Print Friendly, PDF & Email

The global super yacht industry has not escaped from the ravages of the world financial downturn. A moderate recovery, however, has taken place, with around 50 orders so far this year.

The volume of yacht sales and charter activity as well as the number of new build contracts are all showing[ds_preview] gradual upward curves over the past two years. Progress is being made, but as yet it has not reached a position where it is sustainable. The yacht shows in Monaco (21–24 September) and Fort Lauderdale (27–31 October) will give indicators to how far that recovery has advanced. It is timely that the Monaco Yacht Show is celebrating its 21st year because through that period the super yacht market has grown out of all comparison and with the progress it has made a coming of age or graduation is an appropriate point for the industry to have within reach.

Hopes for a more stable market

The financial downturn has hit the market hard especially at the lower 25 m to 50 m size range but its impact has been felt right across the industry. Many involved with this luxury niche lifestyle market are hoping for a return of common sense to the industry as during the frantic 2004–2008 period of growth controls within this industry were lost. There seemed to be no restrictions on the amount of money being spent. And investment in yachts, refits, new yards, designs and other areas tended to somewhat run away with itself. The market was expanding in excess of 20 % a year which was bringing its own pressures and business forecasts that suggested it would just go on and on.

The following recession proved that not to be so and within a very short time the growth ended and the market seemed to be heading for a standstill. Two or more years on there is now much more caution about spending money. Decision making on big projects, be it new yachts, refits or other investment, is taking much longer than previously and those responsible for spending are obtaining more quotes and often looking at a larger number of possible suppliers. Currently yards, brokers and other suppliers in the market mostly say that they are receiving an increased number of enquiries but it will probably be announcements at Monaco that will show if this is translating into a lot of new business.

The downturn resulted in the number of yachts up for sale to rise significantly and the level of new yacht orders to slip from a sizeable three figures to a lowly two figures. The charter market also experienced a marked drop in business and several companies right across the spread of the market went out of business or suffered severe financial problems resulting in restructures and occasionally new owners. Also sources of finance became very tight.

New order outlook

As regards new super yacht build contracts, up to the end of July around 50 orders had been announced or were known of in 2011. This would suggest that the new build performance this year will at least match that of 2010 when 100 or more orders were placed or were known about. Again Monaco and the Fort Lauderdale shows will give an indication on this.

Orders placed so far in 2011 involve over 30 yards in up to 15 countries. Of these Italy, the Netherlands, the US and UK has gained between 7 and 9 orders each. Other countries listed include Turkey, China, Egypt, Poland and South Africa. Taking June as an example seven new orders were made known of which four were in excess of 60 m with the largest being over 80 m.

The industry trend towards larger yachts continues without doubt. In 2010 with the delivery of the 162.5 m »Eclipse« from Blohm + Voss she became the world’s largest super yacht, albeit by just half a metre from the »Dubai« owned by the leader of Dubai. Although not confirmed by the yard, there are several reports that suggest a yacht of about 180 m long is currently being built by Lürssen in Germany supposedly for a member of the Saudi Royal family. Lürssen are also building at least one other yacht over 100 m and earlier this year they made known (not officially) that a 90 m yacht had recently been contracted.

This reflects the consistent pattern of yacht sizes getting larger and this is happening both in the motor and sail yacht categories. At least two sailing super yachts of 100 m or more are being promoted. This trend is certain to continue and a number of designs for yachts of 200 m or more are already available within the market.

Italy remains the leader

The leading super yacht building nations are Italy, Germany, the Netherlands, UK, US, New Zealand and Turkey. Particularly for larger yachts the top quality workmanship of the Dutch and German yards had attracted several new contracts. Italy, having suffered a few yards going out of business, remains the leader overall by a big margin. For quality linked to lower prices buyers can access a number of yards in such countries as Turkey, China, Egypt and others.

Thailand is set to become a new super yacht building market perhaps later this year with one company heavily promoting the benefits of building there using local labour with Western management. Projects of 60 m and 75 m are in prospect. In China the country is slowly expanding is super yacht activity with both dedicated yacht builders such as Kingship and established commercial builders also constructing yachts such as Cheoy Lee and Raffles Yachts, an associate of the Yanti Raffles Group. There are a number of new yard projects under way in China and their skill base and technical expertise continues to grow on the back of its huge commercial shipbuilding operations. In terms of capacity there is no shortage of new building berths and without new orders some yards may still be in danger of facing a shortage of work or having to diversify into other areas. For example in the US, where the number of super yacht orders has dropped of markedly, a number of the yards such as Trinity and Derecktor, have been building skimmer craft to cope with the Gulf oil spill. When the financial downturn came the super yacht refit market quickly suffered a considerable drop in its workload. This has started to turn around and many refit yards have experienced a period over the past six months or more of better work volumes. As the financial situation has eased owners have started to have necessary maintenance and repair work done and with the growth in the world fleet to more than 6,000 super yachts, so demand will increase in the future. To prepare for this and also develop more work, a number of refit yards have expanded their existing facilities or invested in new ones. One example is the new super yacht marina in Montenegro at Porto Montenegro in Tivat. This is based on a former naval base and close by is a repair facility which also used to be a naval shipyard which will be the location of developing a new super yacht refit base that will open in 2012. A French refit company is sharing in this project.

Yacht sales and chartering

Where the market now stands is that the worst is hopefully over. There remains a sizeable number of yachts up for sale, currently in excess of 800, but brokers feel that the underlying indicators are reflecting positive progress. Over the past two years the number of yachts sold and their collective value has risen steadily, but as an example of how the consistency of the market is fluctuating the number of sales this year is higher due in part to the fact that compared with last year the yachts being transacted are smaller and have lower values. This means that the average size and value of yacht is lower than 2010 so far.

A key factor in the sale market continues to be discounting with such benefits for potential buyers being introduced almost daily. The discounts range from around 100,000 € to as high as 3 million € or more. This pattern of reductions needs to slow down to allow the market to stabilise and there is little indication that this will happen in the near future.

It is necessary for the super yacht market to stabilise that the number of yachts for sale perhaps reduce and the level of discounting eases. It is vital, however, that a wide range of yacht types and sizes continue to be available to ensure a strong pre-owned market.

In both the new build and sale areas the availability of finance is a key issue. Following the downturn the number finance provides fell significantly with a number of banks going out of business or withdrawing from the super yacht market. This left a small core of providers and their conditions of lending became much more stringent reflecting the downturn.

The charter market has like the sale market experienced mixed fortunes but the indications this year are that progress is being made. Following the downturn a pattern of late or last minute bookings developed. This has now eased back but continues in part highlighting that there is still improvement required as part of reaching a more stable market.

Cruising areas

With the increase in the global super yacht fleet size during the boom period this placed increased pressure on the key cruising grounds of the Mediterranean and the Caribbean. This impacted upon the supply of marina berths particularly for larger yachts encouraging a development of new marinas, some dedicated solely to super yachts, in adjoining or other areas of the main cruising grounds. The Asia Pacific region, extending from the Arabian Gulf in the West to Hawaii in the East, is now being heavily promoted as the third cruising area for super yachts. The recent formation of the Asia Pacific Superyacht Association reflects this. As part of this promotion a complete provision of yacht services and facilities is being developed where it is not already in place. Strategies to encourage super yacht cruising have recently been introduced in Fiji, Tahita, New Zealand – and the situation in Australia improved. Pressure to enhance the super yacht cruising opportunities throughout the region is underway. New initiatives are being pursued in a number of other areas to varying degrees of success. These include China, Indonesia and the Arabian Gulf states.