Despite headwinds, Minnesota’s boating industry still afloat and trying new tack

Symbolic of the state’s outdoor lifestyle and 10,000 lakes, Minnesota claims the highest number of recreational boats registered per capita in the country — one boat for every six residents.

As the industry’s fortunes have ebbed and flowed with economic cross currents — perhaps more than any other consumer discretionary expense — Minnesota has been at the center of many of those changes.

The number of recreational boats registered by the Minnesota Department of Natural Resources “kind of plateaued over the past four or five years,” before dropping about 6 percent from 867,000 boats in 2008 to 812,000 last year, according to Kim Elverum, boat & water safety coordinator.

Source: MN Dept. of Natural Resources

While traditional powerboats are still the most popular category by far, kayaks have been the fastest-growing segment, from 23,000 registered in 2005 to approximately 40,000 in 2009.

Luke Kujawa, 37, has enjoyed the ride for the last 26 years, ever since he sold his first boat at age 12 working for his parents’ dealership, Crystal Pierz Marine. The family-run business eventually became one of the largest recreational boat dealerships in the Upper Midwest before succumbing to the depressed boating market earlier this year. Kujawa’s boom-and-bust voyage and his newest venture mirror the boating industry changes both in the state and nationwide.

The industry benefited greatly from rising home values and low interest rates as the refinancing boom put money in homeowners pockets “and put a boat in the garage,” Kujawa said. Crystal Pierz and the industry enjoyed strong growth through the early part of the decade.

New boat sales, however, stalled in late 2005, and Kujawa, who had started his own Internet company out of college, rejoined the family business the next spring as president and chief operating officer.

Facing “bloated and aging inventory,” he launched what he described as a “massive turnaround,” taking the largest dealership in the Upper Midwest from 15 locations down to seven and cutting staff and expenses. After the painful cuts, the dealership was on track to break even or turn a slight profit by 2009, he said.

But when the real estate bubble burst and financial markets collapsed in 2008, credit virtually dried up which changed everything.

With only a handful of players providing the majority of inventory financing for dealers and manufacturers, two big players, KeyBank and Textron Financial Corp. pulled out entirely while GE Capital significantly pared back its exposure to marine lending, leaving “a big gap” that has not yet been filled, according to Karen Trostle, president of the National Marine Bankers Association.

The inability to get “floor plan financing,” as it is called, put manufacturers and dealers “in dire straits,” Kujawa said, including Minnesota-based Genmar Holdings, which filed for bankruptcy last June. At that point, Crystal Pierz, as one of the largest distributors of Genmar boats (including the popular Glastron fishing boats), “had to look at a whole new strategy,” he added. His parents decided to sell the business and the Crystal Pierz name to Bass Pro Shops. His father still retains a dealership and marina in Brainerd that he runs himself. 

With plenty of used boats on the market, prices on new boats finally seem to have bottomed, according to Tom Fournier of ABOS Marine Blue Book, a publication that tracks boat prices nationwide.  In an email response, Fournier said that “new boat sales, … practically nonexistent the last couple years,” are picking up “at least relative to what we have seen.” ABOS raised some prices in its latest edition “as the market went from virtually no sales to some sales,” he added. 

But credit squeezes on manufacturers and deflated consumer borrowing capacity are not the only pressures facing the boating industry, Kujawa added.

He describes a host of changing  “psychographic factors” — from competing demands on free time, to the cost and complications of winter storage in Minnesota, to the rapid depreciation in new boat values that can quickly put a buyer “upside down” on a 10-year loan — that all add up to the “hassles of owning a boat.”

It’s a reality that Kujawa believes many in the industry are reluctant to face.

Over the past decade, some dealers and marina owners, including several in Minnesota, have recognized that the boating lifestyle is changing. In response, they have launched shared-ownership boat clubs, where members have access to a variety of boats throughout the season without the “hassles” of boat ownership.  (See list  below.)

After the sale of the family business, Kujawa realized that “for the first time in my life, I wasn’t a boater.” He knew the boat clubs — he’d sold to many of them, so he and a partner launched a new venture, Your Boat Club, at the January boat show in Minneapolis.

Starting with three locations — Gull Lake up north, Prior Lake to the south and a trailer boat location in Anoka — Kujawa hopes to have up to 30 locations throughout the state in four years. “Most boat clubs are captive to a particular body of water. In Minnesota, we have 10,000 lakes … We are explorers, going to different lakes, doing different things,” he said.

Fair winds or foul, he’s now back in a boat.

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Here are several boat clubs in the greater metro area that provide membership use of club boats:

Here are sources of information on boating in Minnesota and boat club franchises nationally:

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