MARINA INDUSTRY OVERVIEW <ul><li>About 11,451 marinas – excluding private clubs – operate in the US. Of the 11,451 marinas, 60% are salt water and 75% are 25 years or older – with a median age around 40 years. A recent survey of 4,300 commercial marinas showed combined annual revenue of $3 billion. The average marina has between three and ten employees and annual revenues of $400,000. Large operations can have up to 100 employees and annual revenues up to $10 million. </li></ul><ul><li>Today’s marinas are generally freestanding and dockage is considered the main profit center of the business. In addition to a stand alone, a marina may be an additional amenity to an upland project. There is also a close relationship between the marina business and the hotel business. Marina dockage rates are generally charged on a daily, monthly, seasonal and annual basis and dockage rates are normally calculated by a per ft charge based on the length of the boat. Basically, a boat slip is like a hotel room, one accommodates the guest’s boat and the other the guest. </li></ul><ul><li>However, when compared to a hotel room, marina guests’ stays are generally longer. In a local marina market, boat owners will more than likely sign a seasonal or annual contract. When compared to the operating cost for a hotel room, which includes makeup and cleaning, a marina only provides space (a slip) for the boat. Even in a slow economy, owners of large boats that cannot be stored on a trailer or somewhere on the owner’s property will always need a place to keep the boat. </li></ul>
FINANCE AND MAINTENANCE COSTS <ul><li>More than 70 percent of marinas are owner operated, stand-alone facilities. Investment sources are often friends, family, local banks, and savings and loans establishments. </li></ul><ul><li>Depending on a marina's geographic location, cash flow can be highly seasonal. Other important financial issues are the high investment in facilities and management of accounts receivable. Because of the risk of accidents inherent in managing large numbers of people and boats, broad insurance coverage is necessary. </li></ul><ul><li>Building and maintenance costs can be high, depending on weather and water characteristics, and soil conditions. Ocean marinas subject to heavy tides are generally more expensive than lake marinas. Pilings, floating docks, and other waterside structures need periodic replacement. Modern docks have a life expectancy of 40 years, but earlier structures have shorter lives. Costs per new slip are around $50,000 to $60,000. In addition to waterside equipment, marinas typically need large parking areas. </li></ul>
HUMAN RESOURCES <ul><li>Due to the high percentage of manual and maintenance labor, the average hourly wage for marina employees is around $13, two dollars less than the national average. Personnel turnover rate is high in recreation-related industries. The illness and safety record is about the same as the national norm. </li></ul>Average Hourly Earnings & Annual Wage Increase Bureau of Labor Statistics Industry Employment Growth Bureau of Labor Statistics
COMPETITIVE LANDSCAPE <ul><li>Competition from Public Marinas - Many public marinas charge lower rental rates and have their operations subsidized. In the three states with the largest number of boaters and marinas, Michigan, California, and Florida, publicly owned marinas provide substantial competition to commercial owners. </li></ul><ul><li>Competition for Waterfront Property - Condominium growth continues to replace many marinas. Developers buying marinas to develop more profitable luxury housing complexes are often encouraged by local and county officials seeking higher tax revenue. Marina owners may encounter significant purchase offers from developers seeking waterfront property. </li></ul><ul><li>Competition for discretionary income from other less expensive forms of recreational activities. Demand for marina services are tightly tied to boat sales and continued use. Power boating is not a inexpensive leisure activity. </li></ul>
SALES & MARKETING <ul><li>Rent varies according to the length of slip a boat needs. In high demand areas typical slip rents can be as high as $15 to $20 per foot per month. Guest slip rates are usually between $2 to $3 per foot per day. Some marinas still have flat slip rates of $120 to $250 per month. Dry stack storage costs are also based on per ft rate and rack storage is generally only available on an annual contract basis - payable monthly. Most marina owners cater to annual/seasonal slip holders and transients. Although transients may be more profitable, their use of marinas is strongly affected by weather and the economy. Marinas generally split their slips between annual/seasonal and transient customers. </li></ul><ul><li>The types of marketing used by marinas depend partly on the mix of annual and transient customers they cater to. Word-of-mouth is very important. Contacts with boat brokers and boat dealers are important to attract annual customers. Cruising Directories, Newspaper and magazine advertising is often aimed at transients. Boat shows are a major marketing tool, and Internet sites have become an important new source of business for both types of customers. </li></ul><ul><li>Special Events sponsored or hosted by marinas are becoming important marketing tools for promoting the facility and producing additional revenues during off peak periods. Special events are normally geared to location and the type of boater the marina attracts. Fishing Tournaments and Poker Runs are the most popular marina special events. </li></ul>
