Motor home industry rolls back
After bankruptcies and consolidation, the motor home business is bouncing back with innovations and new technology.
Bill and Jill Phipps shuttle between homes around the country to keep in touch with grandchildren. But they got tired of crating up Rockne, their Irish Wolfhound mutt, for seven-hour plane rides.
So, with some trepidation, the Tucson couple recently became first-time RVers.
They took delivery of a new 24-foot motor home a couple of months ago, contributing to a wave of sales that are lifting an industry rebounding from the depths of recession.
Deliveries of motor homes from manufacturers to dealers rose 13.6% last year and are expected to climb by almost the same amount this year, the Recreation Vehicle Industry Association reports. Last year marked the third year of increases from a recessionary bottom that that saw sales fall to the lowest levels since at least the 1970s.
With the spring RV-buying season approaching, there’s a growing optimism in the business that affluent families and retirees such as the Phipps are ready to take the plunge. After a round of consolidation, including bankruptcy filings by a couple of the industry’s big names, motor home makers are starting to hit the road again.
That’s good not only for the RV industry but for the economy in general. Purpose-built motor homes typically retail for more than $100,000 and because they’re used for vacations, they’re the ultimate discretionary purchase. The pickup in sales is an early indicator that people might be willing to start spending again — and not just on big-ticket items they can’t do without.
But it’s also an American comeback story: Almost all RV rigs are U.S.-made, many in Indiana. Unlike the auto industry, motor home makers have few foreign competitors, although some are starting to knock at the door.
“People are tired of waiting for things to turn around,” says Sheila Davis, spokeswoman for Winnebago Industries. Some customers “who could have bought a motor home during the downturn … chose to wait. Now, they are feeling more confident.”
That confidence is bolstered by waves of retiring Baby Boomers, their 401(k)s fattened by the stock market’s recent rally, who always dreamed of roaming the hinterlands. Working against makers, however, is the painfully slow pace of the recovery and persistently high and unpredictable fuel prices.
To deal with economic reality, the industry has seen some innovations to try to make models that are more affordable and fuel efficient.
There’s no denying the industry’s progress. Five companies — Winnebago; Fleetwood RV; Thor Industries; Tiffin Motorhomes; and Forest River, part of Berkshire Hathaway — account for more than 75% of motor home volume, says Scott Stropkai, national RV sales manager for Statistical Surveys, the industry’s sales tracker. Both sales and stock prices are up from a year ago.
Winnebago shares doubled last year, and the company’s earnings exceeded analysts’ expectations in its latest quarter. In announcing earnings earlier this month, Thor Industries, which has Airstream and other brands, reported that motor-home sales had almost doubled from the same period in the previous year.
Fleetwood, which was bought by a private-equity firm after a bankruptcy reorganization during the recession, is encouraged by the trends, as well. “We have seen notable growth over the past six months,” John Draheim, Fleetwood’s CEO, said in a statement. “Motor home sales continue to gain momentum, which makes us optimistic about what the traditional spring- and summer-selling seasons will bring.”
Ford Motor announced earlier this month that it is boosting motor home chassis production by 35% to meet burgeoning demand. It says registrations of motor homes built off its engine and chassis are at their highest level since 2007.
“We are increasing our participation in this industry as motor home customers return to the market,” Ken Czubay, Ford’s vice president for marketing in the U.S., said in a statement.
Despite carrying much higher price tags, motor homes are posting bigger sales gains than travel trailers. The RVIA predicts that manufacturers’ deliveries of motor homes will show twice the increase as that of the overall RV industry, which includes trailers.
The comeback “is a reflection of the American economy as we dig out of the recession,” says Sherman Goldenberg, publisher of trade publication RV Business.
Another positive sign: The unemployment rate in Elkhart County, Ind., the center of the motor home industry and its suppliers, has dropped below 10% after rising above 20%. Still, it has a way to go before it falls below 6% again, where it held for most of the last decade. It’s an “unbelievable story of recovery,” says Goldenberg.
To help rev sales, the industry has retooled itself. It’s luring buyers with new products that feature:
- Value. Makers are finding ways to add luxury touches, yet make motor homes more affordable. “Value pricing is very much the order of the day,” Goldenberg says. Winnebago, for instance just introduced a new Vista model last summer that starts at $69,999, about $30,000 below other coaches in its size and type class. It’s “fully featured but cost effective,” Davis says.
- Technology. To lure existing motor home owners to upgrade, makers are loading up units with flat-screen televisions, high-speed Wi-Fi connectivity, LED interior lighting and other modern touches. Antennas that used to be hard to adjust while the vehicle was speeding down the highway now take care of themselves.
- Fuel efficiency. Some of the industry’s biggest sales growth in deliveries this year could come in van conversions, especially those built on platforms such as the Mercedes-Benz Sprinter. The van offers up to 18 miles a gallon on the highway, more than double the mileage of a traditional purpose-built motor home. Chrysler, Ford and Nissan will soon be offering similar UPS-style vans that could add to the conversion business.
Despite the gas savings, the Sprinter conversions don’t come cheap. For example, Airstream, a unit of Thor, sells its Interstate conversion starting at $140,000. But it’s another example of how the RV industry is reaching out to new customers.
Hitting a different market
Instead of courting traditional RV owners, Airstream aims the Interstate at the affluent shopper who might have little regard for a big RV with flashy graphics but craves luxury goods, has multiple homes and is drawn to a smaller motor home with the Mercedes logo on the grille.
The Interstate “really hit the sweet spot of luxury buyers,” says Tim Garner, general manager for Airstream touring coaches. To reach its target customers, Airstream de-emphasized RV shows and instead displayed at more more traditional car shows.
They found buyers such as the Phipps. “We’ve never had a boat, a motor home. We’ve never camped out. This was something of a lark,” says Bill.
To travel the country, the couple didn’t want a rig that was too big, so they went with theInterstate. Jill says the diesel engine’s economy rivals the fuel mileage of her Lexus crossover SUV.
The retirees bought the motor home to make trips to their home in South Carolina and to see family in Ohio, but they’re already plotting weekend trips to fun spots in Arizona.
“I do most of the driving,” she says. “He fiddles with the electronics.”
The Phipps stand in contrast to Brian and Laura Neske, who caught the RV bug long ago. They’ve owned four motor homes, and they just bought a new one, a 34-foot Tiffin Allegro.
The decision to buy a new RV was an easy one for the Warrenton, Va., couple, once they stopped by a dealer: “They just made a deal we couldn’t resist,” he says, and it probably helped to be buying during the winter.
Brian says they use their motor home for about 30 nights a year, for weekend getaways and longer trips, such as a visit to Yellowstone National Park. They always take along their King Charles spaniels.
The upsurge in motor home demand is proving beneficial not only to makers, but to suppliers. John Sztykiel, CEO of Spartan Motors, which makes motor home chassis, expects his company will have a strong year because of pent-up demand for RVs and easier credit for loans.
He also predicts that younger buyers will be getting into the RV market.
Easy to see why, he says: Having a motor home “forces us to get away and leave all the distractions of the house and the job behind.”