By Chris Bryant (Bloomberg Opinion)
After two years when it seemed everyone hit the road to live their best #vanlife or explore the outdoors in a larger motor home, some of the air is rushing out of the recreational-vehicle boom.
Buyers are balking at soaring prices, forcing U.S. RV manufacturers to temporarily shutter production and dealers to discount inventory. The industry faces a testing period of declining sales and earnings, but a renewed commitment to more affordable camping options will ensure its long-term prospects.
Demand for RVs rocketed in 2020 and 2021 as consumers constrained from flying overseas found a safer way to satisfy their wanderlust. Instead of working from home, RV owners could toil from a national park instead.
With dealer lots emptied out, frenzied buyers were sometimes forced to pay more than the recommended retail price and spend well in excess of $100,000 on a motor home.
Though manufacturers faced higher costs, they were still able to boost gross margins via price increases and sales of more high-spec vehicles. However, the bubble has now begun to deflate.
Airstream producer Thor Industries Inc.’s North American RV order backlog shrank 80% in the year to Jan. 31 and revenue slumped 39% in the fiscal second quarter, forcing it to cut full-year sales guidance. Forest River Inc.’s first-quarter revenue also declined 39%, which the Berkshire Hathaway Inc.-owned business attributed in part to “rising interest rates, inflation and other macroeconomic conditions.” Overall RV shipments to dealers declined 52% in the first four months of this year, according to the RV Industry Association.
A sales pullback was inevitable in this cyclical industry — many people who wanted an RV now have one — yet the level of retail buyer caution appears to have caught the industry by surprise.
“There has been a little bit of sticker shock from consumers when they see the increase of new RV prices and the interest rates that are associated with financing,” retailer Camping World Holdings Inc. Chief Executive Officer Marcus Lemonis told investors last month, noting that customers are looking to the used market as an alternative.
So far there haven’t been a glut of first-time purchasers dumping their vehicles and quitting the RV life. However, some recent buyers may discover they have negative equity — meaning they owe more than their depreciating vehicle is worth — making it harder for them to trade in their old rig for a new one.
Dealers are wary of holding too much new inventory — in part because their own borrowing costs have increased — and some are having to cut prices to shift aging stock. So now might be a good time to buy a new RV, providing you have the cash.
In April, John North, CEO of Lazydays Holdings Inc., said the RV dealer was advertising “significant discounts” while this month Jason Lippert, the boss of RV-equipment supplier LCI Industries, said consumers should be able to obtain “a much lower price on product than what they would have got six months ago.”
Two-thirds of the 40 North American dealers surveyed recently by Truist Securities are discounting 2022 model year inventory by 30% or more from the manufacturer’s suggested retail price. “Affordability — unit inflation and higher financing rates — remains the single largest impediment to consumer demand,” its analyst Michael Swartz told clients this week.
However, if the industry’s production discipline continues, very limited inventories may prevent prices falling as much as RV fans might hope.
For now at least, the European RV market remains in much better shape because production severely constrained by a chassis shortages has kept dealer inventories fairly low.
Luxury manufacturers like Morelo (owned by Knaus Tabbert AG) and family-owned Volkner Mobil GmbH have full order books and wealthy customers who are less affected by inflation. Volkner’s bespoke land yachts with space to carry a Ferrari or Bugatti in the vehicle underbelly can cost up to 3 million euros ($3.2 million).
“Two decades ago people would start out with a tent or smaller camper before trading up. Today we have customers who’ve never owned a mobile home before and insist on one of our luxury vehicles,” co-owner Stephanie Volkner told me. “Our clientele aren’t just older people, we have 30-year-old customers with small kids.”
Mercedes-Benz Group AG also remains bullish on the “glamping” trend and recently announced a new line of luxury electric camper vans.
However, after attracting so many Gen Z and millennial converts recently — the median age of a first-time RV buyer in the U.S. has fallen to 32 from 41 — manufacturers can’t afford to neglect entry-level customers.
Camper vans still offer good value compared with the soaring cost of flights, rental cars and hotel stays, and RV owners are able to generate extra income via peer-to-peer renting platforms. Yet along with higher loan payments, insurance and campground entry have also become much more expensive lately.
In a nod to these pressures, French manufacturer Trigano SA said last week it would soon launch new vehicles that “appeal to budget-conscious consumers.”