TRENDS <ul><li>More Boaters Moving Inland - Financial concerns, demographics, and weather are contributing to a surge in business for many inland waterway marinas. The Associated Press reports that more marinas on the Mississippi River are seeing greater demand as boaters relocate from hurricane-affected areas. Inland marinas appeal to customers seeking to avoid higher insurance costs and slip fees in coastal areas; attractiveness of boating to urban baby boomers has also contributed </li></ul><ul><li>In the realm of structural changes, docks and other structures are increasingly made of refined composite structures or concrete designed to withstand the elements more effectively than wood. Marinas have increasingly turned to new products with environmental and fire-resistant attributes. Engineers in the 1990s have also redesigned boat yard and dockside disposal systems to meet environmental regulations. </li></ul><ul><li>In areas of the country with limited waterfront space for new wet slip marinas, dry rack storage facilities are becoming an attractive alternative. By stacking boats on racks in a large building, an operator can handle hundreds of boats on less waterfront property than can a conventional marina. Drawbacks are the need for constant operation of special forklifts and the lack of accommodation for "transient" boaters. </li></ul>
TRENDS IN SERVICES AND AMENITIES <ul><li>Utilities - The type and quality of utilities provided by the marina depend on the market it wants to attract. Utilities provided to yachts and megayachts are much greater than to other types of boats. Electrical power, sewer pump out stations, and telephone lines are all necessary utilities, and demand is greater for some type of upscale convenience and grocery stores to provide essentials. </li></ul><ul><li>High-Speed Fuel Pump - A high-speed fuel pump can offer marinas the opportunity to greatly expand fuel revenues, a major income component. Boats, especially yachts, require a lot of fuel. Installing a high-speed, instead of a standard, fuel pump can save many hours of fuel pumping for large boats. While expensive to install, if a marina is the only one in its market with such a pump, yachts from other marinas will be attracted. </li></ul><ul><li>Online Reservations - Although most reservations for guest slips are still handled over the phone, bookings via the Web are increasing. Some marina operators offer automated reservation services and promotional information on their websites. </li></ul>
BUSINESS TRENDS <ul><li>Destination Marinas - To attract both annual and transient boaters, marinas are providing more than just docking facilities. Some are associated with restaurants, hotels, retail shops, condo developments, and golf courses. Boaters increasingly are looking for destinations, rather than cruising or fishing. </li></ul><ul><li>Megayacht Marinas - A niche market that is continuing to grow is the Megayacht and Superyacht segment. These are boats in the 80’ + category and are priced anywhere from $10 to $ 100 million dollars and more. At present, due to the fast growth of this segment of the market, there is a critical shortage throughout the world of marinas with docks large enough to accommodate these boats. The dockage rate for this segment of the pleasure boating community is generally 2 to 4 times higher than the rates for boats of a smaller size. Picking Location - The location needs of the Megayacht markets are very different from cruiser or other smaller boat size markets. </li></ul><ul><li>Dockominiums/Rackominiums – up until recently, many dry stack and wet slip marinas were built as. or converted to " Condo” type operations. Basically, this means that you own your slip/rack instead of renting or leasing it. These Dockominiums/Rackominiums, as they are called, are essentially sold under the same concept as a condominium. They are considered Real Estate property which can be re-sold, rented or used as an investment which creates equity. However, with the downturn in the real estate market and the economy many of them failed and are in receivership or were recovered by the lenders or investors. </li></ul>
