A good number of yachting industry insiders have contacted me during the past two weeks, wondering aloud about the current status of the crewed charter market. Those who carefully watch sales statistics are seeing what appears to be an emerging trend: the brokerage market is recovering from the global recession faster than the charter market.
This apparent trend is counterintuitive. When cash flow has tightened in the past, the wealthy have turned to charter as a less-expensive option compared with the outright purchase of a yacht. And with the current firestorm about bank bailouts and overcompensated CEOs, it would seem that charter is the smarter choice. It is, quite frankly, much easier to "hide out" on a charter yacht for a week than it is to purchase and use a yacht of your own, no matter the scandal that lands you and your salary on the television news. Just ask Tony Hayward of British Petroleum about his Farr 52.
One of the more intriguing lines of reasoning I'm beginning to hear is that brokerage is recovering faster than charter because the brokerage market has undergone a serious market correction in terms of pricing. It has, for lack of a better phrase, "bottomed out" while the charter market continues to struggle in an effort to avoid that likely reality.
For instance, many owners of yachts on the brokerage market have dropped their asking prices both substantially and definitively. They're not saying, "The real price is $14 million, but I'll give it to you for $12 million for the next couple of months until the recession eases." They're instead saying, "I previously asked $14 million for this yacht, but now I realize the actual value has dropped to at least $12 million, so we can begin the negotiations there."
By contrast, many owners of charter yachts that survived the recession's first blows remain unwilling to adjust their weekly rates. Yes, the market is currently being flooded with discount offers, but they are just that--discount offers. They are not a serious and definitive market correction in pricing. They are a temporary nod to the current circumstances, a nod that may not be big enough for the industry to recover in the long run, a nod that is being made with the other eye firmly gazing upon a hard line in the financial sand.
It's of course impossible to say whether this line of thinking is correct, but it's the first reasoning I've heard that seems logical in trying to explain why brokerage seems to be recovering faster than charter. I look forward to revisiting the discussion at this time next summer, when the 25-percent discounts being heralded today may in fact be the newly adjusted, permanent weekly base rates for some charter yachts. Stay tuned.