Tag: Thor Industries

The bloom is off the RV camping rose

One person’s blessing can be another person’s curse. Take gas prices, for example: according to AAA, Gas Buddy and the Energy Information Administration, gas demand is declining and so are gas prices, down more than 19 cents a gallon from a month ago and more than 14 cents below last year’s June prices. For the RVing public, that’s good news. For RV parks and campgrounds grown accustomed to a brisk amount of business, maybe not so much.

Although lower gas prices mean more people may decide to hit the road, one reason for those lower prices is . . . fewer people are hitting the road. “Demand is just kind of shallow,” according to AAA spokesperson Andrew Gross, as quoted in an Associated Press story earlier this week. “Traditionally—pre-pandemic—after Memorial Day, demand would start to pick up in the summertime. And we just don’t see it anymore.”

Of course, less demand is just one factor in the gas equation, and it will take months to sort through accumulating data to determine what’s really going on at the pump. Crude oil prices are one obvious variable. So is refinery capacity. But it’s not just prices that are down, as overall gas consumption is off by 10% from pre-pandemic levels. More fuel-efficient cars may account for some of that, as may growing sales of EVs. However you parse it, though, the bottom line seems to be that fewer people are driving this summer than in years past, and they’re not driving as far.

How much of that will translate into less traffic at RV parks and campgrounds? That, too, remains to be seen, but it certainly suggests the possibility that business overall will continue softening, as became noticeable early last year. One indicator the bloom is off the RVing rose: RV sales continue declining, even as RV manufacturers keep shoveling out new product on the thin hope that business will turn around any month now. Retail registrations in April, released Monday and the most recent available, marked a 9.8% drop compared to April of 2023. Nor was that a statistical blip: year-to-date sales are down 10.4% from the same four-month period last year.

The downturn has become pronounced enough that The Wall Street Journal took note last week in an article headlined, “It’s a Buyer’s Market for Boats, RVs and Other Pandemic Toys.” Extra cash, low interest rates and a desire for buffered recreation during the pandemic years resulted in a buying surge that pushed RV sales and campground visitation to record highs, but when all that turned around, a lot of new RV and boat owners were left with lightly-used playthings for which the bills keep coming. “The whole business is based on a monthly payment,” Marcus Lemonis, chief executive of Camping World Holdings, told the Journal.

Camping World’s stock price has been on a steady decline since the end of March, when it closed at $27.95 ahead of an expected seasonal upsurge in RV sales that still hasn’t arrived, and now sits at $18.68 amid a bearish short interest outlook. Lazydays Holding, an RV dealership that describes itself as the world’s largest, saw its shares tank more than 64% over the past year and lost $1.63 a share in the first quarter, as reported mid-May; it’s now on the verge of being delisted. Thor Industries, the world’s largest RV manufacturer, reported last week that sales for its fiscal third quarter were down 40% and earnings per share were down by two-thirds from the same period a year earlier.

To be sure, none of that automatically translates into slower business for RV parks and campgrounds, which may yet hope that a continued decline in gas prices will tease out more traffic. But it does suggest a shift in the recreational zeitgeist, a turning away from a pandemic-induced “it” thing to something that’s less physically demanding and with less of a long-term financial overhang. That might mean glamping—which puts the onus of capital investment on campground owners, rather than on campers. It might mean flying off to places an RV just can’t go. Or maybe it just means a return to staycations, now that most people feel comfortable hosting friends and family on familiar turf.

Then there’s the whole pesky weather problem that no one in the campground industry likes to talk about. RV park owners and RV retailers and manufacturers may resolutely turn a blind eye to the issue, but campers aren’t, and they’re making plans—or not making plans—accordingly. There are only so many crushing tornadoes or fire-ravaged hillsides or biblical floods (hello, Florida!) that most people can absorb before they begin to question the wisdom of parking out in the open in a relatively small box on wheels. Next week’s forecast calls for the season’s first truly massive heat wave in much of the country. Any doubts about how that will affect year-over-year camping statistics?

