The Yin and Yang of Providing Maintenance/Repair/Refitting Services

To provide or not to provide boat maintenance, repair and/or refitting services – that seems to be an increasingly common question among marina owners, managers, developers and investors. And in truth the answer is – it depends – on the facility’s vision, the location, the competition, the market and the alternatives, together with an honest assessment of the positives (the yang) and negatives (the yin) that come along with providing such services.

Years ago you would drive your car over to the corner service station where you could get gasoline, windshield wiper blades, oil changes, engine tune ups, a new transmission, body work and more. For regulars, most everyone knew each other by name. Many places required appointments for major work, but for minor things and emergencies there almost always was a way of squeezing you in.

Over the last couple of decades things have been changing for the auto industry. The corner service station has become an endangered entity. Increasingly many have been replaced with multiple island gasoline pump stations with convenience store items and absolutely no service. Many other corner sites have given way to non-auto related developments.

There are many reasons for the changes. And the recreational boating industry has been wrestling with many of the same questions, as it makes decisions for the future.

Service Challenges (Yin)
If you ask those in the industry, the two biggest negatives relative to providing boat maintenance, repair or refit services are increased regulation and finding good help. In fact, it is pretty well known that getting and keeping qualified mechanics and specialized service personnel is one of the toughest issues facing the industry. Trade associations and other industry groups have been stepping up efforts to change this situation, but it still remains a challenge. For some facilities, they are not able to find anyone at all, or anyone who actually knows anything, or knowledgeable employees that you can afford to hire. It’s a problem, and one that’s not likely to go away anytime soon.

The other biggest negative also is not likely to go away anytime soon – increased regulation. In fact, it will most likely only get worse. There is just no getting around the reality that the more services you provide, the more ongoing regulation you are likely going to encounter, which leads to more staff/time/expense to deal with it, often including more equipment to purchase and run or more disposal costs. You also run a greater risk of getting on the wrong side of the rules at some point, whether due to any unforeseen event like a fuel spill, injury to an employee or contamination issues.

Next on the list would be real estate. You need the space to haul and store the boats and to do the work. Increasingly, this work is taking place either indoors or in some form of controlled outdoor environment – on a concrete pad with its own specialized drainage system and with portable screens or tarps attached to the boat essentially walling off the boat being worked on.

For many marinas in more urban settings, the facilities have virtually no or little upland for such service buildings and related upland activities, or the land they do have is considered too valuable to be put to servicing boats.

In fact, in many areas the value of the upland and waterfront access is rising faster for residential development than the revenue increases from marina operations. So developers have been paying premiums for the desired locations for residential and mixed-use complexes. Combine this with property taxes, regulatory compliance, labor costs and market conditions, and it is no wonder that many feel that the facility is worth more dead than alive.

Service Advantages (Yang)
Of course not all is gloom and doom, for where there is yin, there is also yang. The more services a facility provides the greater the potential for additional profit centers and revenue streams. That overall revenue will typically be less seasonal than simply doing slip rental, though the types of work may vary with the seasons, with big projects ideally scheduled for the off-season, spring and fall commissioning/decommissioning, and with ongoing maintenance, repairs and fixing things for the in-season. The full-service marina also typically has trained staff that can help their boaters handle everything from the small to major problems, thereby facilitating positive boating experiences. At a slip rentals only facility, there is a much greater likelihood of a faulty spark plug or loose battery connection ruining the entire day or weekend. And while it’s commonly felt that slip rental rates tend not to vary greatly based solely on a facility being full-service or no service, those facilities with full-service tend to have more loyal customers and fuller occupancy rates, especially when times are tough. It’s no great mystery that one of the most profitable marina chains in the world built its reputation on quality repair service, and not only for the engines and mechanicals but also for the boat hulls as well, both exterior and interior.

In fact, owning a marina, even a full-service marina, still has an allure for many, from the old salt to those successful in other businesses and seeking a life change.

I recently had the opportunity to renew a conversation with a couple who had left their former employments and purchased a marina three years ago with “lots of opportunities.” As they described it, the first year was a year of “reality, cleanup and understanding the business;” the second year was the year of “direction and decisions;” and their third year was starting to “reap the rewards” of their decisions. One of the major decisions they struggled with was being full, partial or no service. They chose full-service. For their location they had the upland and buildings, and their clientele has been changing to those of the new millennium, who have expectations that everything will be taken care of for them. Their decision was coupled with a major facelifting of the facility, becoming more efficient in providing service, and charging fair but meaningful rates. They also embarked on bringing the staff into the fold, both in terms of decisions and implementation, appearance and how to deal with customers. The results are that their employees feel part of the decision-making process and take pride in what they do. Not a bad outcome!

The decision as to whether to provide service or not, all depends on one’s business plan and how it fits into the site specific issues. The world is changing and so is the marina business.

Service Necessity
For facilities in relatively remote locations where no other services are available, the provision of maintenance and repairs really becomes more of an obligation, a cost of doing business. Without service on-site there would be no viable way of having a functioning boating community. And that points to the bigger problem or question – as more facilities opt out of providing maintenance and repairs – at what point is boating in the area hindered, crippled or a tipping point reached where boating stops being viable altogether?

In the automobile industry the automobile dealers have in large part taken over the bulk of the service industry – excepting that of body work, which seems to be thriving with independent business. Part of the reason the auto dealers were able to pick up the maintenance work was the change to longer and multi-year extensions of warranties, as well as the leasing of vehicles. That helped set the tone for customers to rely on the dealers for service, which severely hurt many independent businesses.

Needless to say, most boats do not come with the types and length of warranties that most new cars come with these days – and boat leasing in its various forms, while growing, is still a small percentage of the market. Also, unlike the automobile industry, the boat manufacturers do not annually sell the volume of boats the auto dealers sell. These factors hurt the economic models for the dealers to take over the majority of the service industry for boats (although entities like MarineMax are somewhat heading in that direction).
So the current reality is that we really do need at least a certain density of full-service facilities, as there really is no particularly viable alternative on the horizon. For some full-service facilities, this is good news, but some areas don’t have enough service available in the capacity needed to overcome the negatives of the industry.

One way boat manufacturers and trade associations can help is by getting together and agreeing on standardized common parts. There are hundreds of parts that could be standardized between manufacturers without losing the individual boat design and performance identities. This has been undertaken in other industries. It reduces the inventory burden, delays in response, and frustration on the part of the boat owner. Sounds like a win-win thought.
Other measures might include greater and more effective involvement in shaping the overall regulatory environment, support in dealing with the regulations, and working with local government to help ensure that local zoning and development regulations are supportive of recreational boating, including full-service facilities.

There is room for a variety of facilities with different approaches, and it’s not always an all or nothing proposition. Here in my homeport, for example, we have quite the mix of facilities from no service to full, from yacht clubs to shipyard, and just about everything in between. Each facility has its role, and in many ways it all pretty much works – though if the local zoning wasn’t changed back in the 1980’s, I suspect we would mostly have wall to wall condos. And that kind of drives home the point – recreational boating is doing pretty well here in my homeport, but the service facilities that allow that to be the case may well have disappeared without the community coming together some forty years ago to create an environment that would allow them to carry on.

So make no mistake, service is and needs to continue to be a major part of the future of the industry, and those of us who love it need to find ways to support it – and focus on the yang!

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.