TSR 209 - Owner

The Superyacht Owner Report

209 08/2021

Tom van Oossanen

A REPORT WORTH READING

“We all know that when it’s done right, nothing beats the experiences afforded by commissioning, building and owning a superyacht. W I L L I A M M A T H I E S O N , E D I T O R I A L & I N T E L L I G E N C E D I R E C T O R Three superyacht opex case studies reveal the true cost of ownership

We crunch the numbers to identify the most effective brokerage houses

The real cost of support vessels, leasing schemes and crew rotation

How to optimise on-board space, shipyard selection and the charter proposition

THE ART OF LAW

Experts in all aspects of Law for Ultra High Net Worth Individuals pglegal.it milano@pglegal.it

EDITOR’S LETTER

THE NEXT CHAPTER

BY WILLIAM MATHIESON

The Superyacht Owner Report ISSUE 209

After the success of last year’s Buyer Report, William Mathieson introduces the sequel …

To position this piece in the annals of time, we in the UK have just experienced the thoroughly underwhelming passing of ‘Freedom Day’, the inevitable heartache of an England penalty shoot-out loss and are currently enthralled by the Tokyo Olympics, which has generated a surprisingly large amount of bonhomie despite the devastation wrought on crowds by Covid restrictions.

What’s interesting about these three events is that contrary to what many of we cynical Brits were expecting, 2021 has been a summer to enjoy and has left us with many a memory to treasure. And that’s where I bring this round to the business of yachting ...

Life is nothing but a series of lived experiences and the memories that they generate, passing as they do in the blink of an eye. The true value of any expenditure, therefore, is in its ROEI or ‘return on emotional investment’ – the power of an entity or asset to facilitate, crystallise and ultimately embody these most treasured of lived experiences.

Yes, all of this is somewhat on the metaphysical side, and you’d be forgiven for thinking I’ve entirely lost sight of the task in hand. But my ramblings are a roundabout way of highlighting a problem the superyacht industry still finds itself facing today – the ability to effectively communicate the unrivalled visceral stimulus that is superyacht ownership.

We all know that when it’s done right, nothing beats the experiences afforded

by commissioning, building and owning a superyacht. But we also know that our message is too easily drowned out by the white noise that is poorly reported mainstream media sensationalism about excess and iniquity. [Editor’s note: At this point I would draw your attention to the excellent piece by Jack Hogan on this very topic. Search ‘A race to the bottom’ on SuperyachtNews.com to read the article in full.]

We need more good news stories about ownership lifecycles that last longer, involve investment back into the industry and, ultimately, lead to a more prosperous market driven by a larger pool of clients who are all happy advocates of what they now understand to be the greatest experience their hard work has earned them.

And I guess that’s where our annual ownership tome comes into play again this year.

With last year’s Buyer Report, we brought together a spectrum of the industry’s finest advisory minds to construct a best-practice guide to the purchase/commissioning process. We are now on a continuation of sorts of that journey as we present a series of 10 best-practice topics on optimisation of superyacht operation and lifecycle management. Our in-house team’s diligent research has been complemented by the insight of 10 respected guest contributors, and the result is once again a robust instructional work.

Accept no imitations. This is the definitive guide to ownership. WM

1

CONTENTS

The cost of ownership Euros (millions)*

Propulsion

Total annual expenditure (million euros) of 43m, 55m and 72m yacht

6

5.2

5 4

2

Image courtesy of ABB

2.7

3 1.5

1 0 43m yacht

55m yacht

72m yacht

*Values rounded to 1 dp

The Opex Report Drawing on three case studies of different-sized superyachts, TSG analyses how significantly a vessel’s annual operational expenditure can be impacted by its operational profile.

10

The true cost of ownership 19 Short-term pain may lead to long-term gain when it comes to making those vital financial decisions about buying a superyacht, says Adam Ramlugon, partner at Hannaford Turner.

It’s time to talk about hybrid The umbrella term 'hybrid' belies a multitude of competing technologies. Here, we examine the merits of their adoption ...

34

Superyacht taxation Why we’re clearing the muddy waters of superyacht taxation 43 TSG explores how attitudes towards tax structures have changed, using the Maltese leasing arrangement as an example, from the perspectives of owners and the market itself.

Support vessels

To lease or not to lease Gianfranco Puopolo and Domenico Rinaldi, of PG Legal’s superyacht team, assess the risks of using leasing schemes when purchasing vessels in Italy.

51

Crew rotation

Are two boats better value than one?

TSG examines the cost savings associated with building and running a support vessel as opposed to commissioning an exponentially larger superyacht.

22

Crew rotation: magic bullet or financial nightmare?

Rotation can help crew longevity and lead to a healthy dynamic on board but what’s the actual cost? And should owners bear in mind the mental and emotional implications as well as the financial ones?

Taking on the ‘smart stretch’ Sarah Flavell, communications specialist at Damen Yachting, analyses the benefits of commissioning a purpose-built support vessel rather than ‘going large’.

31

Rotation, rotation, rotation!

Paying two full-time salaries for each position might seem extravagant but it gives owners more options and saves future expenditure, says Laurence Lewis, president of YPI Crew.

4

54

62

CONTENTS

Brokerage Days on market

Chartering

Average number of days on market before sale for yachts sold 2015 onwards by yacht size

600 502

486 394

400

335

300 200 100 0

30-40m

40-60m

60-90m

90m+

What makes an effective and efficient brokerage house? 66 We analyse sole CA sales activity between 2015 and 2021 to identify the brokerage houses that have added the most value for sellers.

Don’t get caught up in the blame game!

Sarah Allan, partner at Penningtons Manches Cooper, outlines the steps yacht brokers can take to protect themselves from liability during contractual disputes.

75

On-board space Keeping pace in the space race 83 As superyachts increase in size, the industry must retain its responsibility to ensure every square metre of space is optimised.

We don’t have the luxury to waste space James Roy, managing director at Lateral Naval Architects, argues that the industry should be building smarter rather than bigger, thereby steering clear of novelty projects with no meaningful value.

Image courtesy of Ocean Independence

500

How to operate a standout charter … and it’s not all about the boat TSG examines the key ingredients for success on the charter market, identifying several case studies of charter yachts that are particularly popular and the reasons behind it.

111

A bite-sized guide to the ‘perfect’ charter yacht Amanda Armstrong, founding partner at Yomira, draws on a combined 50 years’ experience to set out the essential elements that appeal to clients.

123

Choosing your shipyard

93

Superyacht marketing Covid’s long-term effects on superyacht marketing The global pandemic has led to chief marketing officers in the superyacht industry shifting their focus and altering outdated practices in order to appeal to the next generation of owners.

A new wave in search of yachting’s Dr Spock Mark Duncan, director of marketing at Fraser Yachts, examines the surge of new clients to yachting and shares some of their first-time impressions.

The Superyacht Owner Report ISSUE 209

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108

Caveat emptor We talk to a broker, an owner’s representative and a lawyer to ascertain how clients should approach choosing the right shipyard.

128

‘It’s unwise to pay too much, but it’s worse to pay too little’ Howard Lowe, managing director at Mayfair Marine, sets out the key questions that both owners and shipyards should ask before signing a build contract.

137

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The Superyacht Report 08/2021

For more than a quarter of a century, The Superyacht Report has prided itself on being the industry’s most integral source of information and insight. Having continually invested in the most respected journalists and analysts, with complementary areas of expertise that span the whole industry, we firmly believe we are the only source of independent and honest opinion. Our editorial team and our industry contributors stand by their words, and that is why The Superyacht Report is the industry’s most trusted report: A Report Worth Reading.

Editor-In-Chief Martin H. Redmayne martin@thesuperyachtgroup.com Editorial & Intelligence Director William Mathieson william@thesuperyachtgroup.com Business Editor Rory Jackson rory@thesuperyachtgroup.com Technical Editor and Intelligence Analyst Bryony McCabe bryony@thesuperyachtgroup.com Operations Editor & Analyst Jack Hogan jackh@thesuperyachtgroup.com Associate Editor Rachel Rowney rachel@thesuperyachtgroup.com News Reporter Max Stott maxs@thesuperyachtgroup.com

INTELLIGENCE Data Analyst Dennis Leung dennis@thesuperyachtgroup.com Data Analyst Trevor Seymour trevor@thesuperyachtgroup.com Senior Research Analyst Charles Bauman charles@thesuperyachtgroup.com Research Analyst Zara Fennell zara@thesuperyachtgroup.com Research Analyst Charlotte Gipson charlotteg@thesuperyachtgroup.com Intelligence Marketing & Business Development Executive Giacomo Guglielmini giacomo@thesuperyachtgroup.com

DESIGN & PRODUCTION Designer & Production Manager Felicity Salmon felicity@thesuperyachtgroup.com

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The Superyacht Owner Report ISSUE 209

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Analysis of the true cost of ownership

THE OPEX REPORT

BY BRYONY MCCABE

Drawing on three case studies of different-sized superyachts, TSG analyses how significantly a vessel’s annual operational expenditure can be impacted by its operational profile.

10

O

ne common narrative throughout the superyacht industry is that new clients are not always made fully aware about the costs of running, maintaining and operating their yacht.

The issue is that any subsequent higher-than-expected expenses may be interpreted as ‘hidden’ and potentially lead to a negative impact on their ownership experience.

While ‘10 per cent of the value of the yacht’ has traditionally been banded around as a general rule of thumb to estimate a yacht’s annual operational expenditure (OPEX), this is an oversimplification given that, in reality, there are so many variables that can influence this figure.

In order to highlight just how much a superyacht’s annual OPEX can be influenced by its operational profile, cruising itinerary and crew employment packages, as well as many other factors, the following analysis outlines anonymous examples of the annual OPEX of three private motoryachts, all of which have very different spending habits.

The analysis will dissect and compare the key areas in which each yacht spends money, thereby providing a valuable insight into the true cost of ownership.

YACHT A: 43M PRIVATE MOTORYACHT The smallest yacht of the featured case studies, this dual-season, Italianbuilt motoryacht operates between the Mediterranean and the Caribbean, with 18 weeks of owner usage during the profiled year of March 2020 to March 2021. With a total annual expenditure of €1.5 million, this yacht is very tightly run (by the captain’s own admission) and spends significantly less in certain areas of operation compared to the other

The Superyacht Owner Report ISSUE 209

yachts profiled. While these lower costs can largely be attributed to this being the only yacht of the three below 500gt, the owner’s usage habits also play a part.

As with the two other case studies, Yacht A’s largest expense is its crew. With two captains on time-for-time rotation, the yacht employs 10 crew in total, with nine on board at any one time, and salaries totalling €590,000 per year. Another significant part of the yacht’s annual crew expenditure (€18,000), when compared to the other case studies, is on dayworkers or temporary crew. As the captain explains, this expense is unavoidable given the yacht’s operational profile.

“We are a busy dual-season boat with tight turnarounds in between each season, so there is only a small window of opportunity for the permanent crew to take holiday in the year,” says the captain. “The boat, therefore, needs a high budget for extra dayworkers or temporary crew in May and October so that we can keep things running while the crew take holiday.”

Yacht A’s annual vessel expenditure totals €284,000, of which the largest expense is berthage (€127,000). The captain acknowledges that the yacht might have lower-than-average berthage costs due to the number of weeks it is used per year, and therefore not at anchor, as well as the fact that berthage in the Caribbean is usually cheaper than lowseason berthage in the Mediterranean.

Communications and AV/IT is one of the areas in which Yacht A’s expenditure is much lower than those of the two other case studies. Spending just €23,000 a year on communications and AV/IT, it’s almost a tenth of Yacht B’s expenditure.

This, the captain explains, is because the boat doesn’t have to buy VSAT, which is partly due to its sub-500gt size but also

While ‘10 per cent of the value of the yacht’ has traditionally been banded around as a general rule of thumb to estimate a yacht’s annual operational expenditure, this is an oversimplification given that, in reality, there are so many variables that can influence this figure.

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THE OPEX REPORT Breakdown of annual expenditure (’000s euros) of yachts A, B and C 708 Crew expenditure (inc. salaries, flights, food and uniform)

284 Vessel expenditure (inc. insurance, medical and safety, berthing, agency fees)

458 1,000

218 Fuel

366 1,000

23 Communications and AV/IT

204 282

245 273

Maintenance (inc. tenders and toys)

447

27 Management/regulatory fees (inc. shipping fees)

208 400

5 Other

0

250

500

750 ’000 euros*

*Values rounded to 1 dp

12

1,000

Source

superyachtnews.com/intel

43m Yacht A

55m Yacht B

72m Yacht C

1,200 2,100

Total annual expenditure (million euros) of yachts A, B and C Euros (millions)*

5.2

6 5 4 2.7

3 2

1.5

1 0

1,250

Yacht A

Yacht B

Yacht C

43m Yacht A

55m Yacht B

72m Yacht C

Number of crew

10 employed crew, 9 on board at one time

15 employed crew, 14 on board at one time

24 employed crew, 17 on board at one time

Operational profile

Dual season

Single season

Year-round cruising

Cruising areas

Mediterranean and Caribbean

Mediterranean and Red Sea

Worldwide

1,500

1,750

2,000

2,250

2,500

’000 euros*

The Superyacht Owner Report ISSUE 209

13

THE OPEX REPORT

because of the owner’s decision not to spend money in this area.

On the other hand, Yacht A’s annual maintenance expenditure is similar to that of Yacht B, unlike the other expenditure categories. This can be attributed to the fact that the yacht is well maintained, with a relatively high volume for its length. Being a dualseason yacht with lots of usage also drives up maintenance costs.

The other area in which Yacht A’s expenditure is noticeably different from the other case studies is management and regulatory fees. It’s no secret that sub-500gt yachts generally have lower costs in this area. Another factor is the owner’s involvement, which allows the yacht to operate easily without a management company. “We have miniISM compliance costs but that’s it,” adds the captain. “Being under 500gt, it’s fairly straightforward to run the boat without a management company, but we do have the additional help of the owner’s office, which is really involved in the running of the boat.”

YACHT B: 55M PRIVATE MOTORYACHT A single-season, Northern Europeanbuilt motoryacht that cruises around the Mediterranean and Red Sea, Yacht B had an annual OPEX of €2.7 million in 2019, the chosen profiled year due to its usage being affected by the pandemic in 2020. It is managed by West Nautical, whose managing director Geoff Moore explains that the yacht employs 15 crew, with 14 on board at any one time due to the chief engineers being on time-fortime rotation.

“It’s a well-built, modern boat that is well crewed and well run,” says Moore.

14

“It’s got a fairly comfortable annual expenditure, sitting right in between the two and a half to three million level. And I think it shows that across the board, out of a superyacht’s entire budget, nearly half of it is just going on the crew.”

As Moore points out, Yacht B’s largest annual expense is its crew, with crew expenditure totalling €1.2 million, of which €1 million is on crew salaries.

However, Yacht B manages to spend very little on crew travel – just €8,000 compared to Yacht C’s €192,000. This is largely down to the yacht’s singleseason programme, meaning many of its crew are closer to home when the time comes for them to take holiday.

While other areas of large expense for Yacht B are vessel expenditure (€458,000) and fuel (€366,000), the €204,000 spent on communications and AV/IT stands out, particularly when compared to Yacht A. This can be explained by the fact that almost half of that figure (€99,000) is spent on VSAT. “The owner wants very good internet,” adds Moore, “so the boat pays more for VSAT air time when the owners are on board and then it’s turned right down during the winter months.”

Maintenance is also a significant part of the yacht’s annual OPEX, totalling €273,000. Moore notes, however, that in a year in which the yacht undertakes a large MTU service on its engines, the cost would be around double that.

He concludes, “The yacht’s not run on a budget, it’s run on the fact that the owner wants the boat looking very good and well maintained. They don’t want to spend over the odds if they don’t need to, but they don’t scrimp and save either.”

YACHT C: 72M PRIVATE MOTORYACHT A world-cruising, Northern Europeanbuilt motoryacht, Yacht C’s annual OPEX of €5.2 million in 2019 was nearly double that of Yacht B. This can largely be attributed to crew and fuel expenses that are necessary for a year-round, worldwide cruising programme. Yacht C is also managed by West Nautical, and Geoff Moore explains how having the entire crew on rotation significantly drives up the yacht’s overall costs.

“There are 17 crew on board at one time, but 24 crew employed in total, with the deck and engineer officers on timefor-time rotation, and the rest of the crew on three-months-on, one-monthoff rotation, except the chefs who are on two-months-on, one-month-off rotation,” says Moore. Not only does having all the crew on rotation drive up payroll costs to €1.7 million, but it also has a substantial impact on crew air fares, which total €192,000.

Crew rotation on this size of yacht, with this itinerary, is largely to be expected, particularly when it comes to the senior crew, so these significantly higher costs might be considered unavoidable. While it is often said that the benefit of rotational employment packages is increased crew retention, Moore doesn’t agree.

He explains, “Bearing in mind that [Yacht B] has 14 crew on board at any one time, [Yacht B] has spent €70,000 on recruitment fees compared to €50,000 on [Yacht C]. So [Yacht C] has saved €20,000 on recruitment but its payroll is €700,000 more and its crew air fare cost is exponentially more.

“The idea behind rotation is that because the boat’s always moving around, with no home port and lots of

Source

superyachtnews.com/intel

The analysis highlights how much operational costs increase when a superyacht goes past the 500gt milestone. time with the owner on board, the crew need time off and more structure. It’s not always a sound financial argument to an owner but it makes it a lot easier to recruit crew when you have advantageous terms and conditions.”

In the profiled year, Yacht C cruised all around the world and this has inevitably resulted in high fuel costs of €1 million.

This amount of cruising, of course, also means more miles in the engines and generators, and this has had a knockon effect on the vessel’s maintenance costs, which were also high at €447,000 (including the maintenance of tenders and toys).

“Again, there’s no budget. If it needs to be done, it gets done,” adds Moore.

“They're always upgrading and trying to get the latest and best equipment on board and improving their systems.

That is why the maintenance costs are high, combined with the fact that the boat cruises so much, which means that the engines and generators have been used so much more and they need more maintenance as a result.”

Included in Yacht C’s €400,000 management and regulatory fees is the noticeably high €86,000 spent on shipping fees. This value represents any shipping or postage costs added on to produce flown to the vessel. “In remote locations, vessels have no choice but to get some provisions flown in,” says Moore. “As a result, the agency and

shipping fees may [be] a lot more than the actual goods.”

CONCLUSION The three featured case studies are a window into just how much a superyacht’s operational profile and usage can impact overall running costs, confirming that there can be no rule of thumb to estimate a yacht’s annual OPEX based on just size or sale price alone. Most notably, the analysis highlights how much operational costs increase when a superyacht goes past the 500gt milestone, which necessitates more expense in the areas of crew salaries, communications and management and regulatory fees.

While this is well known in the industry, perhaps some owners don’t quite realise the extent of the cost difference.

