On The Waterfront: Chain vs. Independent Ownership

The Yin and Yang of How the Industry is Changing and What Will Stay the Same

It’s hard to pick up a marina or marine development trade magazine these days without coming across an article regarding a marina chain or go to any large marina conference or trade show and not find at least one marina chain making itself known.

There are chains that focus on facilities from around the world to regional and national. There are some good reasons for chains, including economies of scale, a centralized back office, which reduces overhead, creating a brand and ports of destination with a known quality (not to mention potential discounts). Chains also have large labor pool providing access to a wider range of specialists, from mechanics and riggers to marketers, accountants and managers – along with the knowledge and experience that come along with them.

A lot can also be said for the independent facilities. They typically can provide a more family-oriented approach and feel, have a more customized approach to boaters’ needs, and are not bound to a “corporate” regimented approach. Independents often can also make decisions faster, as opportunities or problems present themselves.

Many chains have different business models, some catering to the larger mega and superyacht spectrum, while others have concentrated on service or facilities in a particular type of area.

Buying Power

Many chains have different business models, some catering to the larger mega and superyacht spectrum, while others have concentrated on service or facilities in a particular type of area. The larger chains tend to be buying the larger and/or more exclusive facilities that fit into their business model. I believe that while some independents and small chains see selling to a large chain as an exit opportunity at a desirable price, most independents will likely not fit into their program. Thus, there still will be a role for the independents, and the plain fact is that chains will not be taking over the world. But they certainly can be a fast moving catalyst for independent facilities to define their vision and, most importantly, their market niche. There’s nothing like a chain taking over a marina in a harbor to get it to focus on what it does best and what sets it apart!

There is probably also a larger growing market for the “mini” chains that range from a couple to around ten facilities. The economies of scale and the aging ownership of facilities are some of the reasons for this.

It has been estimated that in the U.S., there are somewhere between 10,000 and 12,000 recreational boating facilities, whether marinas, boatyards, associations, clubs and so forth. It is also believed that more than 50 percent have less than 50 slips and more than 75 percent have less than 100 slips. It has also been suggested that as a rule of thumb a new facility needs 250 slips to be economically successful. Of course there are numerous exceptions to this rule, but it does point to a somewhat fundamental disconnect and feed the notion that there will likely be continued consolidation and evolution of the type of marina operator in the future.

Additionally, many of the family-owned independents, and even some chains, are finding themselves lacking family succession possibilities. This means many family-owned chains and independent facilities are looking at what is their next step. Family succession, while still alive and well in some facilities, is becoming harder and harder with the changing world and the desire of family members to go down different paths.

Regulations, both promulgated and the causes du jour, continue to expand at exponential rates. Trying to keep up with it all can be a full-time job in itself.

Changing Industry

The types of boats and boating customers continue to change and boat costs keep increasing. It is no secret that we are in an era of instant gratification with boaters demanding a high level of service and facilities. Today’s boaters have little tolerance for things not working, logistical and other difficulties, and people not catering to their desires.

This all culminates in a changing tide for the types of marinas, their management and their ownership.

Speaking in generalities: we think the large chains are seeking geographical diversification, as well as looking for the larger facilities in more populated boating communities; some smaller chains have been looking to acquire additional medium to larger niche facilities that meet their business plans; and the small independents are seeking to upgrade and redirect their energies more to a specific niche.

Marina management for all is taking on a much more professional approach.

Some large and medium chains are seeking to streamline and upgrade their facilities and revenue streams with the desire to go public. One of the risks of the chains is that they become too focused on real estate value and/or Wall Street investment plays and less on the recreational boating world. As a related example, not too long ago one of the big name movie theater chains took over a local chain that operated many of the smaller, older theaters in the area. At first this was greeted with some excitement, with expectations that the big chain would further invest in the theaters, most of which were doing fairly well but had not undergone any substantial renovations is some time. That excitement soon vanished, however, as it quickly became clear that the big chain had bought these properties with the intention of shutting the theaters down, thereby eliminating their competition, and redeveloping the real estate for other uses providing a different and potentially higher returns.

There is no question that having multiple facilities can have a significant benefit of economies of scale in dealing not only with back office overhead but with compliance and managing capital projects. It is also easier to share skilled help and have a wider arena of experience to solve issues.

Independents, more often than not, provide a more familial atmosphere, and know more of their customers by their first name. They are also in a position to try to go the extra step to accommodate customers’ desires and, yes, even solve issues with a disgruntled customer. The family atmosphere should not be regarded as lacking professionalism. In fact, many family-owned facilities are even more attuned to the latest technology, regulations and approaches – particularly at the local level. More often than not, they have a better sense of what their customers are seeking and how to be more cost effective on improvements and expenditures. They are fast to act when adversity hits, and in more cases than not, have a higher customer loyalty. That family feeling can also prove very attractive to a facility’s employees, with a mutual sense of loyalty and ties that might not be found in a more corporate atmosphere.

Niche Operations

What we believe will continue to shape the marina industry for the future is facilities defining their niche, whether it be for megayachts, racing boats, fishing boats, shallow-draft center consoles, keeled sailboats or stand-up paddleboards. Facilities are thinking about and maximizing their attributes (both physical and geographic), understanding their limitations, and becoming more cost effective, while at the same time understanding they are in the hospitality business and providing what customers are seeking. This means that there will continue to be room for both the chains and the independents. Like yin and yang, they can have their differences and still complement each other, ultimately making for one better boating world.

Dan Natchez is president of DANIEL S. NATCHEZ and ASSOCIATES Inc., a leading international environmental waterfront design consulting company specializing in the design of marinas and marina resorts throughout the world. He invites your comments and inquiries by phone at 914/698-5678, by fax at 914/698-7321, by email at dan.n@dsnainc.com or on the Web at www.dsnainc.com.