A decade ago, the recreational-vehicle industry was sipping fumes, its factories and salesrooms devastated by the double whammy of $4-a-gallon gasoline and the Great Recession. But today, RV makers are enjoying a robust multi-year recovery in their industry, and last year sold more than 500,000 units for the first time.
Even more important, during its comeback the industry learned some lessons that will keep such a calamity from occurring again, says Bob Martin, CEO of the largest RV maker, Thor Industries—lessons from which chiefs in other industries could learn as well.
Two of the main learnings for CEOs: diversify your product line and customer base, and reduce your vulnerabilities to important external factors.
Elkhart, Indiana-based Thor is the world’s largest RV maker. Sales surged to $7.2 billion in fiscal 2017 from $4.6 billion a year earlier and rose by 12 percent in the third quarter of fiscal 2018. Thor’s consolidated RV backlog is $2 billion.
Baby boomers were the main target for Thor and its competitors when the recession began in 2008, and today that generation still represents a huge cohort of RV buyers. But the industry’s focus has shifted to the millennial generation and to providing those coming-of-age buyers with a proliferation of vehicle types and price points that can find a fit with nearly any of the huge variety of lifestyles experienced by Generation Y.
Perhaps counter-intuitively, millennials are rushing to buy RVs. “In the last several years, the average age of our buyers has dropped drastically,” Martin tells Chief Executive. “Boomers are still a big part of our business, but millennials already have become a bigger market. Look at what they like to do: enjoy the outdoors, spending time with friends and family. They’re camping, and they’re also going to all-weekend soccer tournaments. If parents are there for a day with their kids, it’s great to have an RV with air conditioning and a bathroom.”
Another way that RV makers have appealed to millennials is through the pocketbooks of a generation of buyers that are getting a reputation as value hawks. RV makers now offer a dazzling variety of sizes and types of vehicles that range from just a few thousand dollars to more than $1 million, for an Entegra Coach Luxury Motorhome by Thor.
Neither have RV makers allowed the recent surge in gasoline prices, to an average of more than $3 a gallon, recall the frightful days of a decade ago. For one thing, Thor and others have focused on marketing RVs for short trips, not just the long-haul, cross-country treks that were a staple of boomers as they fueled industry sales.
“Typically more often, people will find a nearby campground or state park; you don’t have to go that far away,” Martin says. “You’d be shocked to see the number of campers who don’t go any further away than 100 miles.”
Moreover, dealers for Thor’s brands—which also include Crossroads, Keystone, Starcraft, Airstream, and others—have learned how to leverage gasoline-price increases in their salescraft. “They’ll talk through the calculations with someone and point out that higher gas prices may only cost you an extra $50 on a trip – and is that enough to keep you from doing it?” Martin says. “Or they’ll get creative and give away fuel-station gift cards. So [gas prices no longer] are a main driver or drag in our industry.”
Meanwhile, the auto industry, which produces RV-tow vehicles such as full-size pickup trucks, has helped by substantially improving fuel economy of its bigger models compared with just a few years ago.
“Fuel prices weren’t such a huge negative when they were $4 a gallon, and conversely when they dropped, they didn’t give the industry a huge lift,” Martin explains. “They are just a piece of things, and when they go up or down they give people a little more or less discretionary spending. The biggest driver of our industry is consumer confidence.”
And the company recently broke ground on a $40-million expansion of the plant in Jackson Center, Ohio, where it builds Airstreams, the streamlined, aluminum-clad, high-end RVs that are popular with celebrities and rank-and-file aficionados.