By most counts, 2014 was exactly the banner year that the superyacht industry wanted it to be. It may even have been the year we needed it to be, given the somber tone with which many spoke as the previous year drew to a close.
Over this past year, many thrived for the first time in a while. It was a year that started off with a bang and finished strong.
Indeed, Boat International described the market as having “fully woken up, refreshed,” essentially, from the extended hangover experienced in the fallout from the global financial crisis. “The cogs are turning, yachts are selling, demand is growing,” it said.
Of particular note were the figures for increased sales and new orders – both of which reflect the health of the industry. In all, there were 139 new orders made in 2014, up from just 117 the previous year, according to Boat International’s figures. That figure is also significantly higher than all years dating back to 2009, with the sole exception of 2011, which saw 146 new orders.
Likewise, sales were up from previous years, according to Camper & Nicholsons. “Almost 500 brokerage yachts were sold in 2014, an increase of 12 percent,” said Miriam Cain, Camper & Nicholsons’ publications and communications manager. “The upturn was not just in value terms but also the volume of yachts sold.”
While these objective statistics are all healthy and robust, what is perhaps more important is this subjective observation: that all indications point to a healthier buyer appetite, with fewer buyers looking for financing. The trend has been toward a more economy-minded buyer who’s conscientious of running costs and less interested in flair and speed. Buyers are “acting with confidence tempered with good sense,” read a market report from Boat International. This, they said, is “a good omen for the long-term health of the industry.”
Cain agreed, saying that “optimism seems to be a recurring theme throughout the industry, spilling into the charter sector and all of superyacht services.”
“All in all,” Cain said, “2014 was an exciting and interesting year for yachting, and looks to have paved an inviting and stable road ahead for 2015.”
Starting off strong
The year started off with a bang. Or, more accurately, 2013 ended with a bang that continued long into 2014.
In fact, most analysts were feeling pretty down on 2013 through November. It hadn’t been the comeback year that many had hoped for. But then December came around and brokers sold 52 yachts in that single month, making 2013 unexpectedly the best-selling year since the financial crisis.
Those strong figures continued through the first six months of 2014. “Our new (build) sales activity in Quarter One has taken off like a bottle rocket,” said John Strader, a broker with HMY Yacht Sales, in Boat International’s first-quarter roundup. Others reflected similar sentiments.
First quarter sales were the highest in five years, and an increase of nearly 20 percent on the same period one year prior.
“Activity with our clients is steadily continuing to be more positive,” said Fabio Ermetto, previously chairman of Fraser Yachts, in the same roundup.
However, there are caveats; there are always caveats.
“While a general upturn is welcome news, it is only when you drill down into the detail that you can see that the market is still segmentally split by size and type, and that market improvement is confined to specific segments,” Cain said.
In particular, Cain noted that the demand for sailing yachts jumped significantly in 2014 – specifically for sailing yachts between 24m-30m. The demand for this range increased by 10 percent over the previous year, while the 30m-40m sailing yacht range was only just behind.
Similarly, in motor yachts, the trends were toward the smaller end of the market. While motor yacht sales remained fairly constant, there was a slight drop on the larger end of the spectrum, while the 24m-30m motor yacht range jumped slightly.
U.S. leads the way
Some of this bullish buying activity was fuelled by the improving economy within the United States, as clients once again started to test the waters of yacht ownership. This was where the strongest client growth was seen. Similarly, the surge may have benefitted – at least initially – from the conflict between Russia and Ukraine. “With the future slightly uncertain between Ukraine and Russia we are seeing clients looking to move assets out of their respective home countries and into yachts,” according to Boat International.
In taking subsequent events into account, including economic sanctions imposed by Western countries which were meant to hit the pockets of that region’s superrich oligarchs, it may perhaps come as less of a surprise that sales slowed slightly in the second half of the year.
But the real growth originated in North America, Cain said.
“We are seeing an increasing number of new buyers, making the split between new and existing buyers almost equal,” Cain said. “The largest growth in demand came from North America. The U.S. economy is leading the way in both new build and brokerage yachts. Camper & Nicholsons have six offices spread over the U.S. and the team have been flat-out with the buoyant market.”
And if the opening of 2015 is any indication, this year just may turn out to be another benchmark. Through the end of February, nearly 60 yachts had been sold in 2015, with more than 130 superyachts coming onto the market, according to Camper & Nicholsons. In particular, the 30m-40m range of motor yachts has shown renewed health.
“Activity in the brokerage market is steadily continuing and the outlook for the remainder of the first quarter looks positive,” Cain said.
