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Star Tribune, Minneapolis, Dick Youngblood column: Owatonna firm's success with RVs shows that this housing still sells

Category: UNSPECIFIED
Source: Star Tribune
Publish Date: Wednesday, April 2, 2008
Summary: ...travel trailer, he said. That argument certainly persuaded Noble's banker, who admits he was skeptical when he was first approached. "The demographics -- the baby boomers -- are there," said Pat Segler, president of United Prairie Bank of Owatonna. "And you could even argue that high gas prices are helping" the RV industry by discouraging long-distance vacation travel, he said. Noble credits not only his company's location, but also its newness: "Everyone...

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By Dick Youngblood

OWATONNA, Minn, Apr. 2, 2008 (McClatchy-Tribune Regional News delivered by Newstex) --

In 2003, Mike Noble accepted a buyout offer from his partner and co-founder of a thriving Owatonna lighting design and electrical contracting firm.

Noble, who exhibits all the symptoms of a serial entrepreneur, had a logical explanation for the decision: "The business was long past the start-up phase and the challenge just wasn't there anymore."

So he spent three years searching, studying and pondering, and finally found a new challenge.

It was a doozy.

In April 2006, with gasoline prices heading skyward and the economy tilting in the other direction, he opened Noble RV Inc. to sell the hulking travel trailers, fifth-wheelers and motorized recreational vehicles (RVs) that are synonymous with guzzled gas.

We're talking travel trailers that weigh between one and six tons, fifth-wheelers that range from three to seven tons and motorhomes that go from five to 22 tons.

Can you say "counterintuitive?"

Yet, Noble has had no reason to regret his choice -- so far. When he started, his first-year goal was to sell at least 120 units in the remaining nine months of 2006. He wound up peddling 187 of them for a first-year gross of $4.2 million.

Then, as the economy headed south for the winter, he sold 323 units in 2007, for a total gross of $8.8 million.

And in the first two months of 2008, he moved 37 units for $1 million, up 39 percent from the same period a year earlier, when he sold 25 units for $718,000. Nearly half of those 2008 sales came at the Minneapolis/St. Paul RV, Vacation and Camping Show, where he sold all 17 units he brought for display.

In short, said his brother and business partner, Pat Noble: "If this is a bad economy, I can hardly wait for it to get worse."

Noble's rapid growth so far has outstripped the state RV industry, which managed less than a 2 percent gain in unit sales last year, according to Statistical Surveys Inc., a Grand Rapids, Mich., company that provides market data to the RV and other industries.

What's going on here?

"The baby boomers are retiring, and not all of them can afford a lake cabin," Mike Noble said. "But they can buy a 12- to 40-foot travel trailer for $10,000 to $30,000 and rent a seasonal site for the summer."

Ditto for the snowbirds, who can haul one south and park it in a rental space under the warm sun, he said.

Or if you have a family of six, including four teenagers, as Scott Petznick does, you figure the cost of gasoline for his new, 11,000-pound motor home is offset to a large extent by other savings.

"Four teenagers and two adults don't fit very well in a car," said Petznick, a resident of St. Croix Falls, Wis., who spends his vacations visiting family in the southern United States. "And this way you don't have to pay for two motel rooms and a lot of restaurant meals" on the road.

Neal Will's new two-ton travel trailer, pulled behind his SUV, trims his miles-per-gallon perilously close to single digits, but the Forest Lake resident figures it's a fair tradeoff for "a great way to get outdoors with the family." But, given the rising cost of fuel, he tends to stick fairly close to home.

"There are a lot of great campsites in Minnesota within a few hours of us," he said, including one he recently reserved along the St. Croix "that's just 10 minutes from our house."

There's even a way to rationalize the somewhat daunting cost of an RV: Returning to his comments about the cost of an RV vs. a lake cabin, Noble said that, at his average sale price of $27,000 to $28,000, the monthly payments on an RV would run about $500 -- "and I pay almost half that much just in taxes on my lake cabin."

Good location

It hasn't hurt Noble's business that his two-story, 14,000-square-foot headquarters and his two display lots are located along the heavily traveled Interstate 35. Better yet, his offices are spotted across the highway from a Cabela's outlet, which is frequented by "the kind of people who buy RVs," he said.

Even better, one of his two display lots is located on a 10-acre patch adjacent to the Cabela's store and adds an estimated 10 percent to his sales.

Noble, who owns the independent dealership with his brother, Pat, concedes that "the possibility exists" that high fuel prices and a weak economy could wind up biting him in the back pocket.

"But there are a lot of people with significant disposable income, and I'm convinced that there will always be people with money" to spend on the likes of a $30,000 travel trailer, he said.

That argument certainly persuaded Noble's banker, who admits he was skeptical when he was first approached.

"The demographics -- the baby boomers -- are there," said Pat Segler, president of United Prairie Bank of Owatonna. "And you could even argue that high gas prices are helping" the RV industry by discouraging long-distance vacation travel, he said.

Noble credits not only his company's location, but also its newness: "Everyone wants to try the new guy," he said.

But he also spends heavily on advertising and marketing -- a total of $125,000 last year for highway billboards, displays at five county fairs and three trade shows and mailings to RV owners in a 100-mile radius, seeking to capitalize on the average four-to-five-year trade-in cycle for RVs.

The company's website (www.noblerv.com) also contributes about 5 percent of sales and has attracted buyers from as far away as Los Angeles; Baton Rouge, La.; Red Deer, Alberta, and Whistler, British Columbia.

Despite his confidence in the industry, the fact is that Noble has laid down a substantial wager that he's right. Included in the mix: the $500,000 he invested from the aforementioned sale of his interest in Owatonna-based Retrofit Companies Inc., a mortgage on the $2.3 million headquarters and the upwards of $4 million he carries in inventory.

Nonetheless, his banker is unconcerned: "Mike and his brother both have good business sense," Segler said.

Dick Youngblood --612-673-4439 --yblood@startribune.com

Newstex ID: KRTB-0281-24196309


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