Boat Market Dips Merrill Stevens Closes Sales Unit
Written by Shearon Roberts on November 13, 2008
By Shearon Roberts
As pleasure boat sales decline in South Florida, Merrill-Stevens said this week it will close its Fort Lauderdale yacht sales and charter services to focus on a $55 million expansion of its Miami River shipyard.
The longtime boat maker says the move is also designed to avoid having a sales division hamper referrals from competitors that would typically send repair contracts its way.
"Focusing on our core business, yacht repair, and refit and maintenance, will assure referring yacht brokers and yacht management firms that we are serving their needs, not competing with them," said CEO Fred Kirtland.
The closing of Merrill-Stevens’ sales division comes in a weak economy that has hurt boat and yacht sales in Miami and the rest of South Florida.
Partly to blame are high fuel prices that have made it costly for potential buyers with interest in engine-powered boats. Further, international sales have been hurt by the weakening of the euro exchange with the dollar.
However, none of these factors played in exclusively with Merrill-Stevens’ decision to discontinue its yacht sales and charter services this week, said Mark Bailey, vice president for External Affairs.
The yacht sales division, based at its Fort Lauderdale facility, was cutting into its growing yacht repair and refit business on the Miami River, he said.
The company was concerned that it was losing referrals for repair contracts from competing yacht brokers and yacht management firms. Merrill-Stevens concluded that one unit of its operation had the potential to hurt another that is under expansion and a priority for the company, Mr. Bailey said.
Some yacht brokers expressed hesitation in referring clients to the shipyard in the face of possible competition from an in-house sales brokerage division, the company found.
The company said the yacht sales division had experienced success during its three-year stint. However, its yacht sales operation consisted of independent contractors for both sales and charter services.
Merrill-Stevens will help the contractors ease transition for clients and will transfer administrative staff to the shipyard. The company stated it will eliminate four positions as a result, and will ensure those workers receive severance and job transition help.
"The long-range future of the mega yacht industry is strong," said Hugh Westbrook, Merrill-Stevens’ co-owner and chairman. "Even with the unpredictability of the world economy, mega-yacht demand and construction worldwide remains on schedule. Our plans for an expanded and modernized mega-yacht repair/refit and maintenance shipyard will continue."
The company is pouring $55 million into its shipyard on the Miami River under the Merrill-Stevens Modernization and Expansion project. The company, which has been on the river since 1923, has worked with the City of Miami to buy additional land to expand facilities and develop public access space near its dry-dock.
The company is two years into the project and will increase its workforce as a result, from 160 employees to 500 in coming years. Most of those new jobs are to be high-paying technical marine positions as the company increases the capacity of its repair stations to handle larger yachts and commercial vessels.
The marine industry generates $14.1 billion in revenue throughout the state and accounts for 180,000 jobs. Experts estimate boat sales were down about 26% in the first half of 2008 compared to the same time in 2007.
"I can tell from our figures, the economy is certainly having a temporary impact on yacht sales," said David Sell, CEO of Florida Yacht Charters and Sales in Miami Beach. "In this economy, people are questioning whether they need a boat, and many people are waiting until next year to see if the economy gets better."
Florida Yacht Charters and Sales actually increased its yacht sales this year 35%, Mr. Sell said. The company sells sailboats and the demand has increased as buyers have looked for alternatives for power boats given rising gas prices in 2008, he said.
The 2007 and 2008 sales figures remain low by Mr. Sell’s comparison to other years and he expects the trend to hold into 2009.
"I believe with the economy in the decline right now, I believe 2009 will be a poorer year," he said, pointing out to buyers that it is an ideal time to scout for deals.
"There’ll never be a better time to buy a boat. The manufacturers have incentives, the dealers have incentives. If people want to buy a boat in the future, they should take advantage of it this year and not wait for next year," Mr. Sell said.
Charlie Carricarte, lead broker with Biscayne Yacht Sales Co., agrees that if US buyers are to come back into the market, dealers will have to lure them in. The company’s sales are down 50% from last year, he said.
"Used boats are a bargain. Buyers are looking for price," Mr. Carricarte said. "Boats on the Internet are selling if priced very, very competitively. The key is, you will sell cheap but buy cheap also."
However, the company sold 66% of its boats this year to international buyers.
"That has now stopped because the season is over," Mr. Carricarte said, "The dollar is high and economic problems are worldwide."
The South Florida boating industry is banking on weathering the soured economy in part because of its regional and growing international yacht reputation, said Frank Herhold, executive director of the Marine Industries Association of South Florida.
The 850-member association operated the 49th Annual Fort Lauderdale International Boat Show from Oct. 30 to Nov. 3. International attendance was up 15%, based on pre-show ticket sales, according to Show Management, the firm that produces the boat show. Overall attendance, however, was down from 2007.
International attendance at the show accounts for 11% to 12% of show-goers and one-third of attendees come from around the state. The association will know in next four to six weeks how after-show yacht sales turn out, Mr. Herhold said.
"This is an international market in South Florida, second to none," he said. "The show is sort of a bellwether because it leads out the Miami and Palm Beach shows. Our business ebbs and flows like the tide. So everybody breathed a sigh of relief that the show went well."