Rising Tide

The Galati family, in the yacht brokerage business for more than four decades, sought a centerpiece for their new $3 million facility on Anna Maria Island.

They found it in sushi and steak.

That's the theme of Ocean Star, a first-floor sushi and steakhouse restaurant in the two-story Galati Yacht Sales complex that opened this summer. The second level includes offices and what firm executive Chris Galati calls the company's war room, where it plans out long-term strategy. “So many people visit Anna Maria Island,” says Galati. “The restaurant helps keep the parking lot and the docks full.”

Another aspect of Galati Yacht Sales that's been full lately is the revenues ledger. Annual revenues in 2014 are on pace to triple 2013, says Galati. The firm, which doesn't disclose specific sales figures, now has eight locations worldwide, including one that opened in Costa Rica last year. “During the downturn new boat sales were hit really hard. We were selling just about the best deals,” says Galati.
“Things have definitely turned around.”

Multiple other boat companies up and down the Gulf Coast, in a wide segment of industry niches, have made that turn along with Galati Yachts. Recreational boating industry sales nationwide are up more than 13% since 2012, according to the National Marine Manufacturers Association, to $36.7 billion in retail expenditures. That includes new and pre-owned boat sales, engines, trailers, services and accessories. The association, in a May statement, projects industry retail sales will rise 5% to 7% this year.

“As the nation's economic recovery matures and boating businesses prepare for summer, a peak selling season for recreational boats, accessories and services, we expect to see continued stable growth in sales,” NMMA President Thom Dammrich says in a statement. “Following a year of inclement weather throughout the U.S. driving pent-up demand and Americans taking to the water in record numbers, the industry is primed for a busy selling season.”

Another essential factor in the rebound, say a handful of executives from all corners of the industry, is interest rates remain low enough to draw in new buyers. “It's discretionary spending,” says Matt Chambers, president of Cape Coral-based JRL Ventures/Marine Concepts. “But with interest rates as low as they are, it's a good time to get a boat.”

Marine leader
That theory is a major factor at Clearwater-based MarineMax, one of the largest recreational boat retailers in the country. Annual sales are up 11.4% at MarineMax, from $524.56 million in 2012 to $584.5 million in 2013. The growth has carried into 2014: Sales in the firm's third quarter, for example, which ended June 30, rose 22% from the same period last year, from $175.8 million to $214.4 million. Sales for the nine months that ended June 30 were $460.6 million, up 6% from the same period last year, when the firm posted $434.8 million.

Marine Max, publicly traded (symbol: HZO; recent price: $17.35), has 55 retail locations in 18 states, from Alabama to California and Rhode Island to Texas. The company sells boats and yachts from more than a dozen high-end brands and manufacturers. MarineMax President and CEO William McGill says the boost in sales comes from a host of factors that includes internal strategy, new inventory and low interest rates.

“The extra effort by our team combined with having the right strategies and product to satisfy the demands of our customers helped us produce a strong third quarter and overcome the obstacles associated with adverse winter weather which lingered into the June quarter,” McGill says in July 24 earnings release. “It is our expectation that we should be able to build on this positive momentum into the remainder of fiscal 2014.”

MarineMax is a bellwether for the boating industry — in good times and bad. The company struggled in the recession, like many others. The payroll, for one, was slashed from 2,600 to around 1,300 employees.

“My biggest job was keeping the morale up,” McGill told the Business Observer last year, “and helping the team realize that the customers are out there, and they're going to be returning, in better times.”

'Over the top'
Those better times are clearly here. Yet the arrival comes with a new list of challenges. Many are similar to obstacles businesses in other industries face, such as government regulation, the rising costs of health insurance and finding and retaining top employees.

Those challenges haven't dented the ongoing recovery at the company that makes precision molds used to create hulls and fiberglass parts for the marine industry. JRL Ventures/Marine Concepts.
Annual sales are up 40% in 2014, says Chambers. The firm's clients are boat builders and others in the boat manufacturing supply chain, so its fortunes are a good economic indicator of the entire industry. “We're an A to Z boat company,” Chambers says. “We do design from a napkin sketch to final product.”

A tangible look at the firm's recent success is in south Manatee County, where it bought the former Wellcraft marine facility in late 2012. The firm spent at least $1 million to buy and renovate the dilapidated facility. Now 100 employees work there, in conjunction with several robots. The company occupies about 200,000 square feet, more than 60% of the complex, where it works on composite tool-making projects.

State and Manatee County officials approved $240,000 in performance-based incentives for the expansion, which Chambers says nearly happened before the recession in Lee County. But the firm couldn't find the right space there, and then the downturn froze the growth plans. The timing was better for the old Wellcraft space.

“We went over the top there,” says Chambers. “We knew we'd do well, but it's been much better than we thought.”

Another boat business growing in the overall industry boom is Venice-based Freedom Boat Club. Annual sales at the 105-employee business rose 16.4% in 2013 over 2012, from $7.73 million to $9 million. And like JRL Ventures/Marine Concepts, the roll has continued well into 2014. “This year has been better than last year,” Freedom Boat Club CEO John Giglio says. “We are still doing really really well.”

Freedom Boat Club's model is to provide club members access to a variety of boats in return for an initiation fee and monthly dues. The firm has 60 locations nationwide, a combination of company-owned and franchises. More than 300 boats are available in its fleet.

“We are a little different than the rest of the marine industry,” says Giglio. “It's not just a boating experience. It's the whole membership experience.”

A Boater's Boat
The Gulf Coast boat manufacturing community has many small businesses, some with 10 or fewer employees.

One of those smaller companies, Sarasota-based Panga Marine, is amid a sales surge that could catapult it to a larger segment of the industry. The niche custom boat builder makes Panga boats, a small stylish vessel used everywhere from Latin America to Dubai for charter fishing, touring, diving and other commercial uses. “These are all over the world,” says Panga Marine President Rob McDaniel, “but the United States has been slow to catch on.”

That might be changing. Panga Marine, due partially to an increase in domestic orders, doubled its space, from 16,000 square feet to a 32,000-square-foot facility in the Northgate Center Business Park, just north of downtown Sarasota. Says McDaniel: “We needed more space and better space.”

McDaniel declines to discuss annual sales, only to say the figure is into the millions and has grown significantly. McDaniel says a big year for the firm, now with 12 employees, would be 75 boat sales. In addition to U.S. customers, Panga Marine sells boats to clients in Colombia, Mexico, Japan and Sri Lanka. Panga Marine boats come in six sizes, from 18 feet to 29 feet. “They are for people who know boats,” McDaniel says. “We never sell to first-time boat buyers.”

A former real estate attorney, McDaniel got into the boat business in 2001. Back then he imported Pangas from Mexico. On a trip there he met his current business partner, Tom Biller. Growth has since come almost exclusively from referrals and word of mouth.

“We haven't done any marketing,” says McDaniel. “The money we would spend on marketing and advertising we spend on making sure the customer is happy.”

Executive Summary
Industry. Boating, boat manufacturing Trend. Many boating companies are having stellar years. Key. Low interest rates have helped drive the industry rebound.