As global finances tightened, fewer owners have felt comfortable about leaving their yachts to bob at the quayside until they step aboard for their cruise. Over the past few years, therefore, we have seen many more private superyachts put to work.
Charter helps owners recoup between 50 and 90% of their running costs. But also, as Timothy Clark, senior charter broker at Ocean Independence points out, ‘More than them needing the money, if an owner’s got a crew sitting on the boat 24/7, he wants them to work because he’s paying them.’
Neil Hornsby, charter director of Burgess, confirms that ‘in the last 12-24 months, there’s definitely a greater volume of boats available on the market’, and he believes that some size brackets in particular have benefited from an influx of stock.
‘There’s been a lot more in the sector between 40 and 55 metres,’ he says, ‘but also there’s been more of the new build 70 metre-plus boats coming on the market.
‘Whereas before the choice was small, now there’s a decent number of 70 to 85 metre-plus vessels we can offer. There’s quite a bit of interest at that level – clients aren’t perhaps so susceptible to market conditions.’
And while bartering for discounts is less common than it was two or three years ago, pricing is down to earth. ‘The major impact that the last three or four years has had, is that it has stabilised the charter rates,’ says Clark. ‘They got to a point, five, six years ago, where prices were over-inflated, probably 20 per cent over what they should have been.’
So with a greater variety of yachts to choose from and reasonable rates, are charterers getting on board? The answer to this question is important not only for charter, but for the superyacht industry in general. Charter is generally viewed as the stepping stone to purchase, in which prospective buyers work out what they like. As Hornsby puts it, ‘Activity in charter is probably indicative of people’s confidence levels going forward.’
The answer from both brokers is that charter is healthy, Hornsby saying the year has ‘started strong’ and Clark that ‘things are improving – my general feeling is that clients are bored of restricted spending habits’. That’s not to say many clients have not taken economic pressures into account when making charter choices. ‘We’ve seen existing charter clients that have taken smaller yachts in the past few years,’ says Clark. ‘As charter can rarely be exceeded as a vacation experience, familiarity particularly by the family unit, has meant downsizing has been a useful option for some.’
While in general the makeup of clients has remained what it always was, both brokers have noticed recent hot spots. ‘We’ve had a lot of interest through our US offices,’ says Hornsby. ‘There’s a lot of confidence coming out of the States and they’re capitalising on a weaker euro.’
Clark, on the other hand has seen ‘a lot more Middle Eastern money coming back into the Med in the last two to three years’.
Emerging markets including China are also heating up for charter. ‘I wouldn’t say the Far East is humming for business right now,’ says Hornsby. ‘But there are key people putting down considerable sums to do some chartering, and yes, I think they’re seeing if they like it and if they want to get into buying.’
Brazil is also strong. ‘Chartering lends itself well to Brazilian culture – sun, swimming, beaches,’ says Hornsby. ‘Brazilians have an affinity with that, possibly more than the Chinese.’
Chinese charterers and others are helping popularise Thailand and other Southeast Asian destinations. ‘There were more yachts available in the last winter season than ever before,’ says Hornsby. ‘We could really do with more yachts there as we certainly have a lot of interest for that part of the world.’
The south of France and Italy are still as popular as ever for charter, but new rules may change that. ‘The big issue coming out of Italy this summer is that VAT will be charged on charters starting in Italian waters,’ says Hornsby. ‘It’s quite complex but the rates vary between 6.3 and 21 per cent, depending on where boats start and where the itinerary takes them.’
‘If it’s 6.3 per cent, that’s manageable; once you start talking to charter clients about 21 per cent VAT it’s going to drive interest away from Italy. Charters starting in France are still exempt from VAT so I think there’ll be more traffic going into France.
But Clark is not so sure that this haven will survive. ‘The industry worked hard 20 years ago to negotiate the French tax exemption for commercial vessels, which has worked seamlessly since, whilst bolstering the economy in the south of France. But as times change with the recent international financial pressures, perhaps the utopian solution would be to have a minimal blanket VAT or ‘yachting tax’ across the EU. Sadly, I fear this is a pipe-dream.’
While the charter market decides how to work around this issue, perhaps a look at how its clients are graduating into buyers will provide some sunshine. We know there are lots of boats at good prices on the brokerage market, and that they are selling, while some Northern European yards have full order books. But the latter fact may be slowing down charterers who would ultimately like a new build, keeping them in the charter market longer than they may have stayed before the global financial crisis.
‘The ‘last minute’ culture is still with us and not just with charter,’ says Clark. ‘Build slots in the major shipyards were hot property six years ago with some owners investing in multiple slots and/or speculation builds. Due to the deterioration of financial confidence in the years since, clients have been reticent to commit too far ahead and many instead choosing to charter in the interim.’
Hornsby agrees: ‘Continuing uncertainty in some areas is maintaining a pretty healthy level in the charter market before people take the plunge.’
But as long as tentative buyers are still enjoying the charter pool, interest and money is staying in the industry – and it indicates that when they are ready, even the currently noncommittal will eventually want a boat of their own. ‘Globally there are markets making a lot of money and people who want to do serious chartering,’ says Hornsby.