Unlike the manufacturing and much of the retailing ends of the RVing industry, campgrounds and RV parks are still privately held and too fragmented to produce much in the way of reliable metrics. Nor are its trade associations able to keep a finger on the business pulse, forcing observers to rely mostly on anecdotal accounts of what’s going on. Thus far those accounts aren’t bullish, but more illumination on that score may be provided the next time KOA chooses to publicize its reservation numbers: if it follows recent practice, those numbers will be all about the dollars, not about camper nights—which last fall it reluctantly acknowledged have been down.

Perhaps RVers can hope site rates, like gas prices, will start responding to softened demand? Isn’t that, after all, the carrot that KOA and other adopters of “dynamic pricing” have dangled in front of their customers to ease the sting of demand-driven price increases?

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RV red flags keep popping up all over

Representatives of RV manufacturers and campground owners keep radiating good cheer about the upcoming season, paying extravagant notice to every uptick in sales and reservations. And indeed there is cause for cautious optimism, with new RV shipments having arrested last year’s free-fall and notching slight gains, while KOA has reported that 64% of campers already have made reservations “for some sort of trip” in 2024. So maybe the first day of spring truly is a sunny one.

Yet it’s also clear that industry participants remain leery of what lies just over the horizon, and there’s good reason for that, too. Short-seller interest in Thor Industries and Winnebago Industries, the two 800-pound gorillas in the RV manufacturing segment, is high, not least because Thor earlier this month slashed its 2024 outlook based on soft demand and high interest rates. Winnebago, meanwhile, will be announcing its 2nd quarter results tomorrow, following an 11% drop in share price this month.

Late last week, meanwhile, Marcus Lemonis, chief executive officer of Camping World Holdings, unloaded nearly a fifth of his company’s stock holdings, selling 100,000 shares at an average price of $25.63. The $2.56 million payday comes several weeks after Camping World announced a 10.6% decline in revenues for 2023, with new vehicles sales for the year down 16.6%. Investor interest in this company also is bearish, with 17.53% of the float sold short.

As the Camping World example illustrates, the industry’s ongoing problem is a post-pandemic hangover that just won’t quit. The explosion in RV sales that started in 2020, while a short-term windfall for manufacturers and dealers, has proven to be too much of a good thing: too many units were cranked out in too short a time, resulting in significant production quality issues, while unceasing demand drove prices way too high. When the wind dropped out of the industry’s sails, dealers were left with too much outdated inventory that is still clogging their lots even as newer—and lower-priced—models are being delivered.

Lemonis tried to put a bright face on his company’s year-end report by noting that used vehicle sales were up even as new vehicle sales dropped, but as overall revenue figures suggest, that wasn’t nearly enough: while used vehicle revenue increased $102 million, new vehicle revenue dropped $651.8 million. And the average selling price of both new and used RVs declined—4.3% and 4.8%, respectively—further underscoring how greatly inflated the industry’s entire pricing structure had become. Indeed, the monthly Black Book reports on wholesale auctions have recorded six consecutive months of price declines for towables, while motorhome value trends have trended downwards since October of 2021, albeit in seesaw fashion.

Meanwhile, general economic news provides little to no reason to think demand will pick up significantly. With interest rates still high because of ongoing inflation anxieties, Americans are either tapped out or turning to deficit spending to sustain their lifestyles. Credit card debt is up and is taking longer to get paid down, with unpaid balances surpassing 2019 for the first time and delinquency rates continuing a steady rise since 2021. With record numbers of Americans unable to afford their rent, and many costs related to car ownership outpacing the consumer price index—AAA calculates that the the total annual cost of owning a new car was $12,182 last year, up from $10,728 in 2022—more people are using their 401(k) accounts as piggy banks. As reported by The Wall Street Journal, 3.6% of Vanguard’s 401(k) plan holders took early withdrawals last year for financial emergencies, nearly double the pre-pandemic average of about 2%.

