Introduction

Greetings, National Indoor RV Centers family of customers and friends.

It’s been over a year since I’ve shared my thoughts about our economy in general and more than two years since I’ve shared my thoughts specifically about the RV industry. A great deal has happened with both since then.

In this series, I’d like to lay the groundwork for my next couple of videos by taking a look in the rearview mirror at some historical trends in the RV industry. I suspect there are more than a few things that will surprise you. I’ll also share several observations that I find particularly interesting.

As Mark Twain once said, “History never repeats itself, but it often rhymes.”

I like to compare looking in the rearview mirror to trying to view an entire building with my nose pressed against a single brick. Only when I step back can I see the entire building. Looking back over the long history of the RV industry provides that same perspective. It gives us the context we’ll need for the next several videos as we look ahead and consider what the future may hold for the RV industry.

For those of you who are currently on the sidelines wondering when the right time might be to purchase a new motorhome, this exercise will also help identify the market indicators that may signal the most opportune buying opportunities.

A Disclaimer About Projections and Assumptions

Before we begin, I’d like to offer a disclaimer about projections and assumptions.

Every projection requires assumptions, and assumptions can be either wise or unwise. Our emotions can cause those assumptions to become overly optimistic or excessively pessimistic. Even small changes in our assumptions can produce dramatic changes in our projected outcomes.

Assumptions are necessary, but we shouldn’t make them lightly, nor should we forget that we’re making them.

Why is this important?

Because assumptions are embedded in every assessment of our economy, our financial markets, and the RV industry. Over time, those assumptions tend to fade into the background while our attention shifts to everything else.

Personally, I believe every projection is wrong the very second it’s made.

Why?

Let’s look at a simple example.

Suppose we’re building a projection based on only five assumptions. Further suppose we’re highly confident in each one and estimate that every assumption has an 85% probability of being correct.

After the first assumption, our projection has an 85% chance of being accurate.

After multiplying by the second assumption—also 85% likely—the probability drops to 72.25%.

After accounting for the third, fourth, and fifth assumptions, the probability of the entire projection being correct falls to just 43.4%.

For comparison, flipping a coin gives you a 50% chance of being correct.

In other words, even a projection built on five assumptions that each seem highly reliable ends up being less likely to occur than the outcome of a coin toss.

Businesses, in my opinion, tend to be more disciplined with their assumptions than governments, if for no other reason than self-interest. We all pay much closer attention when our own capital and our own income are on the line.

History provides plenty of examples of what happens when assumptions prove to be wrong.

In the late 19th century, nearly every government-sponsored U.S. railroad eventually went bankrupt. The lone exception was the privately financed railroad. It’s much easier to become starry-eyed when you’re spending someone else’s money.

Likewise, many investors will remember Global Crossing, the international fiber-optic company. The company genuinely believed its own models. Investors lost nearly everything while the company simultaneously gave the world the gift of inexpensive internet bandwidth.

The bottom line is simple.

The future is never certain.

We make assumptions to bridge the gap between what we know and what we don’t know. If we could know the future with certainty, assumptions wouldn’t be necessary.

But neither would profits.

Profit is the reward for accepting risk.

Assumptions create risk, and risk is what ultimately creates opportunity.

With that in mind, let’s see how wisely we can use our assumptions as we begin looking at the RV industry.

RV Shipments as a Leading Indicator

Because demand is a pull phenomenon rather than a push phenomenon, I like to look at RV shipments as a leading indicator.

Every new RV shipped to a dealer will ultimately be sold. For this reason, shipment data can provide valuable insight into future market conditions.

I also wanted to use data that viewers can easily access themselves. Not all of the information we rely on here at National Indoor RV Centers when making our projections is publicly available. Much of it requires subscriptions to several very expensive data providers.

When you compare RV shipments with actual retail sales, you can clearly identify periods when manufacturers are overbuilding, creating excess supply, or underbuilding, creating excess demand.

With that in mind, let’s begin by looking at the past 43½ years of RV shipments. As we continue through this series, I’ll keep adding information to this spreadsheet as we peel back each layer of the onion.

The RV Industry Has Grown Far Faster Than the U.S. Population

In 1980, manufacturers shipped approximately 106,700 new RVs of every type and class, including Class A, B, and C motorhomes, as well as every type of towable RV.

The industry eventually reached its most recent—and all-time—peak in 2021, when manufacturers shipped 600,240 new RVs before the market entered its inevitable correction.

In 2022, shipments declined 18% to approximately 493,268 units.

From 1980 through 2021, the RV industry grew at a 4.3% compounded annual growth rate.

During that exact same period, the U.S. population increased from approximately 226.5 million people to nearly 337 million, representing a compounded annual growth rate of just 0.97%.

Personally, I find it remarkable that the RV industry has grown roughly 450% faster than the U.S. population.

Although the RV industry technically began around 1910, I don’t believe it truly became mainstream until the 1950s, with the introduction and growing popularity of the Class A motorhome.

For that reason, I don’t really think of the RV industry as being more than 100 years old. Instead, I view it as roughly a 65-year-old industry, dating back to the founding of Winnebago Industries in 1958.

