So You Want To Downsize?

Downsizing. We saw it coming last year. Fuel prices spiked to $5 a gallon and almost immediately powerboat owners
began talking about downsizing. It didn’t make much difference what size boat they
owned, they wanted to downsize. The owner of an 80-footer wants to downsize to a
60-footer; the owner of a 23-footer wants to trade down to a 20-footer. We asked
why, and invariably the answer was the same: to lower operating expenses. When fuel
prices got back to normal we expected to see the scramble to downsize disappear.
But it didn’t. It’s still there among tens of thousands of boaters. Many would like
to downsize to take cash out.

Downsizing has a lot going for it, but room, comfort, stability, amenities and getting cash out are usually not among its benefits.

We have seen waves of downsizing sentiment sweep over powerboaters
before, and almost always it is during an oil crisis. So we weren’t surprised last
summer when we heard boaters talking about it again. Not giving up boating once
and for all, mind you, but just downsizing into something that didn’t burn so much
fuel. It was, after all, the 1973 oil embargo against the U.S. that gave trawler
yachts a big boost in popularity. Some powerboaters were even so rash as to switch
to sail, if you can believe it. Boy, were they sorry.



Fuel prices have dropped back down to a normal range this spring, but still we hear
the talk about downsizing. Things are different this time around because of the
financial meltdown last fall and the uncertainty about the future, which has gripped
many Americans lately, and maybe many people around the world as well.

Clinical psychologists have conducted experiments for years proving that humans can cope better with bad news than uncertainty.

Uncertainty is the Problem



“Our national gloom is real enough, but it isn’t a matter of insufficient funds.
It’s a matter of insufficient certainty,” says Daniel Gilbert, a Harvard professor
of psychology. He then goes on to describe lab experiments on humans that prove
that people do a lot better emotionally knowing that they have been dealt a bad
hand, rather than having to deal with the fear that they might be dealt a
band hand.


A Real Savings?


Yes, if you have a smaller boat you might save a marginal amount of money on slip
rental or rack space, and a marginal amount on insurance, maintenance and fuel,
but the key word here is “marginal.” The fact is that what you are really paying
for in slip rental, rack space, maintenance and insurance is the infrastructure
that it takes to provide the service in the first place. It really doesn’t matter
much how big your boat is. Smaller boats are charged less but the savings isn’t
linear.



And how happy are you going to be if you do save 5% to 15% on your operating expenses,
but you're now in a boat that you really don’t enjoy. Chances are you’ll be thinking
about the good old days when you had your big boat.

Shift your eyes to this young lady’s pinky and you’ll see the world’s smallest steering wheel on a large boat. We hope the next owner likes it.

Prices are Going Up



Now comes the shocker. New boat prices are going to be going up once the over-supply
is sold off. The CEO of one very large boat company-owning conglomerate has already
announced publicly that it will be raising margins in the future. We’re here to
tell you that the staffs and the expenses of most boat builders have been cut back
so far that there is only one way that they will be able to increase margins – and
that is with higher prices. The sad fact is that boating saw its high in unit sales
in 2004 at 308,000 powerboats. It is been all downhill from there. Some industry
experts are predicted fewer than 150,000 new powerboat sales this year. This means
that the infrastructure costs and fixed overhead of boat builders will have to be
borne by fewer units, which means that margins over direct costs (fiberglass, engines,
wire, etc.) will go up substantially.


Downsizing is Dangerous



We feel that for most boaters downsizing is probably a mistake. The cynical among
our readers will likely think that “we are saying just what the manufacturers would
say,” as one reader put it last week in commenting on our “value” article. But that
is not true. If we were a boat builder we’d urge you to downsize or upsize, but
just buy something. In fact, we think if you downsize now, in a couple of years
when you get the natural urge to move up, you’ll be so far out of the game you won’t
be able to make the leap.