The global yacht charter market, like all sectors of the economy, is feeling the effects of the coronavirus pandemic. While it may appear that now is the time to freeze any plans to invest in a yacht charter business, the circumstances offer investors a unique opportunity.
We are here help clear up the confusion and make you feel comfortable about deciding on a long-term investment.
We will be sending our regular newsletters (sign up here!), and we have created these articles and events to keep you well-informed of the developments and how you can make the most of your plans of becoming a charter boat owner:
– The following article is a shortened version of the full E-book –
History has taught us that the charter market is the most resilient part of the leisure marine industry; the COVID-19 crisis will most probably pass by this year, and we expect that season 2021 will show a full recovery in terms of charter week reservations.
Indeed, if history has thought us anything it is that the healthiest and business-minded charter operators come out stronger from the crisis and that shows in the “bungy-effect” that they take advantage off.
The charter clients are urged to not cancel their bookings and instead move them to next season or later this season, then add that with the pro-active measure taken to secure the stability and health of the company, and being there for their most loyal business partners and charter guests, creates an even stronger likelihood of bouncing back with commitment and with a more favourable position than most other charter operators (read more about why We choose to work with independent Boutique Charter Operators).
Newbuilds and the Pre-Owned market – are there any apparent opportunities?
With the current strain the coronavirus is putting on the boating industry, we may see a “normalisation” of prices for newbuilds. The prices have been steadily increasing in coincidence with the last year’s strong world economy and the rise of more successful charter operators and more well-developed charter destinations.
Shipyards will want to offer incentives in terms of easier payment plans and secure the production line is obtained, and their dealership network is healthy and able to represent the brands locally.
Focus on boats from brands that are performing well, e.g. the Beneteau Group, with its Jeanneau and Beneteau brands, has seen taking market share and by proving themselves not just popular to end-users (owners and charter guest) but also to charter operators. Professionals who have to deal with the day-to-day issues of running charter operations and the importance of having a fleet of easily maintained yachts and after-sales support from the shipyards. Furthermore, the well-known fact of the immense popularity the sailing catamarans have seen over the last three years shifts the attention slightly. It introduces a rather new concept of “Investment in charter ownership“.
Investing in a sailing catamaran (and some particular sailing yachts) makes more sense now than ever compared to a similar investment in stocks (Net Present Value). With a Return of Investment (ROI) of 8-11% per year and as low as 3-4% depreciation per annum on the best performing yachts in the charter market, an investment in a vessel is something to consider. *
The most successful shipyards have lead times of two years, which allows you to survey the market and plan, therefore no real reason to put a stop on everything.
There is a large stock of second-hand vessels available in the market which you could refurbish, and take over the leasing contracts. We should also expect a few charter companies who won’t survive the 2020 season (read also “Greek government makes maritime tourism a priority”) to put their fleets for sale. These operators will most probably be adopted and taken over by other charter operators. As a private prospecting person buying a yacht for charter, there are pros and cons of taking over pre-owned charter yachts and buying pre-owned boats on the second hard market to then later introduce them to the charter market.
A full detailed explanation and links are provided in the free E-book (Sign up for your copy here!)
The Three Main Reasons why you should be aware of buying pre-owned yachts for charter ownership:
- There are no “bargains or deals”.
If there is, then you have worked very well to acquire a deal that outweighs a charter management offer that has been worked out by benchmarking and following step-by-step process to make sure you truly get the most optimal solution and offer.
- A good deal is not always the asking price. It’s the total investment and management: what seems to be must-buy-price and deal too good to pass on, should be considered in light of what are the added costs and implications of transferring the rights or converting a pre-owned yacht to be run in charter.
- Demand and supply – the most sought after boats almost cost the same as a new one.
The yachts you would want to consider (most in demand/ best for charter investment/ highly rated models) have high re-sale prices and rate of sales. Indications that investing in a new yacht for charter makes more than practical sense and can be considered as a wise investment scenario. A good example is the catamaran market. Current re-sale values are close to 90% of the original purchasing prices, which results in depreciation as little as 21-23% after 5-7 years. The only reason for buying a pre-owned catamaran is because you found a particular model of your liking and are willing to put resources and money into refitting for an immediate live onboard lifestyle (cruising lifestyle).
Researching the matter online will take you more than a few weeks reading. The issue is discussed widely in among current boat owners and future prospecting boat owner for charter and defended avidly by the sellers (charter operators and the regional dealers).
There are few excellent YouTube videos on how to buy a pre-owned cat. We particularly like the video of Nick O’Kelly and his wife, since they are into their 5th live on board boat, have experience and give an accurate and considerate description of a “how-to” scenario, not taking any unnecessary risks to achieve what they want. This time it was a catamaran they chose and from a charter company.
The video is neither advocating that you buy a second-hand catamaran, nor a charter boat, nor is it deterring you from the idea, it just really illustrates the journey you most likely would have to take and what it requires.
See the videos here:
It pays to know what you are getting yourself into and its always wiser to start at the right end of your prospecting – making sure you research your numbers and make a clear Business Plan, or at least compare the charter programs offered on the market and making sense of them.
The Business Plan: Charter Feasibility Study, Projections, Proven Models
The resulting economic shakeup could separate the weed from the chaff, i.e., those yacht charter companies offering what customers want may survive (read more about past events and how the industry responded and changed).