“Mindful” of the impact of inflation and rising interest rates on consumer affordability, Thor said in March it is “working with our suppliers to lower input costs and introducing new product offerings at value price points.” (Thor and rival Winnebago Industries Inc. report fiscal third-quarter earnings next month.)
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©2023 Bloomberg L.P. Visit bloomberg.com/opinion. Distributed by Tribune Content Agency, LLC.
Are you planning a road trip and can't decide whether to go with an RV or a travel trailer? According to the RVIA, a growing number of Americans are purchasing RVs to travel the county while working from a comfortable space. However, RVs are well known to be more expensive than travel trailers, both in the short and long term. Either purchase is a major responsibility; so as you’re deciding on your home away from home, we’ll break down some of the key differences to find which is the right fit for your needs.
The cost difference between RVs and travel trailers is significant. On average, a standard RV ranges from $15,000 to $150,000, depending on whether its used or not. In contrast, travel trailers can cost anywhere from $5,000 to $50,000.
Besides their different price points, the cost of RVs on the road is also higher; with maintenance, fuel, and increased campsite fees. However, they tend to hold their value better than travel trailers, which depreciate at an accelerated rate.
Related to the topic of cost is how much you’ll be paying for comfortability. Most RVs feature modern appliances such as refrigerators, electric ovens, microwaves, showers and more. Depending on how much you’re willing to pay, some even have a washer-dryer combo and satellite TV to make your RV a true home on wheels. Travel trailers have come along way with more amenities than in the past, but typically have fewer luxuries than RVs. This is why travel trailers are often referred to as “Campers”, because they aren’t traditionally used for long-term living in the way an RV is.
Simply put, although RVs cost more, even the cheapest RV will have certain amenities that a standard camper may not. If you prioritize comfort and a luxurious travel experience, an RV may be the best option. On the other hand, if you enjoy outdoor experiences, want to have your truck or SUV on your trip and are willing to sacrifice some comforts, a travel trailer suits you best.
An RV is undeniably larger than a travel trailer, which can be an advantage or a disadvantage depending on your needs. The size means larger beds and living areas, which is perfect for long-haul family trips. However, the sheer size of the vehicle can be a limiting factor when maneuvering through tight areas and searching for parking. Many cities have laws limiting parking for RVs, so you’ll need to plan ahead.
In contrast, travel trailers are smaller and more maneuverable. They are easier to tow and can be easily detached from the vehicle, which means you can park your trailer at a campsite and use your vehicle to explore surrounding areas. This gives you much more mobility and flexibility compared to an RV. Travel trailers are a great option for couples, small families, or solo travelers who prefer a more streamlined experience. However, their compact size means that they may not have as much interior space or as many amenities as an RV.
RVs are more complicated than travel trailers and require more maintenance including oil changes, servicing the generator, safety-testing the belt systems, etc. RVs also require higher-grade gas, which is more expensive, and tire rotations regularly. Travel trailers, on the other hand, require a simple maintenance schedule, including bearings and tire inspections, brake maintenance, and occasional cleaning. You can easily get this done with DIY videos, making it easy for newcomers to the travel trailer & RV community.
RVs and travel trailers offer different driving experiences, depending on your preferences and skills as a driver. The first point to note is, whether you’re towing a camper or driving an RV, you’ll need a commercial driver’s license (CDL) for any venture where the gross vehicle weight rating surpasses 26,000 pounds. At least, that’s the standard in many states here in the USA. This is rarely an issue when towing a camper, but is often a major consideration when purchasing a Class A recreational vehicle.
Assuming you have all the paperwork in order, RVs are also more difficult to drive. They are heaver, have a higher ground clearance, and leave less room for error in narrow spaces. In contrast, a camper can be affixed to the back of any medium-sized truck or SUV. Naturally, travel trailers are more often preferred by casual outdoorsmen, while RVs are preferred by committed and experienced travelers.
Choosing between an RV or travel trailer depends on your unique lifestyle and the type of traveling you plan to do. If you have a large family and love extended trips, an RV may be the best option for you as they offer more living space and more significant amenities for comfortable travel. However, if you’re a couple or small family and prefer something more affordable and mobile, a travel trailer may be the best option.
The biggest factors to consider are your preferences, your budget, and your travel needs. Take your time to conduct thorough research and factor in everything above to make the best choice for you and your family. Remember, whichever you choose, you’re sure to create unforgettable memories on the road. And if you happen to buy a Camper, choose Fastway Trailer Products for the best sway control hitch on the market today!
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