Part of the reason for the increase in sales has been a newfound pragmatism on the part of sellers. Average asking prices have dropped to healthier, more realistic levels, say many brokers. This, in turn, has made the sale of yachts easier.
Everything in this industry works as if connected by levers and pulleys. A bit more water in one bucket drops it lower and shifts another bucket higher, and so on and so forth.
However, as asking prices drop, there are some would-be sellers who just aren’t selling because they’re not getting the return they’d come to expect. Instead of upgrading to newer or larger yachts they are hanging on. Consequently there are fewer yachts on the market, especially those less than five-to-ten years old.At the same time, the overall reduction in new orders since the financial crisis has also reduced the number of new yachts available.
The Superyacht Intelligence Report’s five-year review shows just how glaring the discrepancy between new build orders and new deliveries has been. In 2009, there were 227 new yachts delivered and just 119 new orders. Each year, the number of new deliveries diminishes more until, in 2013, the numbers finally normalize and reflect each other in a more typical manner, with just 151 new deliveries and 117 new orders.
Between 2009 and 2013, there were 948 yachts delivered – effectively 20 percent of the entire superyacht fleet. However, there were only 599 new orders placed in that same timeframe (150 of which either fell through or were significantly delayed) which has certainly contributed to the current state of affairs.
In 2014, we saw the number of new orders jump to 139, with 160 new deliveries. This could be a result of buyers simply not finding anything used on the market and instead opting to build new. It could also reflect a growing confidence in buyers – which is more of a reflection on the global economy as a whole than it is on the superyacht industry.
In any event, shipyards will be heaving a major sigh of relief. For many, long-term projects would finish up without any new orders to follow.
How shipyards have fared
The recession was hard on shipyards, especially if it was a shipyard without pedigree. “Almost all the top performers in this period are long-established names,” noted the Superyacht Intelligence Report’s analysis.
“It is clear that the dominance of European yards is likely to stand firm, and possibly even to grow,” the analysis said. “As the many shipyards struggling to maintain a regular flow of orders/deliveries grow weaker as a proposition for owners, their competition is further strengthened.”
According to the analysis, the top five overall shipyards from 2009 to 2013 were as follows:
This, however, accounts only for the past five years, and it reflects only a record of consistent deliveries, combined with other factors like average hull-length.
“Whether these rankings remain the same for the next five-year period remains to be seen,” the analysis notes. “For example, Trinity ranks third overall for this time period, but currently only registers one yacht project in build.”
Other top performers were: Sunseeker, Sanlorenzo and Oceanco.
Of the 185 shipyards that delivered yachts during this period, just 20 delivered 10 or more yachts. More than 70 only delivered one yacht in the whole five years, and another 30 delivered two yachts.
Some of these low-performers are still in business, while around one-quarter of them no longer operate.
MLC 2006 and new builds
One interesting factor that is currently at play within the whole matrix of factors affecting new builds is the Maritime Labour Convention of 2006. The new regulations came into effect in August 2013, and the space and staffing requirements have clearly affected the market, according to a Boat International analysis.
For one thing, the MLC 2006 has new requirements for crew quarters. Essentially, they have to be bigger for any yachts whose keels were laid after August 2013. Obviously, with added crew space comes reduced owner space.
Similarly, gross tonnage has played a factor with yachts under 500GT and over 3,000GT. In these cases, the number of crew and spacing requirements is in excess of what has widely been deemed practical.
“Fortunately, the effects have been ameliorated somewhat by the yacht-focused equivalencies hammered out by the MCA, SYBAss and ICOMIA to prevent the MLC 2006 emptying the world’s build sheds,” notes the analysis.
“The overall result seems to be a 500GT to 3,000GT bracket where the rules are manageable,” it says.
Some have said the MLC’s new requirements have led some owners of larger yachts to instead consider owning one or two smaller yachts in different parts of the world. And, based on the figures from last year, it is true that the appetite for 24m-30m yachts increased.
However, Cain said that this could simply be an indication that “the number of clients in this size range have increased rather than potential large yacht buyers looking at smaller yachts.”
“This is good for the yachting market,” she said, “as it indicates there are new clients dipping their toes into the water, some of whom may start small and move on to bigger yachts in the future.”
Back on track
Overall, the industry is healthier than it’s been in some time. It could probably be argued that it is healthier than it was pre-financial crisis, because there is less speculation and buyers are acting much more cautiously.
The market is perhaps not growing as robustly, but it is maintaining a much healthier position with less risk.
Indeed, Boat International’s report on December 2014 may have offered an apt summary in saying that the year “ended respectably” with “unspectacular but solid numbers.”
Certainly, after the tumult of the past six years, the outlook more bright.