If there is one thing I’ve learned here at the 2011 Genoa Charter Yacht Show, it is that the global economic recession has left megayacht owners in one of three camps.
In the first and smallest camp are the owners of pristine, brand-new, pedigree yachts who will swing naked from a crow’s nest before they reduce their asking prices or offer other incentives. They figure they have the best products in the market, and they have the money to ride out the recession with or without charter business. They’re not budging.
In the second and far larger camp are the owners of charter yachts that are good, but not so pristine, new, or pedigree. They have been discounting like crazy since the summer of 2009, sometimes offering as much as fifty percent off just to keep charter business coming in. These owners may not quite be publicly naked, but they are certainly showing all of their cards as they enter the third straight summer season of the global recession. They would rather risk devaluing their product than lose charter income altogether, since in some cases they need it to continue being yacht owners at all.
In the third camp—strikingly evident here at the Genoa show—are owners who used the down time from the past two years to invest in their yachts so that they will be able to keep asking reasonable prices as they re-enter the recovering market. During my first day at the show, I saw no fewer than four motoryachts across a broad swath of size ranges that fit this description: the 92-foot Maiora Asha and the 120-foot Palmer Johnson Anna J, both with International Yacht Collection; the 155-foot ISA 360° with Neo Yachting; and the 193-foot Austal Icon with Edmiston and Company.
These yachts did not use the past two years to do minor repair work. I’m talking about serious refits and complete interior overhauls. The owner of Asha spent €640,000 to add a sundeck Jacuzzi, extend the yacht’s swim platform, install zero-speed stabilizers, and freshen the interior. The owner of Anna J dropped €1.5 million to add a hydraulic swim platform, increase crew capacity, install teak on a non-skid sundeck, and completely renovate the interior including woodwork and bulkhead fabrics. I couldn’t get a price point on the refit of 360°, but it had to be well into six or seven figures since it included installation of zero-speed stabilizers, a cabin reconfiguration, an all-new interior by a Los Angeles designer, a brand-new audiovisual system, and new marble in all the cabins. And Idol, well, her owner’s €1.5 million was spent on recreating her interior as a contemporary showpiece that is being buzzed about on the docks as absolutely stunning.
All of these yachts are re-entering the charter market this summer just as booking inquiries appear to be taking a turn for the better. When they are compared against other yachts in their size and age ranges—no matter the price—they look a heck of a lot newer, fresher, and more appealing. That’s not to say they can charge the most money in their categories, but they are succeeding in getting reasonable rates as opposed to having to settle for massive discounts.
As an example, Asha had a weekly base rate before the recession of €52,500. Her post-refit base rate is €35,000. The current rate represents the market adjustment that the entire charter industry has seen, but it’s still a heck of a lot better than other yachts in her highly competitive size category whose owners are settling for €25,000-a-week bookings at 50-percent discounts.
At the other end of the size spectrum is Idol, which, when she was still known as Outback last summer, had reduced her weekly base rate from €399,000 to €320,000 to try to garner business. The newly refit and rechristened Idol is now able to ask €325,000—not so bad at all in the current market conditions, even if she goes out to charter at a 10-percent discount.
If the charter market continues to show recovery trends, these owners who invested in substantial refits may turn out to be the savviest of all. For while there will always be clients who will pay any price to charter the newest, fanciest yachts, there also is a point at the bottom of any market where clients begin to choose good value over the lowest possible price. When that type of spending once again becomes fashionable in the post-recession charter market, quality may in fact be the new black.
Editor’s Note: Kim Kavin is an award-winning writer, editor and photographer who specializes in marine travel. She is the author of seven books including Dream Cruises: The Insider’s Guide to Private Yacht Vacations, and is editor of CharterWave and Boatermouth.