than traveling by car - or at least at a competitive cost. And given that people have less time off these days, it makes more sense as well.
Which is why, when we travel, we see that most of the RVs in the campground are not from faraway places, but from right next door - often literally. People drive no more than a few hours to get to their campsite, often just for the weekend. And in many cases, people reserve the same site for the same week, year after year - only a few hours from home. The RV is no longer a traveling machine, but a weekend cottage or a once-a-year getaway by the lake - at a cost far less than that of owning a lakeside cottage.
Some folks will even drive up and park their RV on a site, days in advance, and then the whole damn family shows up (each with their own car, even the small children, with their pink Barbie Jeeps) and hangs out for the weekend. In a way, it is like the old "railroad camps" that used to line the tracks on some of the Finger Lakes in New York State. Clapped together out of old scrap lumber, the family would decamp to the lake for the summer, while Dad worked in the city. On the weekends, he would take the train to the camp, which was often adjacent the right-of-way. On Monday morning, he would flag down the train (no, really!) and catch a ride back to the city. Those were the days.
Of course, there are other factors at work here. The cost of travel is still high. Even at around $3 a gallon, travelling by RV isn't cheap. Even our small rig burns up about $40 of fuel per day, going only a couple hundred miles or so. Larger rigs get even worse mileage (in the single digits) and cost more to move. As a result, the idea of "seeing America by RV!" has less and less appeal.
But beyond that, I think this recent boom in RV sales is different than in the past. The era of the big-bus motorhome may be on the wane. Again, this is based on my unscientific observations. Perhaps real RV industry data would say otherwise. But it seems to me that there has been a real boom in inexpensive tow-behind trailers in recent years. And in a way, this makes sense. Americans are buying large SUVs and pickup trucks in record numbers. They find out they own not just a big vehicle, but one with a tow rating in the thousands of pounds - sometimes over ten thousand pounds. The vehicles are out there - why not sell them a trailer to pull behind it?
And a simple "box trailer" made of sticks and staples can be affordable for a young growing family. And this seems to be who we see buying them. All this talk of a decline in the number of high school graduates (which is something I discussed years ago in my college bankruptcy posting) is just a blip in the statistics. Spend a weekend in a campground sometime - you'll think a kid bomb went off!
So these inexpensive trailers are affordable for young families. They have the rig to tow them with, and there is a RV park within a few hours of their home to drive it to (within whining distance of small children kicking the back of your seat). A perfect storm. And an affordable one, or at least more affordable than a motorhome.
Motorhomes had their heyday more than a decade ago, methinks. As the 401(k) generation matures and retires, the idea of spending a quarter-million dollars or more on a rapidly depreciating asset makes less and less sense. The previous generation - the pre-baby-boomers - retired from the finger-cutting factory with a hefty pension. They could live on that comfortably, and when they hit 63, they got a nice present from Uncle Sugar in the form of a Social Security check of $1500 to $3000 a month.
So off to the RV dealer they go, and find out that you can "buy" an expensive motorcoach with a monthly payment about equal to their social security check. So many did, not realizing that they were upside-down on the coach for most of the term of the loan. And if Bain Capital bought out the old finger-cutting factory, they might find their pension paying out 40 cents on the dollar. For a lot of folks, the "dream" RV turned into a real nightmare.
For us in the 401(k) generation, such a nightmare is less likely, as we simply don't have the money. Or if we did, we would look at the overall cost, not the just the monthly loan payment, and realize that spending 1/4 of your net worth on a "thing" makes no sense at all, particularly when, after five years, it is worth half what you paid for it.
Yes, we still see the motorhomes being driven, and rows upon rows of them at the dealer lots. But during the recession of 2008, many motorhome manufacturers went bankrupt, including the "See Ya!" brand (which is what they said to people who wanted to make warranty claims after bankruptcy) and the venerable Wanderlodge brand (hampered no doubt, by a front axle overload problem on their later models). Even old-line brands such as Winnebago, while surviving, branched off into the towable market to get a piece of this rapidly expanding slice of the business.
In short, we are experiencing an RV revival right now, but I am not sure it is the same as the old days. It seems to me that we are seeing brisk sales, but not of $250,000 motorcoaches, but $25,000 tow-behinds. And that is a big change in expectations of the current generation over the last.
In other words, it is a thin recovery, not a fat one. And whether it has sustainability remains to be seen. When the shit hits the fan, the first things to be cut from the family budget are expensive toys like boats, RVs, and jet skis. And speaking of boats, that industry is experiencing a similar recovery- lots of sales in the very high-end boats to billionaires, and lots of sales of starter boats to the middle-class. But the era of middle-class people buying 40-footers seems to be waning, at least from what boat salesmen are telling me.
But the RV industry is a flexible one. The "factories" that make RVs are little more than warehouses where these rigs are screwed together one at a time. No big investment has been made in assembly lines or other capital equipment. They buy the parts, mostly from the same suppliers, and then hire kids to screw and drill and saw it all together. When the market tanks, it is a simple matter to just lay people off and hunker down until the next boom cycle.
Of course by then, most of those rigs they sold are already starting to leak....