As Marina Consolidation Matures, What Comes Next?

As Marina Consolidation Matures, What Comes Next?

There has been a tremendous amount of change in marina ownership over the past decade. An industry historically dominated by independent and family-owned businesses now includes a growing number of regional and national operators, institutional investors and private equity-backed platforms.

Much of that change has been positive. Outside investment has brought capital into an industry that needs it. Larger organizations can provide technology, purchasing power, professional management, better employee benefits and career opportunities that can be difficult for smaller operators to provide on their own. They can bring greater financial discipline and provide resources to address aging infrastructure and increasingly complex marina operations.

I believe there is a lot to like about what increased investment and professionalization can bring to our industry. But as consolidation matures, I think an interesting question is beginning to emerge. What comes next?  More specifically, once an organization has demonstrated that it can successfully acquire marina businesses, what does it take to consistently make those businesses better?

We Aren't the First Industry to Go Through This

That question led me to spend some time looking at industries that are further along the consolidation curve than ours.

Veterinary medicine, dentistry, HVAC and home services, funeral homes and other traditionally fragmented industries have all experienced significant outside investment and consolidation. They are obviously different businesses from marinas, but there are some striking similarities.

Many were historically made up of independent, locally owned businesses. Their success depended heavily on the knowledge of the owner, longtime employees, customer relationships and a strong connection to the local community. Then outside capital entered the industry.

Businesses were acquired. Regional and national platforms were created. New technology and professional management were introduced. Centralized services provided capabilities that many smaller operators could not efficiently build themselves.

There were meaningful benefits. But as these industries matured, many discovered that the challenges changed.  The question was no longer simply how to acquire and assemble businesses.  It became how to operate an increasingly large and complex collection of them well.  I think that distinction has real relevance for the marina industry.

Acquisition Capacity Is Not Operating Capacity

One of the themes that appeared repeatedly in looking at other industries was that capital can scale considerably faster than organizational capability.  An organization can acquire several businesses in a relatively short period of time. Building the infrastructure necessary to absorb those businesses takes longer.

Every marina that joins a portfolio brings more than docks, buildings and revenue. It brings employees. Customers. Equipment. Systems. Vendors. Maintenance needs. Local relationships. Different ways of doing things. And often decades of institutional knowledge.  Each acquisition therefore adds not just scale, but complexity.

Dentistry provides an interesting example. The rapid growth of Dental Support Organizations demonstrated how quickly a fragmented industry could consolidate when capital became available. More recently, parts of the industry have had to focus increasingly on operating infrastructure, integration and sustainable performance at the individual-practice level.

The lesson isn't that consolidation failed. It's that growth in the portfolio has to be matched by growth in the organization's ability to support it. I think there is a similar question worth asking in our industry.

When evaluating the next marina acquisition, the obvious questions concern the business itself. Is it a good market? What is the occupancy? What are the revenue opportunities? What capital investment is required? How does it fit with the existing portfolio? But perhaps there is another question that deserves equal consideration: Is the organization ready to absorb it? Not just financially.Operationally.

Do the systems have the capacity? Does the support structure? Can the organization integrate another business without creating unnecessary complexity for the businesses it already owns?  The ability to acquire another marina and the ability to successfully absorb another marina are not necessarily the same thing.

Scale Creates Different Questions

As organizations get larger, decisions that were once relatively simple become more complicated.  What should be standardized across every marina?  What should intentionally remain local?  Which decisions are improved by centralized expertise, and which are better made by the people closest to the customer and the operation?  How do you capture the knowledge of an owner or longtime employee after an acquisition?  How do you introduce new systems without creating more administrative work than operational value?How do you capture purchasing power and other efficiencies without making the customer experience feel more transactional? And how do you make sure corporate support remains exactly that?

These aren't arguments against scale. In many cases, scale is precisely what allows an organization to solve problems that were difficult for an independent operator to solve. Safety programs can improve. Technology can improve. Financial controls can improve. Purchasing can improve. Benefits can improve. Capital planning can improve. But the experience of other industries suggests that there is a difference between applying the advantages of scale and simply making everything the same. That distinction becomes more important as organizations grow.

Getting Bigger and Getting Better Aren't the Same Thing

This may be the part of the consolidation discussion that interests me most. Growth is relatively easy to measure. How many marinas does the organization own? How many slips? How many markets? How much revenue?  How many acquisitions were completed this year?

Those are all legitimate measures of growth. But they primarily tell us how much larger the organization has become. They don't necessarily tell us what happened to the businesses within it. If we really want to understand whether consolidation is creating value, I think we also need to look at the individual marina business. What happened to customer retention? Employee retention? Occupancy? Service performance? Ancillary revenue? Asset condition? Safety? Productivity? Organic revenue growth? Profitability?

If we looked at a marina several years after an acquisition, could we say that it is a better business than it was before? That seems like an important test. Because it is entirely possible for a portfolio to become larger while some of the underlying businesses become weaker. Conversely, a growing organization that consistently improves the businesses it owns may be building something much more durable.

Quality and Financial Performance Aren't Opposing Goals

There can sometimes be a tendency to frame these conversations as a choice between financial performance on one side and customers, employees, culture and asset quality on the other. I don't think that's the right way to look at it. The better question is whether those things ultimately reinforce one another.

A marina that retains good employees should generally provide better service.

A marina that provides better service should have stronger customer relationships.

A marina that maintains its assets should provide a better customer experience while reducing the operational consequences of deferred maintenance.

A marina that understands its customers and its market should be better positioned to identify appropriate pricing and revenue opportunities.

And a marina with strong systems and financial discipline should be able to convert those advantages into better operating results.

The objective isn't quality instead of financial performance. The objective is quality that produces sustainable financial performance.

That is a very different proposition from simply maximizing short-term results.

What Comes Next?

I think consolidation presents a significant opportunity for the marina industry.

Capital is available to improve infrastructure. Technology is becoming more sophisticated. Larger organizations can create meaningful career opportunities for people in our industry. Best practices can be shared across properties and markets. Resources that were once unavailable to many independent operators are increasingly accessible.

Those are real advantages. But the experience of industries that are further along this path suggests that the challenge evolves.  As consolidation matures, the competitive advantage may increasingly shift from the ability to acquire businesses to the ability to operate them exceptionally well.

That raises a number of questions worth exploring: how much growth an organization can effectively absorb, what should be standardized and what should remain local, how institutional knowledge is preserved, how corporate resources can support rather than complicate local operations, and ultimately how we should measure whether scale is actually creating value.

I'll explore those questions in the next several articles. But perhaps the most useful question to keep in mind throughout the discussion isn't how many marina businesses an organization has acquired. It's what happened to those businesses afterward. Did they get better?