Sales of recreational vehicles and motorhomes in South County seem to be outpacing national trends, and forecasts are so encouraging that dealerships are promising to either move or expand in Morgan Hill over the next six months.
The total number of dealerships within city limits will be three by the end of this year – three times as many as there were before the 2008 recession that drove longtime Morgan Hill motorhome dealer Alpine RV out of business.
And that’s likely to fuel increasingly optimistic sales tax revenues that fund city services, according to city officials.
Family RV, a San Jose-based renter and seller of motor homes, is planning to relocate their headquarters to Morgan Hill and vastly expand their operations in north Morgan Hill.
McMahon’s RV retailer opened on Condit Road about two weeks ago. Just next door on Condit Road Pan Pacific RV, which moved into the former Alpine site when that dealer vacated, plans to expand on its property with a service center and a bigger outdoor sales area.
For a few months in 2009, after Alpine RV was forced to close up shop due to the tightening of credit and financing constriction, there were no RV dealers in Morgan Hill.
Now, the city’s newest dealer expects sales to rise “dramatically,” particularly in Northern California.
“This part of California is recovering faster than other areas,” said Glenn Elsing of McMahon’s RV, a dealership chain based in Southern California. The new shop in Morgan Hill – their first in Northern California – represents an expansion of the company. “If you’re going to expand, this is a great area to do it.”
Elsing noted that about a third of all calls to McMahon’s from interested buyers are from the northern part of the state. McMahon’s lot in Morgan Hill has about 80 RVs and motorhomes for sale.
“There’s a lot of people with pent-up demand,” for motorhomes and RVs, Elsing explained. “They want to spend time with their families, and with their kids, and they want to go camping. They’ve held off (while the economy struggled) and now they’re able to (afford) it again.”
The owner of Family RV expects to double his workforce of 20 and nearly triple his sales when he moves his dealership and rental facility to Morgan Hill by the end of this year.
Family RV purchased the former Alpine RV site at 19380 Monterey Road in north Morgan Hill, and plan to open by the end of this year, according to assistant city manager Leslie Little.
The company plans to improve the existing building on the site, spruce up the five-acre property with new landscaping, and build a new structure to accommodate a five-bay service center, Cezar said.
Plus, Family RV will double its staff to 40 employees, and will be recruiting for the new jobs in Morgan Hill in the coming months, Cezar added.
The addition of a full-service center for RVs is sorely needed in the South Bay, and is lacking at Family RV’s San Jose location, Cezar said. The service center will be “probably the largest recreational vehicle service center in the South Bay,” Cezar said.
The owner has been thinking about moving to Morgan Hill for about 13 years, and said it’s “the proper place at the proper time” to make the move. On a personal level, Cezar and his family have horses in the area, off Watsonville Road, and he wants to move the family home to Morgan Hill.
On a business level, most of Family RV’s customers come from south of San Jose and the new location will be easier for them, Cezar said. Plus, the City of San Jose is not the most business-friendly environment for his industry now, and it’s unlikely the company would be permitted to expand in its current location.
“It’s more about serving what the public needs,” Cezar said.
Currently, Cezar reports about $5 million annually in sales. He predicts that will jump to at least $15 million a year when the move to Morgan Hill is complete.
If the trend continues, that not only means more money for retailers and potentially more jobs, but also more revenue for the city. City manager Ed Tewes explained that the “transportation” category of sales tax revenues – which includes automobile and gasoline sales – is “by far” the city’s largest category of sales tax.
“It’s the only category that has experienced significant increases over the (last three) years,” Tewes said. “The Ford store is doing very well, and the addition of a new RV dealer will help us.”
The city gets 1 percent of all sales on all vehicles and retail goods sold in Morgan Hill, and that money funds basic services such as police and fire services.
Transportation sales tax revenues have risen from about $1.3 million in 2009 to about $1.9 million in 2011 in Morgan Hill, according to city staff. Overall sales tax revenues have gone up from about $4.8 million in 2009 to about $6.3 million in 2011.
Nationwide, RV sales are starting to bounce back from 2008 recession levels, but are still far from their peak in 2006.
The RV market took a nosedive in 2008, and the experience of Alpine RV at that time mirrors that trend.
That dealership saw its total sales plunge from $56 million in 2007 to about $18 million in 2009, the former owner said at the time.
In February, RV manufacturers nationwide shipped about 24 percent more vehicles – about 24,600 units – to retailers than they did the same month in 2011, according to the Recreation Vehicle Industry Association.
Shipments only jumped about 4 percent nationwide in 2011, and in 2010 shipments skyrocketed by 46 percent, according to the RVIA.
The RVIA also notes that fuel prices are not a significant factor in RV sales, and suggests based on surveys of owners that those prices would have to more than double to deter potential buyers from making a purchase. Plus, RV owners adjust for gas price increases by taking trips closer to home.
Still, sales are nowhere near where they were in 2006, when about 390,500 units were shipped to retailers. In 2009, that number sunk to 165,700, and in 2011 rose to about 252,300 RVs.
While Gilroy-based RV dealer See Grins RV owner Randy Scianna is discouraged by what promises to be a slow return to the normalcy of 2006, he admits his sales are up from recession levels.
He calls it a “soft bounce” in sales, as his sales in the second quarter of 2012 are on pace to be up 10 percent from the same period last year. In contrast to a 30 percent statewide decline from 2008 to 2009, that’s not very optimistic, especially in an election year when consumers tend to spend less anyway, Scianna said.
“We’re very aggressive,” Scianna added. “We spend a lot of money on advertising. But statewide, I’m hearing (RV) dealers are struggling.”
Pan Pacific RV, on Condit Road, moved to Morgan Hill in 2010 but only recently acquired a permit for a service center at its site. The planning commission voted unanimously June 12 to approve a conditional use permit for RV servicing and outdoor RV sales at that dealership.
Plans for that project include improved landscaping, a paved lot, and improvements to the existing building on site – the former Golden Oak restaurant – which they will use as an office and retail parts and accessories sales, according to city staff.
Pan Pacific moved to the property last year.
-2007: 353,400
-2008: 237,000
-2009: 165,700
-2010: 242,300
-2011: 252,300
Source: RV Industry Association
-2008: $1.8 million
-2009: $1.3 million
-2010: $1.5 million
-2011: $1.9 million
Source: City of Morgan Hill
