When the crisis hit in September 2008, the financial world went into freefall, dragging businesses and fortunes with it, and wiping more than US$10 trillion off the portfolios of the world’s wealthiest. Three years later, the aftershocks are not only still with us but the shadows cast by ‘double dips’ and ‘recessions’ are long and looming.
However, one old adage probably best sums up the reaction of the yachting market since the fall of Lehman Brothers – ‘once burnt, twice shy’. Entrepreneurs and business leaders the world over have restructured their fortunes, re-appraised their risk to exposure and returned to the business of making money. In fact, the UK’s Sunday Times Rich List 2011 showed the country’s wealthiest increasing their fortunes by more than 20% in the previous 12 months.
The effects of this on the yachting industry have been plain for all to see. In the grand scheme of things, a superyacht costing EUR 30-40 million may not use up too much of a client’s total wealth, but it is a discretionary spend and always the first to go in times of uncertainty. For those existing owners whose wealth was badly hit in 2008, getting rid of the yacht was a natural knee-jerk reaction and it was one that effectively hammered the nail in the coffin of the boom years between 2005 and 2008. By January 2009, the superyacht market was flooded with yachts for sale. Speculators who had bought and built yachts purely to sell them on at huge profits without even stepping on board, suddenly lost their bonuses or their jobs. Consequently the outpouring of vessels new and old continued, saturating the already swamped marketplace. And then the world stopped buying yachts.
Pre-crisis, the generally accepted average number of superyacht sales per month was around 30. In January 2009, according to industry leaders Boat International, there were four. February saw three! But just as the world was awakening to the myth that there exists a Japanese word for ‘crisis’ which also means ‘opportunity’, so a new wave of buyers seized their chance to pick up some of the world’s most magnificent yachts at up to half the previous year’s price. We saw 2009 finishing with a bang. Thirty-one sales were recorded in December 2009, with the year finishing on a total of 197 sales and over EUR 1.84 billion in revenue*.
That growth continued in 2010 and as of August 2011, 192 yachts have already been sold year-to-date (an increase of 40% on 2010) generating more revenue in those eight months than the whole of 2009 (EUR 1.88 billion).
“Clearly these are the best results since the financial crisis hit,” explains YPI Group CEO, Bertrand Vogèle. “But one fact remains – more yachts are coming to the market than are being sold. It’s still a buyers’ market, but one that requires some prudence. Quantity, unfortunately, does not mean quality.”
Realistic asking price
And what of those wishing to sell their yachts today? Is it really a tale of doom and gloom? “Yachts are selling,” says Bertrand. “But it all depends on the yacht – its age, size, builder and of course the level of maintenance it has seen. Quality yachts that are well looked after do sell, although the older the yacht, the greater the pressure on its price.” As of August 2011, while the majority of yachts sold were aged between six to ten years (40%), 36% were over ten years old and 24% less than five years old.
When it comes to ‘asking prices’, brokers advise sellers to be realistic. “So many of the price reductions over the last few years are the result of brokers being unrealistic about price, or not having the confidence to tell owners from the start that their asking price is too high,” explains Bertrand.
As owners strive to find that balance between market rate and maximum return, price reductions (or ‘corrections’ as they are often referred to) are still being announced every day, with more than 360 being recorded as of August 2011. “The only way to get it right is to track the market and the yachts,” concludes Bertrand. “Looking at their history, their individual specifications, condition and location. And then working twice as hard to seek out the right types of people for the yachts we have on offer.”
For those wishing to build a new yacht the real anxiety over the last few years has been whether or not the contracted shipyard has enough work on its books to stay in business. “Like everything in life there are winners and losers,” says Head of YPI Management, Franc Jansen. “Some yards have disappeared or are on the hunt for new investors, but quality shipyards are still building yachts and doing good, solid business.” Just over 50 orders for new yachts have been recorded so far this year, the average build being 41m (134ft 5in). “It’s not quite a return to the boom years,” says Franc, “but what we have now are owners building yachts for the fun of yachting. The speculators have gone and that’s not necessarily a bad thing. The best designers, architects and engineers are all working. Owners today have access to the very best talent at very competitive rates, with lots of extra value.”
For much of the superyacht industry post-September 2008, ‘better value for money’ and ‘added value in service’ are two tags that run consistently throughout. However, one field where both these features have always been in play is charter. After a significant dip immediately following the crisis, the business of luxury yacht charter has continued to bounce back. Fiona Maureso, Head of YPI Charter, believes the time to sample yacht charter is now. “Think about it,” she smiles. “There have never been so many yachts offered for charter, nor such a diverse choice, including the most advanced, hi-tech and luxurious vessels ever built. Throw in the most competitive deals I have seen in all my 25 years in this business, together with the attentive services of charter brokers keen to ensure you not only book now but every year – it just doesn’t get any better for charterers!”
