When Tom Walworth and his wife planned a weekend getaway to Traverse City, Mich., earlier this year with friends, they didn’t book a hotel. Instead, they rented an RV.
In addition to saving about $100 on food and lodging, Walworth got a taste of an activity he has analyzed for more than 30 years as president of Statistical Surveys, a research company based in Grand Rapids, Mich.
“We were hooked. We had an absolute ball and would do it again,” he said.
More Americans are taking to the road in recreational vehicles as sales of towable campers approach prerecession levels and shipments of motorized models gain speed. The total for all new units sold this year is projected to rise about 11% from last year to 316,300, Walworth said. Meanwhile, 2014 looks like another good year, as sales could top 335,000, the most in six years.
“All things are a go for the RV industry again,” he said.
That’s good news for manufacturers Thor Industries and Winnebago Industries. It’s also encouraging for the U.S. economy because RV demand has a strong relationship with household confidence, and these vehicles are very discretionary purchases, said Richard Curtin, director of consumer surveys at the University of Michigan, who has analyzed the industry for more than 30 years.
While demand for more expensive motorized vehicles has been slower to recover than in previous expansions, 2013 marks a turning point, Curtin said. More than four years since the 18-month recession ended in June 2009, sales of these units — with an entry-level price of about $80,000 — are up more than 30% from last year, he said, citing data from the Recreation Vehicle Industry Association, a trade group. Meanwhile, towable units — retailing for as little as $4,000 — have risen 8.5%.
The industry is benefiting from improvements in consumer spending related to gains in the housing and stock markets, as well as low interest rates, said Curtin, who added it’s impressive that sales “have been steady and at a remarkably good pace, which is expected to continue for the next several years.”
Many of Thor’s customers delayed purchases during the economic slump and some traded down to less-expensive models, CEO Bob Martin said in a phone interview. They were having trouble getting loans or couldn’t afford more expensive options, so the Elkhart, Ind.-based company expanded its lines of towable campers priced near $30,000 — a category that “came back pretty quickly after the recession” — and motorized RVs retailing for less than $100,000, he said.
Now, pent-up demand and easier access to financing for motor homes priced as high as $150,000 are helping boost sales, so “we’ve seen a nice swing heading upward,” Martin said.
It’s useful for investors to monitor this industry because it’s proven to be “fantastic as a leading indicator of overall economic trends,” said Kathryn Thompson, a founder and analyst at Thompson Research Group in Nashville, Tenn. Sales began to drop as interest rates climbed into 2006; the yield on 10-year Treasuries reached 5.24% in June that year. By December, “the consumer was completely falling apart in the RV industry.”
That slump came one year before the U.S. entered the worst recession in more than 70 years. Now traffic at dealerships nationwide probably will be even better in 2014, Thompson said, adding that very strong sales have helped drive towable units near the prerecession peak.
Gross domestic product expanded at a 3.6% annualized rate in the third quarter, and RV shipments are growing at about three times that pace, said Mac Bryan, a vice president at the RVIA in Reston, Va. “The adjective I’d use to describe this year’s sales is wow.'”
That sentiment is echoed at Thor, maker of the Airstream brand, as dealers attending a recent exposition in Louisville, Ky., were very optimistic about the spring sales season, said Jeff Tryka, director of investor relations. The company recently unveiled a new RUV model that’s a cross between an RV and a sport-utility vehicle.
SOURCE: USA TODAY
