Yachts-2009 Stirring Demand Starts to Refill Sails
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Inside Phil Stevens on life as captain of the luxury vessel, Slipstream Page 8 SPECIAL REPORT | Wednesday September 23 2009 www.ft.com/yachts-2009 Stirring demand starts to refill sails But there is a widely held view that recovery will be slow and the market may never be the same again. Victor Mallet reports year ago, many yacht brokers and manufacturers still dared Ato hope that the intensifying financial crisis, although obviously severe, would spare the world’s wealthiest people and leave them with enough cash or credit to buy the $100m superyachts they had always wanted. With hindsight, it is clear that the luxury boat industry, fattened by years of rising production volumes and improving profit margins, was far too optimistic. There was a shock- ingly abrupt decline in the market in late 2008 and early 2009, following the collapse of Lehman Brothers, the investment bank. Today, as the first, tentative signs of recovery appear, most industry executives, financiers, and suppliers are no longer asking how well the superyacht business will resist the global economic slowdown. They are wondering whether it can ever be the same again. “The situation in the early months of this year and the later months of last year was very difficult,” says Anton Francesco Albertoni, chairman of Ucina, the Italian nautical industry association. Italy is the biggest pro- ducer of luxury yachts, with a total pleasure yacht industry turnover of about €6bn, and Mr Albertoni says the sector suffered a “violent stop”. The problem was not always felt immediately in the yards that build larger boats – a superyacht is loosely defined as a vessel more than 30m or 100ft long – because the long lead- times in construction mean that some are still making boats ordered in 2007. But the dearth of new orders, some cancellations and the withdrawal of credit have left indebted companies struggling and caused headaches across the industry. The charter busi- ness was also hit by lower prices. Figures from the Superyacht Intelli- gence Agency, part of The Yacht Report Group, show that 241 large yachts were delivered last year, com- pared with 231 in 2007 and 267 in 2006. From this year, however, it will be hard to achieve such steady numbers. “While it is not all gloom and doom, we have certainly seen a huge reduc- tion in yachts sold and charters booked,” The Yacht Report says. Camper & Nicholsons International, the yacht group, which produces its own slightly different statistics in its annual Yachting Index, says that the crash in financial markets after the collapse of Lehman Brothers in Sep- After the financial storm: serious buyers,” says David Tydeman, teamed up for the launch this month tion, for the comfort of a displacement tember 2008 “triggered a change, and buyers may prefer Customers are more likely chief executive of Oyster, the luxury of their venture to make a revolution- vessel rather than the gas-guzzling most probably an irreversible one, in classic, elegant lines, than before to opt for UK yacht maker, which has extended ary €100m, 2,900-tonne motoryacht of speed of a fast, planing motoryacht, the large yacht industry”. Offers to such as those of this its range and is due to finish its first “exceptional” width, style and com- and for classic, elegant and seaworthy buy were withdrawn and build con- sailing yacht, Gliss discretion over 100ft-plus sailing yacht next year. fort that would be powered not only lines over extreme designs. tracts cancelled by potential owners. Other producers see similar indica- by diesel but also by arrays of solar “In general, we are losing the nou- Nimbler companies moved quickly conspicuous consumption tions of demand flickering back to life panels, wind generators and a kite to veaux riches ,” says Azimut’s Mr to cut production. Fairline, the UK and predict better times, once the assist propulsion. Vitelli. “There were plenty in the last maker of motor yachts up to 78ft, had stock overhang of – new and second- Patrick Thomas, Hermès chief exec- 24 months before the crisis, coming trebled in size through organic hand – boats for sale has shifted. utive, says the ultra-wealthy target from Russia, from finance, from growth in the previous 13 years, but “The growth of the past few years market for the vessel numbers only emerging markets.” took drastic steps to reduce output at has been enormous and a sort of cor- 200 people, a “very rarefied” universe Barry Gilmour, executive chairman the end of 2008, according to Derek rection was necessary,” says Paolo of possible customers for this “anti- of Royale Oceanic, the yacht services Carter, chief executive. Inside this issue Vitelli, founder and chairman of boat”. For Wally founder Luca Bas- company that supervises construction The company laid off 400 of its 1,400 Manufacturers It has been a Classics Richard Donkin on the Italy’s