The other standout expense revealed by the data is on crew, with nearly half of a yacht’s annual OPEX spent on salaries, travel, recruitment and provisions.

While this will be unsurprising to most in the industry, it’s a concept that prospective owners may struggle to get their heads around. It is, therefore, up to the industry’s advisors to be upfront and transparent about such details in order to ensure new owners enter the industry with their eyes wide open. BM DO YOU WANT TO KNOW MORE? VISIT SUPERYACHTNEWS.COM AND SEARCH ‘OPEX’

This information is just the tip of the iceberg. If you want to know even more about the market and its performance, we can delve a lot deeper into its nuances. To find out more about our bespoke consultancy and due diligence services, please contact William Mathieson: william@thesuperyachtgroup.com

Unrivalled Superyacht Intelligence – your partners for strategic growth

The Superyacht Owner Report ISSUE 209

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A SUPERYACHT HUB SERVICING THE ASIA PACIFIC Stay for a short break or take advantage of some of the best refit and repair facilities in the Southern Hemisphere.

wearegoldcoast.com.au/superyacht

A U S T R A L I A’ S

GOLD COAST S U P E RYA C H T G U I D E

With recent investments and a new port of entry, this tourism mecca has become a key stop on the itinerary of captains.

LOCATION An easy stop en route or a hub for refit and repairs 3.

4.

1. Berthing docks at Southport Yacht Club 2. Gold Coast skyline showing Marina Mirage and Southport Yacht Club along the Broadwater 3. Creeks and rivers that stretch along the northern end of the city, protected by South Stradbroke Island

01 1–

5.

6.

7.

CAPTAINS TIP: CHECK OUT THE LOCAL TOURISM WEBSITE, DESTINATIONGOLDCOAST.COM FOR IDEAS ON THINGS TO DO, RESTAURANTS AND TOURS. 1.

8.

– 10

Indonesia Papua New Guinea

Timor Sea

Darwin Cairns

Indian Ocean

Townsville

Coral Sea

Whitsundays

Queensland

Brisbane

Perth Great Australian Bight

Adelaide

Newcastle Sydney Melbourne Tasman Sea

2.

Hobart

Sailing the Asia-Pacific will often include a safe passage along the east coast of Australia. Along this well-sailed route, lies the Gold Coast, about halfway between the iconic harbour of Sydney to the south and the tropical waters of Cairns and the Great Barrier Reef to the north.

The region is the perfect place for superyachts looking for a short break en route, or for a longer stay with some of the best refit and repair yards in the Southern Hemisphere.

3.

This sub-tropical city, below the tropical storm belt, offers warm year-round weather averaging 21 degrees Celsius in winter and 29 degrees Celsius in summer.

Life on the Gold Coast is centred around the water – 52 kilometres of golden beaches, endless canals lined with luxury homes and yachts, expansive Broadwater protected by relatively untouched sand islands, a World Surfing Reserve and creeks and rivers that lead to one of AsiaPacific’s largest marine industry precincts.

Behind the naturally beautiful and obvious allures of this destination is an ever-present energy that keeps people coming back and, for many, draws them to stay forever.

–2

02 1. The Boat Works, a one-stop-shop for luxury superyachts

SERVICE A one-stop-shop for superyacht berthing, maintenance, services and fit out

2. The dedicated crew from Gold Coast City Marina alongside the De lisle III

4. Lady Christine at the Gold Coast City Marine, one of the largest maintenance facilities in the southern hemisphere

3. One of the qualified tradesmen servicing the Gold Coast City Marina

1.

3–

With a vibrant boating and water-based lifestyle, including one of Australia’s largest boating communities, the Gold Coast is a premier marine services hub for the Asia-Pacific.

Clustered around the northern end of the Gold Coast are the city’s largest marinas including the Gold Coast Marine Precinct, which houses the largest concentration of superyacht and recreational marine trades in the Southern Hemisphere.

2.

CAPTAINS TIP: THE GOLD COAST CITY MARINA AND THE BOAT WORKS CAN ASSIST WITH MAINTENANCE AND REFIT OF SUPERYACHTS OF ALMOST ANY SIZE. TALK TO THEM ABOUT HOW THEY CAN CATER TO YOUR SPECIFIC NEEDS.

Maintenance and refit facilities are centred within this precinct including the Gold Coast City Marina and Shipyard (GCCM) and The Boat Works. These leading facilities offer a one-stopshop for superyacht berthing, maintenance, service and fit out, and are recognised worldwide for their innovation and quality workmanship.

The Gold Coast has 125 superyacht berths, and one mega yacht berth, scattered across six marinas also including Southport Yacht Club, Marina Mirage, Mulpha Sanctuary Cove Marina and Sovereign Island Marina. For those accustomed to a certain standard of living, these marinas are located adjacent to luxury hotel and resort amenities.

3.

4.

–4

INTERNATIONAL PORT OF ENTRY Making it easier for superyachts to visit our waters

It’s hard to believe that before 2017, one of Australia’s largest marine destinations didn’t have its own port of clearance. Now, four years on, the Gold Coast is welcoming foreign superyachts and other international vessels directly to its waters.

The Southport Yacht Club, located in the Broadwater, not far from the Gold Coast seaway entrance, is an appointed Port of Entry by the Australian Government. Here, you can obtain the clearances you’ll need for your stay.

In addition, the Australian Government has reduced red tape for superyachts operating commercially in Australian waters. The Special Recreational Vessels Act 2019 (SRV Act) is intended to allow ‘special recreational vessels’ (superyachts) to visit and charter for up to 12 months and conduct commercial activities without being regarded as imported under customs legislation.

The Gold Coast is seeing a remarkable increase in demand with internationally flagged superyachts heading to Australia for charter opportunities and world-class marine infrastructure in a safe region.

1. Southport Yacht Club, location of the city’s port of entry 2. Gold Coast broadwater, protected by South Stradbroke Island

1.

5–

2.

CAPTAINS TIP: BEFORE ARRIVING TO THE GOLD COAST, DOWNLOAD THE GOLD COAST SUPERYACHT GUIDE AVAILABLE ON THE GOLD COAST WATERWAYS AUTHORITY WEBSITE, FOR INFORMATION ON PRIOR NOTICE PERIODS AND HOW TO NAVIGATE OUR WATERS. –6

VISION A major superyacht hub for the Asia-Pacific

The Gold Coast’s yachting industry is having a coming of age (arguably decades in the making) as the facilities and infrastructure are expanding to meet a remarkable increase in demand from both domestic and international yachts.

Adjacent to Southport Yacht Club, Marina Mirage is undergoing an overhaul to cater to more luxury vessels. Aside from more and bigger berths, the new facility will provide the highest standards in luxury dining, shopping and lifestyle…not to mention, Palazzo Versace Hotel is located right next door.

Gold Coast City Marina, already one of the largest facilities in the Southern Hemisphere, has announced plans to more than double in size which will increase the yard’s lifting capacity by an eye-watering 400 per cent to more than 1000 tonnes.

Neighbouring facility, The Boat Works, is on a similar trajectory recently unveiling the first stage of its $100 million expansion. The new facility caters to yachts of all shapes and sizes along 500 metres of river waterfront.

7–

04

Australia’s largest superyacht berth, at 163 metres, was recently constructed at the Southport Yacht Club, the location of the city’s designated port of clearance. This investment, in partnership with government, is evidence of the region’s vision to become a major superyacht hub for the Asia-Pacific.

1.

CAPTAINS TIP:

2.

1. Palazzo Versace Hotel, Sheraton Mirage and Marina Mirage offer exclusive amenities along the broadwater

PALAZZO VERSACE AND SHERATON MIRAGE ARE LOCATED WITHIN A FEW MINUTES WALK OF THE PORT OF ENTRY AND PROVIDE FIVESTAR ACCOMMODATION.

2. Lady Christine Superyacht navigating Gold Coast waters

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STAY

Be reeled in with the laidback lifestyle and endless ways to spend your days

You may know of the Gold Coast, a city of close to 700,000 people, for its surf breaks, theme parks or spectacular skyline. But the Gold Coast of today is so much more. It’s also a city of espresso coffee, authentic cuisines and a growing arts and cultural scene. It’s a place of world-heritage listed rainforests, golfing greens and eco-tourism. It’s laidback. Thongs in the morning, heels in the evening. People are friendly and share a passion for their city.

The easiest way to experience the Gold Coast is by coastal neighbourhoods, thrown in with some adventures to theme parks, golf courses and the Gondwana Rainforests.

Getting in and out of the Gold Coast is easy with access to two international airports (Gold Coast and Brisbane).

And, an easy day trip from the Gold Coast is Byron Bay, a vibrant town now known for it’s famous locals.

Or, if you are looking to get back to some hustle and bustle you can venture to Brisbane, the capital of the State of Queensland.

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1. Oceanfront dining at Burleigh Pavillion 2. Retail therapy at Pacific Fair Shopping Centre 3. Tallebudgera Creek, a popular spot to swim after a walk through the national park 4. Surfer enjoying the swell at Kirra, part of the world surfing reserve 5. Yugambeh Aboriginal Dancers at Currumbin Beach 6. Only the best in dining at The Start Resort and Casino 7. Sky high luxury at The Star Resort and Casino 8. Smiles and adrenaline at Gold Coast theme parks

LOCATION An easy stop en route or a hub for refit and repairs 3.

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1. Berthing docks at Southport Yacht Club 2. Gold Coast skyline showing Marina Mirage and Southport Yacht Club along the Broadwater 3. Creeks and rivers that stretch along the northern end of the city, protected by South Stradbroke Island

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CAPTAINS TIP: CHECK OUT THE LOCAL TOURISM WEBSITE, DESTINATIONGOLDCOAST.COM FOR IDEAS ON THINGS TO DO, RESTAURANTS AND TOURS. 1.

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28.0167˚S, 153.4000˚E Australia

T R A L I A’ S

E X P E R I E N C E T H E G O L D S TA N DA R D S

GOLD COAST

wearegoldcoast.com.au/superyacht

S U P E RYA C H T G U I D E

With recent investments and a new port of entry, this tourism mecca has become a key stop on the itinerary of captains.

TIMELESS BEAUTY Soaring by A&R

www.abeking.com

Guest Column with Adam Ramlugon

The true cost of ownership Short-term pain may lead to long-term gain when it comes to making those vital financial decisions about buying a superyacht, says Adam Ramlugon, partner at Hannaford Turner.

The Superyacht Owner Report ISSUE 209

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Guest Column with Adam Ramlugon

As is the case in many industries, the changes and challenges of the past 18 months or so have ushered in a fresh perspective.

The superyacht industry is no exception.

Brokerage houses and shipyards have been reporting bullish sales and growth figures over this period, with an increase in first-time buyers dipping their toes in the water and more experienced players driving growth in sales and construction.

So what’s at play here? Our experiences, based on discussions with clients old and new, is that a reassessment of what both ‘cost’ and ‘value’ mean to yacht owners is an important factor, with many seeing more value in deploying disposable income to enhance and improve their options and opportunities (in this case by opting to escape landbased shackles for the open sea).

For many years, yacht managers, lawyers and tax advisors have argued that while yachts may be depreciating assets, the purchase or construction of a vessel should be treated with the same degree of care and due diligence with which an owner might approach the acquisition of a company or other ‘hard’ asset in the course of their mainstream business.

This concept has gained broad acceptance across the industry and has translated, in the main, to key stakeholders leaving no stone unturned to protect their clients’ interests.

Managers, brokers, lawyers, tax advisors and other professionals each play a role as part of the team retained by an owner to streamline transaction costs, maximise charter revenue (if the yacht is to operate commercially) and protect and preserve legal rights against contractual counterparties.

In 2021, the idea of protecting a superyacht’s ‘value proposition’ has evolved. In much the same way that ESG values and the impact of the investment sector are gaining more and more traction in the business world, both the cost and value of superyacht ownership have taken on broader meanings. Put another way, when looking at the true

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cost of superyacht ownership, emphasis should be placed on both the financial and, increasingly, the ‘extra financial’.

Best practice requires an owner’s team to work as one cohesive unit to protect the owner’s financial interests in the traditional narrow sense and also to take a more comprehensive view that might require short-term costs to be incurred in the pursuit of preserving long-term value and protecting these ‘extra financial’ interests.

It’s easy to lose sight of what an owner’s team is there to do. It’s all very well chiselling the shipyard or an advisor to reduce costs and fees, but is that really the right outcome if the end result is a lesser product, a heightened risk profile or high-value work being carried out by the wrong party?

As an industry, our raison d’etre is to ensure our owners enjoy every moment of their superyacht experience, from the genesis of the project through to delivery and beyond. This has arguably never been such a multi-faceted and nuanced issue.

The following are some examples that illustrate the point throughout the superyacht ownership life cycle.

1. Initial considerations The owner and his team should go into a yacht project with as full a realised vision as possible for what they want to achieve. Will the yacht operate as a commercial charter vessel? If so, how much room is there to strike a balance between the owner’s vision and commercial appeal in the charter market? How will this affect the resale value? These points should not be afterthoughts but addressed head-on.

2. Impact As was reported in these pages earlier this year, Lürssen is building its first superyacht which will incorporate hydrogen fuel cell technology. Other yards have also delivered high-profile hybrid-powered yachts over the past few years. Current market sentiment seems to be swaying more and more

towards hybrid and alternative fuel systems. Any significant superyacht project commissioned now will likely be ready for delivery in no less than three years and probably more. What appetite does the owner have for exploring hybrid or alternative fuel systems for the project? How sensitive are they to the politics surrounding this issue and what the zeitgeist might look like in three or four years?

3. Contracts There’s an old saying that a guarantee is only as good as the person giving it, but that principle could also be applied to any contractual counterparty. Carrying out thorough due diligence on every key party that the owner does business with is so important. It’s quite standard to hedge counterparty risk through seeking bank guarantees and insurance cover but it’s much better to be in a situation where the owner doesn’t need to call on them. What do the audited accounts of the proposed counterparty reveal?

What other contractual business do they have to secure future cashflow?

Is there any threatened or pending litigation with third parties? These are all standard questions in any corporate due-diligence exercise and are, in our experience, of increasing prevalence in the superyacht industry.

4. Disputes While we, as lawyers, enjoy a good tear up from time to time, this is another area in which scoring points on behalf of the owner is not always the right approach. Let’s take the example of a construction dispute between an owner and a shipyard. The shipyard has made an offer to settle but there is a sense that the owner might be awarded a greater sum in arbitration. Even if that’s the case, the owner risks an award being made in their favour requiring the shipyard to be responsible for rectifying the problem when the owner would have preferred to have chosen an alternative party that may have done a better job. Pursuing the arbitration, and even winning it, might be an example of the tail wagging the dog if a fair settlement offer is on the table. AR

A report into the support vessel concept

ShadowCAT Hodor.

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Are two boats better value than one?

TSG examines the cost savings associated with building and running a support vessel as opposed to commissioning an exponentially larger superyacht.

BY BRYONY MCCABE

Clint Jenkins Photography

T

The Superyacht Owner Report ISSUE 209

he support-vessel concept is a simple one. Its main purpose is to enhance the superyacht experience, and a purpose-built support vessel is able to carry surplus equipment, tenders and toys, freeing up spaces on board the mothership for owner and guest usage while also reducing the time they have to wait on arrival or departure from an anchorage, leaving the mothership and its crew fully dedicated to service.

As well as these well-documented design and operational advantages, owning two smaller vessels, consisting of a mothership and a support vessel, as opposed to one significantly larger yacht that can carry the same amount of equipment, can also have benefits in terms of cost.

ShadowCAT is observing a shift in the market when it comes to the perception surrounding the cost of owning a support vessel. “In the past, owners have reasoned that two vessels must be more expensive to operate than one larger one, but they are starting to see that this is a false economy,” explains Robert Smith, director at YCTS and cofounder of ShadowCAT. “Today, brokers and management companies are doing a great job introducing the benefits of this fleet approach, and owners are seeing more successful examples at sea

and want that for themselves. There is almost no yacht owner who doesn’t suit a shadow vessel.”

Project Phi, scheduled to be delivered later this year, is a prime example of how the support-vessel concept can optimise the superyacht experience as well as add value for the owner.

The 58.5m mothership Phi, in build at Royal Huisman, will be operated in conjunction with its 36m support vessel Phi Phantom, in build at Alia Yachts, both of which will share aesthetic DNA. Phi Phantom has been built to carry a 12m and 14m tender, an 8m sailing boat, six jet skis, a car and 60,000 litres of surplus fuel for the mothership, as well as bicycles, motorbikes, spare parts and a vast amount of storage and refrigeration. Owners’ representative Guy Booth estimates that Phi would need to be a 90m project in order to deliver the same functions on board one yacht.

Value, as opposed to cost, was a key factor for Booth in the initial discussions surrounding the concept of Project Phi. “If you are cost-conscious, you don’t build a custom yacht at Royal Huisman. Value was a factor but it is inseparable from all the other factors surrounding operational simplicity and guest experience,” he says.

“First of all, building the mothership

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SEE YOU IN GENOA st

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below 500gt was very important because compliance levels and build costs are much lower when you don’t have to meet all the standards that come into play at 500gt. And this extends to annual operational costs, which are also much lower below 500gt.”

As such, Phi has been built to be 499gt, which offers significantly more value than a 500gt-plus yacht. “The educated figure that I’ve heard is a 25 to 30 per cent increase in build costs for 500gt compliance compared to sub500gt compliance, and double the length is at least double the build cost in terms of labour and materials,” adds Booth.

“When you consider it would be potentially a 25 per cent higher build cost to have all of that utility on Phi rather than on a support vessel, there’s no way that our support ship has cost us 25 per cent of the value of Phi, not even close. So we essentially have the utility of a 90m yacht at a significantly lower build cost than building a 90m yacht.”

The same thinking was applied to Phi Phantom, which has been built to 199gt as a similar cost leap occurs at 200gt due to the higher compliance levels. The eventual decision to build the support vessel at Alia Yachts also came down to value, as well as the owner’s particular vision for the boat.

“Phi Phantom is a workboat and, as such, we wanted it unfaired and painted in matt paint,” explains Booth. “It would be an extra €150,000 to fair and paint Phantom with a hard gloss yacht finish. But is that value? Probably not because it doesn’t need to be shiny and the owner wanted to build a tank. But all of the machinery and equipment on board, the stabilisers, the propulsion, the navigation, is exactly the same on Phantom as it is on Phi, which

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is uncompromising and the highest standard we can buy.

“We went to Turkey to get value because the labour rates and overheads are particularly low and there are VAT advantages associated with building outside of the EU. But, in addition to that, the metalwork they do at Alia is superb and that was an important factor because we knew we weren’t going to fair the paint.”

Another element of the supportvessel concept linked to value is the ability to optimise valuable real estate on board the mothership for guest usage.