All of which explains why the nearly 200 respondents to a recent Wells Fargo/RV Business survey of RV dealers had, at best, a tepid outlook for the coming year. More than a third (39%) expect a flat-to-down year, while an almost equal percentage (38%) expect growth of 0- 10%. Asked to describe the general state of the RV market, only 14% agreed “it’s solid, despite increasing interest rates, soft demand and other headwinds.” At the other extreme, 19% said it’s the “worst it’s been since the 2008-09 recession, ” while 39% admitted to being “nervous about inflation, potential recession and other challenges.”

Some of the dealers’ comments, meanwhile, echoed what many RV campers have been saying for several years. When it comes to repairs, for example, “parts and service has only gotten worse and the factories do not care at all,” while “manufacturers underpaying for warranty work is a major problem.” Or as another respondent observed, “It appears most industry executives, both suppliers and builders, are under the impression their quality is good. In most cases this is laughable.”

And on a more poignant note that should touch a nerve in all corners of the RV and campground ecosystem, there’s this: “I think the industry has lost touch [with] what camping was all about. Where has affordable family fun gone?”

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RVers adopt a wait-and-see attitude

It is a given that industry representatives will insist the sun is shining even as thunderheads pile up on the horizon—and really, who can blame them? But for everyone else, being lulled by rosy forecasts that ignore storm clouds can result in a good soaking. Or worse.

Having declared a month ago that the 2023 camping season was off to a strong start, which is demonstrably true, KOA went out on a limb by assuring the public that campers “are also starting to make solid plans for the rest of the year.” But “solid” requires some context. As previously reported, a year-over-year comparison of KOA’s surveys actually showed a remarkable softening: fewer than half as many campers had made reservations by February for this season as had in 2022 for that year.

The hesitation continues. KOA today released its March monthly report, flagged with the optimistic headline “Rise in camping continues” and citing strong camping turnout at the start of the year. But again it went a step too far, with senior vice president Whitney Scott announcing in a press release that “we’re seeing more bookings made earlier”—yet KOA’s own figures show that 27% of their survey respondents have booked some or all of their 2023 camping trip thus far this year, compared to 50% at this time last year.

There is, undeniably, strong interest in the idea of camping. KOA’s surveys show that, and certainly this year’s near-record turnout at the big RV shows underscores the point. People are looking and day-dreaming, pressing their noses against the display windows of their imaginations as they conjure visions of sweeping vistas and crackling wood fires—they’re just not committing. They’re keeping their powder dry, whether it’s by deferring RV purchases—dealers have been complaining that RV show interest is not translating into sales—or by merely bookmarking campgrounds and RV parks on their computers for a later decision.

The downturn in RV sales, despite industry efforts to characterize it as a return to pre-pandemic norms, is notably larger than expected. Market-leading Thor Industries—whose flagship labels include Jayco and Airstream—earlier this month posted steeper than predicted declines in sales and profits for its second quarter, contending that the sharp slowdown “is proof that our consumer is being impacted by elevated prices, higher interest rates and inflation.” Meanwhile, Winnebago Industries today reported second-quarter results that actually cheered Wall Street because the hole it’s in is not as deep as they’d expected: sales declined from $1.2 billion a year ago to just $866.7 million, or almost $60 million more than the consensus forecast. But helping plug the hole was Winnebago’s 16.1% increase in boat sales, to $112.9 million—apparently a segment that is not taking on water.

A similar pull-back was reported last month by Camping World Holdings, which posted a double-digit decline in same-store new vehicle sales for its fourth quarter—and which cut nearly 1,000 jobs. That mirrors trends in Elkhart, Indiana, where the great majority of U.S. RVs are manufactured and where the unemployment rate in January jumped to just a hair under 5%, more than doubling over the past year.

All this is more suggestive than definitive, as KOA and other industry leaders will be quick to aver. Americans have bought a lot of RVs in the past couple of years, and they’re going to want to use them. An RVing trip is still one of the cheapest ways for a family to go on vacation. Working away from an office is still a thing, and especially among a younger generation of technologically savvy nomads who have been the single biggest demographic of new RV buyers.