Azimut-Benetti Group. But he sani, the key to the yacht is stability. and management for owners, says staff and cut turnover by a third to fierce storm but there are signs J Class revival (pictured) adds: “Rich people want to spend “A lot of customers still suffer sea- customers will once again start spend- about £100m a year. Other luxury of calmer waters, writes Page 5 their money there are plenty of rich sickness,” he says. “The original idea ing millions of dollars on superyachts. yacht builders, including Ferretti in David Glenn Page 2 people and in the world.” was to create a kind of floating island But he expects to see consolidation Italy and Rodriguez and Couach in Bases Antigua has many What is not yet clear is precisely rather than a yacht.” among the weaker members of the France, were forced to restructure Finance Jill James says advantages but drugs and how the crisis will change the spend- Even if new customers are attracted industry in the aftermath of the crisis. their debts or seek protection from the crisis has restricted petty crime are problems, ing habits of the rich and whether it to superyachting by such innovative “It’s a cyclical business. People in creditors. deal-flow and there are writes Frances Howorth will affect two of the notable recent concepts, sceptics doubt that the mar- the yacht business got carried away Today, international yachtmakers fewer lenders Page 2 Page 6 trends in the superyacht market: the ket as a whole can return to the by their own hype,” he says. “I think say they are starting to see a trickle irruption of fashion designers, archi- heady growth of the previous decade. we’re probably going to hit the nadir of orders and are hoping for a return Consumers The lack of America’s cup tects and luxury goods houses – Nor- Brokers and manufacturers say the in December or January and we’ll to some sort of normality in 2010, superyacht marina places Simon Greaves on a two-boat man Foster, Philippe Starck, LVMH – mood among the wealthy has been start to see slow recovery from there. especially for vessels of – relatively – is a worrying constraint race Page 8 and the drive for more environmen- changed by the financial crisis and But I don’t think it will ever get back modest size and price. on the industry. tally friendly boats. the resulting public scorn for the fin- to where it was.” In a glamorous busi- Victor Mallet “It’s been very tough since the sum- reports Sometimes the two are connected. anciers responsible. Customers are ness once known for its ebullience mer of last year, but I’m seeing early Page 4 Wally, the Monaco superyacht com- more likely than before to opt for dis- and year-after-year expansion, that signs of confidence returning and pany, and Hermès of Paris have cretion over conspicuous consump- view is surprisingly widely shared. The ultimate in discretionary spending CHARTERING sometimes disappointed, how- their wealth in billions. Some when many owners want exclu- most exclusive yachts reflects ever, as owners withdrew their may have seen a £10bn fortune sive use of their yachts. “The production demand among Owners want to keep boats rather than cave in to halved to £5bn in the credit pick-up in business means that yachtbuilders. The production chartering but won’t excessive price-cutting. crunch but at the end of the it has not been as catastrophic company, Sunseeker, has “Some charterers have had day, they are still wealthy peo- as we feared at one stage,” he avoided the difficulties experi- do it for a pittance, the impression that all yacht ple and, in most cases, can use adds. enced among some of the Italian says Richard Donkin owners are desperate and will- their yachts as they wish. But Ben Stuart, general manager builders by reducing production ing to take big price drops,” the yachts have to be main- at C&N Marinas’ Grand Harbour in smaller, and increasing its says Alev Karagulle, director of tained, crewed and insured; they Marina, Malta, one of the Medi- business share in bigger, yachts. Early indications suggest that marketing and communications can’t be laid up in the Nevada terranean’s largest purpose-built “I’m quietly optimistic. We have charter business among super- at Burgess, the yacht sales, bro- desert like surplus aircraft.” worked very hard to develop the yachts – worth about $530m in kerage and chartering company. When charter can bring in boats the market wants and I’m 2008 – may have fallen by 25 to “Those who charter boats like €220,000 a week as it does for ‘People don’t charter proud that we have done so 30 per cent this year, although to keep them chartering as it News Corporation chairman their yachts as a without laying anyone off,” says there are signs that the market brings in some income to help Rupert Murdoch’s 56 metre-long chief executive and company has been picking up towards the with running costs; but they’re sailing yacht, Rosehearty, the business but in order founder Robert Braithwaite.