No matter how large a superyacht is, there’s always an element of compromise ingrained in its build due to the number of tenders, toys and technical spaces that have to be incorporated, and being able to avoid compromise is something that has been taken real advantage of on Phi. “Of course, we have technical spaces on board for our own machinery on the mothership, but we don’t have a big lazarette or garage spaces. Our lazarette on Phi has a couple of frisbees and some snorkelling gear, it’s tiny,” says Booth.

“By putting all of these tenders and toys, as well as half a container’s worth of long-range tools and spares that you might only use once a year but need to carry, on the support vessel you get a lot of space given back to the guests.”

As a result, Phi’s biggest ‘wow factor’ is its exterior spaces. “The outside spaces are enormous because we don’t have hull doors, hull openings, overhead cranes and all of these complicated systems that you need just to carry your tenders and toys,” adds Booth.

“We have a small rescue tender on Phi and a small crane to launch it, but if we didn’t have a support vessel

No matter how large a superyacht is, there’s always an element of compromise ingrained in its build due to the number of tenders, toys and technical spaces that have to be incorporated.

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26 Tom van Oossanen

Phi and Phi Phantom share an aesthetic DNA.

we would either have had to put the main tender on the bow, which would create a big eyesore on the bow, or have a big crane somewhere at the stern to pick the tender up and put it on top of the swimming pool.

“Somewhere, somehow, we would have had to put one or two tenders on Phi, which would completely change the boat and sacrifice 15 to 20 per cent of the space that is now for guest usage, not to mention the compromise there would be on tender size. These are the same compromises that yacht designers and builders have been struggling with for decades and if we didn’t have a support vessel, this is the vice we would have been pressed into.”

Smith agrees that key to the supportvessel concept is allowing clients to be uncompromising in their approach to building a yacht. “Existing owners know better than anyone the inconvenience of clearing the decks of your guests so a helicopter can land, or not being able to upgrade a tender because you have run out of space,” he says. “If accommodation is starting to feel cramped as an owner’s lifestyle changes, co-opting storage from the technical or deck departments is unlikely to happen.

“Overall, it’s a series of compromises for clients that they should not have to sacrifice after making such a large investment. If the premise is that the client just needs more space, there is not a limitation on price or creativity where constructing superyachts are concerned, they can be built as big as a client desires … up to a point. But as these vessels get larger in scale at ‘big white boat’ prices, there could still be real sacrifices when the vessel is at sea. Imagine clearing your guests off the exterior decks and securing the pool area so that the helicopter can land. And consider how much

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“We have seen many more mediumsized yachts, from 35-60m, coming out with support vessels. So I think the demand for support vessels is quite high right now, and more boats are looking at the concept.”

potential space devoted to guest comfort would be sacrificed to accommodate the larger crew required for a larger volume of vessel.”

Most owners will habitually think of sizing up when they decide they want more space, either due to an element of ego or simply because that is the traditional direction in which they are pushed by advisors within the industry.

However, this mindset is changing the more clients realise how much the onboard experience can be optimised with a support vessel, with projects such as Phi and Phi Phantom paving the way.

Booth acknowledges this shift.

“We started this process five years ago and, during the course of the project, we haven’t yet seen another support vessel being built with shared design characteristics with the mothership, but we have seen many more mediumsized yachts, from 35-60m, coming out with support vessels. So I think the demand for support vessels is quite high right now, and more boats are looking at the concept.

“I’ve certainly had several discussions with a dozen colleagues of mine over the last two years who are driving 45-55m yachts, and the owners are saying that they either need a bigger yacht or a support vessel because they want more space and storage. We might be one of the first to do it but we’re

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certainly not the only ones thinking about it.”

For existing owners, this could even mean reconfiguring their current yachts and building an additional support vessel, which would mean further cost savings as opposed to building a single bigger yacht. “For example, most 50m yachts traditionally have a tender garage and a stern door that might be 60sqm or more, so you could get rid of the tender garage and turn it into a beach club,” says Booth. “If an owner likes their yacht, they might not want to sell it for €20 million and then invest €40 million to buy an 80m. That’s a completely different consideration as they are now running a ship with all the additional logistics and expenses that come with it.”

As Booth concludes, it’s no longer about chasing the bigger and the better.

“The landscape has changed, and what was sensible and the best way to operate 20 years ago is probably not the same now. I hope Phi inspires other builders to start investigating and offering packages and options like this, and owners to look at a different way of yachting in the form of a low-cost, high-value and highutility support vessel.” BM DO YOU WANT TO KNOW MORE? VISIT SUPERYACHTNEWS.COM AND SEARCH ‘SUPPORT VESSELS’

Guest Column with Sarah Flavell

Taking on the ‘smart stretch’ Sarah Flavell, communications specialist at Damen Yachting, analyses the benefits of commissioning a purposebuilt support vessel rather than ‘going large’.

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Guest Column with Sarah Flavell

The purpose isn’t just to support your main yacht, it’s to support your yachting lifestyle.

Using the term ‘essential’ in the context of buying a superyacht of any size is somewhat debateable – especially to those outside our industry. Therefore, questioning whether someone needs a second purpose-built support vessel or would be better off going bigger with a new custom-build yacht could be construed as pushing the boundaries of necessity. But that’s exactly the point.

Supporting an evolving yachting lifestyle has become a necessity, and looking at how best to do that is a genuine issue faced by many owners at some point.

My own view comes from a unique standpoint. At Damen Yachting, we’ve delivered more than 15 purpose-built yacht supports over the past 10 years to clients looking to extend their fleet operations, but we also have clients who have opted instead to build a bigger Amels and even those who have built a custom solution. Different platforms for varying motivations and requirements united by one key element: finding the yachting solution that works to an owner’s exact needs.

I’m always drawn back to a remark once made by one of our Amels captains when he said, “I never understood the purpose of a support vessel until I experienced it first-hand. Once you’ve had one, you can’t understand why you never did.” I suspect this observation is based on the emotion of the experience delivered rather than any financial benefit of taking on the ‘smart stretch’, as we like to call it, which made me think: if you take the emotion out of the equation, where does the real value lie?

To give some context, let’s start with a hypothetical owner of a 60-metre yacht looking to either add a 55-metre yacht support vessel or sell the 60-metre and build an 80-metre-plus. Why? They want more capability, capacity, facility

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and service – all things a larger build can certainly deliver. So can the support option achieve this more efficiently and economically or does it fall short?

Let’s start with size alone. Bigger isn’t always better. Go for the 80-metre and you’re entering lengthy full-custom build times. Also, those extra 20 metres can come at quite a cost. The running expense alone can be significantly more than it would be by doubling your fleet and meterage with a support yacht.

Depending on how you intend to use it, the support vessel can be configured and finished to a more cost-effective standard while still providing all the functionality you need. Operational costs are less and, depending on how you man it, lower certification may be required, therefore saving on salaries.

It’s not just about having more space; it’s also about how you use it. Keeping certain activities and logistics away from the mothership means protecting your luxury real estate on the main yacht, safeguarding value, privacy and personal space. Some owners opt to use the support yacht for tenders and toys (not just for stowage but for all operations and activities), others for hosting parties and events or even as a way of making a distinct personal/private divide such as using the support vessel for hosting guests or as a place of work and research. This separation enables you to store everything you need off the main yacht and take on extra specialised staff or security to increase the service level on the mothership.

Also, size determines flexibility; once you get above a certain size there are limits.

Some ports are no longer an option and certain restrictions and requirements (such as pilots, certifications, running costs) need to be considered. Doubling up retains the versatility. You can send

the support vessel on ahead and let guests relax on the mothership while the support vessel takes care of setting up the perfect anchorage, beach party and water activities. Then, for guests, you have a turn-up, ready-to-go scenario.

Flexibility is something you can also apply to extending the usage, whether that is being season-ready, using the support yacht to take your own selected containerised goods from the Mediterranean to the Caribbean or keeping the two yachts in different (near or far) locations. You can direct each one to where they are needed. The purpose isn’t just to support your main yacht, it’s to support your yachting lifestyle.

While there’s value in doubling up your location reach, there’s also a benefit of being together. Strength in numbers carries merit when it comes to levels of safety; the support vessel indirectly acts as guarding security and with the space to carry fast boats as well. Then you have the added bonus of privacy. Head towards 80 metres and there are a lot of crew. Stick with the two smaller options and the reduced number of crew per boat means fewer people on board but still plenty of hands on deck for service.

You can even accommodate and host overflow guests, younger guests or friends away from the main yacht.

The more I delve into the functionality, flexibility and freedom offered by a support yacht, the more I begin to see exactly what our Amels captain meant.

Regardless of whether the value lies in operational benefits, extended use and space, enhanced service, financial savings or lifestyle flexibility, it’s the purpose that renders a support yacht essential. I’m inclined to agree that once you’ve had one, the chances really are that you’ll no longer understand why you never did. SF

THE FINER DETAILS The ever-growing complexity of superyacht interiors is misleading owners to think that they are ‘expensive’. But there are ways to simplify the process and amplify the value …

Earlier this year, as part of its ongoing research into the optimisation of superyacht ownership, which has culminated in the publication of this report, The Superyacht Agency conducted a multifaceted research project into the role of interior subcontractors in both new-build and refit projects.

While the granular analysis of this niche sector spanned almost 130 pages of internal documentation, one of the overarching findings was worthy of mention in this ownership-focused report.

Owners and their advisory teams may only have purview of the final cost of a project, which, of course, has grown exponentially over the years as both the physical size of the interiors and the complexity of their make-up has grown,. However, the corollary of this ever-greater demand for complexity of design is a corresponding increase in the complexity, and therefore cost, of offsetting structural and operational risk, as well as ensuring that the interior outfitting itself is robust. In simple terms, the more parts introduced to a design, the more noise and vibration needs to be counteracted. And the sum of introducing evermore variables to a project is a greater total cost.

In my decade reporting on the superyacht supply chain, this is a phenomenon spreading across the subcontractor landscape, with the expectation of client teams being that the ratio between price and quality should be ever smaller. And the result has been something of a race to the bottom among said subcontractors.

Nowhere is this being more fiercely felt than in the interior outfitting sphere – where the artisanal techniques, skilled labour and costly raw materials make price competitiveness a particular challenge. This journalist has seen a number of market exits over the last decade triggered by myopic pricing wars and the unviable squeezing of margins.

So how can we as an industry collectively tackle this for the mutual benefit of all interested parties?

As with everything outlined in this report, the foundation of any cost-effective project is to appoint the right team, and this is no different when selecting an interior outfitter; as the old adage goes, ‘If you think it’s expensive hiring a professional, try hiring an amateur’.

As one of the most artisanal elements

of a new-build project, it is important to select a company with a proven track record and a portfolio of work that has stood the test of time. Yacht construction should be undertaken in the context of a vessel’s entire life cycle.

And like any other project the residual value the constituent parts of the interior offer should be factored in, in the form of lower running costs, fewer aftersales requirements and ultimately more time enjoying the vessel on the water.

But all too often, this is being overlooked in favour of the initial bottom-line figure.

‘Soft’ costs such as experience, custom expertise or an understanding of working with a particular shipyard may first appear as excessive levies on top of the cost of raw materials. And rather than introducing degrees of complexity by appointing multiple stakeholders, the key is to research an interior subcontractor with a demonstrable track record that can assure from the outset what is agreed is also delivered – and with no hidden extras. Ultimately, by looking beyond the binary figure, the true value of this artisanal sector will shine through.

This information is just the tip of the iceberg. If you want to know even more about the market and its performance, we can delve a lot deeper into its nuances. To find out more about our bespoke consultancy and due diligence services, please contact William Mathieson: william@thesuperyachtgroup.com Unrivalled Superyacht Intelligence – your partners for strategic growth

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The pros and cons of various propulsion configurations

IT’S TIME TO TALK ABOUT HYBRID

BY JACK HOGAN

The umbrella term ‘hybrid’ belies a multitude of competing technologies. Here, we examine the merits of their adoption ...

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he term ‘hybrid propulsion’ seems to have taken on a life of its own in the superyacht industry as it’s challenging for an outsider (or even an insider for that matter) to break down the topic. Any attempt to define it and it seems to change form. Depending on who you speak to, it takes on a new meaning and, like the hydra sea monster of Greek mythology, sprouts a new head.

As the term gestates and filters through all layers of conversation within the superyacht industry, it’s important to ground our expectations.

The dangerous interpretation of ‘hybrid’ comes from failing to give it definition.

Hybrid has become a combination term for a wide range of propulsion and energy-generating technologies that are increasingly being wrapped in a green bow. The green credentials of many of these systems are dubious at best and often rely on a fundamental disassociation with the law of energy conservation: that energy cannot be created or destroyed, only transformed.

The fundamentals of naval architecture haven’t changed in generations, and the rock-solid centrepiece of the calculations has been the dirty, but oh so predictable, characteristics of diesel and the big dumb engine that burns it. The well understood power output ratio, volumetric considerations for fuel capacity and the relative predictability of a high flashpoint fuel have allowed many yachts to maintain a continuity of technical space layout, providing the platform for the guest spaces and exterior design that make up the clientfacing side of the industry.

However, this balance is shifting; emission restrictions are forcing many yachts to have at least the option to run on battery power and, therefore, no emissions when in certain Mediterranean destinations or in the Norwegian

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fjords from 2026, for example. Enter the hybrids or, more specifically, the yachts with big battery storage and the ability to run off them for long enough for an owner to effectively use their yacht in a restricted area before returning to diesel operations on crossings and charging between stops.

Many of the hybrid technologies we laud today are not new, despite what the upsurge in publicity may suggest.

Hyperbole aside, there are some genuinely innovative re-combinations of existing technologies developing in the superyacht sector. That said, we should be cautious in attributing green credentials arbitrarily just because a vessel is silent some of the time. We do not, for example, herald HMS Hajen, a submarine launched in 1904 by the Swedish navy, as being green despite her pioneering use of a diesel engine to charge a battery bank and running an electric motor for silent propulsion (emulated by the US navy and the majority of submarine fleets in World War I). I’m also sure that ‘clean and green’ would be far from the minds of the Swedish submariners at the time.

As the need for environmental compliance increases, the superyacht industry is in the fortunate position that existing and proven technologies can help a generation of yachts comply with these regulations. Calling these systems ‘hybrid’ is fine as long as we are grounded about how and why we are applying it. This shifting standard is welcome to Ivo Veldhuis, technical manager at Mayfair Marine. “When it comes to ship propulsion, the superyacht industry has never been the most innovative,” he says. “But the marine industry is changing rapidly and that’s a good thing.

It’s about time.”

There’s nothing cynical about combining older technologies to meet

A mechanical diesel-propulsion system with a battery storage capability and the ability to switch to electric propulsion is, comparatively, the minimally invasive baseline for hybrid systems and has proven to be a popular option for many shipyards.

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changing regulations. Propulsion configurations have been an ossified part of ship design, and turning up the heat via regulatory imperatives will drive innovation. A mechanical dieselpropulsion system with a battery storage capability and the ability to switch to electric propulsion is, comparatively, the minimally invasive baseline for hybrid systems and has proven to be a popular option for many shipyards.

Marnix Hoekstra, co-creative director at Vripack, says, “The best hybrid set-up, in our opinion, is a diesel engine directly coupled to a gearbox, and the gearbox is directly coupled to a shaft line in a traditional mechanical diesel configuration. However, the gearbox has a second entrance, and there is also an electrical engine which is on the gearbox.” (A visual representation of this system can be seen in the diagram above.) Hoekstra is also clear that this still requires some confidence and

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forward-thinking. “I’m not sweet-talking anybody into this. It’s expensive. It’s a complex system.”

As a naval architect, Hoekstra believes it is also a problem that can be solved. “I don’t see this as some kind of personal sacrifice for the owner. For example, it is not necessarily true that an additional treatment tank dictates that the engineer’s office will have to be removed.

This is a design challenge. For us now, no boat leaving our drawing tables as of last year goes without this set-up.”

This configuration has proved to be popular with some highly successful shipyards. “Shipyards such as Heesen, and Amels to a certain extent, are choosing diesel mechanical hybrid systems because that allows them to operate with the same platform and use the power that is in these bigger engines more sensibly,” says Veldhuis. These engines run efficiently and effectively to allow superyachts to adhere to the

Mechanical diesel hybrid system with multi-entry drive train.

environmental regulatory framework that is moving ever closer.

Fully diesel electric propulsion is tried and tested in the commercial and cruise sector, effectively running pod drives and dynamic positioning while balancing variable hotel loads and peak shaving the loads on the diesel power plant. However, these systems were born out of efficiency and razor-thin margins, not environmental considerations.

Luckily for the superyacht industry, we can turn to some highly refined technologies that have been honed in North Sea oil fields under the microscope of cruise-ship accountants with extremely sharp pencils.

Already present on many high-profile superyachts such as Octopus (2003) and Eclipse (2006), its use was a function of efficiency matching operational profile, and the industry is fortunate that there are a number of smart engineers and resourceful marine industry giants that have been working on this for a long time.

Riccardo Repetto, global segment manager yachts at ABB Marine & Ports, summaries the benefits of this system succinctly. “By selecting the number and combination of the prime mover diesel engines that form a power plant which is based on the intended

The disruption required to go fully green is hard to overstate. Any conversation about hybrid then inevitably shifts and flows down conceptual rabbit holes that are difficult to follow and result in a dissociation with what the industry can realistically achieve.

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operational profile of the yacht, a diesel-electric/hybrid system allows the diesel engines to operate close to the optimum operation point, which leads to better fuel consumption and, as a result, lower emissions.”

Repetto also perceives that the efficiency and reliability of direct diesel mechanical propulsion is an oversimplification for yachting applications.

“While a diesel engine directly driving a propeller [through a reduction gear] may give an impression of efficient operation, it is vital to take the prime mover into consideration. The losses of a diesel engine operating at lower than rated loads are substantially higher than the difference in electrical transmission losses.”

To push the boundaries of innovation, more risks need to be taken. The advantage of not breaking the mould is that, to put it literally, you can continue to use the mould. When producing many superyachts in a very profitable way, partly predicated on existing supply chain and production facilities, it’s not unreasonable to expect that manufacturers would choose a specific system that does not require wholesale changes to layout and design.

Veldhuis says, “Some shipyards are saying, ‘Please stay away with your innovation because we don’t want it at the moment. We have just gone through this wonderful process of maturing our industry and everything is running smoothly at the moment’. And here comes along an industry change that, at least privately, many don’t actually want.”

The disruption required to go fully green is hard to overstate. Any conversation about hybrid then inevitably shifts and flows down conceptual rabbit holes that are difficult to follow and result in a dissociation with what the industry can realistically achieve.

Typical conversations in our office are now frequently about the moral implications of mining lithium, the physics of cryogenic hydrogen storage and heavier-than-air fuels or, recently, what happens to the carbon molecule in a methane to hydrogen fuel cell?

These are conversations that I’m sure are replicated across the industry and this is where we have slipped into a defence mechanism: combining all the fuels and concepts that do not neces-

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Image courtesy of ABB Image courtesy of ABB

ABB diesel electric with Azipod propulsion.

