Opening Bell

Revenge Travel: RV industry booms

mm Welcome back to Chester's opening bell recreational vehicles surged during the pandemic. Even though order backlogs became an issue for some dealers. Yet after a record year in 2021 with more than 600,000 vehicles ordered 2022 appears to be a relatively strong one. However, fading Covid fears, combined with high gas prices and rising interest rates may deflate record demand here to discuss and break this down further as Caleb, silver editor in chief at investopedia Caleb. Always good to have you wan curious to get your thoughts and insight in terms of trends that you're seeing in the RV sector regarding demand. And I'm also curious to know whether you're surprised by how stickiness demand has been in the sector. Yeah, good to be with you as always. And somebody cue willie nelson because we're on the road again, sales pretty strong in the last year, Pretty strong this year, but not as strong as last year. We're looking at about 1,099,000 shipments this year. That's the predictions for the industry, that's the second strongest year in history, but that is down about 8.5 8.4% from last year. So demand waning a little bit but coming off very, very strong 2021 when a lot of people wanted to get back on the road again. But we're seeing those lighter sales, especially for the R. V. S, the big ones, the Tobel trailers, the motor homes. But you're seeing the higher sales for those big park model Rvs, those big ones that you see being truck down the road and also for those fifth wheel trailers. So you're getting a little bit of a balance of sales there. But they are slowing from last year. Interesting though. So given that they're slowing from last year, I would almost argue that that number is a lot lower than I would have expected given that so many of the travel options have opened up this year that weren't available last year that you would have imagined people would have flocked to and we are seeing them flocked to but there still are being and they're still going for these road trips. Yeah, well, high gas prices probably slowed sales a little bit. Plus we did have a lot of supply chain imbalances that you couldn't get all the components you needed for new RVs. We saw rental RVs have a very strong year also last year and into this year as well. So getting the components, getting the new one is very tough and look at the price points for some of these, they range from 10,000 to $300,000. The average price right around 73 $2,000 for an RV, but that's down 4% from last year. So prices are falling a little bit, but we are entering that part of the year where sales are probably going too slow anyway seasonally as people go back to school, let's talk shipment and production orders, they are seeing a slight pullback this year as well. What is causing that decline and could RV popularity rebound orders, you know to 2020 levels. Yeah, well you're seeing the popularity wane a little bit. Some of that is pricing some of that was gas prices which have come down substantially. So that's part of the issue. The other part of the issue is the price point is people are fearing maybe a pullback, maybe a recession pulling back on the big discretionary spending what's more discretionary than a recreational vehicle if you're going to hit the road and go camping. So a lot of people putting off those purchases, But as prices come down, you're gonna see buyers come back and I'll tell you something RVS have this way of sort of not really falling so deep into economic recessions or into downturns. They do pretty well. They did pretty well back in 2001. They did pretty well in 2008. They did pretty well in 2018 they don't fall as much because people are still looking for that cheaper travel option. So they're pretty good barometers. Speaking of that, we actually spoke to the CFO of Winnebago about the industry's kind of future amid these inflationary pressures, I want you to just hear what he had to say and I'm gonna get your reaction on the other side. It is an opportunity for us to continue to um bring that RV lifestyle to the average consumer. We're seeing a lot of new interest from the millennial generation in particular and I think that they are seeking that alternative way to recreate at a more reasonable price. And so with the length of tenure of um financing that is available for RBS and Ed referenced this to that that monthly payment for an RV is something that's affordable and so we'll continue to um make sure that people understand that this lifestyle is is something that they can get into and then it's a great way to enjoy the outdoors that seems to kind of fall in line and almost mirror what you were just saying a moment ago and it's interesting the idea and the data that you bought a moment ago in terms of inflationary pressures, not really having a big impact historically on the RV sector. I am almost curious and this is kind of where that sound bite came from. Follow the question and I asked him about, you know, the other chaos that we're seeing in other travel sectors, the increase in price, you know, if if you're trying to get on a flight right now um it again the chaos there, if that's an added tail win on top of the benefit that the sector really doesn't fall and cave under as much pressure during inflationary periods as others. Yeah, good point and you know RV rentals can be a lot cheaper than flying the whole family somewhere where you can probably do that for about $911 a day, depending on the RV that you get. So the rental option instead of flying the family somewhere taking a couple weeks in an RV. We're seeing a lot of families take advantage of that, but you also got to think about RVs as a place to live and as housing prices remain sticky high, especially at the high end and inventories remain tight and we get those 30 year mortgage rates above 5% and they stick up there. You see a lot more people thinking about the RV, especially the Parkland RV where you can actually live in one of those and travel from state to state. So it also becomes an option as mortgage rates remain high and housing inventory remains tight. That's why we're seeing these companies do okay. And they're so widely held, some of the publicly traded companies in this sector talking about Winnebago thor industries, uh rev group these do pretty well and they've had a really nice balance in the past month or so I'm curious then more broadly here, what's your overall outlook on the RV industry, you know, for next year? And do you think it has a longer opportunity, you know, period than than some other sectors again amid the inflationary pressures that the consumers are feeling right now. Yeah, I think it's gonna be a slow and constant grower. There's only a portion of people that really ever want to buy or rent an RV. So I don't think it's gonna be this barn burner of a grower. But to grow steadily over time and most of the companies, the publicly traded companies they offer nice little dividends, Winnebago just announced another stock buyback, doubling its dividend. And you look at who owns these stocks, some of the biggest stocks in the R. V. Industry, it is the big institutional money managers. Blackrock vanguard, they love these stocks why? Because they they deliver dividends and they grow slowly year after year and the R. V. Industry is gonna grow about 34% compounded over a year over year over year. So they're nice steady growers, they're never gonna take off like a big tech company. But if you like being on the road and sort of a steady sort of earnings type of growth company, these RV companies are very interesting. Well if the old tale, the tortoise and the hare taught us anything, it's that slow and steady wins the race night. But that's the argument that the R. V. Industry is is going to be making right now and historically has made Caleb always good to get your time and your insight Caleb. Silver editor in chief at investopedia