In the years that followed the
financial crisis, sales of RVs began booming. Once considered a pretty
dowdy way to travel. RVs have benefited from slick
industry ad campaigns, relatively low gas prices, and a renewed
interest among Americans of all ages including retiring boomers and
younger RVers lured by a chance to live the
so-called van life. Sales began to drop in 2018, but
the latest boon to the business might be the
coronavirus pandemic. So it's a common thing that
we've been hearing from our dealers, from customers, friends of mine, the
same way that maybe never considered the lifestyle, but they needed
a place to get from point A to point B and an RV
truly is the safest way to do it. We've been wanting to buy a camper
for a while now, and we knew that if we got a camper or the
sooner we got a camper the more we would go camping,
just in general. And so this gave us
the nudge to do that. RV companies such as Winnebago
and Thor Industries have seen revenues soar over
the last decade. RV sales grew from 2010 to 2017
in most years by double digits annually. The new boost from the
pandemic could fuel growth for months if not years to come. But it also risks
straining the industry's capabilities. Some longtime RVers and industry
watchers say the RV industry's rapid growth has come with
its share of pains. Some say they are seeing reports
of quality issues with RVs bought in the
last several years. They attribute it to the boom
in production and intense price competition among manufacturers looking
to lure new customers. Surging demand has strained the
supply chain and production capacity of the
RV industry's heartland. Elkhart, Indiana, where the vast
majority of RVs are made. Data indicate first time buyers
are pouring into dealerships and shows looking for their own
happy home on the road. This is a promising sign for
a business built around a lifestyle even RVers admit was once
seen as deeply uncool. But long timers say new customers
need to do their research before signing and understand what the
RV life is really about. It can be wonderful, but people
need to do their homework first just to make sure it's a
dream come true rather than a nightmare. A recreational vehicle, broadly speaking,
is one that has spaces and features that enable people
to essentially live in it comfortably, at least
for a time. There are many types that
fall under this banner. The two main categories are
towables and motorhomes, which each break down further into different
subcategories, such as camper vans, fifth wheels and so on. Vehicles in these different segments
range in size, the amenities they offer, and in their
sticker prices, which can run from thousands of dollars to
more than a million. Towables which are hitched to the
back of cars or trucks, make up 90% of the market, according
to the RV Industry Association. Motorized versions make up
the other 10%. Towables allow consumers to get in
at a lower price point because you're not paying for the
engine in the automotive portion. So as long as you've got a
vehicle that can tow it, it allows people to get in and
a little more affordably way. As the industry has grown, RVs
have become larger and more sophisticated with features that
ever more closely resemble those found in an ordinary home. The RV industry is as old
as the automotive industry itself. Historians place its birth in the
year 1910, just about seven years after the Ford
Motor Company was established. 1910 was the year the
first motorized campers were made. Up to that point, people who
wanted to sleep comfortably on wheels had to resort
to outfitted railway cars. Most of these early designs were
pretty simple, and they were devoid of many of the
conveniences found in contemporary RVs, such as fully functional
kitchens and bathrooms. Yet these new campers found a
market among Americans eager for a new tool to help
with comfortable travel. A culture of tin can tourists began
to sprout in America in the 1920s. By the 1930s, RVs
included beds, dining tables, water and electricity. Progress continued into
the 1950s and 1960s, around the time many of
the current RV manufacturers were founded. RVs became an
established American cultural phenomenon by the latter 20th century. Despite this, they were for a
long time considered, well, not really hip. People thought that
RVing was young people thought it was very corny and
just for retired people. And of course, that's change now
in the last few years. As the U.S. economy recovered from
the recession, spurred by the financial crisis of 2008, the RV
industry saw several years of impressive growth. Sales of the
iconic brand Winnebago grew from $449.5 million in 2010
to around $2 billion in 2019. Sales of market leader Thor
Industries, which owns the also iconic Airstream brand, grew from
$2.3 billion in 2010 to around $8 billion dollars
in 2018 and 2019. Part of what fueled this is
a dramatic spike in interest among members of very different
generations, say industry analysts. So-called baby boomers are retiring
and looking to spend more time traveling. These customers
fit industry analyst Chuck Woodbury characterization of road
going grandparents eager to enjoy their golden years. But there has also been a
sharp rise in younger buyers, fueled by what some call
the van life trend. Van life is often rendered with
a hashtag signifying the role social media has played
in the movement. A fair number of younger buyers
see an RVs and converted vans the promise of a life of
greater freedom and simpler living. Others are just looking to get
away from home for a bit. There really is a large resurgence in
wanting to get back out in nature. Everybody realizes it's good for
the soul as well as for the physical body, and the RVs allow
you to get there, set up a base camp, do what you enjoy
doing, hang out with friends, hang out with other families, and get
that break away before you return to those very active lifestyles
that pretty much all of us have today. We
love the camping lifestyle. We both grew up camping. We love-there's so many, like
family values that go behind camping between, you know,
teamwork and organizational skills, and enjoying the great outdoors. And so we really wanted to
still have that element of camping and instill those values
in our kids. There is an important
point to make here. Many of the people living the
so-called van life do not buy ready made RVs. Instead, they often buy conventional
transit or cargo vans. The Mercedes Sprinter and Ford
Transit lines are popular choices. These vans are then
converted either by the owners themselves or by shops that
specialize in van conversions. This is often a lot cheaper than
buying a ready made camper van. Like conventional RVs these can
range from these simple and spartan to the luxurious. Perhaps the most famous camper van
of all time is the Volkswagen bus, formerly known as the Type Two
which became a symbol of the counterculture and at home on the
road for a generation of hippies. The camper version of the
Type Two was called the Westfalia, named for the company