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“LNG has the advantage of starting with something today that is there and well proven with existing infrastructure. And, when more widely available, [you’ll be able to] buy biogas to lower carbon emissions even further.”

sarily belong in the same conversation into one narrative, creating a highly volatile mixed definition of ‘hybrid’, a word that already has plenty to deal with right now.

There are not enough trees in the forest to produce the paper to cover the topic of fuel cell and alternative fuel hybrid debate. Also, these systems are not in the short-term future of the vast majority of the superyachts in operation.

But there are hybrid solutions that offer another level of emissions reduction while still retaining a traditional combustion engine, have some form of infrastructure network in place and, crucially, have seen wide success in terrestrial applications. The fascinating work that the handful of new-build yards are attempting with technologies such as hydrogen cells and ammonia is tangential to the rest of the fleet.

Oskar Levander, SVP business concepts at Kongsberg Maritime, sees benefits in using conventional propulsion systems, with innovative fuels, for a future-proofed and realistic superyacht propulsion system. “An LNG [liquefied natural gas] system is an effective and efficient system today because you have a lot of options available for the future. You can switch to biogas and you can switch to synthetic methane.

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Therefore, with an existing propulsion system, you have already three different fuels to choose from depending on how low you want to be on your carbon footprint.”

With many of these fuels showing encouraging signs concerning emissions, the scarcity of supply presents a challenge to implementation. Levander adds, “LNG has the advantage of starting with something today that is there and well proven with existing infrastructure.

And, when more widely available, [you’ll be able to] buy biogas to lower carbon emissions even further.”

Veldhuis also sees a viable alternative that hasn’t had the coverage it may deserve. “The option I haven’t seen in wide application is synthetic fuels created from various biological products.

Because you’re using the biofuel, you’re not adding emissions to the overall atmosphere so you’re taking emissions from somewhere else. And while you’re combusting it, you’re not adding those emissions back into the atmosphere. I haven’t seen that properly reflected in some of these proposals.”

The communication breakdown surrounding hybrid lies, at least partially, at the feet of the yachting media, but it has broader implications. The language the industry uses, and the creation of

hype around certain technologies, is harmful to the highly complicated task of dragging the engine room into a green future. If owners are hesitant to commit to certain new technology, I don’t blame them.

We are attempting to talk authoritatively about subjects that, through no fault of our own, are very difficult to comprehend. Defining what is truly green, and what is simply an efficient use of power storage to allow for a certain amount of silent operations, is one key hurdle. Reflexively using the term ‘hybrid’ as a coverall undermines decades of pioneering research behind the scenes.

Many of our industry’s brightest minds are working on solutions to a problem that is not over the horizon, but firmly upon us. They may have taken different routes to solve it and not all will bear fruit. It’s vital that we don’t confuse the situation further with a thousand opinions about very scientific and complex issues, creating static and blurring the visions and concepts that will drive the industry into a sustainable future. JH DO YOU WANT TO KNOW MORE? VISIT SUPERYACHTNEWS.COM AND SEARCH ‘PROPULSION’

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PARTNER CONTENT

Falcon Yachts flies high again with the creation of a new Legacy

After a long and careful search for a prime investment vehicle in Italy, in 2019 a Middle Eastern venture capital company found what they were looking for in Falcon Yachts. Both the strength and history of the brand and the intrinsic value of its facilities and location made Falcon Yachts a very strategic investment. Here, we speak with Valentina Antimi, business development director, about Falcon Yachts’ past, present and future.

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Valentina, can you tell me something of the history of Falcon Yachts?

Falcon has always been synonymous with unique yachts. After 20 years working in the luxury sector, Edoardo Spreafico founded Cantieri Navali Falcon in Viareggio, Italy, and began building yachts with soul that were manufactured so owners could enjoy the freedom and joy of a day spent on the water as an exclusive experience. It was 1988 and Cantieri Navali Falcon began by specialising in fibreglass motoryachts in the 15-35m range. Hallmarks were classic lines, refined interiors and exceptional performance at sea.

In 1992, Falcon Yachts was founded as a sister company to Cantieri Navali Falcon to respond to the growing demand for larger yachts. After Spreafico sadly passed away in 2018, the shipyard changed hands and subsequently was acquired with the intention to bring back this historical brand in Italian yachting.

Italy’s shipbuilding tradition is well known, and the local docks have been home to some of the most famous and best-loved names in Italian yachting. Can you tell us about Pisa’s Navicelli area?

The Navicelli Canal, which gives its name to the area, was commissioned in the late 1500s by Cosimo I de’ Medici to connect Pisa to the bustling port in Livorno.

The name originates from the small boats, called navicelli, that were used to transport goods at the time. Changes have been made over the years and now it’s wider and deeper than it used to be.

It’s in a truly strategic position right by Pisa’s Galileo Galilei airport, close to the Autostrada and with direct access to the Mediterranean.

The location is a plus for owners coming to check on the progress of the build of their yachts?

Yes, being close to Pisa, Viareggio and Florence it’s convenient for owners who want to check on their yacht in build while enjoying a Tuscan vacation. Since the Navicelli area is a shipbuilding hub we can count on a deep pool of talented local artisans and craftsmen who have years of experience in shipbuilding. Our shipyard is exceptional because we have a freehold on the land and 86m of frontage on the canal where we have requested permission to build a launching ramp.

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How large are the shipyard’s facilities?

We have 11,000 sqm of covered sheds composed of three units, all of which are 13m high. Two are 4,525 sqm and the other, which we will use for working steel and aluminium and other hot works and for priming before painting, is 1,150 sqm.

We also have a large dry dock area and the canal front, about 80m long, that I mentioned before.

Steel and aluminium, are those newbuild materials for Falcon?

Yes. Traditionally, Falcon Yachts built fast displacement models in fibreglass, but our CEO is interested in expanding our production into steel and aluminium. The first yacht that we have sold, a 40m fast displacement model from our Legacy line that is scheduled for delivery in 2022, is in fibreglass but the next Legacy 40 and 45 models that we have built the nesting structures for will be in aluminium. The 50m full displacement yacht that we will be constructing next will be in steel and aluminium.

Can you tell me a bit about the Legacy line?

Our Legacy 40 and 45m yachts connect our current production to the heritage left to us by Edoardo Spreafico. With design by Quartostile, these models are enjoying an excellent market success.

Owners really appreciate the balance between comfort and performance, and areas such as the sky lounge and the beach. The Legacy 45, for example, will have a 4.3 x 5.1m pool by its beach platform, a unique feature that is getting a lot of attention. The aft section has fold-down bulwarks around the pool, so it becomes a real terrace on the sea.

Interiors are customisable and fitted with luxury materials. On top of that, the tender garage is floodable and is large enough for a 7.2m tender. Plus, there are spaces on board for two jet skis. Features like this mean that the Legacy line will be leaving its own legacy for years to come.

So the Legacy line is just the beginning?

Yes. When the two yachts in the Legacy line are completed, as previously mentioned, we will begin work on a 50m full displacement yacht in steel and aluminium that will have strong, good looks. We are continuing to invest in structures and talent, in fact we have a tender out for designs for some new projects and are evaluating the entries.

What happens after the yachts are delivered?

Falcon has always maintained a clientcentric approach. From the moment our owners close on their contracts we accompany them through the build process, working together on everything from selecting features such as spa pools to choosing fabrics and finishes for the interiors. We continue that experience with an attentive aftersales and warranty service to ensure that the quality of the Falcon Yachts owner’s experience is as high as our build quality.

So is it safe to say that Falcon Yachts has spread its wings and is ready to fly high again?

Yes! And we’d like to invite prospective owners to come to see our Navicelli facilities to experience first-hand what Falcon Yachts is all about.

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Exploring the complex world of superyacht tax arrangements

Why we’re clearing the muddy waters of superyacht taxation TSG explores how attitudes towards tax structures have changed, using the Maltese leasing arrangement as an example, from the perspectives of owners and the market itself.

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BY RORY JACKSON

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ossessing a superyacht may seem simple in theory, but in reality there’s complexity at every stage of the ownership journey, and it could be argued that some owners have fallen foul of poor taxation advice and off-theshelf ownership structures.

“While I do think it's important to obtain unbiased and well thought through advice, this can come from a variety of sources when you take into consideration the different profiles of superyacht owners; the large accountancy firms will be right for many, but not for all,” says Nic Arnold, UK head of JTC Private Office. “Sometimes clients, especially if they are at the lower end of the superyacht size spectrum, may require a more straightforward answer.

But they do still need a well thought through answer, and I believe it is incumbent on the superyacht industry to make it clear to clients that the fiscal aspects of owning a superyacht are often not as straightforward as it might initially seem, even at the smaller end of the market.”

Arnold argues that those within the more professional superyacht services, including corporate service providers, brokers and lawyers, need to be brave when dealing with potential owners by clearly outlining the potential complexities of superyachting. The industry is wider and more nuanced than many could imagine and the smallest of changes in an owner’s profile could have a profound effect on how their superyacht should be owned and managed.

“The tax world is more complicated than people realise at times,” adds Arnold. “The EU Commission is of course all over it, journalists are increas-

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ingly interested in tax matters and there has been a material shift in the attitude towards paying tax over the last five years. Clients will find it useful to talk to a friend or advisor that they know well, but within that conversation there needs to be the context and awareness that no one-size-fits-all solution exists in the superyacht space. The aim is to ensure that clients and their advisors are fundamentally thinking about the complexity of ownership and operation.”

There are, of course, risks involved in giving clients advice that threatens to ruin the allure of a simplistic superyacht purchase. For a broker, for instance, being entirely upfront about the complications of ownership structures and the need for clients to seek additional advice may lead to a slower sale, or it may be the case that taking additional advice and time may not necessarily fit in with the client’s expectations and meet the time restrictions they have placed on using the yacht.

“Simply put, education is the key here across the industry,” says Richard Simm, private client director at PwC. “It is easy to say this flippantly, but it’s essential that we spread the knowledge.

At the very least we need to get more people in the industry to be aware of the key complexities and how easily things can go wrong for owners if the right approach isn’t taken at the right time. All too often, owners don’t know the right questions to ask without the guidance of those around them. Clear, holistic [that is multi-tax] advice that’s grounded in prior experience is key to gaining a clear picture before jumping into ownership.”

Simm, while espousing the use of better, clearer advice, is well aware

that not all owners or owners’ reps have the time to be educated on the market’s various tax complexities or the inclination to educate themselves.

The onus, therefore, must be on the industry to professionalise to the extent that it is sufficiently educated and able to signpost things for owners. This is not only good for owners and keeping them in the industry, but it will help protect those professionals and brands in the industry that could otherwise get caught in the crossfire when things go wrong. For example – where mistakes are made after a client moves forward with a structure or acquisition without being giving all the necessary information.

“If you are associated with a client deciding to go in a particular direction that seemed simpler, quicker or because it’s what the last owner did, and it goes wrong, then it is likely to come back to you unfortunately,” adds Simm. “There are so many examples we can give of tax structures going wrong at every stage that the industry needs to be aware of.

“It can go wrong at acquisition, it can go wrong when you cross a customs border, it can go wrong when you interact with a supplier on the ground, when you have guests on board and when you sell the yacht. At nearly every point, something can go wrong from a fiscal perspective – often based on events that took place many years earlier because of lack of awareness. This might result in penalties, double VAT charges, the yacht being impounded, guests having to leave or the yacht losing its VAT status. All these are examples that have happened in our industry. Owners having the right, well-informed support team from the get-go is essential.”

Richard Simm, private client director, PwC.

“At nearly every point, something can go wrong from a fiscal perspective – often based on events that took place many years earlier because of lack of awareness.”

Perhaps the best example to highlight the evolution of superyacht taxation and ownership structures in recent years has been the development of the Maltese leasing structure and the broader development of its maritime/superyacht cluster. It must be noted at this point that there are a number of structures available to superyacht owners across a variety of well-respected nations.

Nevertheless, the changes that have occurred in Malta showcase the direction in which the industry, and indeed its clients, has moved.

“Malta, given its maritime tradition, its geographical position at the centre of the Mediterranean Sea, its natural harbours and mild climate, has been a key player in the yachting industry for a number of years now,” says Mark Lautier, partner at PwC. “Even prior to Malta’s accession to the European Union in 2004, there were a number of measures that sought to attract yacht owners to Malta including the possibility to acquire and register a yacht in Malta with the benefit of having a VAT paid vessel following Malta’s EU accession. From that point onwards, the measures continued evolving.”

What Malta offered at that time was largely modelled on similar arrangements applied by other EU Member States and consisted in the application of the ‘use and enjoyment’ principle contained in the EU VAT Directive and transposed in Maltese VAT legislation.

In brief, the arrangement provided that Maltese VAT should only be charged on that portion of the charter fee that relates to the ‘use and enjoyment’ of the yacht in EU waters. Furthermore, in order to provide an element of legal

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“The fact that VAT may be applicable on the sale and purchase of the yacht may be duly addressed with proper planning.”

Mark Lautier, partner, PwC.

certainty, VAT guidelines were issued by the Maltese Authorities (and which were regularly updated over the years) which set out the deemed use and enjoyment thresholds by reference to the size and mode of propulsion of the yacht.

“What you effectively had was a Maltese company, which acquires or imports the yacht in Malta for the purposes of chartering it out. On this basis, the Maltese company should be in a position to recover any Maltese VAT incurred on the acquisition or importation of the yacht,” adds Lautier.

“On those charter payments, only that portion attributable to the use and enjoyment of the yacht in EU waters was chargeable to VAT in Malta at the

46

standard rate of VAT in Malta, which is 18 per cent. Thus, in certain cases, the VAT liability on the entire charter arrangement could have been substantially reduced. It was an arrangement that was in place for a number of years and that had been fine-tuned along the way. It also reflected the fact that there was, and still exists, a strong preference in the yachting industry for leasing arrangements – mainly for non-tax reasons such as financing, cash-flow and asset ring-fencing reasons.”

According to Lautier, issues arose when new entrants to the market saw the opportunity that the superyacht market presented and started applying the above arrangement as a one-size-fits-all

model. Some factions stopped thinking about the complexities and, arguably, the arrangements were being put forward with less diligence than was required.

“The success of the Maltese yacht leasing arrangement also began to raise attention and the Maltese leasing arrangement was put under increased scrutiny ,” says Lautier. “It also coincided with a key decision of the Court of Justice of the European Union (CJEU) which clarified when a leasing arrangement should be treated as a supply of a ‘service’ or a supply of a ‘good’ for VAT purposes.

This judgement was particularly relevant in the context of the Maltese yacht leasing arrangement given that the ‘use and enjoyment’ principle mentioned

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Nic Arnold, UK head, JTC Private Office

“Today, you have to consider whether or not you are the right client for any given arrangement from the perspective of media scrutiny and personal brand equity.” earlier only applies when there is a supply of a ‘service’.”

Lautier says the result has been to further polish the arrangement to make it as robust as possible and to continue to ensure that the lease arrangement as far as possible from a finance lease arrangement. The basis continues to be a ‘leasing arrangement’ that builds on the principle approved and confirmed by the CJEU that a person may opt for a leasing arrangement rather than a direct acquisition of the asset.

“We have now had a pure operational lease for a longer period of time, say seven to ten years, with no purchase option,” says Lautier. “The benefit of such a leasing arrangement is that instead of having a lump-sum VAT charge, you spread the VAT liability over a number of years. It is essentially a cash-flow advantage. Furthermore, we have noted that even without a VATpaid certificate, which was one of the unique selling points of the prior leasing arrangement, many yacht owners still opt for a leasing arrangement.

“What we have noted in practice is that having a VAT paid certificate, albeit helpful, is not essential. The purchaser, particularly in the case of superyachts, will probably also be considering setting up a leasing arrangement. Hence, the fact that VAT may be applicable on the sale and purchase of the yacht may be duly addressed with proper planning.”

That being said, the use of a leasing arrangement should always be explored on a case-by-case basis taking into consideration all relevant facts and not merely the cashflow benefit derived from spreading the VAT liability. Such other considerations include the owner’s

48

particular intentions, the size of the yacht, administrative costs and also the cost of transporting the yacht to Malta.

What works well in one particular set of circumstances might not necessarily work in others.

The key to the development of the new system has been to understand the client rather than trying to fit them into an existing system and this is indicative of the direction in which the superyacht market as a whole should be moving when it comes to ownership structures.

There have been cases where non-EU owners have flagged and structured the ownership of their superyacht in Malta, which effectively makes no sense when there are easier and more effective options for what they are hoping to achieve. Therefore, what does the client have in mind for the yacht’s use? What kind of yacht is it? Where was it bought?

Has VAT already been paid or not?

Where is the client domiciled? Where are their other tax liabilities?

“From a slightly wider perspective, we are talking about an arrangement that is an appropriate interpretation of the law and that now meets all the required criteria,” says Arnold. “You don’t get a VAT-paid yacht but you should get a perfectly viable solution for the right client. There are, however, things to consider beyond the legality of an arrangement and its practical implementation. Today, you have to consider whether or not you are the right client for any given arrangement from the perspective of media scrutiny and personal brand equity.”

When considering the use of any ownership structure, one must be wary of various characteristics beyond the

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cold legality of that structure. Is it likely, for instance, that if the arrangement was made public it could damage one’s personal brand? Could the loss of business as a result cost more than the savings made from the ownership structure? Is the structure so complex that it’s simply frustrating? Indeed, in recent years, there has been a gradual movement towards fiscal transparency and simplicity.

“I think there is a genuine movement within society as a whole, in much the same way that the tide of people thinking more sustainably has got traction over the last five years,” explains Arnold.

“Where tax is concerned, people are bringing it into their strategic thinking when asking themselves, what are we doing and why are we doing it? What is our purpose? It feeds into that general societal debate and then it filters down into the superyacht industry.

“If, in order to get a low tax profile, you have to jump through many hoops, step into a world that you don’t understand or it seems too good to be true, then I would advise you to take a moment to consider whether or not a given structure is the right option for you. A lot more clients are looking to keep their tax interests uncomplicated and this may entail staying within your jurisdiction or paying VAT.” A number of years ago there was a series of well publicised cases in which unwitting celebrities were convinced to use extremely complex taxation structures as a means to reduce their tax bills. These individuals had their names splashed across the newspapers and were vilified by the public. Later, the Paradise Papers highlighted the use

(and occasional misuse) of perfectly legal tax structures.

Regardless of legality, those who were exposed as a result of the Paradise Papers still found their names all over the media, and their characters were brought into question. Today, HMRC and other authorities will no longer tolerate the extremely complex systems that were previously touted, and legitimate advisors are no longer offering such services. Not only have the perspectives of some superyacht owners changed, the tax market itself has also changed, and this is reflected in the evolution of the Maltese yachting cluster.