Given that we live in a capitalist economy where entirely new industries and disruptive technologies emerge every year, I think it’s incredibly impressive that a mature, 65-year-old industry continues growing at a rate roughly 450% faster than the population itself.

From this broader perspective, it’s clear the RV industry is not becoming obsolete. It’s certainly not another buggy whip business or the next Blockbuster Video.

On the contrary, the RV lifestyle remains extraordinarily popular throughout the United States.

That’s the good news.

Towables Have Driven Nearly All of the Industry’s Growth

Now let’s peel back the first layer of the onion and separate towable RVs from the overall market.

In 1980, manufacturers shipped 78,468 new towable RVs.

By 2021, shipments had climbed to approximately 544,058 units.

That represents a 4.8% compounded annual growth rate, or nearly 500% faster than population growth.

That’s an impressive performance.

However, National Indoor RV Centers is exclusively a motorized company.

So let’s peel back another layer and look specifically at the motorhome segment.

This is where those “slightly different assumptions” I mentioned earlier begin producing dramatically different conclusions.

The Motorhome Market Has Been Shrinking for Nearly Four Decades

Surprisingly, motorhome production actually reached its all-time high back in 1984, when manufacturers shipped 81,992 new motorhomes across all classes—Class A, B, and C.

If it had a motor and a bathroom, it was included in that figure.

By comparison, the most recent cyclical peak occurred in 2022, when manufacturers shipped only 58,403 motorhomes.

Since reaching its all-time high in 1984, the motorhome market has experienced what Wall Street would describe as six dead-cat bounces.

With every business cycle since 1984, we’ve seen lower highs and lower lows.

From 1984 through 2021—the same year the overall RV industry reached its all-time shipment record—motorhome production actually experienced a negative compounded annual growth rate of 0.92%.

Think about that for a moment.

During the same period:

• The U.S. population grew at roughly 0.97% annually.
• The motorized RV industry shrank by nearly the same percentage each year.

But the decline becomes even more striking when you examine market share.

In 1984, motorhomes represented approximately 38% of all RVs produced.

By 2021, that share had fallen to just 9.36%.

That’s a staggering 75.4% decline in market share.

So after stepping back and looking through the rearview mirror, what are we really seeing?

Despite the tremendous popularity of the RV lifestyle, are motorhomes slowly becoming obsolete?

Do consumers simply prefer pulling their accommodations behind them instead of traveling in a fully self-contained motorhome?

Have motorhomes become too expensive?

Has the population able to afford them declined?

Have motorhomes become less competitive compared to second homes or other forms of recreation?

Let’s examine each of those possibilities one at a time.

Have Smaller, Less Expensive Motorhomes Become the Solution?

Let’s begin by dispelling the idea that smaller, less expensive motorhomes—particularly Class B and Class C coaches—are growing rapidly enough to reverse the long-term decline of the motorized RV industry.

Today, Class C motorhomes account for 44.6% of the motorized market, while Class B motorhomes account for another 31.1%.

Combined, Class B and Class C motorhomes represent 75.7% of the entire motorized RV market.

If we also include the less expensive gas-powered Class A motorhomes, which make up another 15.6%, then these lower-priced segments collectively account for 91.3% of all motorhome sales.

That leaves the most expensive segment—Class A diesel motorhomes—representing only 8.7% of the motorized market and just 0.72% of the overall RV industry.

Not even one percent.

Clearly, the Class A diesel segment isn’t responsible for the motorized industry’s long-term decline.

Even more importantly, the data shows that the least expensive motorhomes have also lost both volume and market share over the past 38 years.

The evidence suggests this isn’t simply a story about buyers abandoning expensive motorhomes in favor of more affordable ones.

Something much larger is taking place.

Why Does Europe Prefer Motorhomes While America Prefers Towables?

By 2021, the data showed that 90.7% of RV owners in the United States preferred some type of towable RV, leaving only a small percentage choosing motorhomes.

Can that really be true?

Let me answer that question with another question.

Why is the exact opposite true in Europe?

Approximately 90% of European RV owners choose motorhomes, while only about 10% own towables.

Historically, fuel prices provide one obvious difference. Over the same time period, gasoline averaged roughly 43% cheaper in the United States than in the United Kingdom, while diesel fuel averaged about 54% cheaper.

Some people argue that Europe simply doesn’t have America’s large, 45-foot diesel pushers.

But that explanation doesn’t hold up.

Remember, of the 58,403 motorhomes shipped in 2022, only 24.2% were Class A gas and diesel coaches. The remaining 75.8% were Class B and Class C motorhomes—the very same types that dominate the European market.

In terms of unit volume, the large diesel pusher represents such a small portion of the American motorhome market that it cannot reasonably explain the industry’s decades-long decline.

So once again, we’re left looking for another answer.

Have Motorhomes Simply Become Too Expensive?

Perhaps motorhomes haven’t become too expensive in absolute terms, but have they become too expensive relative to other measures of affordability?

Before answering that question, it’s helpful to remember a basic concept from statistics.

A perfect correlation coefficient is 1.0, while anything above 0.70 is generally considered a strong correlation.

With that in mind, let’s compare motorhome prices against several economic measures that have historically shown meaningful relationships with RV sales.

