Latest update on February 4, 2021.
The coronavirus pandemic hit the dive industry like a freight train on a squirrel! Where do we stand? What’s next?
1) The Dive Industry 2020–2021: How bad is it?
There’s always been a severe lack of scuba diving industry statistics and market data. When the sea is calm and the sky is blue, it’s not too bad. But in the middle of a storm, it’s hard to navigate without instruments!
From the limited available data and numerous conversations with dive industry professionals, we will sketch out what we know of the current situation before looking at ‘What’s next?’ and what we can do to help ourselves.
Let’s look at the current market situation from different angles, which, put together, should give us a pretty good picture of where we stand.
Dive Resorts in Bad Shape
Contrary to local dive shops with a significant local clientèle in what we call ‘origin locations’, dive resorts are typically located in areas where tourists are the only clients.
We do not have worldwide statistics on the drop in business activities at dive resorts. It would fluctuate between locations depending on numerous factors including whether or not borders are closed to travelers!
Overall, though, dive resorts are the most badly hurt stakeholders in the scuba diving industry. Dive resorts are hurting like airlines. And there is no real light at the end of the tunnel.
As of mid-September 2020, airlines were canceling flights again as a hoped-for bounceback in demand fizzles.
A forecast on international tourism by Oxford Economics predicted that “tourism won’t reach 2019 levels again until 2024”. The same report forecasted a drop of 59% in inbound travel to the Caribbean.
As you can see in the graph below, we are entering a period of growth — but this growth is based on the new lows established earlier in 2020.
Let’s not gamble our success on miracles! We need to plan dive resort operations on much lower inbound tourism for the foreseeable future and the constant risk of borders reclosing.
As an industry, we must also plan for fewer dive resorts. Some have already closed. Others will, soon.
Here’s a look at what is happening in Cozumel, Mexico, a very popular scuba diving destination for Canadian and American scuba divers.
“All of Cozumel’s dive centres were affected. Some managed to pay their staff throughout the lockdown, others launched online campaigns to help them pay their employees, or the rent on their premises. Unfortunately, some operators were not able to pay their staff and cover their costs and have had to close and sell their boats as a result.” Source: Anita Chaumette in Dive Magazine.
There’s an interesting account of a dive trip to Cozumel in an article published in September 2020 in Scuba Diving magazine, recently acquired by PADI. Besides providing an overview of the problems associated with traveling during the coronavirus pandemic, the author recount how they were “lucky to have the boat to ourselves (…) which was an added bonus!”
Being alone on a dive charter boat may make the experience so much more enjoyable for the scuba divers. It’s like having VIP private service at a group rate. But it is not viable for dive boat operators. This story is scary if you are a dive professional.
The Revival of ‘Local Diving’
As we discussed in a prior article, local and inland diving was revived in numerous locations around the world during the COVID-19 pandemic.
Overall, during this crisis, domestic tourism is seeing a drop much less significant than international travel, which simply came to a halt.
In some regions, scuba diving operators witnessed a boom in their local scuba diving activities. We discussed it earlier this month in an article titled ‘The Revival of Local Diving: To Save The Scuba Diving Industry’.
States with good local ocean diving, like Florida and Hawaii, actually experienced growth in the number of open water certifications during the second half of 2020. We can assume the increase in scuba certifications in Florida is due to scuba diving activities by Florida residents as well as Americans jumping on a ‘road trip’ within the USA instead of taking vacations outside the country.
People in the yachting industry in California reported the same phenomenon to me. They witnessed a higher than usual demand for boats. There are fewer boats for sale than normal, with more people looking at buying boats. People are simply looking at activities they can do close to home.
Mark Young’s Dive Center Business Magazine
Dive Center Business (DCB) is a magazine distributed free to all dive centers in North America. It is the most reliable source of market data for the dive industry. Mark Young doesn’t play games and calls it as he sees it.
Every month since last April, DCB conducted market surveys with dive centers in the USA to take the pulse of the dive industry vs. COVID-19.
DCB reached the same conclusions we have regarding local diving’s increased role in the scuba diving industry.
“According to the survey numbers and retailers’ individual responses, many stores are fully open with good traffic, training inquiries and equipment sales. And while dive travel restrictions are negative, local diving has become more important.” ~Mark Young
While the current dive industry numbers look better in these surveys now than last April, we are not out of the woods, yet.
International dive travel programs are pretty much dead everywhere and that is usually a significant revenue driver for the forthcoming Fall and Winter months.