While Malta became known for its leasing arrangement and the various benefits to owners who used it, its success has spawned a whole professional cluster that not only offers leasing arrangements, but also provides the full suite of yachting services. Indeed, the same is true of Monaco, Cyprus and any number of other superyacht hubs. Legitimate advisors, such as those in Malta, should no longer be trying to pigeonhole owners into off-the-shelf-arrangements; instead they should be giving unbiased advice that will ensure any given structure or arrangement takes into consideration the full breadth of an owner’s profile and their various tax liabilities. By going back to the very beginning and asking the right questions, tax advisors, corporate service providers and various other stakeholders should be able to ensure that the headaches that have been associated with less than optimal tax arrangements are now avoided. RJ DO YOU WANT TO KNOW MORE? VISIT SUPERYACHTNEWS.COM AND SEARCH ‘TAX’

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Guest Column with Gianfranco Puopolo and Domenico Rinaldi

To lease or not to lease Gianfranco Puopolo and Domenico Rinaldi, of PG Legal’s superyacht team, assess the risks of using leasing schemes when purchasing vessels in Italy.

The Superyacht Owner Report ISSUE 209

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Guest Column with Gianfranco Puopolo and Domenico Rinaldi

Leasing schemes are an alternative way to acquire a yacht as opposed to a standard sale and purchase. Such schemes, quite common in Europe, allow the ultimate beneficial owner (UBO) of a yacht to mitigate the VAT applicable to the purchase price and/or to defer the payment of the VAT. However, recent developments regarding anti-avoidance tax laws and anti-money laundering (AML) regulations have created serious doubts about using such schemes when purchasing a yacht in Italy.

AML rules and international information exchange agreements Italy has fully implemented EU directives on anti-money laundering (legislative decree No 231 of 21 November 2007 and subsequent amendments). These rules require Italian legal professionals to identify the UBO of corporate structures involved in the transactions for which they provide their professional services.

This information is fully accessible to both the tax and judicial authorities.

In addition, these professionals are required to report suspicious transactions (including tax fraud) to the national anti-money laundering authorities.

The past 20 years have seen a worldwide radical evolution of financial information exchange. Until a few years ago, it would have been unthinkable for Switzerland and Monaco to give out information on the beneficial owners of bank accounts; today, it’s normal.

In this context, Italy has adhered to the Common Reporting Standard agreement and every year obtains the names of ultimate beneficial owners of bank accounts (even if they are formally in the name of corporate entities) located in foreign banks. Moreover, thanks to its network of double taxation conventions, Italy can carry out effective bilateral information exchanges with the tax authorities of other countries, both EU and non-EU.

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This means the UBOs of any corporate structure are visible to the Italian tax authorities.

General anti-avoidance rules (GAARs) GAARs are sets of rules to combat tax avoidance provided by the national legislation of many countries. Antiavoidance rules typically apply by focusing on the substance of a transaction or arrangement. One common feature is limiting or denying tax benefits when the economic substance of a transaction does not justify it. Italy is among those countries that have adopted general anti-abuse legislation. Indeed, article 10-bis of Law 212/2000 states “an abuse of law exists when one or more transactions lack any economic substance and, despite being formally in compliance with tax laws, are essentially aimed at obtaining undue tax advantages.”

For example, according to the above rule, Italy may impose VAT payment if a VAT exemption rule is applied for a transaction without economic substance, with the sole purpose of saving on taxes. In the worst-case scenario, this kind of transaction may also be considered a tax fraud, with criminal implications for all involved (for example, when the invoices underlying the transactions have never been paid).

The Italian leasing Until 2020, Italy applied a reduced VAT rate on leasing installments depending on the yacht’s length (6.6 per cent for yachts over 24 metres instead of the ordinary rate of 22 per cent). In such cases, leasing agreements had to be executed exclusively with authorised Italian companies such as banks and financial institutions. Therefore, this was a genuine financial operation with a third party, subject to all the conditions of the financing company. Since this tax regime is no longer applicable, Italian

leasing contracts now don’t have any particular fiscal advantage.

Conclusions In light of the above, leasing schemes, including the most frequently used Maltese scheme, must be carefully assessed when they involve Italian residents, whether individuals or companies. Indeed, if such schemes present issues related to the economic substance or the ‘transparency’ of the parties involved, Italian authorities could easily investigate them.

For example, it must be carefully checked whether a leasing scheme: 1. Is carried out at ‘arm’s length’ value (to avoid objections of lack of economic substance); 2. Is not ‘circular’, that is executed between the same UBO with the absence of third parties (to avoid the accusation of ‘simulation’); 3. Is always executed in full, paying all the relevant leasing instalments (to avoid accusations of the fraudulent transaction).

In this regard, see judgment 89/13/2013 of the Liguria Regional Tax Court in a case that resulted from an investigation by the Guardia di Finanza (Finance Police). The court ruled that setting up a yacht charter company and then purchasing a single yacht, leasing it for years to the same person, was an operation to avoid tax obligations.

Moreover, in this case, the agreed rental was far below the market price.

Judgments of this kind have been increasing in recent years.

Therefore, it’s advisable to consult an Italian tax advisor, who can assess and/or exclude the risks (administrative and/or criminal) of applying the rules.

GP & DR

PARTNER CONTENT

Time for a touch of class When is a defect not a defect? When it’s a negotiating tool, say Giovanna Cabbia of Clyde & Co and John Leonida of LP Squared.

The sale and purchase of nearly all superyachts is conducted using the MYBA Memorandum of Agreement (MYBA MOA). Last year, John Leonida, writing in this magazine, considered the MYBA MOA to be a cavalier document compared to the Roundhead that is the BIMCO Norwegian Sale Form 2012 (NSF2012), the sale and purchase document upon which most, if not all, commercial ships are bought and sold.

We were going to put the case for NSF2012 to replace the MYBA MOA, then we had a sleep thought. In the way that the standard MYBA MOA Addendum One originated from the documentation clause of NSF1993 (we know that because we added Addendum One to a MYBA MOA in July 1998!), perhaps there are things done better in NSF2012 which we might usefully import into the superyacht world.

The most common area of dispute within the MYBA MOA is Clause 27 which relates to defects found during the condition survey of a yacht. The original intention of the clause was to provide a mechanism for buyer and seller to agree either a new price or a scheme to rectify the defects. The unscrupulous buyer sees this clause as an opportunity to reopen negotiations on the original contract price, even if the defect complained about is not within the meaning of the MYBA MOA – that is, a defect that goes to the operational integrity of the yacht as certified by the buyer’s surveyor.

It’s not unusual for buyers to use an

The Superyacht Owner Report ISSUE 209

actual or questionable defect as a hook on which to drive down the price. The price renegotiation often has no link to the actual cost of remedying a defect, and if the parties don’t reach an agreement on the price reduction or repair works, the contract falls away, therefore adding pressure on a seller who has been marketing the yacht for some time, and there is often little appetite to jeopardise a real potential buyer on a technicality.

So how does NSF2012 deal with the same set of circumstances? The only defects contemplated are not subjectively within the control of the buyer’s surveyor but are objectively determined to be defects only if they affect the ship’s classification society status. It’s a typical superyacht delivery document that confirmation of class is delivered by the seller which confirms there are no conditions or recommendations on the vessel’s class records.

The effect of the recommendation or condition on any ship’s class record would effectively make it (and that includes superyachts) documentarily and potentially physically unseaworthy.

If the ship’s classification society requires the defects to be rectified before the next dry-docking survey, the seller would have to rectify the defect to the satisfaction of the classification society without condition or recommendation.

If, on the other hand, the defects can wait until the next class survey, clause 6 (ii) provides: “If the Classification Society do not

require the aforementioned defects to be rectified before the next class drydocking survey, the Sellers shall be entitled to deliver the Vessel with these defects against a deduction from the Purchase Price of the estimated direct cost (of labour and materials) of carrying out the repairs to the satisfaction of the Classification Society, whereafter the Buyers shall have no further rights whatsoever in respect of the defects and/or repairs. The estimated direct cost of the repair shall be the average of quotes for repair work obtained from two reputable independent shipyards at or in the vicinity of the port of delivery, one to be obtained by each of the Parties within two (2) Banking Days from the date of the imposition of the condition/ recommendation, unless the Parties agree otherwise. Should either of the Parties failed to obtain such a quote within the stipulated time then the quote duly obtained by the other Party shall be the sole basis for the estimate of the direct repair costs.”

In our opinion, redefining what is meant by ‘defect’ and limiting it only to matters that affect the class status of the yacht would remove the temptation to threaten to walk away or drive down the price. It would encourage potential buyers to undertake proper due diligence on a yacht before making a respectful offer that would be fixed and not open to renegotiation. Too often, the MYBA MOA is not outright and definitive. Perhaps it’s time it should be.

53

An evaluation of the merits of crew rotation

Crew rotation: magic bullet or financial nightmare?

Rotation can help crew longevity and lead to a healthy dynamic on board but what’s the actual cost? And should owners bear in mind the mental and emotional implications as well as the financial ones?

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BY JACK HOGAN

T

he goal of attaining a rotational position is a driving force for many ambitious yacht crew.

Rotation can be held up as the ideal endpoint for crew on their career pathway through yachting, with many captains working towards it for their entire careers. It’s seen as the moment when the hard work pays off and the elusive work-life balance is achieved.

However, the complexities and costs associated with it are often a sticking point for yacht managers and owners.

Rotational structures range from five months on, one month off (5:1) up to the idealised time for time spilt, most commonly two months on, two months off (2:2). When a rotation is implemented effectively, it can give a level of balance and structure to the vessel’s operational profile, the guest experience and the life of the crew on board and ashore. It also elicits a strong reaction. As yachtmanagement director Jack Molyneaux puts it, “In this industry, rotation is an emotive word.”

The prospect of a structured leave schedule that allows planning for life outside the constraints of a yacht’s operations can hold great appeal for hard-working crew. Conversely, allowing the vessel and management to structure the crew’s movements also adds a level of organisation that can filter through the yearly operational profile of a typically busy yacht. When implemented effectively, rotation can also provide an owner with a healthy dynamic on board, with solid crew retention.

The Superyacht Owner Report ISSUE 209

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Rotation is also used as an incentive by senior management in some cases, tantalisingly over the horizon but just feasible enough to keep crew on board constantly for one more season.

Rotation is becoming an increasingly common feature on commercial vessels and commercially run large superyachts.

It’s expected by chief engineers and captains, and is now becoming more commonplace throughout a typical superyacht employment structure and on a more diverse size range of vessels.

Rebecca Adams, placement manager at Viking Yachts, put this growth in expectation for rotation into context.

“We are now starting to see junior deckhands stating that they will only accept a 3:1 rotation for their first role.”

This is something that would have been unthinkable to the previous generation of crew.

As the application and expectation for rotational positions grow, the rationale for or against implementation deserves examination. Rotation doesn’t suit every vessel and must fit the operational profile of a superyacht. Often, the driving factor in favour of rotation is that the crew’s workload is high and more time off with more structure is needed to retain them. By contrast, the cost to the owner is the reason most often cited against a rotational system.

But what is the actual cost? Are the financial implications too simplistic a metric on both sides of the decisionmaking process?

In terms of percentages, the implications for the owner can be reasonably easy to quantify, at least initially. Tim Clarke, managing director at Quay Crew,

The Superyacht Owner Report ISSUE 209

“For a new-build 65m-plus, the variance in cost from 60 days’ leave, excluding engineers, for the entire crew to a full rotation for senior crew and 3:1 for the juniors was 34 per cent.”

says, “We worked with a 100m-plus yacht which brought in a 3:1 from a 5:1 rotation for all the junior crew. This move added just under 20 per cent to the annual cost for the junior departments.”

There are 100m-plus vessels with sufficient junior crew numbers that can implement something like a 5:1 rotation but these don’t necessarily offer a valid comparison with most superyachts.

Additionally, this leave schedule is somewhat disingenuous as an authentic ‘rotation’. Having two fixed months off with almost no flexibility essentially leaves 10 months a year that do not exist to you on a personal level. However, this does marry the operational profile of 3,000gt-plus superyachts with the structure of the commercial maritime industry and assists with the bilateral flow of crew between these two sectors.

The majority of the fleet – the sub3,000gt sector – presents a more complicated scenario for rotational implementation. This is where the justifications for or against rotation become more opaque and subjective. However, staying with the financial implications, Clarke offers more detailed examples of the effect on the budget for conventionally sized superyachts. “Quay Crew have recently been working closely with a yacht owner’s team and put together a variety of crewing options for a new-build 65m-plus. The variance in cost from 60 days’ leave, excluding engineers, for the entire crew to a full rotation for senior crew and 3:1 for the juniors was 34 per cent.

“This also meant that the number of crew on the payroll increased from 18

57

to 24. That is a significant commitment and doesn’t include the additional costs accrued elsewhere. We also recently put together several options for a very prestigious 90m new-build. The difference in cost from the smallest budget to the largest budget, with various rotations and crew structures, was 30 per cent.”

This 30 per cent increase belies a complex set of considerations for any owner. If not handled correctly, the cost of rotation can spiral significantly – a situation that Clarke has seen unfold first-hand. “A few years ago, we worked with a large new-build project. Unfortunately, the build project manager/ owner’s rep, despite being very competent at many things, hadn’t worked on yachts so didn’t have the required knowledge of the optimum crew structure for a vessel of that size, salaries, packages etc.

“The result was that a lot of time, money and effort were wasted on something which wasn’t fit for purpose and which, if implemented, would have been disastrous for the project once launched. The owner experience also would have been very negatively impacted and crew turnover would have been high, as would all the associated costs.”

As Clarke explains, it’s a complicated undertaking and getting the right advice is critical. “Get someone to look at the crew structure, schedule and packages who knows what they’re doing from an early stage before anything is signed off. Having a budget signed off but then reworking it at a later date because of a structural oversight to fit the owner’s expectations is very difficult.”

Dùghall macLachlainn, captain of a 70m-plus yacht, is unequivocal about whether these costs were outweighed by crew retention and a general satisfaction and happiness on board.

58

“One hundred per cent yes, 150 per cent yes!” macLachlainn says the incremental implementation of a structured rotation system helped his pro-gramme immensely, retaining great crew, but he is also clear that it is not a one-size-fits-all solution. “Rotation is just one factor in crew longevity and a healthy dynamic on board. You have got to offer the right package all round and have the right person to match the itinerary.”

The cost is, in many ways, the most simplistic factor: more flights, more hotels and, especially in the age of COVID, more testing. But there is a more complex set of circumstances that require attention, concerning both the owner’s experience of their vessel and crew job satisfaction and their mental health. Molyneaux believes the emotional considerations should not be overlooked, at least from an owner’s perspective. “Everything always comes down to the emotional position of the owner. I think that in some cases, irrespective of whether the numbers make sense or they don’t, sometimes emotionally, rotating the crew is just not what the owner wants to do.”

As more pressure and expectation for rotational positions is applied from junior crew up to senior management, there needs to be a more nuanced appreciation of what is involved. The yacht management is not simply asking for more budget. Molyneaux says, “I’ve never tried to justify a rotation based on expenditure. It’s always been based on the workload of the crew. This approach gives you room to review continually.

You may be able to make smaller incremental changes and tailor the organogram of the structure of the crew to the yacht specifically, as opposed to [it] being a preconceived idea.”

The justification for six months of the year doesn’t sit well with many time-

for-time rotational crew who may work entire rotations with no time off and have days that flirt with the boundaries of hours-of-rest compliance at the very least. Also, for a rotation to work within the challenges of a busy yacht, many captains especially are never entirely ‘off the boat’. While this may be a system that works for regimented commercial vessels, the dynamism and complexities of a busy superyacht can make it impractical.

Barry de Kock, captain of a 65m-plus vessel, says, “Personally, myself and my rotational captain would keep in touch each week during my rotation off.

I am never completely cut off from the yacht. I think you should have enough involvement and rapport with the crew to know what is going on on board, so that when you return you are up to speed with important developments because a lot can change.”

Molyneaux adds, “What’s the thought process or the emotional decision leading towards going to the rotation? Is it because you want to retain the crew? Are you trying to adopt

“As rotation becomes increasingly normalised, then you may be doing the owner a disservice by not offering it and attracting the best possible candidates for positions.”

The Superyacht Owner Report ISSUE 209

it because you think it’s an industry standard? Or does the boat think anyone that’s holding a class one licence should have a rotation? The clarity in this position will always help in presenting it to the owner.”

Another side to the topic that certainly comes up on board is the resentment, sometimes explicit and sometimes implied, from the senior crew. Many captains, for example, have worked their entire long careers for a rotational position. According to Molyneaux, as captains are the conduit between the crew, management and owner, their hesitancy may hold up its implementation, even when it’s the solution that suits the vessel’s operational profile. “The senior crew that have invested so much time to get rotation, and maybe [are] resentful to new crew getting it significantly quicker, perhaps need to take emotion out of the equation and accept that that is the way the market is going. As rotation becomes increasingly normalised, then you may be doing the owner a disservice by not offering it and attracting the best possible candidates for positions.”

A significant implication of the idea of rotational ubiquity across the industry is the dilution of the talent pool. The system works for owners only if there is minimal disruption to the guest experience, and by implication that requires having an equally talented crew in each rotational position. Clarke says, “There will be an owner at some point soon who has no concern about budget, who purely wants the best crew and wants to hold on to them, and will offer time-for-time rotation from the most junior positions up. In my view, this will be disastrous for the industry as a whole because, at the moment, there’s a massive shortage of great crew for the number of yachts and new builds scheduled.”

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Many crew walk a tax-burden tightrope that is predicated on a precise number of days outside their country of residence. This balancing act relies on organisation on both sides, and mistakes have affected many crewmembers.

A less tangible implication that rotation presents for an owner is the effect on the continuity of a charter. The structure that underpins a rotation of crew does not always fit with what suits a trip. The bonds that form between crew and owners, owners’ families and charter guests is a large part of what makes a trip successful; disrupting this balance with a partial crew changeover at the midpoint of a long trip can be highly disruptive. Often, despite the black-and-white nature of many seafarers’ contracts, the reality is that an owner will want a specific crew with them on a particular trip. This requires flexibility that may seem fundamentally the opposite of the idea of rotation in the first place.

Molyneaux feels there should be clarity, with rotational agreements being communicated clearly. Days on board, especially concerning time-for-time crew, have broader implications on time ashore. Many crew walk a tax-burden tightrope that is predicated on a precise number of days outside their country of residence. This balancing act relies on organisation on both sides, and mistakes have affected many crewmembers.

“As crew contracts become more serious, and you’re on rotation with

The Superyacht Owner Report ISSUE 209

a significant salary package, it’s very important that you fundamentally understand what you’re signing,” says Molyneaux. “What it means to you in the event of not being able to join, having to stay on longer or if the vessel sells.

Today, you need to understand your contractual position more than ever.”

The least calculable, but most palpable, consideration associated with a rotational system affects crew mental health and the dynamic on board.

