Consumer Sentiment and Behavior with Recreational Products

“During COVID, the economy switched from being very service based to very goods based,” said Christian Lawrence, senior cross-asset strategist at Rabobank, the parent company of DLL. “People couldn’t spend on services. They couldn’t go on vacation. So, they spent more on goods.” The way consumers viewed recreational products changed, which drove a fundamental shift in the U.S. economy with a surge in spending on them.

Let’s explore how recreational spending may transition over the next few years in markets for two specific recreational products: golf cars and compact tractors.

Golf car industry varies based on market nuances

The golf car market was one of the recreational product markets that saw dramatic growth spurred by consumer spending.

“Instead of going on vacation, consumers spent the same money to get a customized golf car to ride around the neighborhood. I do not feel that is going to stop in the next years. It may slow for a period, but I think it will end up continuing to grow for years to come,” said DLL Program Manager Jim Stanley.

With the surge in consumer segment, many expected sales in the fleet golf segment (golf courses) to grow as well. Contrary to this expectation, golf car sales to this segment remained flat.

“While there were more rounds played, outside the pricing adjustments that are coming along from commodity increases, the actual growth in the fleet market is actually flat,” said Stanley.

However, the commercial segment of the golf car segment, which includes a diverse customer base, saw growth. Municipalities have been adopting golf cars as a means of public transportation in city centers. Resort staff transport tools, laundry and supplies, and contractors use the cars as jobsite transport vehicles.

Then there are the last-mile-ride applications that replace taxi systems in city centers. “Some cities are starting to close off certain boundaries where six-passenger golf cars can transport people from the parking lot to restaurants then to their entertainment space and even to a pub afterwards,” said Stanley. “I think you are going to see more concepts like that in the next five to ten years.”

Compact tractor market driven by hobby farms

Another product category influenced by a shift in recreational spending is the compact tractor market.

“We will continue to see an increased customer base from West Coast residents moving to the Midwest or South and purchasing small acreage plots, which is a perfect fit for compact tractor usage,” said DLL Global Head of Program Management, Ken Whitelaw. That’s not the only area seeing growth. “Hobby farmers in the East continue to purchase compact tractors at a higher rate than anywhere in the United States,” he added.

However, future market swings are on the horizon.

“In the short term (two years), the compact tractor industry will be heavily impacted by several factors: inflation, interest rates and the strong U.S. dollar,” said Whitelaw. “Most of the industry is forecasting a roughly 20% drop in demand of compact and subcompact tractors going into 2023 compared with 2022, with effects felt through mid-2024. However, demand is expected to rise in the long term back to normalized levels. However, the market remains buoyant compared to industry sales prior to the pandemic and is expected to grow over the longer-term”

To understand this market trends, watch the housing market. “As housing increases, so does compact tractor demand, and vice-versa,” said Whitelaw. “As we see the market demand drop locally, this correlates into less demand for compact tractors.”

So while the market could shrink some due to lower interest in hobby farming from millennials and Gen Z, Gen X farmers selling land to urban sprawl will grow the segment. Plus, we’ll see Baby Boomers retiring to small acreages.

“For the United States, the compact tractor segment will continue to see an overall growth cycle for many years to come,” said Whitelaw.

Looking forward

Rabobank continues to see consumers borrowing at record rates.

“We have seen quite a surge in consumer borrowing,” noted Lawrence. “This year we have seen five of the six largest increases in history when it comes to monthly consumer credit. There has been increased borrowing, which is perhaps delaying the inevitable sharp downturn in terms of consumption.”

“However, I think discretionary spending is going to tighten up a lot,” said Edwards. “For households, it is real wage growth that matters — wages adjusted for pricing. That has never been so negative. It is negative across every single sector. Households are losing purchasing power.”

This loss of purchasing power is coming at the same time the economy is beginning to normalize and shift back towards being more service based. While the next few years may be challenging, the long-term outlook for recreational products such as golf cars and compact tractors still remains relatively positive.

When it comes to financing equipment purchases from golf cars to compact tractors to large agriculture equipment, consumers will be well served by a company with expertise in the market. “We believe we excel with our firsthand knowledge,” said Stanley. “We have the knowledge to look at a scenario and say the standard offering doesn’t work, but is there another way we can look at this to make it work correctly for everybody. That sets DLL apart from the others.”

For more information on solutions DLL can provide in the golf and compact tractor industries, please contact us for more information here.