Flagship: The only way is up (pandemic permitting)
As the old adage goes: ’Everything comes in threes’. The same could be said for when the global pandemic became a reality in the superyacht sector. Covid-induced anxiety aside, travel and quarantine restrictions and, in a business sense, a fear of the economic unknown all contributed to many a sleepless night in the past year.
For the US yachting world, many of those fears have since been allayed. The upward trajectory since Donald Trump’s election in 2016 has not faltered. Neither has the rising business activity Superyacht Investor (SYI) reported on last November. This week SYI spoke to Robert Allen, founder, Robert Allen Law about the how US yachting world is faring as we begin 2021 ahead of the upcoming cruising season.
Motioning to his upper chest, Allen told SYI “our lawyers who deal with purchases and sales of yachts are up to here”.
“Since the election of Trump we have been on a significantly upward trend,” said Allen. “Then the pandemic, which was supposed to be disastrous, actually brought in significantly more work, for us as a law firm.”
Whilst 2019 numbers were only slightly up in 2020 for used yachts sales, in terms of new boats Allen said inventory is significantly down. As a law firm that deals with both new and used transactions, 2020 was a very busy year for Allen’s company. “As transactions go, so does everything else.”
So much so, the firm has hired two new lawyers in the past four months and is looking to make a new addition in the transactions department later this year. Allen said he had three enquires to retain him in the past day. Two of which concerned vessels over 30m in length.
Busyness is clear to see
The busyness of the US yacht business is clear to see elsewhere too. MarineMax, the America’s largest yacht retailer, posted record sales and earnings growth for the quarter ending December 31st, 2020. The firm reported that revenue increased by over $107m, to $411.5m for the quarter from $304.2m in the comparable period in 2019.
Same-store sales grew over 20% in the quarter, driven by growth in new units sold of more than 35%. The 20% same-store sales growth was on top of 24% growth in the comparable quarter in 2019, pointing to a continued strength of demand.
W. Brett McGill, MarineMax president and CEO, said: “We are realising meaningful benefit from the foundational shift of new customers embracing and enjoying the boating lifestyle. This shift positions us to build on our growth for years to come, as many existing and new customers should upgrade to larger boats and take advantage of our multitude of product and service offerings. With the largest selling season ahead, we expect to build on the strong start to our fiscal year.”
According to BOAT International, December 2020 saw a total of 57 sales, 15 more than the 42 sales in December 2019. The only month with better sales since 2009 was May 2017, with 59 sales. Figures actually show that the second half of last year was the highest six months for brokerage sales since 2009.
How does this all look going forward? In the short term, the forecast looks good, according to Allen. The Sunshine State-based lawyer said: “The pandemic counterintuitively has led to greater sales because people’s ‘getting away’ options are severely limited. Those are the same factors that are leading to a rise in real estate prices in places like South Florida as people leave the cities for warmer climates [or more pro-business states like Florida].”
All of this in turn boosts yacht sales, said Allen. As long as there is a pandemic and states continue to have a different approach to dealing with the virus, compared with Florida and Texas, growth in yachting sales will continue. “While you can’t go to Europe, you can’t go to South America, you can’t easily go to the Bahamas, then yachts remain the easy option. I mean it’s conceptually like buying an RV.”
‘Yachts remain the easy option’
However, this growth is all in the context of what happens with the economy. Allen fears that the ability for new owners to make that first purchase could dwindle under the new administration. “I think if I was a professor, I would be kicked out of the university but it’s the reality. It is why people come to America.”
Globally, the economy has already taken casualties in the superyacht industry. Italian superyacht builder Perini Navi declared bankruptcy after its debt structuring plan was thrown out by a court. According to Italian media, the court reportedly also turned down a request for more time to present other structuring and financing options and declared the yard bankrupt as of February 1st.
“Obviously, the Perini position is world-known and it’s sad. Let’s hope another builder picks up the name, concept, workers and so forth,” said Allen. The question is: Can the demand supply a yard of this nature? The demand for large sailing yachts has dwindled, according to Allen. It will always be there, but it is unlikely to support a concept like Perini. So while sailing yacht builders could face an uncertain future, that being said, their already smaller demand should infer lesser expectations for growth and an already thickened skin to harder times.
Allen added: “From what I can see, the demand for motor yachts is unabated. And I can’t see why yards would be having problems in the demand area. I haven’t seen anywhere but Perini. I don’t think that’s coming right now, only if there is a sudden drop in demand.”
While it is true that the pandemic’s negatives were threefold — risk of infection, travel restrictions and economic unknowns, it is also true that three has so far been the magic number for US yachting. Yachts have become an easily cleanable sanctuary away from the risk of infection, travel restrictions have created a boom in domestic tourism, and demand for yachts has grown to record levels. So, whilst, the picture may not be as rosy for other markets, in the US, for now, the only way is up.