All true. But so are the statistics that show millennials are piling on debt to unsustainable levels, while Americans overall increased their credit card debt in 2022 by a record $180.3 billion—and today’s Fed decision, pushing interest rates to a range of 4.75% to 5%, means additional billions in costs in the months ahead. Moreover, millennials and others with college debt can expect an end to the government moratorium on their payments in a few months, further undercutting their ability to afford even relatively cheap vacations—and those, too, are becoming more illusory. RV parks have done themselves no favors by relentlessly increasing their prices the past couple of years.

Recent events have demonstrated just how quickly an apparently stable financial system can get shaken up. Alert RVers are paying attention to the gathering storm clouds, and park owners would be smart to do likewise, regardless of how many rosy forecasts they hear .

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More electrifying news for RVers

A pair of webinars this past week, one hosted by the RV Industry Association and one by the National Association of RV Parks and Campgrounds, underscored how seriously the campground world views the oncoming onslaught of electric vehicles. While campground and RV owners remain mostly skeptical, questioning the costs, range, recharging availability and environmental impact of a lithium-based technology, industry leaders are unwavering in their belief that the EV-RV revolution is already here and that the problems others see are either overblown or will be resolved in timely fashion.

“We are really at an inflection point which is amazing,” Ashis Bhattacharya, senior vice president for development and advanced technology at Winnebago Industries, told his RVIA audience. A “wave of electric adoption” is already washing over rental car agencies, delivery services such as Prime, UPS and FedEx, as well as school buses and other municipal vehicle fleets, all of which is normalizing the technology. The paradigmatic shift already underway, Bhattacharya added, is as significant as any ever experienced in the transportation sector.

Meanwhile, said Jay Landers, RVIA’s vice president of government affairs, state initiatives to outlaw internal combustion engines are giving the entire EV sector a kick in the pants. Five states, including California, already have voted to ban sales of new internal combustion vehicles by 2035, and others are looking to possibly follow suit. The state of Washington, which had the country’s sixth highest rate of RV shipments this year, is even more aggressive, adopting a 2030 cutoff deadline. Furthermore, expansion of the EV charging network nationwide is being super-charged by $5 billion in federal funding approved earlier this year.

None of which, all speakers agreed, is to minimize the problems confronting EV in general, and EV-RVs in particular. “The (EV) technology is still more expensive than what it’s replacing,” conceded MacKay Featherstone, Thor Industries’ senior vice president of global innovation. Moreover, he added, “the charging experience is utterly critical” and still inadequate for RVers in particular, both because most RVs need pull-through charging stations to be practical and because they have larger power needs than EV cars.

To their credit, RV manufacturers, frequently criticized for shoveling out hundreds of thousands of RVs without giving a thought to where their buyers might use them, are at least trying to get out in front of this development. And there is little reason to doubt that a society-wide change is coming, and coming hard. EV-RV costs inevitably will come down as sales take off, as they do with any emerging technology. Alternatives to lithium batteries, using less exotic minerals, are being developed, and advances in recycling technologies will further ease environmental concerns. Similarly, ongoing improvements in battery density will continue to expand vehicle range, relieving one of the biggest consumer anxieties about EVs.

The weak link, however, appears to be the RV park and campground end of the product chain. The RVIA webinar inadvertently made that point when its campground representative on the panel—Toby O’Rourke, president and CEO of KOA—was so unintelligible that she had to be dropped from the screen, apparently because she was trying to link in from an airport. (And why O’Rourke, again? Is there no other campground industry representative who can speak to the industry’s issues? Maybe someone from the Yogi franchise, or ARVC, or one of the other large state RV park associations, like Texas or California?)

Subbing in for O’Rourke was Brandi Simpson, her chief of staff, whose faltering contribution was to assert that campground owners are dealing with “a ton of misinformation” about EVs and need a lot of education and guidance. Which, presumably, KOA is scrambling to provide. . .