The process of buying a yacht is still long process; one to two years to construct an optimal charter management or you can just choose a standard pre-made charter ownership offer with a global charter business with any of their ownership programs.
If you’re considering an investment in a yacht charter operation, you need to be prepared and create a business plan. In the free E-Book, you will learn more about the difference between:
- the ownership programs and the charter management arrangements,
- and the process of making sure you get finally receive the optimal ownership – which is the combination of the:
- maintenance plan,
- operator and marketing.
You’ll make the best investment and choice based on your principle wishes, as buying a boat has sentimental and emotional value, however, from a strict investment point of view, you should be aware of the following two very important advises…
1. Using a trusted and knowledge partner that shares your interest and risk:
Acquiring a boat, financing it, and running the boat in charter – requires a knowledgeable business partner. Equipping and pricing a yacht can be done in many ways and make a difference on the final price you are paying and also how well the vessel is adapted to the charter market and your purposes of owning a boat.
Using a trusted partner that advises you not just on deals and brands that they represent, but that takes the consideration of your interest first and is helping you to understand the ins-and-outs of the offers on the market and translating this is into what is best for you!
Naturally, every sales representative will claim they do, but they are representing their interest and products and principal.
When you are finally handing over your beloved gem to an operator you have chosen, also make sure that they represent a mutual interest and perhaps even the risk. For instance, make sure you have a clear business plan and that the operator shares your vision and can prove this.
An outstanding charter operator won’t be the best at everything and won’t make promises or sell guarantees. Instead, their reason for existence is to deliver the best possible service and be outstanding at what they do best – run their charter business the way they have made it successful. Therefore, you don’t have to be worried about talking to salespeople if you want to make sure you have found the right operator, as their reputation precedes themselves. Their current boat owners and financial health will give you all the evidence you need to make your decision.
So always make sure you check up on the seller and the operator and on what basis you make your evaluation. Don’t just buy a boat –invest in your lifestyle and your own business!
2. Turn data into useful information:
To make sure you are making the correct decision on the type of yacht and destination and ultimately matching the financing to the business plan (covering leasing costs with the charter income), you will need to research your numbers.
One way to quick route this is by just gathering offers from different well-known charter operators internationally, and then from local companies. Compare the different charter ownership programs and then try to figure out the details in the offers and how to make sense of comparing apple with pears. You will be examining what is best for the sellers – you will not get 100% what you want and what you need.
You should trust the testimonials and of course, listen to what your guts tell you and what the general public thinks of the seller. Still, you will never really had a given yourself an honest chance to find out what are the real possibilities out there and make an informed decision by comparing the offers and options efficiently.
Another way to go about acquiring the information you need is to research the feasibility of the venture by making a charter feasibility study (CFS). In the CFS, you will have answered the rudimental questions as a precursor to narrow down your search and have decided on what purposes the yacht should fulfill and how you like the use your yacht during the charter period and if there is an after charter plan as well. The CFS will include perhaps a few different brands and models of the type of boat you like to acquire and the desired destinations, and then the expected charter income, what is called the Charter Forecast Projections (CFP).
The CFP will include a detailed study on the expected income during a charter season including the VAT on the charter weeks and what is charged by the charter operator for running the charter operations for you. Finally, you will need to know the cost for upkeep and to run the charter operations of your yacht, the information provided by your chosen charter operator.
All of the above will go into a Business Plan, where you will calculate the initial payments, the expected charter income minus the costs, and the leasing or financing instalments.
An advanced version of the Business Plan will include the Net Present Value along with a detailed account of historical data on the charter performance of similar models from different sites in the same destination and internationally, and also the Cashflow overview with the attached information of the asking prices on the pre-owned market at the various destinations (expected deprecation rate).
Summary – How to make the most of your plan to become a charter boat owner
At a glance, the above advice seems overcomplicated considering the number of standard options and global charter companies offering seemingly attractive and popular ownership programs.
It’s never easy making sure you receive the optimal ownership solution for your yacht. Still, when you get it right, it’s always a decision and choice that you will know is what you truly wanted and needed, and that will prove to be a wiser yacht charter investment decision.
In our consultancy (read more here) to our prospecting clients (boat buyers), we take 36 action points as part of the scope of services before we have presented a final version of the best options available. After the client has chosen and has received his unique offer, we start with the operations side of getting his Tailored Charter Management in place. Another 73 checkpoints and steps that we manage for the client before he and his family finally can enjoy their first week on their yacht in warm and safe waters.
When done right, the Tailored Charter Management is superior to purchasing an Ownership Programme. Tailored Charter Management is first and foremost, the optimal combination of yacht + charter operator + financing + maintenance agreement + business plan. A business plan that takes full consideration of the owner’s wishes (flexibility and choice) and the value of the actual investment the day the owner opts to sell his boat (liquidate the asset).
In the current E-book, you will also read a list of available yachts for delivery 2020 and 2021: some associated with deals and some models with room to negotiate better conditions than usual.
We gather the top Yacht Sales opportunities on the charter market – from our network of yacht dealers, brokers, agents, and our trusted charter operators. Make sure you get your free E-book and receive the list of 54 current sales opportunities.
YachtWorld: search criteria included: catamarans from the well known brands/ 44-46ft/ 4 cabin configuration/ launch year from 2013/14. Note: the prices are excl. transport (specially notable in exotic location where asking prices are higher)
Denison Yachting Market Report: current market report from Denison Yachting from the 2019 listed and sold catamarans.