'The New Equilibrium' - Jonathan Beckett's views on the superyacht market
by Malcolm MacLean
Early last year Jonathan Beckett, Chief Executive of Burgess, proved remarkably prescient in predicting market movements in 2010, so I asked him if he’d care to dust off his crystal ball again and give us his take on current conditions and what the future holds for 2011. Here’s what Jonathan had to say:
Over the last 12 months the superyacht world steadied itself after the economic downturn and seized the opportunities generated by the turmoil. The last time there was a major recession, there was no superyacht industry to speak of. Today it is a huge global industry and it will survive - but in a different more mature form going forwards. The superyacht market is in much better shape now than it was a year ago. It is no longer in free fall and the result is a new landscape - one in which realism reigns.
2010 was another turbulent year for the brokerage market. A few companies came out on a high, others did reasonably well, while some just scraped by. The hard graft was getting prices agreed and closing deals. Many transactions floundered between prices being nailed down and contract signing. The smaller end of the market (20m - 40m) continued to struggle. The mid-range (40m - 55m) sector was pretty active, but the large yacht market proved to be elusive again with only about ten deals closing at €40 million plus, of which only five were at the €50 million plus level. The indicators for the year ahead are for a very similar pattern. There remains a large existing brokerage inventory to shift and this will be supplemented by yet further new inventory hitting the market at 'priced to sell' levels. Prices will remain depressed throughout 2011 and closing deals will continue to be extremely challenging. We should see some green shoots at the larger end of market but at low prices.
Neither has it been an easy 12 months for new construction, due to the volume of recent vintage brokerage yachts on offer at competitive prices, teamed with new build clients looking for unrealistic opportunities. This was exacerbated by quite a number of "spec build" yachts (either completed or nearing completion) that were sold at realistic prices, rather than the premium prices the shipyards had forecast when construction commenced. A marked improvement is unlikely until 2012 and 2011 will undoubtedly be another tough year for shipyards. However, there is a sense of cautious optimism in the air and I predict that more new build orders will be placed this year due to a combination of clients feeling more financially stable and a few shipyards needing to sign one or two contracts at exceptional prices just to secure an order.
Charter trading conditions in 2010 reflected the troubled market, with the first quarter proving especially bleak. The trend for short-lead bookings resulted in a concentrated surge of enquiries and bookings between May and August. Everyone booked late! Everyone asked for a discount! This said, in the final analysis, summer 2010 was a fairly good season for most yachts, especially in comparison to 2009. Unfortunately, demand has slumped again for winter 2010/11, borne out by the fact that numerous yachts were tied to the quay in the Caribbean over Christmas with no bookings. For the majority of clients, their summer charter in the Mediterranean remains the primary focus and a second charter over the winter months is now no longer the norm.
Interestingly, the forecast for summer 2011 is already upbeat with a good flow of early bookings and the prediction is that a good season lies ahead, despite continued pressure for rate reductions. Charter levels for Christmas/New Year 2011/12 are anticipated to increase, but the outlook for the remainder of next winter is pessimistic. As the charter market is flooded with such a large influx of new yachts, another trend that has emerged over the last two years is a decreasing demand for the 'older' (circa 6 years +) yachts.
Clearly, the superyacht industry is resilient enough to adapt to turbulent economic conditions and to generate a market for yachts across the board whether in brokerage, charter or new build, but if the world has learned anything over the past two years, it is this - that, in the end, market forces will always dictate.