. . . as is ARVC, which lustily beat the drum on behalf of EV-RVs at its national conference in early November, and again at an hour-long webinar a couple of days after RVIA’s face-to-face. Pitched as “a recap of the best” of the conference for those who might have been unable to attend, the session inexplicably ignored the most contentious convention issue—a proposal to adopt industry-wide “standards”—while devoting the majority of its time to further promoting the idea that campgrounds need to get on the EV bandwagon, starting with the installation of EV chargers.

All of which is undeniably true, but far more nuanced and with many more questions than have been answered to date. For example: both webinars referenced possible tax breaks and federal grants to defray campground costs for installing chargers, while glossing over the reality that such inducements will require making the chargers accessible to the general public, and not just campground guests. Getting equally short shrift were any explanations of the occasionally mentioned “partnerships” that campgrounds might have to accept, whether with public utilities or third-party providers, to deal with licensing and infrastructure issues, since electric sales are typically a utility monopoly and EV chargers require robust additional power supplies.

(On a related note: one of the biggest frustrations for many KOA franchisees has been the parent company’s insistence on taking a 10% cut of all site fees—including any electric charges, even though campgrounds are legally prohibited from making a profit from reselling electricity. To the extent that EVs will increase electricity consumption at RV sites, that means even more unearned money transferred from franchisees to corporate headquarters.)

By ARVC’s calculations, electric metering of RV sites can reduce energy consumption by a third.

Indeed, the whole issue of who is going to pay for the extra electricity consumed by EV-RVs, and how, is still being sidestepped at the national level, quite possibly because there is no one answer. That, by itself, may become the biggest impediment to mom-and-pop campgrounds rushing into this brave new world. It’s notable, for example, that while ARVC now has an online “EV Toolkit” to help its members understand how to accommodate the new technology, the only guidance it provides for covering their costs is the vague advice to “consider billing for shorter stays, especially [campers] with unique equipment (large class As, EVs, electric golf carts, etc.), automatically billing those campers for the electricity they use. “

Presumably these and other issues will get resolved, sooner or later—once the industry stops talking around them. The RVing public, meanwhile, should brace itself for still higher costs, as a new electric sensibility starts percolating through the camping universe. Just as computerized reservation systems have introduced demand pricing and all kinds of add-on fees, the electrification push ultimately will result in all RV sites getting electric meters. Or as ARVC’s EV Toolkit asks, in a prominently displayed screen, “You don’t give away ice, candy bars or firewood, why give away electric?”

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IndyStar blasts RV industry big-time

Kate Mercer photo

Okay, class. Today we have a pop quiz–but don’t panic! There’s only one question, and the answer is multiple-choice, so you have at least a 25% chance of getting it right:

What do you get when an industry pressures an inadequately staffed and poorly-trained workforce into increasing output by almost 50%?

a) A lot of shoddy product.

b) A lot of sick and injured workers.

c) Record industry profits.

d) All of the above.

If you answered d), congratulations! You’ve just described Elkhart, Indiana, which is to recreational vehicles what Detroit once was to automobiles. Four out of every five RVs in the U.S. roll out of Elkhart, an area dominated by three major players the way Detroit was once dominated by Ford, Chrysler and GM: Thor Industries, Forest River and Winnebago Industries. Unlike Detroit, however, Elkhart is union-free in a so-called “right-to-work” state. And unlike Detroit in past decades, Elkhart has been ravaged by the Covid-19 coronavirus.

The result, as documented October 19 by the Indianapolis Star in a damning 15,000-word, four-part, multi-media series, is an industry riddled with broken bodies and a record number of recalled RVs, even as the major manufacturers all have been posting unsurpassed revenues and profit margins. Covid drove an unexpected surge in demand for RVs, much of it from first-time buyers who were looking for a safe way to travel. But Covid also decimated the ranks of RV factory workers, even as they were being pushed to increase production by almost 50%.