Holding up rotation as a panacea for the healthy operation of a vessel is an oversimplification. Speaking from personal experience, I never saw a crewmember gain rotation and then have their career stress wash away. Molyneaux explains, “Teams on board have to think about their own culture and their ethos and what they’re trying to establish on board.

Everything has to tie in together. You can’t cherry-pick the aspects you like.

I think there has to be a sensible and professional approach to it.

“Rotation will not fix a broken culture. I think a competitive package is essential. I think there is an expectation, and I think it’s becoming more commonplace, reasonable or not. I think it’s a personal interpretation but it does not fix the dynamics on board

or cultural issues on board, which can become more exacerbated by introducing it.”

Clarke was also prescient with his conclusions. “Rotation is viewed as some form of magic bullet. If we bring in a 3:1 rotation for all junior crew and put all the department heads on timefor-time, the cost will be another 40 per cent over the year. Then we will have to pay X, Y and Z, and then we will have a great crew and a great dynamic on board. That’s a fallacy. The reality is that unless you have a good captain with a solid working culture and a happy work environment, you’re still going to get turnover.”

Rotation is not a privilege or a right for crew. However, it does present an excellent chance for a vessel to reward its crew with more time ashore and structure to their lives. This can lead to higher retention of crew, an improved dynamic on board and a better owner experience. However, it should not be seen in isolation and will succeed only if considered as part of a comprehensive system of on-board operations. JH DO YOU WANT TO KNOW MORE? VISIT SUPERYACHTNEWS.COM AND SEARCH ‘CREW ROTATION’

61

Guest Column with Laurence Lewis

Rotation, rotation, rotation!

Paying two full-time salaries for each position might seem extravagant but it gives owners more options and saves future expenditure, says Laurence Lewis, president of YPI Crew.

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Rotation or job share creates a dynamic of success; the yacht has double the experience for any given position, crew can exchange ideas, brainstorm and come up with new solutions and experiences for the owner.

One dictionary definition of ‘rotation’ is ‘the passing of a privilege or responsibility to each member of a group in a regularly recurring order’. In yachting, crew rotation is both a privilege AND a responsibility.

This was certainly the case 10 years ago, yet some might say that a paradigm shift has taken place and far from being a privilege, rotation has become a given and is widely sought after, expected and requested. Three months' work/ three months' leave/paid 12 months, or variations thereof, is what most crew and captains aspire to on yachts over 500gt.

So how does this affect yacht owners?

Is it still a subject of debate in 2021?

Does anybody continue to question its benefits?

As recruiters, we see first hand the benefits to the owners brought by rotation: crew stability, reduced crew turnover, a sense of appeasement within the team and, of course, the possibility to attract high-calibre crew which leads to a satisfied owner and an enhanced guest experience as well as promoting a sense of enjoyment of their yacht.

Given the opportunity, crew will leave a non-rotational position for a rotation and many will quietly start looking for such opportunities within a year of joining a non-rotational job. That’s the reality.

Without doubt, rotation contributes to tackling the high crew-turnover issue that burdens our industry. This turnover comes at a cost not to be underestimated: when someone quits a job they get paid their days worked that month, their accrued leave, perhaps their notice in lieu of leave and, with recruitment costs on top, it’s not surprising that even someone quite junior on a €3,000 per month salary will end up

The Superyacht Owner Report ISSUE 209

costing €12,000 to replace. Those are the tip-of-the-iceberg costs and more are lurking in the shadows.

At first glance, rotation does not come cheap either – paying two full-time salaries to have one person on leave at any given time might seem extravagant.

However, this instant spreadsheet view doesn’t integrate one vital element that I like to call ‘future collateral savings’. I started my recruitment career in London working with stockbrokers, mostly with futures and options traders, and I remember the concept of hedging risks and locking in a price beforehand.

Rotation can be envisaged with this concept in mind: paying now to better control – or completely avoid – future expenses.

How is that? High turnover of crew, with perhaps a heavy reliance on temporary crew to fill in gaps, impacts the quality of service, the safety and maintenance of the yacht. The price of losing knowledge in all departments, mostly in engineering and on the deck side, when crew quit their positions is high compared to the cost of having crew on rotation. Also, when well implemented, rotation or job share creates a dynamic of success; the yacht has double the experience for any given position, crew can exchange ideas, brainstorm and come up with new solutions and experiences for the owner.

I recently spoke with a client who, after 20 years of yacht ownership, had decided to offer rotation to all his heads of departments – not just his captains and engineers, but also his officers, chefs and stews. Our society is changing, our collective perception of work and what happiness and fulfilment entails has evolved at both employer and

employee level, and COVID-19 has further accelerated this process.

Was this move to offer rotation altruistic?

No, the decision was made because it made sense. The owner wished to have the vessel available at all times throughout the year, at very short notice and without compromise in the quality of service. This became challenging to achieve as many of his regular crew took holidays during the off-peak season.

Rotation was the obvious solution.

Sweeping statements don’t apply in an industry where bespoke is the norm, and clearly rotation is not the answer for all yachts. At present, rotation is generally offered on yachts above 500gt and more likely to hire crew with a commercial maritime background for whom rotation is in evidence. A vessel’s itinerary and programme are also a consideration; a single-season private yacht doesn’t probably warrant rotation for all crew apart from the engineers, for whom rotation is the norm on yachts over 50m.

The cost and benefits of rotation are clearly yacht- and owner-specific, with the best time to address this topic at the build stage or as soon as a purchase is envisaged because setting up a rotation is easier to implement before employing the crew. It will avoid the salary negotiations involved with a change of status and set the high-performance standards from the outset.

Yacht managers and crew recruiters are well positioned to formulate and budget the best way for each owner to build an effective and loyal crew in an employment market where rotation is undeniably picking up momentum. It’s an interesting equation. LL

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Camper & Nicholsons has invested in a brilliant team of people with proven expertise in guiding owners and buyers through the world of yachting. With one of the industry’s most sophisticated digital brokerage platforms and a constant investment in technology, we help owners and buyers understand the market, explore unique opportunities and enjoy the process of acquiring yachts of all sizes and pedigree. With Camper & Nicholsons, our clients get the most out of yacht ownership.

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Brokerage market report

WHAT MAKES AN EFFECTIVE AND EFFICIENT BROKERAGE HOUSE?

BY JACK HOGAN

TSG analyses sole CA sales activity between 2015 and 2021 to identify the brokerage houses that have added the most value for sellers.

66

Source

superyachtnews.com/intel

Figure 1: Average GT and LOA sold by brokerage house (2015-2021) GT

LOA (m)

900

750

60 49.4m 45.4

41.6m

44.2m

50 41.0m 38.2m

600

38.7m

37.5m

35.5m

36.4m

40

450

30

300

20

150

10

0

670

588

485

424

378

302

290

261

247

247

Burgess

Fraser Yachts

Camper & Nicholsons

Edmiston

IYC

Worth Avenue

Ocean Independence

Northrop & Johnson

Denison Yacht Sales

RJC Yacht Sales

Note: sales are sole CA only

C

alculating the efficiency of a superyacht sale is challenging as many factors affect the time it takes to make a sale. Pre-owned superyachts add another layer of complexity; one owner’s dream is another’s nightmare and, occasionally, taste is inversely proportional to the size of the superyacht. Brokers work hard to get these deals done, and there has been significant activity in the sole CA sales market from all industry key stakeholders since 2015.

By compiling data from The Superyacht Agency, a brokerage data set gives insight into the nuances of superyacht sales. When examining the total number of sole CA transactions, the most active stakeholders since 2015 can be seen. As presented in Figures 1 and 2, a diverse set of brokerage houses is represented.

The Superyacht Owner Report ISSUE 209

Average GT

0

Average LOA (m)

The 10 stakeholders presented in Figures 1 and 2 provide a cross-section of the brokerage market from both sides of the Atlantic and the traditional size range specialists. Concerning average LOA and GT, Burgess and Fraser have the most robust representation of large yachts, with Fraser selling significantly more 30-40m yachts. Other industry heavyweights, such as Camper & Nicholsons and Edmiston, are next, with smaller highvolume US-based brokerages, such as Denison Yacht Sales and RJC Yacht Sales, at the other end of the scale. There is nothing overly surprising here.

Examining the total sales or the highest average GT and LOA sales in isolation to evaluate the top brokerage houses does not present the complete picture. To get a more detailed analysis, The Superyacht Agency compared a selection of more nuanced angles.

The average size and number of price reductions per sale offer a more detailed comparison. Burgess, Fraser, Ocean Independence and Edmiston have offered the largest average reductions (Figure 3).

All except Ocean Independence would appear to relate to the larger average size and expected value of the yachts sold. RJC has offered the lowest average reduction while also selling the smallest yachts. Many price reductions remain opaque, especially in more private brokerage transactions. However, the notion that RJC is offering less than half the average reduction of a comparable brokerage houses such as Denison, which sells almost identically sized yachts, is significant (Figures 1 and 3).

Concerning the average number of price reductions per sale, Burgess, Edmiston and RJC have the least, with 0.6 per sale (Figure 4, rounded to nearest

67

BROKERAGE HOUSES Figure 2: Sales by brokerage house and LOA size sectors (2015-2021) LOA (m) 80 70

71 61

60

63

50

46

40

44

42 37

27

30

24 19

20 10 0 Northrop & Johnson Note: sales are sole CA only

Fraser Yachts

1

IYC

30-40m

40-60m

8

6

2

1

Camper & Nicholsons 60-90m

Denison Yacht Sales

90m+

Figure 3 : Average size of price reductions to point of sale (2015-2021) e-1.13 million

Burgess Fraser Yachts

e-1.07 million e-0.97 million

Ocean Independence

e-0.97 million

Edmiston Northrop & Johnson

e-0.82 million

Worth Avenue

e-0.79 million

AVERAGE PRICE REDUCTION ACROSS THE 10 BROKERAGE HOUSES = E-0.73 MILLION

Camper & Nicholsons

e-0.68million

Denison Yacht Sales

e-0.62million

IYC

e-0.61 million

RJC Yacht Sales

e-0.25 million

e-1.25 million

e-1.00 million

Note: sales are sole CA only

68

e-0.75 million

e-0.50 million

e-0.25 million

0

Source

superyachtnews.com/intel

Figure 2: Sales by brokerage house and LOA size sectors (2015-2021) LOA (m) 80 70

62

60 50 40

39

40

33

29

29

25

20

30

20

20

12

8

RJC Yacht Sales

Ocean Independence

40-60m

10 0

Worth Avenue

30-40m

4

2

1 Burgess 60-90m

Edmiston

90m+

Figure 4: Average number of price reductions per sale by brokerage house (2015-2021) Denison Yacht Sales

1.6 1.3

Worth Avenue

1.3

Ocean Independence Northrop & Johnson

1.2

Fraser Yachts

1.0

IYC

0.9

Camper & Nicholsons

0.7

2.00

1.50

1.25

1.00

0.75

0.6

RJC Yacht Sales

0.6

Edmiston

0.6

Burgess

0.50

0.25

0

Note: sales are sole CA only

The Superyacht Owner Report ISSUE 209

69

BROKERAGE HOUSES

Figure 5: Average number of days on market by brokerage house (2015-2021) Ocean Independence

549

Fraser Yachts

447

Edmiston

441

IYC

418

Camper & Nicholsons

400

Burgess

396

Denison Yacht Sales

386

Northrop & Johnson

360

Worth Avenue

341

RJC Yacht Sales

307

0

100

200

300

400

500

600

Note: sales are sole CA only

0.1). This also shows the next significant differentiator between Burgess and Fraser, with the latter needing 1.0 reductions per sale. This is countered by the highest number of price reductions per sale, namely Denison, Worth Avenue, Ocean Independence and Northrop & Johnson, with each requiring at least one reduction per transaction. RJC is the outlier in this data set, bucking the trend shown in Figures 3 and 4 that smaller yacht sales require multiple small price reductions.

The length of time each sale remained on the market offers another point of analysis with, in this case, Ocean Independence transactions spending the most time on the market, at 549 days, and RJC the least, at 307 (Figure 5). The average length of time a yacht takes to sell at each of the 10 brokerage houses is partially explained by the general trends

70

shown across all sales that certain sizes show specific traits in terms of time on the market. For context, when the entire brokerage market is examined over the same period, certain trends are evident regarding LOA and time on the market (Figure 6).

That 30-40m vessels spend the most time on the brokerage market on average (502 days) is both surprising and unsurprising (Figure 6). On the one hand, 30-40m superyachts are the most affordable of all the superyacht size ranges and so have the largest potential buyer pool, suggesting that the sale of 30-40m vessels would be easier and, perhaps, quicker. However, 30-40m superyachts are also by far the most numerous of all the size ranges and, therefore, their rarity is negated and competition for sales increases.

Given the issue of rarity (supply),

Ocean Independence transactions spent the most time on the market, at 549 days, and RJC the least, at 307.

BROKERAGE HOUSES

Figure 6: Average number of days on market before sale for yachts sold 2015 onwards (by yacht size) Days on market 600 500

502

486 394

400

335

300 200 100 0

it stands to reason that as the vessels grow in size, their time on the brokerage market will decrease, and that proves to be the case. On average, 40-60m vessels spent 16 fewer days on the brokerage market than 30-40m vessels. However, it should be noted that a 16-day average differential is nominal, to say the least.

The 151-day average difference between the 40-60m and 60-90m size ranges is of far greater consequence.

When related to the ‘days on market’ analysis, this helps to explain the longer time on the market for a brokerage house such as Ocean Independence, whose average LOA of 38.7m places it firmly within the 30-40m sector which

30-40m

40-60m

60-90m

traditionally has the longest expected time on the market.

It also elevates the apparent performance of RJC, Denison and Northrop & Johnson which, while also selling in this highly competitive and traditionally time-consuming sector, were able to keep their time on the market relatively low and well below what would be expected from their average LOA of superyachts sold since 2015. Conversely, these data points prove to be the only other major differentiator of note between Burgess and Fraser, with 396 and 447 days respectively on average spent on the market. However, this can be explained by the latter’s much higher

90m+

number of 30-40m yachts sold (Figures 2 and 5).

In a highly dynamic and competitive sector, simply ranking brokerages based on headline figures is overly simplistic.

There are as many contributing factors as there are yachts on the market, and some can affect an owner’s experience and financial bottom line more than others. A more nuanced picture must be drawn for any real comparison. As the industry forges ahead, we look forward to seeing if these trends will also hold. JH DO YOU WANT TO KNOW MORE? VISIT SUPERYACHTNEWS.COM AND SEARCH ‘BROKERAGE’

This information is just the tip of the iceberg. If you want to know even more about the market and its performance, we can delve a lot deeper into its nuances. To find out more about our bespoke consultancy and due diligence services, please contact William Mathieson: william@thesuperyachtgroup.com

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Guest Column with Sarah Allan

Don’t get caught up in the blame game!

Sarah Allan, partner at Penningtons Manches Cooper, outlines the steps yacht brokers can take to protect themselves from liability during contractual disputes.

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Guest Column with Sarah Allan

It’s with relief that we return to a new normal as countries in yachting hubs are more readily opening their borders.

Meanwhile, yacht brokers have sat in the middle of a firestorm. The number of charter cancellations and contractual renegotiations due to Covid was unprecedented. Clients looked to their brokers for assistance.

Quite often, solutions were found that accommodated both parties’ interests, thereby avoiding arbitration.

However, under pressure, brokers could have unintentionally exceeded their authority or acted inconsistently with their principal’s interests. Where contractual provisions might not benefit a party, a broker will want to avoid any blame, and it’s worth reflecting on how they can protect themselves in these circumstances.

To do this, one really must go back to basic principles. An agent may have the authority to act on behalf of a principal, and this is often recorded in a written contract such as a central agency agreement. Alternatively, they may have apparent authority where the principal relates to the other party that an agent has jurisdiction to contract on their behalf. Ideally, the scope of that authority should be agreed, but implicitly it covers the services incidental to carrying out the principal’s instructions.

Under English law, a broker is obliged to exercise reasonable care and skill in providing its services. They also must not act beyond the limits of their actual authority. A broker may (subject to any exceptions in their contract) be liable for damages directly caused by any breach of their duties, which include any applicable industry code of conduct and fiduciary duties.

Brokers may not have the authority to conclude a contract without reference back to the principal. Under MYBA contracts, the actual contracting party will usually sign the agreement. This avoids any allegation that the broker acted beyond the scope of their actual authority in concluding a contract, and

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the principal is on notice of the contract terms.

Importantly, under English law, precontractual negotiations are rarely admissible in construing any contract.

This contrasts with a situation where no formal contract is agreed, and one must review both the parties’ conduct and correspondence to ascertain what was agreed.

The Covid pandemic was a novel situation and the legal issues were more complex in cases where countries adopted different regulations.

Brokers handling negotiations were often committing their clients to new contractual obligations and therefore had to tread carefully. For instance, did a party have a right to cancel or had they inadvertently waived that right because of a broker’s equivocal or ambiguous response? Did the broker have authority to bind the principal to a new agreement? Were the terms of the new agreement fit for purpose or did they in any way jeopardise the principal’s rights?

Inevitably, these issues only came to light as the renegotiated contracts, often incorporating some form of Covid addendum, were scrutinised when the ‘rescheduled’ obligations arose.

What can a yacht broker do to protect their position?

As a starting point, yacht brokers providing any service should have a written agreement with their principal, clearly setting out the scope of their authority, remuneration and limitations of liability. Equally, where a subbroker is engaged, the brokers should have a separate agreement between themselves, thereby also avoiding potential disputes over commission arrangements.

Who the broker is acting for may be obvious where a seller or owner engages a broker and pays commission to that broker. The position can be unclear in cases where a broker deals with both parties. A charterer or buyer

may incorrectly conclude that the broker is looking after their interests. Brokers should seek to be open about this with the parties, particularly where a dispute is likely.

While it’s commendable to keep a contract alive by negotiation, principals should be consulted on their options and told they can seek independent legal advice. This isn’t to say that yacht brokers can’t play an important role in helping parties to resolve their differences rather than resorting to arbitration. Expressing a commercial and unqualified view on the likely outcome of a dispute can be instrumental in broking a compromise.

A broker may also be appointed as stakeholder but those obligations are distinct. In the event of a dispute, a separate department should ideally handle such matters. If a stakeholder comes under pressure to release a deposit where there is a dispute but arbitration has not been commenced, legal advice should be sought. If the contract is subject to English law and jurisdiction, a stakeholder may be able to apply to the court to give directions as to which party the broker should pay the deposit.

If a dispute can’t be resolved then legal process will have to be commenced. In such cases, the broker may be obliged to disclose all relevant documents.

Yacht brokers should therefore maintain a complete file of all electronic correspondence, including text and WhatsApp messages, and should also keep a record of all telephone attendances and meetings. In the event of a cancelled charter this would prove the broker exercised best endeavours to mitigate the loss if a replacement charter could not be found.