In overall business activities, about one-third of American local dive centers report sales above normal. It was possible to operate a profitable local dive shop in the USA in the Summer of 2020.
At the other end of the spectrum, more than 20% of current local dive shop owners are not sure if their business will survive the current pandemic crisis.
To survive, and even thrive, in times of crisis, one must ‘adapt’. This was captured in one of the survey participant’s comments.
“I will survive, but my business may look drastically different. I am weighing different options and avenues.” ~DCB Survey Participant
Cline’s Dive Industry Survey, Summer 2020
If you operate a scuba diving business, you’ve probably received William Cline’s email invitations to participate in his surveys.
Cline recently published the results of a special industry Summer of 2020 survey.
We have to thank William! He’s one of the rare sources of ‘data’ available in this industry. However, we may sometimes wonder about the accuracy of his findings.
For instance, while the DEMA open water certification census reports a drop of 52% in entry-level scuba diving certification in the USA, Cline’s survey reports a decline of only 40%.
I always suspected those dive industry participants answering William’s surveys are likely to be part of the more successful and professional dive operations, making Cline’s survey results on the optimistic side of things. We see it at play here, once again.
But the trends are usually consistent.
And based on Cline’s survey results, the drop in scuba diving certification since the beginning of 2020 has been even worse outside of Canada/USA.
Otherwise, in October 2020, Cline published the results of a ‘sentiment’ study conducted in August and September of this year.
“We as an industry are massively changing and it started well before this current global pandemic. We are seeing shifts in training, dive vacation habits and gear purchasing patterns that all point to seismic shift in our dive consumer base.” ~William Cline
Issues raised by surveyed scuba diving professionals were not new. They have only been amplified during the coronavirus pandemic. We are discussing these results here: “The Scuba Diving Industry in October 2020: A Sentiment Study”.
Scuba Diving Equipment Sales
Official numbers are hard to find on that front. In North America, Scubapro is the only company making its sales results public as part of Johnson Outdoors Inc (NASDAQ:JOUT) filings to the U.S. Securities and Exchange Commission (SEC) and in Johnson Outdoors annual reports to shareholders. We’ve reviewed Scubapro 2020 sales results, here.
Otherwise, from numerous conversations with dive industry participants, here are some additional highlights.
Sales at scuba diving equipment online retail websites have been said to be relatively stable — from slightly down to slightly up. Yet, dive gear manufacturers have seen a significant drop in sales.
What most likely happened is that sales of scuba gear, overall, were down. Meanwhile, scuba divers still purchasing gear were more likely than usual to do it online.
This is the same trend we’ve seen in the general population as outlined in a McKinsey & Company study we’ve discussed in ‘A New Business Model for a Redefined Local Dive Center’.
Once local businesses started to re-open, some local dive shops brought in good sales this Summer. This was most likely related to the trend toward doing activities close to home as well as an increased desire by scuba divers to own (not share) their scuba diving equipment.
Dive gear manufacturers have confirmed this pattern to us, and Dive Center Business’ surveys confirmed it.
“Indications are that people who might not travel with dive equipment are buying equipment to dive locally. One industry representative has also noted that the COVID conditions that have led to smaller, more personal classes have also resulted in more equipment sales.” ~Mark Young, DCB
The big question now is about the future of the dive industry in 2021 and 2022 which we discussed, here. Even if you had good sales in the Summer of 2020 with people staying close to home, it is doubtful this trend will continue during the winter months. For local dive shops in origin locations, dive travel to exotic locations is the fuel for sales in winter. And that fuel will be scarce.
What is PADI saying?
As the most prominent dive certification organization and one of the largest dive industry businesses, PADI can have a significant impact on the entire dive industry. It’s worth looking at what PADI’s representatives are saying.
PADI is known for the color pink! By that, I mean that no matter how good or bad things are, year after year, PADI always give us a rosy picture of the dive industry. Typically, PADI’s presentations to dive industry professionals are closer to that of a motivational speaker than a business partner providing actionable information.
Always been like that.
Yet, now, we see different messages.
In a series of email messages sent to PADI members (dive instructors and divemasters), Drew Richardson, CEO, used words I never thought he would say — words like “our diving industry has been hit particularly hard”, “diver travel, training and certifications plummeted to near zero in some areas”, and “it feels like you’re fighting for your life right now”.
The dive industry will not get back to what it was pre-coronavirus pandemic just by wishful thinking. We have work to do.