that converted the van for camping. Volkswagen has been making
camper vans since the original VW bus era. Among others, there was the
Vanagon, the Eurovan, and the California camper, which, despite the
name, is not sold in California or anywhere else
in the United States. VW has said it plans to revive
the original VW bus concept as a futuristic, fully electric
van in 2022. The major RV manufacturers also
make their own camper vans, often built off platforms such
as the Mercedes Sprinter. And the RV Industry Association says
the average age of RV owners has been dropping from the age of
48 in 2015 to 45 in 2017. We see a lot of people that do
the van life for a number of years and then move into a little more
traditional RV, even if it is just the van camper or small,
motorized or even a towable product. That means the industry
is connecting with younger consumers and suggests more good
years are ahead if those customers keep coming back. Many of these younger are RVers have
jobs that allow them to work remotely, widespread internet
connectivity helps. About 1 million to 1.5 million
live in their RVs full time. According to the
RV Industry Association. RVs have become so popular in fact
that some people say RV parks and campgrounds have
become pretty crowded. Stories abound of travelers struggling
to find space to park their vehicles. RV parks are not
growing very fast and very expensive. $20 to $25 thousand a
space is where it costs somebody to build an RV park when
you figure all the hookups and everything that goes into it. So they're very expensive. It takes
a long time to get that money back. So there's not
that many RV parks. And yet you've got all these people
that want to stay in them. And then you've got the full
timers that are staying in and you've got the traveling nurses,
the pipeline workers, all these people. So where are these
people going to stay? Those in the industry say the
explosive growth of RV sales has exposed some other
troubling phenomena. The fact is RVs. What you don't see, what you
don't see beneath the surface, the staples and the glue that's holding
them together on the cheap ones and the short
cuts that people take. Industry watchers such as Chuck
Woodbury say they have heard tales of RVs cheaply
and hastily made. I went out on a press trip once
with a they gave us these bottom line, RVs to use. And I'm telling you, the bed was
it was like a normal bed at home but without the mattress,
just the box springs. I mean, it was awful. Critics
attribute the troubles to the dramatic spike in demand, and
intense price competition among the few manufacturers
in the business. Today's RV industry is heavily
consolidated, a trend that intensified during the financial
crisis, when many smaller makers were either gobbled up
by larger competitors or simply went out of business. Now,
three makers control the vast majority of market share, Winnebago
Thor Industries, and Forest River, which is owned by
Warren Buffett's Berkshire Hathaway holding company. Thor Industries has
about 48% of the market alone, according to Jefferies
analyst Bret Jordan. Forest River has about 33% and
Winnebago about 8%, with the remaining 11% made up
by smaller players. 83% of RVs are made in
Indiana, mostly in Elkhart County, the heart of the industry. So the soaring demand has left
what was once a small, very regional industry, struggling at times
to ramp up production and to service vehicles
in need of repairs. RVs have also become
a lot more complex. It seems obvious to say it, but
it is worth remembering that RVs are more like houses than
they are like cars. They have bathrooms, sinks,
refrigerators, complex lighting systems and unique construction. That means servicing one of these
things requires a pretty wide skillset, including a familiarity
with automotive maintenance, electricity, plumbing, and
other things. In 2018, the RV Industry Association
invested $10 million in the creation of the RV Technical
Institute in Elkhart, Indiana. The institute launched in
the fall of 2019. The goal is to create
more trained technicians, help current practitioners strengthen their skills,
and reduce service wait times for customers. With respect to quality issues, the
RVIA said it maintains teams of employees that regularly
make unannounced safety inspection visits to RVI member factories,
which comprise 98% of RV manufacturers in the country. A recent survey of owners by the
RVIA showed that less than one percent of them plan
to stop RVing. Thor industries in Winnebago were
not available to comment on this story. In 2018 and 2019, RV shipments
had shown signs of decline after years of growth. But the onset
of the global pandemic has boosted consumer interest. According to those in the
industry, campgrounds and RV parks have seen jumps in reservations. On June 10th, KeyBank analyst Brett
Andress said in a note that RV demand has stabilized and
has shown signs of accelerating. The firm raised estimates and price
targets across the board for manufacturers and the RV
seller Camping World. Andress said he believed Covid-19 had
the potential to create a longer tail this time
given incremental hesitation toward traditional leisure avenues such
as hotels, cruises, and sporting events. Evidence for this can
be found in the airline travel disruptions seen after the
attacks on the World Trade Center in September 11th, 2001, which
led to a significant 15 month tailwind for
the RV industry. However, he did also say there
are concerns the industry might not have enough inventory
to meet demand. Jefferies analyst Bret Jordan said in
a note on May 5th that production shutdowns due to the
pandemic did have a significant effect on demand in April. And it was looking bleak as
to what's going to go on. And as time continued, we
started to see the trends. Consumers, you know, who had been
confined to an apartment or to a home in one place, were itching
to get back out and do things yet remain socially distant. And an RV allows you to have
some of that freedom of flexibility and control. In a note on
June 12th, however, Jordan said that many of Thor's dealers reported
a significant sales boost from April to May and were
optimistic about future demand. That, Jordan said, could be partly
influenced by an influx of first time buyers. Trade-ins were below historical
levels, and Thor's strongest demand at that time was coming
from its entry level models. While analysts who follow RV
stocks generally see short term upside for the industry, some do
point out that the larger U.S. economic situation
remains uncertain. And RV sales have risen and
fallen in cycles throughout history. It is worth noting that
towables tend to outperform motorized RVs during economic downturns. Wells Fargo noted that owners of RVs
are on average in their mid to late 40s and have average
annual incomes around $90 thousand. People who buy towables and camper
vans however tend to be younger. That might bode well for
a business in an America that is also changing. It just needs to
keep up with demand and keep its owners happy and fit
to take on the highways.