In conclusion, if a yacht broker has any doubt as to the scope of their authority or instructions, they should seek clarification before committing their principal. This is of utmost importance when unforeseen situations arise and brokers are asked to assist. SA

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Water Revolution Foundation column with Bram Jongepier

The birth of the real-life YETI Bram Jongepier, chair of the Yacht Environmental Transparency Index project, explains how his 3am brainwave triggered serious progress towards more environmentally friendly yachting.

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It started with a Christmas card in 2018 that I’d sent to my peers in the yachting industry with the request to help me find the YETI: the Yacht Environmental Transparency Index. I received very enthusiastic reactions so we hosted a meeting in March 2019 at our FeadshipDe Voogt offices to discuss this idea, and this resulted in exciting progress and significant milestones over the past two years.

At this meeting, I shared the challenges I face as a designer to showcase to our clients how much better a new concept design we had created would be compared to the status quo. Great concepts mostly end up being judged by their economic cost alone, and unfortunately there was no reference for the ecological side that could indicate the benefits versus costs and as such to make a more informed decision.

The yachting sector didn’t have a standardised way of comparing yachts on their environmental credentials. The invited industry peers faced the same challenges.

My brainwave at 3am one night in November 2018 turned into an official Joint Industry Project through the new collaborative platform Water Revolution Foundation.

The way forward No less than 11 leading yacht builders, four renowned naval architecture firms, a large refit yard and three Dutch knowledge and research institutes signed up to take on this challenge.

The group represents more than 40 per cent of the market share and I’m very proud to be the initiator and chair of this project. We all understand that if we don’t do this, IMO will wake up one day and force the general IMO EEDI system upon yachts. Obviously, then it will be too late to propose an alternative for yachts. This project is to develop a scientific, sound and robust tool on which we subsequently can base a new competitive arena to deliver the environmental friendliest yacht.

Transparency Ambitiously, we ‘set sail’ to develop a rating system that was ultimately able to

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reward clients, designers and shipyards for the efforts put into the project and choices made to make a better yacht.

A yacht that provides the same (or an even better) experience to clients by using fewer resources. The tool needed to also showcase why a yacht is better.

The T in YETI stands for transparency, a vital aspect and highly valued throughout the YETI development. Reduced environmental impact can be achieved through good naval architecture, system energy savings or additional technical features in the power-supply system.

Scope YETI 1.0 YETI is based on the Life Cycle Assessment (LCA) methodology which includes the build, operation and end-of-life/refit.

The scope of YETI 1.0 is focusing on the operational phase of the yachts and more specifically on the energy they use. This is split up into energy for propulsion and hotel function. By combining all yachts in one scope, we can truly compare them with one another on their environmental credentials. This means full- and semidisplacement yachts, fast yachts and sailing yachts, with most common powering systems such as diesel direct, diesel electric and hybrids.

Each yacht is unique … but their use is similar There are very big differences in size, type and execution in yachting, so the method needed to be inclusive, while also being sensitive to unique characteristics.

From the outset, YETI had to be realistic.

Our task was to develop an average operational profile that reflects the reality of current superyacht use.

A large quantity of AIS data (automatic identification system, compulsory on all large yachts) was analysed. Out of almost 300 years of operational data from 109 yachts, a standardised, parametric operational profile was determined with time and speed distribution, where speed was found to be related to waterline length. Yes, there are exceptions, but on average yachts tend to spend little time at speed (only 10 per cent) and most of their time in harbour (56 per cent) and at anchor (34 per cent). The use of an operational profile is the main difference from the EEDI approach, developed for

ships by IMO, which looks only at a single sailing condition.

Hotel function, however, is always on, also when in harbour with no guests on board.

Yachts connect to shore power or run on generators. The shore power supply has been counted for by taking into account the average energy grid in popular yacht marinas. You’ll see that we haven’t left any stone unturned and have created a very sound YETI methodology.

Existing fleet What about your current yacht? YETI does not only focus on new builds. In fact, we have a collective responsibility for the existing fleet of yachts. The same YETI approach works for comparing existing yachts to the fleet benchmark to determine its YETI score. Water Revolution Foundation aims to provide concrete solutions for yachts to be upgraded through refit should their owners wish to do so.

We can only do it right and together I hope our YETI development inspires you and that it proves our industry is working together to seriously progress towards environmentally friendlier yachting. We all feel a pressing need to make sure future owners of superyachts can still have fun without having unsustainable impact on our environment.

As I write this column, the YETI group is conducting the fleet review to test the YETI 1.0 calculator – an incredible milestone.

Still, much work needs to be done before we launch in November at The Superyacht Forum in Amsterdam. You’re most welcome to include your yacht in our YETI test fleet.

I want to thank Feadship for granting me the significant time to put into the YETI project and, of course, my fellow YETI developers at Abeking & Rasmussen, Baglietto, Benetti, Damen Yachting, De Voogt Naval Architects, Delft University of Technology, Dykstra Naval Architects, Fincantieri Yachts, Heesen Yachts, Lateral, Lürssen Yachts, MARIN, MB92, Oceanco, Royal Huisman, Sanlorenzo, TNO and Vitruvius. Together, we’ve put the YETI in the world, and I can’t wait to see it grow up! BJ

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A report on the optimisation of on-board space

KEEPING PACE IN THE SPACE RACE

BY MAX STOTT

As superyachts increase in size, the industry must retain its responsibility to ensure every square metre of space is optimised.

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here’s no right answer to the question of how to allocate space on a superyacht. It’s the result of a symbiotic relationship between ship builder and superyacht owner. However, over the years, it has become increasingly the norm to accept that it’s rare to see an owner enjoying their lavish owner’s deck or for a complex balcony installation to take its fully extended form. Far too often, a dining room, sauna or beach club is used for storage instead of for its original purpose.

Wasted space is seen mostly on superyachts for new owners. However, this is not solely due to their lack of experience; there’s also a significant disparity between owner, captain and builder. When we asked one captain whether he thought designers had an obligation to pass on their common experience about what constitutes onboard enjoyment, he replied with a chuckle, “It’s an interesting question because it works on the presumption that designers know what it’s like on board a superyacht.”

The goal of optimising space can be reached through a number of routes. The use of 3D renderings and VR can help to eliminate human error in the build process. Hybrid engines, depending on the type, are also reducing the size of engine rooms and freeing up space for the owner and crew. Designers and ship builders are also taking into consideration the full life cycle of a superyacht to ensure refit and repair work is more sustainable and cost-effective. But also, as we are seeing more often, the parameters that limit the fundamental ‘laws’ of design are being constantly pushed further.

For experienced owners who know exactly what they want, space is almost never wasted and is often optimised.

Mexican businessman Emilio Azcarraga, who owned Paraiso and Azteca before he

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“You have to ask yourself, are you optimising space or are you just using it?”

The stateroom on board M/Y Zeus was built a level higher than the bridge.

© Guillaume Plisson

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decided to build M/Y ECO (now Zeus) in 1989, changed one of the most rigid boat design laws in the industry. On Zeus, the owner’s stateroom is a floor above the bridge. When the designer suggested the top floor would be more suitable for the captain because there is less spray and a better view, Azcarraga replied, “Yes, that’s why I’m there.”

To this day, the owner’s cabin on Zeus remains above the bridge and serves as an example of how the necessity of client satisfaction can trump the rigid parameters of boat design. Azcarraga was an owner who used his superyacht experience and love of yachting to craft a vessel that he knew he could get the most out of.

In the 1970s and 1980s, when the largest private vessels were a quarter of the size of the current largest superyacht, wasted space was not seen as an issue.

Many crewmembers who worked on superyachts in earlier decades reported that every inch of the superyacht was used by the owner. The reason for this could just be because superyachts were smaller then, but with the evolution of design and technology moving at such an unprecedented pace, it’s difficult to resist the urge of taking a step back and observing with a critical eye.

Legendary designer Jon Bannenberg advocated practicality and simplicity throughout his celebrated career. In 2002, just before Lürssen launched 97m Carinthia, Bannenberg admitted his inspiration derived from the minimalist and simplistic silhouettes of the naval vessels in the Lürssen shipyard. At Lürssen’s 125th birthday in 2000, he said, “I could see how structures were driven only by the need to support the purpose for which they were designed.”

Optimising space is obviously not something exclusive to megayachts; designers in the 25-45m bracket have been addressing this issue at an

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Below: Space optimisation was at the forefront of the design process on the Princess X Class. Bottom: Project Fury is a concept that features 40 per cent more space than sail boats of a comparative length.

Image: Van Geest Design and Rob Doyle Design

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increasing rate in recent years. The Princess X Class, The San Lorenzo X-Space and the Wally Why200 are just a few of the prime examples of this. In this size range, the optimisation of space is more evident in every nook and cranny of the superyacht.

However, the 50m-plus bracket is where things get more interesting, according to Pieter van Geest, of Van Geest Design. “Most designers will tell you that an 80-metre superyacht is the ideal size because you can include all the most desirable features in a comfortable space. With 50-metre boats, the client often wants all those same features that you find in an 80-metre, so that’s where things get a bit more tricky.”

Van Geest, along with Rob Doyle, of Rob Doyle Design, recently delivered a very well received 63m sailing yacht concept named Project Fury. The sailing yacht boasts 705gt – a 40 per cent increase in space compared to most sailing vessels of the same length.

Project Fury effectively features the interior of a motoryacht inside a sail boat.

“There were no real main challenges.

It’s almost as if nobody ever came up with it,” explains Van Geest. “It’s weird because when you put it all together, it makes so much sense.” The simplicity of the concept, when studied alongside the impact of the final result, almost demands credit to the designers responsible.

Today, there is a vast expanse of concept superyachts circulating in the media space. Many of the most viral concepts, while they must be applauded for their passionate nature, are often unachievable. On the other hand, there are a number of ‘conceptual concepts’ that are innovative in their own right but fail to offer anything ground-breaking.

What Van Geest and Doyle have delivered in Project Fury is a superyacht that sits in the very heart of this spectrum.

Van Geest also offers his thoughts on the allocation of space on larger superyachts. “I think that space optimisers are usually people who started from small boats going into big boats.

Big-boat designers, I don’t think they are in a position to optimise space.”

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“They put a lot of gimmicks on which are meant to enhance the owner’s experience, but on one boat I worked on, the dining salon was used once the entire time and that was it.”

The Amsterdam-based designer, who is currently designing a 90m superyacht, adds, “You have to ask yourself, are you optimising space or are you just using it?

We have created a design with so much space that we are currently deciding what we are going to do with it. It sounds shocking, but with the larger yachts you have to be really creative in what you do and how you do it. How many swimming pools and hot tubs can you have at the end of the day?”

One aspect that appears to be a particular gripe for stakeholders in the industry are the ‘design gimmicks’ that appear to be more and more frequent.

Christoph Schaefer, who has been a captain on superyachts for more than three decades, says, “I’m always a little bit disappointed by what they do, what they call innovation. They put a lot of gimmicks on which are meant to enhance the owner’s experience, but on one boat I worked on, the dining salon was used once the entire time and that was it. Why bother with it?

Why don’t we start rethinking things a little bit?

“True innovation, when it comes to the bridge, when it comes to navigation, when it comes to hybrid installations in the engine room, that is always driven by really experienced owners who are well past the gimmick stage. They might include gimmicks just because they know the resale value of the boat later on is going to be higher.”

Of the ‘gimmicks’ that Schaefer refers to, he highlights a few from his own experience that were eventually deemed a waste of space. “We had the owner’s balcony in the master stateroom. This was a feature that was used quite a bit in the beginning, and then less and less towards the end until it was basically never really used anymore at all.”

An unused feature not only takes up space, it also takes up working hours.

“There was this barbecue pit made out of stainless steel. The crew spent hundreds of hours polishing it and it was never used once,” says Schaefer. Over-complicated electric and hydraulic designs have also proved to be something of

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A dining table, dance floor and cinema all in the same space.

a headache for Schaefer’s crew in the past. “We had these hydraulic falling bulwarks and sliding doors that meant the dining salon could be completely opened up. In the end, the crew didn’t operate it anymore because we just had constant problems with the electrics and hydraulics that didn’t work. It was just too overcomplicated.”

Kate Hadjidimos, of D-ID design studio, explains how she has tackled the issue of wasted space on superyachts through exploring multi-functionality.

“Something we did recently was focus on addressing this issue of how much space is not used on a yacht or is used in such a small capacity,” she says.

“If you monitor the percentage of what rooms are used at what times of the day, you will see that the dining room is one of the areas that really flags up. So we have created different opportunities for that space with technology, and what that translates to is a standard configuration of 10 seats around the table which can be extended to seat 16. But, crucially, it can also all be packed away with the storage, all planned within the space, so the area can be transformed into a full-set cinema or a dance club.”

A superyacht is a complicated space; on the one hand, it demands comfort and relaxation for the owner while on the other, it must provide practicality in conjunction with the labour-intensive tasks of the crewmembers. Hadjidimos highlights the importance of considering the crew areas on board a superyacht when allocating space. “It’s intensive work, and at times the crew need to be seen and at other times they don’t. If they are changing bags and moving dirty linen around, they don’t want to operate in public and the guests on board don’t

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© 2021 D-iD Ltd

want to witness these efforts either. So crew circulation is always an important part of our consideration.

“If the crew are happy on board, then the chances are much higher the client is happy on board. As a designer, your foremost aim is for the client to be happy.

To ignore the crew areas and solely focus on making the owner’s area beautiful and decorative without addressing the practical side of things, then I think from a design perspective, that’s a missed opportunity.”

Hadjidimos believes that the next generation of superyacht owners will be the biggest driving force for future innovation in superyacht design, “Specifically clients who are new to yachting, who’ve got experience in other industries. Their requests and ideas will push the boundaries of yacht design.”

Meanwhile, Van Geest is particularly enthusiastic about the emergence of digital tools coming in to play. “Virtual reality and 3D rendering is going to be standard in the next two or three years and it’s going to really help the process of shipbuilding.”

There’s a bubbling sense of excitement and anticipation in the superyacht design world. When analysing some of the more ostentatious and unpractical design gimmicks that remain in the industry, there’s a sense that you are observing the landscape through a rear-view mirror. That said, if you are to analyse the present and future prospects of space optimisation on superyachts, you’ll find that your cynicism is quickly replaced by optimism. MS DO YOU WANT TO KNOW MORE? VISIT SUPERYACHTNEWS.COM AND SEARCH ‘LAYOUT’

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Guest Column with James Roy

We don’t have the luxury to waste space James Roy, managing director at Lateral Naval Architects, argues that the industry should be building smarter rather than bigger, thereby steering clear of novelty projects with no meaningful value.

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Guest Column with James Roy

We all have a responsibility to design, engineer, build and operate in a smarter way, using fewer resources more effectively.

Sustainability does not mean doing or delivering less.

The world is, in parts, a very crowded place. In these places, humankind has by necessity become highly inventive at maximising liveable space. Boats are a good example of environments where there are hard physical limitations and competing demands on available space. Much like urban environments, if more space is needed you either become more inventive in using what you have or you expand. However, unlike the urban environment, expanding the size of a yacht does not necessarily deliver a proportional benefit. There are diminishing returns.

Given that superyachts are generally limited to 12 or 36 passengers (depending on the regulatory framework chosen), one must ask how much space we actually need in the context of liveability. Certainly, to provide a base level of luxurious liveability, a 12-passenger yacht can be fairly small.

That said, it doesn’t take long to get into ‘inflationary’ territory. If you give a designer a client’s wish list, invariably the design will begin to grow. I can barely think of a project, regardless of size, where the use of space has not been a challenge, and I’m convinced that increasing the size is not necessarily the easy fix that people think it is.

Many yachts are designed with repeating features, the so-called ‘wedding cake’ label as often cited by some observers, and indeed even by clients who specifically wish to avoid it. Other yachts are festooned with countless novel features and spaces,

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many of which one would question how often they are used.

This poses two questions in my mind. Is one of the biggest luxuries to be wasteful of space (in the case of repetitive areas of similar function)? And is novelty is being presented as luxury?

I’m an engineer and naval architect.

One of the core elements of my job is to make things more efficient, especially considering our focus on sustainability and our impact on the planet.

It therefore often seems nonsensical to me to be searching for a saving, often investing significant engineering resources in the pursuit of single-digit percentages, to make a design bloated by inflation ever more efficient. I would compare this feeling to designing better running shoes for an increasingly overweight athlete. Is the first step not to go on a diet?

Inflation (more and more) versus deflation (more with less) is where the matter of sustainability begins – being inventive and so avoiding inflation.

Ultimately, before we ask engineers and naval architects to apply science via engineering, let’s apply some science in the development of liveable space.

When visiting the latest new builds, I often come away with a sense of awe.

We are producing floating artisan showcases. Fine craftmanship meets heavy engineering; go anywhere any time while wanting for nothing. But I’m also left feeling that I’ve not been in a modern 21st-century living space, one

that is inventive and avoids inflation.

There are some yachts that don’t fall into this category, and it’s increasingly obvious when you are on board one.

Smart design begins with a smart specification. However, aside from a client’s wish list, new-build specifications are often developed based on opinion of what is needed rather than on functionally based fact of what is needed. Every performance criteria is taken to the maximum in the belief that this will lead to a yacht of greater capability. Ultimately= it might, but if that capability is never actually used then resources have been wasted. It could even then be argued that the yacht is not fit for purpose.

Those resources are not just raw materials, design and engineering hours, energy and cost. They are also the residual space that is left for the yacht’s primary purpose – the liveable space that is the objective function.

In the context of sustainability, we don’t have the luxury to waste space even if it’s a luxury we can afford. Nor do we have the luxury to conceive, design and build novelty that offers no meaningful value.

We all have a responsibility to design, engineer, build and operate in a smarter way, using fewer resources more effectively. Sustainability does not mean doing or delivering less. The goal is to have the same functionality, luxury and performance or more, using less.

That’s the real challenge ahead of us. JR

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Covid’s long-term effects on superyacht marketing

BY MAX STOTT

The global pandemic has led to chief marketing officers in the superyacht industry shifting their focus and altering outdated practices in order to appeal to the next generation of owners.

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washing,” he says. “Sustainability is not a race, it is a team effort. Sustainability should be the norm in the industry and we need to learn from one another. The whole concept of yachting needs to evolve – from garbage waste, to noise pollution to the overarching purpose and very meaning of being a superyacht owner.”

An enthusiasm for sustainability is a trait shared by fellow chief marketing officer Kiran Haslam, of Princess Yachts.

“You can't enjoy a boat without enjoying the environment,” says Haslam.

“And everyone in the industry needs to know that. Our owners are in a unique position to make a difference because they can justify much larger financial contributions, they can incentivise projects or, at the very least, raise awareness among their circles.”

What appears promising is the sense of honesty and excited accountability among industry leaders. Haslam adds, “Are we amazingly green and clean? No. But have we committed to switching over to clean renewable energy? Yes. Have we already promised that we’ll do at least a 25 per cent reduction in our CO2 emissions from manufacturing within the next two years? Yes. Put that in writing. I hope [we are held] to account for it. Come back in two years and say, “Did you do it Kiran, or were you full of it?”