In that regard, PADI and other training organizations have set up numerous initiatives to help us all. We’ll get back to this topic in “What’s Next”, below.
The Vulnerability of Small Businesses Like Local Dive Shops and Dive Resorts
Understanding which small dive industry businesses are most threatened can help the rest of us respond to the crisis.
An analysis by McKinsey & Company found that 1.4 million to 2.1 million small businesses in the USA could close permanently as a result of the disruption from just the first four months of the COVID-19 pandemic. That’s 25 to 36% of American small businesses.
In Canada, the Canadian Federation of Independent Businesses (CFIB) finds that as of September 3, 2020, only 64% of small businesses were fully opened, and only 28% had sales back to normal. February 2021 update: This number is now 47% fully opened and 22% with sales back to normal. It’s worse! We are far from being out of the woods — or back in the water!
It is not farfetched to imagine similar ratios in the scuba diving industry.
In economic downturns, businesses with limited financial resources are the most at risk. Vice versa, businesses and individuals with the most cash-on-hand stand to benefit the most as they can acquire failing businesses for pennies on the dollar — and the same applies to marketing expenses to gain market shares.
Unfortunately, most local dive shops are uncapitalized businesses. Many of them live month by month. Therefore, we can expect quite a few local dive shops closures in the coming Fall and Winter months when sales to people seeking local adventures fade in the snow while international travel doesn’t pick up.
We expect that percentage to be 20% in the USA.
About 1 in 5 local dive shops will have closed during this pandemic, leaving about 1400 local dive centers in the USA.
But don’t take it personally! “A recent research by the Federal Reserve finds that only 35% of small businesses [in the USA] were healthy at the end of 2019” ~McKinsey & Company.
At the end of the day, no matter what the ‘big guys’ (dive training agencies and scuba gear manufacturers) do to boost recovery in the scuba diving industry, it won’t help keep the doors of a local dive shop open if it has already run out of cash.
DEMA’s Open Water Certification Census, USA 2020
February 2021 update: We now have received and analyzed open water certifications in the USA for the full 2020 year, here.
In the first quarter of 2020 (January to March), new entry-level scuba diving certifications were down significantly from 2019, by more than 20%.
The coronavirus pandemic train hit hard during the second quarter of 2020 (April to June) with a year-over-year entry-level scuba diving certification decline of more than 70%.
Since the dive industry sales and profitability are highly dependent on new open water diver certifications, you can imagine the financial impact on local dive stores, dive resorts, scuba gear manufacturers, and dive training agencies!
Per region, here are the declines in new entry-level scuba diving certification in 2020 compared to the same quarter of 2019.
Overall, for the first half of 2020 (both quarters together), we have a drop of 52%. Usually, there is more scuba diving activity in the 2nd quarter than in the first one.
So what do we do now?
2) The Dive Industry 2020 and Beyond: What’s next?
Recovery will take time.
“After the 2008 recession, larger companies recovered to their precrisis contribution to GDP in an average of four years, while smaller ones took an average of six.” ~McKinsey & Company
Let’s not kid ourselves! And let’s roll up our sleeves.
McKinsey & Company states that “many small businesses in the United States will need to make extreme changes to survive”. We certainly can say the same about small & medium-sized companies operating in the scuba diving industry.
These extreme changes are along the following lines:
- protecting the health and safety of employees and customers
- adapting business models
- investing in talent and technology
- adjusting staffing models and labor practices
A paragraph from one of Drew Richardson’s recent email messages to PADI members puts the finger on what to do next quite nicely.
“We should be collaborating and improvising by reallocating our resources, reprioritizing our work, adapting our training methods, adopting new business strategies, and serving new and existing customers based on how their lives are now to ensure our collective stability and strength.”
Of course, it would be best to plan a bit more and improvise a bit less but overall, his assessment is quite accurate.
In fact, it would have been accurate even before the coronavirus pandemic hit the scuba diving industry.
We need to redesign our dive industry business strategies to better serve customers, based on how they live, shop, and entertain themselves nowadays. Today’s consumers are not the same as in the 1980s when the current dive industry business model was set up.
The coronavirus pandemic has accelerated this evolution.
Here are some of the changes to which we must adapt.
That’s an obvious one.
For one, customers will expect to see serious processes to ensure their safety. This includes properly disinfecting dive gear between usage as presented at the bottom of one of our prior articles.