CRITICAL ISSUES <ul><li>Dependence on Economy - Boating, because it's recreational, tends to be more subject to fluctuations in the economy than other activities. Demand for marina services are tightly bound to new boat sales, which in turn depend on the health of the US economy and consumer spending. The long economic expansion of the 1990s promoted steady increases in sales of inboard-motor and sailboats. In previous economic slowdowns, boat sales dropped 50 percent over several years. </li></ul><ul><li>Environmental - Marinas are subject to various state and federal environmental regulations concerning direct water pollution from boaters, contaminated storm water runoff, and dredging operations. Because of the high concentration of oils, fuels, soaps, paints, solvents, sewage, and sanded materials, in addition to unknowledgeable boaters, marinas must take extraordinary precautions to prevent water pollution. Voluntary standards have been established for best practices that result in a Clean Marina designation. Violations of environmental regulations can result in heavy fines and other penalties. </li></ul><ul><li>High Construction Costs - Construction costs for new or expanding marinas can be $60,000 per slip, due to the extensive permitting processes, requirement for more durable materials, and because underwater soil must be environmentally tested. Although lumber costs fell 0.4 percent in January 2006 compared to year-ago; steel grew 13.3 percent; cement climbed 4.5 percent, according to Engineering News-Record. To produce a 10 percent return on such an investment, monthly slip rental and other income must average $500. </li></ul>
BUSINESS CHALLENGES <ul><li>Highly Leveraged Business - Marinas require heavy investment and have high fixed costs, so ongoing high occupancy is crucial to financial success. With PP&E (Property Plant & Equipment) high and variable costs low, marinas depend largely on the ability of the operator to achieve high occupancy rates through astute marketing and excellent services. Small changes in occupancy rates have a big impact on profitability, increasing the overall risk of this business. </li></ul><ul><li>Dredging Regulations - Dredging regulations, coupled with limited dredged material management options, typically make dredging a significant operations' cost for marinas. While new work dredging, for the most part, is more strictly regulated than maintenance dredging, the biggest problems are created for marina operators in terms of permits and costs by the ongoing need to maintain channel and basin depths. </li></ul><ul><li>In recent years waterfront land values have dramatically increased. By 2017 more than 27 million people are expected to reside along U.S. coastlines The desire of people to be on or near the water has caused a spiraling escalation of waterfront property values. This has created a new challenge in the marina business. With all this land being purchased for land side development of resorts, condominiums and rental apartment buildings there is less opportunity for building new free standing marinas. Many of the free standing marinas that have traditionally been small family businesses are selling out to land-side developers. Needless to say, the competing interests for valuable waterfront property and new environmental policies are creating major hurdles for new marina development. </li></ul>
SUMMARY <ul><li>Boating, because it's recreational, tends to be more subject to fluctuations in the economy than other activities. However, owner’s of larger boats 40’ plus are not that affected by the economy. </li></ul><ul><li>Construction costs for new or expanding marinas can be $60,000 per slip, due to the extensive permitting processes, requirement for more durable materials, and because underwater soil must be environmentally tested. Tested. </li></ul><ul><li>Marinas require heavy investment and have high fixed costs, so ongoing high occupancy is crucial to financial success. </li></ul><ul><li>Although most reservations for slips come over the phone, the internet is beginning to play a bigger roll in booking reservations </li></ul><ul><li>Marinas near upscale retirement locations fare particularly well in times of increasing numbers of retirees. </li></ul><ul><li>Property and construction costs, coupled with limited supply of prime locations, inhibit new marina operators. </li></ul><ul><li>Many inland marinas are starting to report greater customer volume as boaters leave expensive and damaged coastal marinas for safer and lower priced locations. </li></ul><ul><li>Many marinas are being bought by developers and converted into luxury waterfront residences. </li></ul><ul><li>Dry stack facilities are common in areas with cold winters, and are also a launching alternative where waterfront is limited. This type of boat accommodation is ideal for casual boaters. </li></ul><ul><li>Newer Marinas offer electricity, water, TV and phone hookups; bilge and sewerage pump outs; maintenance and repair services; fuel sales; grocery and supply sales; bar and restaurant sales; laundry services; boat sales; etc </li></ul><ul><li>In some cases marinas can apply for federal grants under National Boating Infrastructure Grant Program (NBIG) to construct, maintain, and renovate docks; dredge waterways; install utility services; or buy items like navigational aids and marketing materials to attract more transient boaters. </li></ul><ul><li>US personal consumption expenditures for participant amusements and pari-mutuel net receipts, which includes marinas, are forecast to grow at an annual compounded rate of 4.6 percent between 2005 and 2008. </li></ul>
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