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The Great Outdoors

Gabelli Funds

Gabelli Funds
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Research Analyst


The COVID-19 pandemic has led to a shift in consumer behavior across the world, with many people’s normal day-to-day lives put on halt. Major questions remain even as the global lockdowns have begun to lift. Two that we believe that have yet to be fully or even partially resolved are: When will people feel comfortable to travel for leisure purposes again (e.g. airplanes/cruises) and will people leave major cities for suburban/rural areas for good? Both of these unanswered questions have opened the door for better than expected demand in the outdoor leisure market. Whether it be boats, RVs or jet skis – the market for outdoor recreational products has rebounded and even expanded in some cases as consumers look for ways to enjoy the outdoors with family or friends while following social distancing protocols. Consumers who were planning on spending money on taking trips with the family, sending kids to summer camp or even those who have just saved up money over the past three months, have now started to spend money on outdoor leisure products. As a result, the group we like to call the “Great Outdoor Index” is outperforming the market by a wide margin YTD. In this report we discuss the inputs we believe have translated to the unexpected demand in the outdoor leisure market and discuss potential long term and short-term beneficiaries of the trend. 

Table 1

The Great Outdoors  Index

Input #1 Travel/Leisure Industry Collapse 

Since the onset of the global shelter-in-place orders, the travel industry has suffered significantly. Many consumers are not willing to fly, cruise or visit tourist hotspots with the virus still rapidly spreading. The collapse of these three industries has in part contributed to the rise of the outdoor trends. 

Exhibit  1

TSA Checkpoint travel throughout numbers

Source: TSA

Commercial Airlines

According to the TSA, passenger throughput was down around 52% YoY in March, 96% in April, 90% in May has since recovered to about 81% declines in June (Exhibit 1) (link). Additionally, with tourist hotspots virtually closed down and hotels re-opening with stringent 

policies, vacations seem to be a more of a hassle than an escape. It is unknown how long consumers will opt out of flying but the International Air Transport Association (IATA) projected in April 2020 that Revenue Passenger Kilometers (RPKs) would not return to 2019 levels until mid-2022, giving demand runway for outdoor leisure and travel far past this year (Exhibit 2). The recent resurgence of cases in states post-reopening may also signal a longer than anticipated return to normal consumer behavior, benefiting the outdoor companies. 

Exhibit 2

Global GDP and global RPKs, indexed to equal 1000 in 2019

Cruise Lines 

The cruise industry is also suffering with the Cruise Lines International Association (CLIA) announcing that its members are voluntarily suspending sailing until September 15th. The CLIA’s members carry about 95% of the world’s cruisers. In 2018 there were a total of 28.5M passengers on cruise ships globally, with the average cruise goer being 47 years old (around the same age as a typical boat buyer). As the cruise lines gear up to open in September, there is uncertainty as to what capacity operations will actually run. Even further, it is unclear if there will be substantial demand as a result of concerns over virus containment on these ships. Typical cruise goers may also be more stringent with disposable income later this due to economic uncertainties and potential replacement spend on recreation products over the summer. The cruise industry has an uphill battle to face in the form of the newfound negative stigma regarding the safety and cleanliness of operations (post virus breakouts on ships in March/April). We believe the industry will not fully recover until there is a wide-spread vaccine for COVID-19, which again bodes well for adjacent leisure activities such as boating and RV vacations. 

Tourist Destinations Closed/Upended

With both commercial airlines and cruise lines either operating at limited capacity or not at all, tourism has suffered substantially. The world saw 1.4B international tourist arrivals in 2018. The United Nations expects the global tourism industry to lose at least $1.2T this year with losses climbing to $3.3T if travel restrictions persist through March 2021 (link). Popular tourist destinations such as Las Vegas (42M visitors in 2018) and Disneyworld (52M visitors annually) have been suffering the brunt of the blow with operations shutdown since the onset of lockdowns. As lockdowns were lifted in states such as Florida, visits to Disneyworld seemed viable. Cases have since surged in Florida and many are calling for the re-opening of the theme park to be postponed (planned to open July 11). Disneyworld’s sister park in Anaheim has already announced the delay of its planned re-opening on July 17th. Even when these tourist destinations re-open it is unclear how many consumers are willing to visit. While many tourist locations have been gung-ho about reopening timelines, there is always a risk that cases rise or even a second wave emerges later this year, effectively shutting down operations once again. The uncertainty over the viability of tourist destinations for the remainder of the year have led families to start spending disposable income on outdoor vehicles such as RVs and boats to enjoy outdoor activities in lieu of vacations (and to keep children occupied as summer camps are closed). 

Input #2 Real Estate Trends – City Exodus? 

Many large cities around the country are experiencing a sharp decrease in lease renewals and occupancy rates across residential and commercial as tenants flee big cities for more open locations. Additionally, with tourism acting as the lifeblood of many cities, commercial tenants such as retailers are hotels are struggling to keep the doors open. More consumers in suburban areas can ultimately lead to a natural interest in outdoor recreational products

Residential: As COVID-19 swept through large cities, many residents decided to shelter-in-place in suburban homes. The timing of the lockdowns coincided with the major lease renewals/signing  months (usually between March and June). As a result, many of those who left the city have decided not to return due to concerns over the future containment of COVID-19. Using New York City as an example of this trend, new leases signed in May in Manhattan dropped 63% compared to last year (54% drop in Brooklyn). This figure represents the lowest number of leases signed in the last ten years. Additionally, the number of apartment  listings grew 34% YoY in May, representing the largest YoY increase in inventory in the last four years (link). According to the Real Estate Board of New York (REBNY), the May vacancy rate was 2.88%, the highest it has been since August 2006 (link).  It is expected that as the city opens back up and agents can show apartments in person that vacancy rates will decline through the rest of  the year. It is still unclear if the majority of people who left these cities and decided not to renew during the pandemic will return this year or even in the near future. 

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Originally Posted on July 1, 2020 – The Great Outdoors


This whitepaper was prepared by Alec M. Boccanfuso. The examples cited herein are based on public information and we make no representations regarding their accuracy or usefulness as precedent. The Research Analyst’s views are subject to change at any time based on market and other conditions. The information in this report represent the opinions of the individual Research Analyst’s as of the date hereof and is not intended to be a forecast of future events, a guarantee of future results, or investments advice. The views expressed may differ from other Research Analyst or of the Firm as a whole. 

As of June 30, 2020, affiliates of GAMCO Investors, Inc. beneficially owned 5.12% of Marine Products and less than 1% of all other companies mentioned.

This whitepaper is not an offer to sell any security nor is it a solicitation of an offer to buy any security.

Investors should consider the investment objectives, risks, sales charges and expense of the fund carefully before investing. 

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