It also means that certain dive skills will never be taught the same way. Think of practicing sharing air from a single regulator or simulating mouth to mouth during rescue scenarios!
Dive training agencies have already put out changes to ‘how we teach’ numerous skills. On our side, we need to have processes in place to ensure our staff follows health guidelines — all the time.
Renewed Focus on Local Diving
Local and inland scuba diving is what saved numerous dive centers so far this year. It’s one good thing coming out of this coronavirus pandemic!
The COVID-19 crisis is not over. We still have plenty of time to shift toward ‘diving nearby’ instead of ‘teaching’ and ‘selling gear’.
Instead of profits resulting mainly from customers coming in and out before a dive trip to an exotic location, we can make good money with regular customers coming back for ‘diving’ with us. In other words, we need to work on ‘repeat business’ from local customers instead of continually recruiting new clients simply to ship them down South.
Most dive certification agencies have set up programs to support the access and the promotion of local scuba diving activities. Here’s a pretty comprehensive article on this topic by PADI and our own take on it.
Emphasis on the Experience of Scuba Diving
With self and forced confinement, the human-need for social contacts is actually increasing. There are just so many exciting conversations one can have with a wall!
For instance, an optimally successful ‘local diving’ program is designed along with social encounters (within health guidelines), not just focused on scuba diving.
An emphasis on the experience also means that we need to raise the bar on how we operate. Participating in our local scuba diving outings should be convenient and fun — on top of being safe, of course. Let’s think about how we can accommodate people. Asking them to jump through hula-hoops to grab a dive gear bag here and an air fill there is not the way to go!
A local scuba diving program should be based on what is best for the scuba diving clients, not what is most convenient for us.
In fact, our entire perception of how we provide scuba diving products and services in local markets needs a new paradigm that we started discussing at the DEMA Show 2019.
Consider White Glove Programs
As we discussed in ‘Meet The Next-Normal Scuba Diver’, a focus on health & hygiene as well as ‘nesting at home with the family’ may open the door to selling more private scuba lessons — and even dive travel — to some of your more affluent clients.
Focus On What You Do Best
Being everything to everybody is not the way to build a successful business. And operating six businesses under the roof of one small company is a bad idea! Yet, that’s what the dive industry has forced us to do.
It may be time to invest time and money in what provides the most value to your local scuba diving clients and shred the rest. We started this discussion under ‘A New Business Model for a Redefined Local Dive Center’.
Business Closures and Consolidation
At the dive industry level, we can expect even more consolidation than what we’ve seen in the last few years. Cash-rich private equity firms will find attractive acquisition targets among scuba diving companies tight on cash.
On a local level, opportunities may also arise.
Recently, an executive at a scuba diving equipment manufacturer was telling me that, unfortunately, where local dive shops were closing, the volume wasn’t picked up by the remaining stores. Why not?
If you have cash available, now is the time to give a serious push to your marketing and advertising efforts.
In a time of crisis, the deep pocket guy wins — as long as you’re in the game! Standing by ain’t the way to grow!
A Blue Ocean Future
With all this talk about adapting our business strategies to thrive in a post-coronavirus world… What about our business model?
With the pandemic’s disruption comes a transformation that “will happen to long-standing markets, competition, regulation, consumer preferences, behaviors, industries, business models, value propositions, and competitive advantages” ~Bob Zukis, Forbes Magazine.
In many cases, changes were already underway — like growth in online shopping to the detriment of local retail stores. The pandemic crisis gave fuel to these changes, and we have to deal with them.
About the business world post-COVID-19, Bob Zukis goes on:
“Successful business leaders won’t look to resiliency; they’ll look to renewal and rebirth because so many foundational things about their markets will be changing. Smart leaders will find the blue ocean’s where the competition will be reset.”
A Blue Ocean Strategy is about breaking out of the red ocean of bloody competition to create a new uncontested market space that makes competition irrelevant. ‘Blue oceans’ are vast, deep, and powerful in terms of opportunity and growth.
On Scubanomics, we’ve discussed how a Blue Ocean Strategy would be beneficial to a leader in the dive industry while satisfying today’s consumers.
With all the changes happening around us and within our dive industry, now has never been a better time to invest in creating a new scuba diving industry.
With so many changes happening in the scuba diving industry, what will happen with our trade association, the Diving Equipment & Marketing Association (DEMA)? That is a whole topic in and of itself.
You may be interested in more articles about the scuba diving industry and the COVID-19 pandemic.