Flagship: Scenting strong demand ahead
Relief at the success achieved in 2020 and the scent of strong demand this year, partly from new entrants, were the twin themes of Superyacht Investor’s inaugural Town Hall online meeting last week.
Despite early industry fears of a disastrous year due to Covid-19, the growing perception of superyachts as a haven from the pandemic drove business in sales – particularly in the second half of the year.
Richard Lambert, senior partner – head of Sales, Burgess Yachts summed up the appeal of yachting to both existing owners and new entrants. “In effect, yachts are your own luxury floating island, enabling you to move around wherever you want to go, subject to local regulations,” he told delegates.
The benefits did not go unnoticed. December alone saw the completion of 57 yacht sales in the +30m category compared with 42 in the same month of 2019 and 38 in 2018. “We probably saw the strongest end to the year since 2015,” said Lambert. In 2020, total worldwide sales of +30m yachts amounted to 409 compared to 406 in 2019 and 436 in 2018. While the charter market saw some recovery in the second half, the sector ended the year 50% below the business that would have been achieved without Covid-19, said Lambert.
“When the pandemic hit, the industry was incredibly concerned about how the year would pan out,” he added. “But the year was a lot more encouraging than any of us had expected.”
Picking up the theme of new entrants, Jay Tooker, partner and co-head of Yachts, HFW, said: “I wonder if the pandemic will introduce a lot of new people, who were not previously interested in yachting, who used to spend their money on art, cars and other things. A yacht becomes an even more attractive proposition if you can’t go anywhere else or do anything else with your time.”
‘General increase in boating’
HFW’s Hong Kong office confirmed Covid-19 had only a limited impact on the Hong Kong yacht sector. Andrew Charlier, partner and co-head of Yachts, HFW explained: “There has been a general increase in boating in the region.” Confirmation came from Sanlorenzo, which had reported that 23.5% of its yacht sales last year were made to the Asian market. “So, certain boat sellers are doing very well indeed in Asia,” said Charlier.
Some owners in Hong Kong were even returning their yachts from Europe to home waters, he added. Whether this reflected differences in travel restrictions or the changing use of yachts remains unclear.
One global trend beyond doubt was HFW clients re-investing in boats. “We are seeing clients upgrading their yachts,” said Charlier. “The effect is that we have a buoyant second-hand market, as owners trade or sell yachts to upgrade to something bigger and better.” Lack of inventory – particularly for the larger-sized yachts – was expected to be one of the challenges of 2021.
Another pipeline was detected by Lambert, of Burgess Yachts. “We have always seen charter as people putting their toe in the water before stepping into purchase,” he said. “And we did see a number making the transition from charter to ownership. Part of the reason was the freedom and flexibility that ownership offers – they can go whenever they want.” It was a freedom that became increasingly attractive as travel restrictions began to lift. “That attraction to safely go yachting – where you are in control of your environment to a much greater degree – appealed to a lot of people who wanted to spend quality time with their family.”
Concerns about Brexit were supplanted by Covid-19. HFW’s Charlier, who had expected to spend much of the year talking to clients about Brexit but found himself talking about Covid-19 instead. “Brexit was bringing both opportunity and risks to yachting”. Lack of clarity on the impact of Brexit on VAT paid yachts is a concern. On a positive note, when cruising the Mediterranean, UK residents with a UK-flagged vessel may be able to apply for temporary admission status, which delivers VAT exemption for private yachts in EU waters. Plus, UK shipyards will offer tax-free refits using inward processing relief for qualifying boats, which they were previously unable to do.
Meanwhile, Brexit could deliver opportunities for EU member states such as Malta. “At the end of last year, Malta announced it had 850 yachts over 24m flagged in Malta, making it the largest flag state in the world,” said Charlier. Malta might consider that Brexit offered the opportunity to attract more yachts that may otherwise have gone to the UK/Isle of Man.
‘850 yachts over 24m’
Aside from fuelling demand, Covid-19 also frustrated both sales and deliveries. Prospective buyers, finding it difficult or impossible to conduct visual inspections in person – had to rely on video appraisals. Also, new owners were unable to install their new vessel’s crew, creating insurance problems.
Finding it impossible to inspect a yacht in Europe, Florida-based Bob Allen, founder of Robert Allen Law, recruited help from an unexpected source. The prospective buyer was very interested in the yacht’s galley, so a local chef was hired to inspect its fittings and equipment. “While the chef was there and had a great sense of smell, we asked her to smell the whole boat,” recalled Allen. “And the deal proceeded on the chef’s sense of smell.”
On a less co-operative footing, Allen reported a big rise in litigation, sparked by first-time buyers’ who were ill-prepared for the realities of boat ownership. “We have seen a lot more litigation,” said Allen. “It’s natural when you have first-time boat buyers –they think it is like buying a Rolls-Royce or a Mercedes. They expect it to run perfectly all the time without realising the incredible complexity of running a yacht.” Nevertheless, Allen described 2020 as: “The best year we have ever had.”
Superyacht Investor’s first Town Hall meeting – ‘2021: Looking at the key issues of 2020’ – took place on Thursday February 25th and was sponsored by HFW. You can watch the meeting here or listen on listen to the podcast here.
Meanwhile, register here for next month’s Superyacht Investor Town Hall ‘Yard Insolvency and Restructuring’.