To the spreadsheet we’ve already been using, let’s add:

• The yield on the 30-year U.S. Treasury bond
• The closing value of the S&P 500
• Median household income

I don’t know of any variables that have stronger historical correlations with RV shipments than these three.

Interestingly, fuel prices and inflation show virtually no meaningful correlation with RV shipments, despite how frequently they’re discussed.

The relationships that do matter are much more revealing.

RV shipments have a fairly strong negative correlation with the 30-year Treasury bond, with a coefficient of approximately -0.75.

That simply confirms the obvious:

When interest rates rise, RV sales tend to fall.

Conversely, RV shipments have a very strong positive correlation with the S&P 500, with a coefficient of approximately 0.83, and an even stronger relationship with median household income, which carries a correlation coefficient of approximately 0.86.

These three variables appear to be among the most meaningful indicators when evaluating demand for motorhomes.

Now that we have meaningful benchmarks for comparison, let’s see whether motorhomes have actually become less affordable over time.

Have Motorhomes Become Less Affordable?

To answer that question, I’m going to use the 35-foot Tiffin Allegro diesel motorhome as a proxy because it was in production both in 1984 and in 2022, allowing for an apples-to-apples comparison across nearly four decades.

In 1984, the MSRP of a 35-foot Tiffin Allegro diesel motorhome was $71,700.

At that time:

• Median household income was $22,687.
• The average yield on the 30-year U.S. Treasury bond was 12.96%.
• The S&P 500 closed the year at 167.64.

Fast forward to 2022.

The MSRP of that same motorhome had increased 450% to $322,982.

During that same period:

• Median household income increased to $70,100.
• The 30-year Treasury yield declined to 6.27%.
• The S&P 500 closed at 3,839.

As a result, the estimated monthly payment on the motorhome declined from 48.6% of the median household income in 1984 to 40.4% in 2022.

Another way to view affordability is by comparing the MSRP of the coach to the value of the S&P 500.

In 1984, the motorhome’s MSRP was approximately 429 times the value of the S&P 500.

By 2022, it was only about 84 times the S&P 500—an 80% reduction on a relative basis.

In other words, despite the higher sticker price, motorhomes have actually become more affordable relative to both household income and household wealth than they were at the industry’s peak in 1984.

That clearly does not explain the motorhome market’s 38-year decline in sales and market share.

Have Motorhomes Become Too Expensive Compared to a Second Home?

Let’s compare motorhomes to another large discretionary purchase—a second home.

Florida consistently ranks as the nation’s leading state for second homes, accounting for approximately 10.8% of all second-home ownership.

In 1984, the average home price in Florida was approximately $56,800.

Over the same period:

• The 35-foot Tiffin Allegro diesel increased in price from $71,700 to $322,982, a 450% increase.
• The average Florida home increased by approximately 481%.

In other words, second homes appreciated more than motorhomes over the same 38-year period.

So once again, the data suggests that motorhomes have not become disproportionately more expensive relative to another major discretionary purchase.

This explanation also fails to account for the long-term decline in motorhome sales and market share.

Have Motorhomes Become Too Expensive Compared to Other Forms of Recreation?

Finally, let’s compare motorhomes to other common forms of recreation and travel.

There are countless ways to make this comparison, but I’ll keep it simple by using two familiar examples:

• A Disney World admission ticket as a proxy for recreational spending.
• A room at New York City’s Hotel St. James as a proxy for travel accommodations.

I intentionally chose a budget-conscious hotel rather than comparing motorhomes to luxury vacations like Pebble Beach or five-star Manhattan hotels.

In 1984:

• A ticket to Disney World cost $18.
• A double room at the Hotel St. James cost $25 per night.

By 2022:

• That same Disney ticket had increased to $109, a 506% increase.
• The hotel room had increased to $194 per night, a 676% increase.

By comparison, the 35-foot Tiffin Allegro diesel motorhome increased 450% over that same time period.

Once again, motorhomes experienced smaller price increases than these representative recreational expenses.

The bottom line is this:

When we compare motorhome prices against the income and wealth of the people who purchase them, against competing discretionary purchases like second homes, and against other common forms of recreation and travel, the data simply does not explain the slow, steady 38-year decline in motorhome sales and market share.

And all of this has occurred during what has arguably been the wealthiest generation in our nation’s history.

I believe something else is at work.

There must be another factor responsible for the motorized segment moving in the exact opposite direction of the broader RV industry, even while the RV lifestyle itself has flourished.

I have my own thoughts—or perhaps more accurately, my own beliefs—about why this has happened.

Given the amount of capital we’ve invested, and continue to invest, in the motorized segment here at National Indoor RV Centers, I think it’s fair to call them beliefs rather than mere opinions.

I’ll share those beliefs in my next video, followed by our projections in the third installment of this series.

For now, my goal has simply been to lay the historical foundation that will support those future projections.

In the meantime, I’d genuinely love to hear your thoughts.

Why do you think the motorized segment of the RV industry has moved in exactly the opposite direction of the RV industry as a whole?

As always, thank you for listening to my musings.

I wish you safe travels and all the best.