Equally for superyacht owners considering generating extra revenue by chartering out their yachts, the huge ‘panic’ discounts that ensued in 2009 have long since gone. “The volume of business is not as it was before,” says Fiona, “but it is constantly growing. Our own business in 2011 so far is up 50% on last year. Chartering a superyacht is an exclusive and unique way of holidaying, so it has not been affected by the same competitiveness seen within the hotel and private resort sectors.”
So how do we see the market going forward? For many in the industry today, a large portion of its future success is based on the increasing demand from new and emerging markets such as those in Asia, India and South America. Ã¢Â–Â
Find out your yacht’s history
YPI brokers have always stressed the need for understanding the history of a yacht. That means finding out what it sold for before, how it has been maintained and exactly what the seller has been doing with it in the lead up to the sale.
“Some of the yachts put up for sale in 2008 and 2009 were from owners who had bought into the industry purely to make money,” explains YPI CEO Bertrand Vogèle. “Their yachts were left in dry storage without crew, so maintenance – or the lack of it – was a cost some new buyers weren’t aware of until after they had purchased.”
For this very reason, the importance of the advisory role played by quality brokers today cannot be underestimated. “Good brokers,” continues Bertrand, “like any experienced advisors and negotiators, are worth every cent of their commission. And believe me, these days they work hard for it.”
YPI opens three new offices in Asia
The Asian market is a potential boom target, especially once the infrastructure and facilities for superyachts has improved, says YPI’s Mark Duncan.
“The Chinese market is primed for superyacht growth,” says Olivier Besson, Head of YPI Asia, the new joint venture set up by YPI to better serve Asian clients. “This year the number of Chinese billionaires increased to 115, more than double 2010’s total. With the extra money and influence comes the need and desire to have and enjoy more of the best life can offer. Superyachts are firmly on the radar.”
The Chinese government is building marinas at a furious pace along its 9,000 miles of coastline. Of the 20 or so existing Chinese companies able to produce superyachts, most of which are government backed, many are already enjoying the substantial rewards.
New projects and the latest deals
Even companies who have nothing to do with yachting are getting in on the act. Following the general interest shown by Chinese investors in Italian yard, Baglietto, Shandong Heavy Industries, a group turning over more than US$10 billion dollars a year producing machinery, has just acquired a EUR 100 million stake in renowned Italian builder Ferretti in return for the exclusive rights to produce and distribute Ferretti yachts in Asia.
Hong Kong-based Kingship Marine have a new 48m (158ft) project in their yard in Zhongshan. IAG Yachts, the country’s newest constructor, have just sold their first two projects: the 40m (131ft) PRIMADONA and the 30m (99ft) ELECTRA, to an American and Chinese buyer respectively.
Sunbird Yachts signed one of their biggest deals ever at the popular Hainan Rendez-Vous, a contract to build the 30m (99ft) DREAM CAT – the biggest catamaran ever built in China. The company says it is now taking enquiries for even larger projects.
“The fact that the Chinese government levies a 43% luxury tax on imported vessels,” explains Olivier, “makes it particularly interesting to have your vessel built in China. There are, however, other ways to reduce your exposure to tax if you import.”
And the same patterns are being repeated elsewhere. Brazil’s leading marina operators, BR Marinas, have signed deals to develop new ports along Brazil’s 8,000km coastline. The Shipbuilding & Marine Engineering division of Korea’s Daewoo is now working with Italian designers to create a new range of superyachts, from 20m to 70m (66ft to 230ft).
CONCLUSION: Making an informed decision
Overall, the market would seem to be reasonably stable. Compared to the boom years there are some incredible deals still to be had for those interested in enjoying their yachts, rather than snapping them up as short-term investments. And a new level of interest from emerging markets is good news for everyone in yachting.
But brokers still advise prospective owners to approach with care. “Like anything in life,” says YPI’s Bertrand Vogèle, “if you approach your purchase properly informed, there’s less room for surprise or disappointment. Ultimately, the very basis of yachting is to get the best out of life and the world we live in. Yachts are not just investments or things to be shown off...they open up a world of pleasure and discovery. That’s one essential reason why as a pastime, a business and an industry, yachting can change but it will never die.”
* All numbers quoted in this article are based on statistics compiled by Boat International and overall industry data.