Two results were inevitable. One was a volley of Covid-19 complaints to the underfunded, undermanned and industry-friendly Indiana Occupational Safety and Health Administration, which responded not with inspections but with requests to employers to submit documents “proving” they were following Covid-19 safety protocols. Indeed, IOSHA’s response was so perfunctory that it physically inspected only 44 of more than 6,000 Covid-related complaints state-wide–the worst inspection rate in the U.S.–including just two in Elkhart County, neither involving major RV makers. The county eventually recorded nearly 700 Covid deaths.

But as the Star also found, problems in the RV plants had been brewing long before the epidemic, which the virus only exacerbated. “Workers told Indy Star about injuries from lax safety rules and the fast pace, drug use, unfair pay structures, a disciplinary system that punishes workers for taking sick time, a lack of training, and quality issues with products that leave factories,” the Star reported. “Several RV workers said they and others inside the factories needed daily uppers such as energy drinks, Ritalin or Adderall–even methamphetamine–to keep up with the pace.”

The other predictable result was that as the work pace picked up–one Winnebago employee said he went from working on 16 RVs a day to 36 during the pandemic–the products coming off the line were increasingly substandard. Ron Burdge, an Ohio attorney who has been suing RV manufacturers for years over defective products, told the Star that RV quality had been declining for at least 15 years prior to the pandemic, but took a nosedive once it hit. Record-setting recall numbers bear him out. Companies owned by Thor Industries recalled more than 156,000 RVs this year alone, while Forest River–a subsidiary of Berkshire Hathaway–recalled nearly 200,000 and Winnebago Industries recalled more than 125,000.

“All are among the highest for each company in the last five years,” the Star reported. “Among the problems that led to recalls: gas leaks, various electrical issues, increased propane pressure and poorly installed awnings.” One example it offered of the life-threatening dangers unwitting RV buyers have been accepting: an Oregon family that purchased a 40-foot Heartland Road Warrior for more than $100,000, only to have it burst into flame in Montana on the return trip home, totaling it and the tow vehicle. The cause appears to have been faulty wiring in the fifth-wheel’s electrical panel, yet as the Star observed, RV workers don’t need a license or certification to do electrical work.

Industry response to the Star’s findings, grim as they are, thus far consists either of stonewalling or of denying there is a problem in the first place. Thor Industries responded to the newspaper’s requests for comment by claiming the quality of its units had actually improved, even as it was making more of them, as evidenced by a lower level of warranty claims–without acknowledging not just this year’s 156,000 recalls, but the 371,384 recalls it had in 2021. Forest River, meanwhile, didn’t respond at all to the Star’s requests for comment, while Winnebago declined to answer the newspaper’s questions about quality issues.

The industry overall seems to be hoping the Star’s blockbuster series will sink out of sight. RV PRO, an online site “for the RV professional,” ran a terse and nonspecific news item about the series on the day it was published, much of it devoted to quoting an equally nonspecific response from the RV Industry Association, the trade association for RV manufacturers. Lamenting that it had been answering the Star’s questions for nearly a year, “emphasizing the high priority the RV industry places on workplace safety and the safety of our products,” the RVIA insisted that “protecting the safety of these valued employees is of paramount importance to our industry.”

RVIA’s own website, however, has none of that. Indeed, at this writing, the RVIA website makes no mention at all of the IndyStar story and its withering critique.

Putting an ironic frosting on the cake, so to speak, it must be noted that Winnebago Industries held a previously scheduled earnings call at 10 a.m. October 19, even as the Star’s report was being published online. Business was gangbusters, financial investors and analysts were told: fourth-quarter net revenues were up 14%, year over year, for a gross profit of $210.4 million. Net revenues for the year were $5 billion, for a record gross margin of 18.7%.

No questions were asked–and no information was given–about workforce or production issues. Chief financial officer Bryan Hughes, however, did offer the observation that “the company and our culture are successful because all our employees care deeply about our end customers, strategic business partners and each other.”

[The full Indianapolis Star series can be accessed here, but readers should note that virtually all of it is behind a paywall–non-subscribers will instead be shown a graphic novel that capsulizes some of the reporting, followed by an invitation to subscribe. The good news is that an introductory subscription can be had for just $1, with subsequent cancellation always an option.]

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