Custom Megayacht Builders: a Dark Economic Forecast
The Superyachting Index predicts a rough patch ahead as supply for new builds far exceeds demand.
"Alarming" is not a word that I see used regularly-if ever-to describe the status of the megayacht industry. Thus, my antennae shot straight up while reading the newly released, 48-page Superyachting Index from Camper and Nicholsons International. It breaks down megayacht industry data for calendar year 2009, and it calls the number of new orders for custom yachts 100 feet and longer “the most alarming of all available statistics and data.”
In 2008, according to the Index, there were 241 contracts signed by people wanting to build yachts 100 feet and longer. In 2009, that number plummeted to 90, representing a 65-percent drop in new business for shipyards worldwide.
The wallop is attributed to a perfect storm of trends related to the economic downturn. Fewer people are placing new orders because of their own financial problems or their inability to secure financing in the current banking climate. Shipyards themselves are starting fewer builds on spec, fearing they won’t sell once completed. And the brokerage market is flooded with top-quality yachts from existing owners now desperate for cash, luring some of the customers who otherwise would have placed new builds to help yards buffer the downturn.
As a result, yards now completing custom megayachts that were ordered before the crisis are not finding new business at the rate they require. As the Superyachting Index notes, the custom megayacht market currently seems less affected by the downturn than the semi-custom market—the lights are quite literally still on—but this is likely because it takes longer to build custom yachts. Pre-recession orders are still being completed, so the empty shipyard bays haven’t yet hit the books. Once those bays are empty, which will be soon, the yards will encounter 65-percent fewer orders. The effect could be cataclysmic.
“The impact of the downturn may be more visible in this segment in the years to come,” the Index states, adding that there is “much concern for the future of a number of shipyards.”
And it’s not just Camper and Nicholsons that thinks so. I recently had an off-the-record conversation with the head of another leading megayacht company who told me he sees the same harbingers of further struggles, as well as another trend about to emerge.
“If you look at the larger yachts—over 40 meters—the total capacity is about 100 yachts a year,” he told me. “If 2010 is a good year, maybe 25 or 30 yachts will be sold. So there is huge overcapacity. In any other market, this would mean that shipyards go bankrupt and shut down. The strange thing about yachting is that shipyards hardly ever close down, but instead get taken over by wealthy people who invest from all over the world. So for the shipyards, it is unfortunate that the worst is still to come. In six or twelve months’ time, you will see more of this trend, of wealthy individuals taking over.”
Editor's Note: Kim Kavin is an award-winning writer, editor and photographer who specializes in marine travel. She is the author of six books including Dream Cruises: The Insider’s Guide to Private Yacht Vacations, is editor of the online yacht vacation magazine www.CharterWave.com, and writes the blog at www.BrokerageBoss.com.
