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Things are getting rough for the recreational boating industry. New sales of smaller vessels, typically financed by borrowing, have contracted sharply, and sales of preowned yachts are plummeting.
The picture at the top end of the market is markedly different. Demand for new superyachts, costing upward of $20 million, remains robust - but for how long?
Boat builders and dealers are understandably nervous, but they are determined to weather the turbulence, just like they weathered the downturn after the terrorist attacks of Sept. 11, 2001. John Mitchell, an analyst with the Yacht Report, the boating industry bible, reckons there are similarities between industry developments after the attacks and the current state of play.
“There was a significant dip in yacht builds immediately after the terrorist attacks, but this was followed by a substantial hike,” Mitchell said. “The general consensus on this being that not only were fortunes severely depleted at the time, but many owners did not want to build yachts at a time of crisis and suffering - even if they could afford to.”
Expectations were high at the International Boat Show, which ran Oct. 30 through Nov. 4 in Fort Lauderdale, Florida. At the show, an industry barometer for next season's trends, around 1,200 exhibitors occupied three million square feet or 279,000 square meters, of exhibition space, and an estimated 130,000 tickets were sold for the five-day extravaganza, which was - surprising to some - on a par with last year.
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“After witnessing a slowdown at the Monaco Yacht Show in September, we were concerned that dealers would struggle to close sales at Fort Lauderdale, but the majority of exhibitors reported keen interest from qualified buyers and a healthy number of repeat viewings,” said Skip Zimbalist, the show's organizer. “There was a strong international presence, with potential buyers flying in from Europe, Russia, Mexico and the Middle East.” Although Zimbalist did not have exact figures, he reckoned international ticket sales were up by 15 percent from 2007.
Bargain hunters were out in force at Fort Lauderdale, and dealers did not disappoint. “There were terrific discounts if you were prepared to buy secondhand,” Zimbalist said. “Preowned boats less than two years old were on sale for 50 percent less than the cost of a new model.”
Whether this flurry of interest translates into concrete sales remains to be seen. Zimbalist is cautiously optimistic. “It will take a few weeks to gauge the overall success of the show, as deals are taking longer to close and the financing market remains tight,” he said. “But all the indicators suggest that people still have money to spend on boats - especially at the top end.”
Vendors say they expect sales to continue to contract at the lower end of the market as many small and midtier boat owners bought craft with borrowed money, often secured on residential property. In many cases the value of these loans now exceeds the value of the assets. But the superyacht industry, which is not dependent on financing, is stronger than it has ever been before, Mitchell said.
“Many of the yachts being built around the world are in fact orders from repeat clients,” he said, “and there are several thousand families joining this upper rank of wealth every year, capable of building these vessels.”
Figures released by Camper & Nicholson, an international yacht brokerage firm, showed that new orders for superyachts had grown 18 percent in 2008. The size of the average superyacht is also ramping up. In the late 1990s a typical superyacht measured 70 feet to 80 feet long, or 21 meters to 24 meters. Today, the average superyacht is pushing 190 feet, with some as long as 450 feet.
Tom Chant, a spokesman for Superyacht UK, which represents the interests of British yacht vendors and brokers, said that a recession was unlikely to halt the growth in size of super yachts. “The majority of repeat orders are from owners who are wanting to trade up to bigger and more exotic models,” he said. “Owning a superyacht is all about making a statement. If money is no object, then size becomes important.”
There is also a practical reason boats are getting bigger. “Many superyacht owners want privacy - a yacht that can house a full complement of staff, and provide all the amenities that the ultrarich would expect to have access to on a daily basis,” Chant said. Exotic add-ons, like helipads and submarines, are also increasingly popular, which is pushing up the size of the yachts being built today.
But as money continues to be lost on world stock markets, even the ultrarich may be required to make economies. The rising costs associated with manning a vessel, especially fuel, crew and maintenance costs, means that owners have to spend around 10 percent of a yacht's value on annual running costs. For an 80 foot yacht that translates into $8 million a year, and many wealthy people have several yachts.
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