One thing that seems increasingly obvious is that the marketing sector feels an enormous responsibility to ensure transparency and honesty. Over the past decade, the general public has lost trust in the fourth estate, and this has been seen across a range of media landscapes, even in the niche yachting media. By eliminating sensational language and putting candour at the centre of their marketing campaigns, Nefzi and Haslam are making sure that ‘mistrust’ and ‘suspicion’ have no place in the lexicon of their brand.

© Feadship

‘J

olting’ is one word to describe the effect that the past 18 months has had on the marketing sector of the superyacht industry. With so many restrictions to real-life interactions and events, one could be forgiven for assuming shipbuilders across the globe have suffered financially. However, the complete opposite is the case; the shipbuilding industry is booming, and this is in part due to the adaptability of those responsible for selling these superyachts.

A post-pandemic environment will feature a world with more savvy clients who can stream superyacht knowledge from a variety of platforms. Superyachts are now not only exclusive to a small community, they are also part of the real world. There’s also an expectation that shipbuilders are maximising their sustainable efforts – the thin veil of greenwashing used by past marketeers is now transparent to the average client.

There has also been a power shift; the potential buyer now dictates many aspects of the buying process. The introduction of Zoom and Teams has meant a client can enjoy the buying process from the comfort of their own home – and on their watch.

Farouk Nefzi, chief marketing officer at Feadship, has described the journey of transforming Feadship from a respected company to one that is now admired. Nefzi tackled this by drowning out excessive glorification and empty promises. “The level of misconception is the most frustrating aspect of our industry. If a company says that they are going to make a difference then they should put their money where their mouth is,” says Nefzi. “In a world of clickbait and punchy headlines I think there is a hunger for realistic, conceptual and achievable aspirations.”

Nefzi also expressed his frustration with misconception concerning sustainability. “I absolutely hate green-

Farouk Nefzi, chief marketing officer, Feadship.

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Kiran Haslam, chief marketing officer, Princess Yachts.

As well as a shift in the way in which companies approach the market, the overall attitude of potential clients has also changed. Speaking to the Financial Times, Erwan Rambourg, a luxury analyst and author of Future Luxe: What’s Ahead for the Business of Luxury, said, “Right now, even with high unemployment, it is the iconic, recognisable products that are outperforming versus pre-Covid. There is no guilt factor – it’s more of a ‘I’ve survived this, it’s OK to reward myself, I’m worth it’.”

This attitude has led to an increase in demand for many luxury consumer goods across a number of industries.

Lamborghini recorded its most profitable year ever after selling 7,430 cars worldwide in 2020. Likewise, Rolex and Patek Phillipe are experiencing a huge resurgence after sales plunged at the start of the pandemic. Luxury home sales are also soaring. According to a recent Redfin report, sales in the US increased by 41.6 per cent in the first three months of 2021 compared to the first three months of 2020, with ‘luxury homes’ being defined as those selling for an average of $975,000.

Another noticeable change in the evolution of the marketing sector is the eradication of competition. Companies are now unified in their approach to tackling some of the biggest issues facing the superyacht industry. Even aside from

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“You need to be flexible nowadays.

The employees of the company are often remote, and sometimes so are the clients, so you need to make sure you’re working on the customer’s time, on their watch. ”

superyachts, unification is a sentiment that is being shared throughout the business world.

Reed Hastings, chief executive officer of Netflix, has said his biggest competitor was not Amazon Prime, HBO or Disney+ but rather it was sleep. “You know, think about it, when you watch a show from Netflix and you get addicted to it, you stay up late at night. We’re competing with sleep, on the margin.

And so it’s a very large pool of time.”

Hastings described Netflix and his more traditional competitors as “two drops of water in the ocean of both time and spending for most people”. The benefits that come with having a broader, more open view of the respected marketplace has allowed forward-thinking individuals to enhance the client experience.

The power shift has also been a significant change. Haslam says, “You need to be flexible nowadays. The employees of the company are often remote, and sometimes so are the clients, so you need that flexibility in order to make sure you’re working on the customer’s time, on their watch.

You’ll need to be able to respond and interact in real time, and you need to do it using every tool available to you.

The businesses that are able to do that are going to be successful, and they are going to be what I call the ‘hybrid businesses’.”

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Boat shows appear to be going out of fashion.

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This view is shared by Marianne Hendriks, managing director at Moonen Yachts. In a recent One to One series with SuperyachtNews she explained, “The client is now able to go through the majority of the buying process from the comfort of their own home or office. In a way, you are both talking on a digital platform and you are both in your most comfortable places. So it feels familiar from the very start.”

Hendriks added, “Normally, you would invite the client for a three-day visit to the shipyard, and very often it can be somewhat overwhelming because there are so many questions and so many decisions that need to be addressed. If you can break that down into 12 Zoom calls instead, it gives the client more time so they can take a more relaxed approach.”

Many stakeholders in the industry were also eager to witness the results of a year without boat shows. Hendriks said, “In my opinion, there is only one function for boat shows, and this is to show customers a boat when they are thinking of buying a boat.” She went on to compliment the evolution of the

Monaco Yacht Show which places the ‘drivers of the industry’, the owners, on the podium.

Haslam also has strong views on the topic. “Those guys drive those pylons in to make that marina for three and a half weeks so they can run their boat show and destroy some of the most important seagrass beds responsible for nurturing life at the most inopportune moment,” he says. “They’re held at the worst point of the calendar year and are wreaking havoc on all these marine animals such as pipe fish, seahorses and small fry when they are at a critical stage of development.”

Haslam explains the sense of tragic irony he felt after a boat show where he had spent a week pioneering sustainable efforts. “I’m standing there watching people roll up carpet which was down for five days and is now going into landfill; it’s just such a crazy idea. We have got to do things better.”

He not only believes in moving away from traditional methods of marketing, but also wants to push yachting into previously unchartered territory. “I think we need to go outside our sphere

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“I think we need to go outside our sphere of comfort, we need to move away from boat shows and start taking boats into the real world, and not be this tiny little closed club.”

of comfort, we need to move away from boat shows and start taking boats into the real world, and not be this tiny little closed club.” The sense of exclusivity and community that comes with being in the yachting world is an important marketing tool but it can also narrow the perspective and make us forget about the ‘real world’, as Haslam puts it.

Haslam himself has been very active in his mission to push yachting into the real world. Princess Yachts was the first luxury yacht company to be on connected TV through advertising via smart boxes. “[We were] the first luxury yacht company to have a trailer in the Quentin Tarantino movie Once Upon a Time in Hollywood.” Princess Yachts appeared in trailers across the UK, Ireland and other parts of Europe. “We changed the dynamic of how we present ourselves,” says Haslam.

Something that has been at the core of the marketing strategy for Princess Yachts has been its approach to authenticity. “We present ourselves in glorious detail,” says Haslam, who explained how he channelled his inner Don Draper. “I use film during the production process. I don’t use digital media for a lot of the stuff we do. We use 35-millimetre film, real film, it’s dangerous. The film is streaming off the reel and I’m thinking every second it streams it’s costing me and I don’t even

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know whether we’ve caught the content or not. But that’s given us texture. That’s given us something special. It’s given us our own unique look and feel, and profile within the industry.”

It’s interesting to see that in a socially distant world, companies in the superyacht industry have actually drawn closer together, and some of the main issues now seem closer to being conquered as stakeholders become more united in their approach. The aim of a marketing officer in a post-pandemic world is not simply to attract new clients; the role now also comes with a responsibility to ensure that the image and perception of their brand is not merely a spectacle, but also the honest truth.

Moving away from comfortable and familiar environments, embracing a virtual world and making real sustainable progress are some of the key elements in the industry’s change of approach to marketing superyachts. It’s been an eventful 18 months which has demanded adaptability as a necessity for success and survival, and it’s safe to say that the overwhelming majority of stakeholders have welcomed this transformation. MS DO YOU WANT TO KNOW MORE? VISIT SUPERYACHTNEWS.COM AND SEARCH ‘MARKETING’

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Guest Column with Mark Duncan

A new wave in search of yachting’s Dr Spock Mark Duncan, director of marketing at Fraser Yachts and author of best-selling Smart Yacht Marketing 101, examines the surge of new clients to yachting and shares some of their first-time impressions.

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It won’t have gone unnoticed that the year in which many yachting companies reduced their marketing spend and travel, networking was sorely restricted and yacht shows simply didn’t happen was the year when our industry witnessed one of the greatest surges in demand for yachts and yachting in more than 13 years.

It took a pandemic to finally position boating and yachting on the radar for a whole new wave of would-be owners and charterers.

Our industry has only ever succeeded in converting less than 10 per cent of all those with the means to sample what yachting has to offer; now more of the remaining 90 per cent are motivated to give it a try.

The current demand has not been driven by any desire to buy or charter a yacht. It’s the result of a greater, more existential need – a focused desire to be with those we care for in a free and safe environment. A timely reminder that, as humans, we don’t buy products just because they exist – we buy them because of the benefits we perceive they bring us.

“It doesn’t matter how big your home is,” one new owner told me. “Houses don’t move. When you can’t move either, and family aren’t with you, it is only a matter of time before your home starts feeling like a gilded cage.”

Over the past 18 months, for many of those with the ability and desire to escape those gilded cages and be together in a more fulfilling environment, one solution has been to purchase property in more ‘back to nature’ locations. Since July last year, the luxury property market worldwide has reportedly grown between 60 and 90 per cent on previous years. Boating and yachting have offered a second solution, and that’s where the greatest growth is taking place. As one first-time buyer somewhat surprisingly revealed, “It only dawned on me recently that a yacht can be more than just something to travel on.”

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As of early August, data from our own in-house Fraser Central Intelligence Department (CID) shows worldwide sales of yachts above 24m pacing at a staggering 230 per cent above the average for the first seven months of any year since records began in 2009.

Every size sector is witnessing growth.

The lion’s share, however, lies in the 24-60m sector with sales of 24-40m yachts, the entry point to our market, more than double the average of the past two years and accounting for more than 80 per cent of all sales. Perhaps, not surprisingly, this is the sector with the greatest number of first-time buyers – almost 40 per cent according to our own analysis (a number also mirrored within our charter business).

So with so many fresh new eyes surveying our market for the first time, what key first impressions has this new wave of clientele been left with from an industry so keen to impress? “You are all THE #1,” joked one buyer, among many.

“At least six of you are #1 at the same thing – selling the most yachts. How can that be?” Is anyone else reading this now and recalling that wonderful line popularised by Mark Twain: “There are three kinds of lies: lies, damned lies and statistics”?

For the increasing number approaching our market without a recommended broker or shared insight from a friend, the greatest first impression seems to be the difficulty in getting to know ‘who is who’ in our sector. “I was going in blind,” said one potential buyer. “In other industries I can find a Forbes ranking or an IBD [Investors Business Daily] ‘Most Trusted’ list to help give me a steer on companies worth considering. If that exists in yachting, I certainly didn’t find it. I ended up having to reach out to four companies before I could confidently think of moving forward. Very timeconsuming and a bit confusing … you all say the same things!”

For many, industry website offerings vary from being ‘professional’, ‘informative’ and ‘helpful’ to ‘difficult to understand’ or ‘useless on the phone’.

One of the most common frustrations is probably best summed up by an American billionaire: “Guys, the days of websites being just shop windows are gone. Look at travel concierges. Where’s my own dashboard to save my chosen yachts, compare features, prices, locations? I want live feeds with the latest offers. I didn’t see much evidence of that anywhere. Make things easier!”

Of course, some originally queried why more of the buying process couldn’t be conducted online, but once they started exchanging with brokers about what they wanted, how to find it and then secure it, most realised Click & Collect was not the way to go. In fact, most appreciated the mine of information and insight their broker brought to the table in guiding them through their purchase.

And therein lies a refreshing takeaway.

Aside from our need to continue focusing on smoothing out those touch points at the beginning of every new client’s journey of discovery, it’s the confirmation that despite those headlines over recent years predicting the ‘fall of the broker’ as online tech democratised access to information, the reality today is that it’s not just information new clients crave and benefit from. It’s insight – the personalised added-value that holds the key to enjoying the best from yachting, something exclusively held and shared by the world’s most experienced brokers and the teams that work alongside them.

One owner recently told me, “Owning a boat is like having kids – they cost you lots of money, cause you neverending problems, result in countless arguments with your spouse, keep you awake at night and yet, when all is said and done, you wouldn’t change it for the world.”

For those clients looking for the yachting equivalent of Dr Spock or Heidi Murkoff, the answer is a quality broker … once you know how to find one! MD

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Why 'average' yachts can make the best charters

How to operate a standout charter … and it’s not all about the boat

TSG examines the key ingredients for success on the charter market, identifying four case studies of charter yachts that are particularly popular and the reasons behind it.

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ome owners believe that putting their yacht on the charter market will secure 12 weeks of charter a year and offset much of their operational costs – but it’s not always that simple.

Running a successful charter operation is a goal many owners aim for but don’t always achieve.

Contrary to what one might presume, it’s not always the newest boats built by the best shipyards that are the most popular with charter clients. In fact, in an increasingly competitive marketplace, some of the most successful charter yachts have been ‘average’ in terms of age and builder status, with their popularity often down to reputation alone (something that is evidenced in the following case studies).

“It is not necessarily the physical aspects of the yacht that make it successful on the charter market,” explains Toby Maclaurin, sales director at Ocean Independence. “Whatever size range of yacht you’re in, you’re probably going to have a recently refitted or exceptionally well maintained yacht, with all the toys and features that would be expected. But with so many yachts having such similar equipment lists and specifications, if owners want their yacht to be successful on the charter market, they have got to consider what else they can do to make [it] more appealing to the retail customer.”

It’s the on-board experience that matters the most for the charter client and this so often comes down to the crew.

“You can have a better charter holiday on a 10-year-old 50m motoryacht with a

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great crew than you can have on a brand new 50m with a less enthusiastic crew,” says Maclaurin. “After a successful charter, clients will always comment on how great the crew were, but it’s very rare that they will say ‘The Seabobs were the best thing I’ve ever done’ or ‘The bathroom in the master cabin blew my mind’. Of course, you’ll get complaints if those elements are subpar, but it’s always the crew that the clients really appreciate.”

The importance of the crew to a successful charter yacht means that when a yacht gets to a point where it’s receiving this consistently positive feedback, crew retention will become an important consideration for the owner. Sometimes, this is not just about paying the crew higher salaries, it’s often about better employment packages including more time off, opportunities for professional career development or a high standard of crew areas and facilities on board.

Equally important as the attitude of the crew is the attitude of the owner or owning company – having a commercial mindset can make all the difference to a yacht’s reputation on the charter market. From a charter broker and client perspective, attractive commercial terms mean not only that the yacht is priced competitively, but also that the owner and management team is flexible and has a proactive attitude to securing bookings.

“For owners, this means being quick to answer enquiries,” adds Maclaurin.

“It helps to give the charter manager a

Some owners are happy to prioritise securing charters over their own usage, while others view an ad-hoc charter booking as more of a bonus.

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preset remit of goals to work in between so that they don’t have to constantly come back and ask the owner or their representative about what is proposed.

Also, it's helpful to have already discussed how flexible the yacht would be on relocation and what the terms would be. So much of securing the charter comes down to the ability to move really quickly when you’ve got the enquiry, and sometimes I’m not sure that the owners appreciate that it’s a very competitive marketplace.”

Helene Delstanche, charter fleet manager at Ocean Independence, agrees. “The brokers that are selling the charter need to know that the yacht is a successful machine and that it has a charter manager that knows the owner very well and has the answers to all the questions without having to go back to the owner on everything.

“This means giving the charter manager the flexibility to make decisions on minor discounts and giving them the parameters to work within such as ‘I can accept a five to 10 per cent discount in low season but in high season I want nothing but full rate’. If we, as charter managers, can go back to the retail brokers with those answers ready for them, then slowly but surely that confidence in the yacht is built.”

This mindset can really make the difference in a market where supply outweighs demand. “Sometimes, booking a charter can be a rather lengthy process and it’s hard for brokers because while they’re waiting for information, they may miss out on other

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opportunities,” says Kellie Shoemaker, head of charter management USA at Fraser Yachts. “If you're working with a programme that’s really responsive and is getting you the information quickly, it just keeps the process moving. But when there’s a hold-up, a broker’s worry is that they might lose their second or third choice. It seems like a no-brainer but there really are so few programmes that are able to provide this.”

Of course, a successful charter yacht is defined differently by individual owners depending on their expectations or requirements, with some happy to prioritise securing charters over their own usage, while others view an ad-hoc charter booking as more of a bonus.

This is another dynamic that can have a knock-on effect on a yacht’s reputation on the charter market.

Delstanche says, “There are owners out there who use their yacht a lot during the summer and we’ll try to fit charters in around their usage, but there are also other owners that want to charter the boat back-to-back all summer and they will take what’s left, and we just work according to their requirements. However, we find that the retail brokers will also get to know which yachts are more commercial and, therefore, which are more flexible.

And I think this goes back to the question of how to establish a really good charter machine and that’s with an owner whose priority is charter.”

Maclaurin adds, “No owner wants to own an unsuccessful charter yacht, even if they’ve only made it available

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“Social-media posts created by the crew can also convey the yacht’s personality in a way that professional photography cannot. These are things that can build a story around the yacht and make it stand out.”

on the market for a couple of weeks a year. And if you’re looking to charter the yacht during low season, then actually you’ve got to be even more commercial because there’s more availability and there are more yachts being more flexible. But you can really maximise your income if you come up with a great plan to attract low-season business as just one or two more weeks booked in May, June, September or October can make a phenomenal difference to the charter income bottom line at the end of the year compared to sitting in port with an inflexible attitude towards relocation.”

Furthermore, when it comes to the management of the yacht, if owners can allow for the time and budget to do a thorough sea trial or shakedown cruise prior to a charter season, it can make a difference to the success of a charter.

“Guests don’t want to feel as though they’re on the first cruise of the year, which can happen if things break or go wrong,” says Maclaurin. “So allowing for proper preparation ahead of the season can save an awful lot of heartache on all sides. And if you can be better prepared earlier in the year, then you’re also better placed to pick up last-minute business earlier in the season.”

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Marketing is another factor to succeeding in the charter sector. Again, the most effective charter marketing often focuses on communicating the on-board experience rather than on the actual yacht. “I look at some of the crew profiles that exist and they might tell you the basics about the captain’s background, but what it fails to tell you is that they’re also the best host as they know all the local people and exactly where to go,” says Maclaurin.

“We try to sell the experience more through in-depth crew profiles, personalised itineraries suggested by the captain and sample menus designed by the chef. Social-media posts created by the crew can also convey the yacht’s personality in a way that professional photography cannot. These are all things that can build a story around the yacht and make it stand out.”

While it may take time to establish a yacht’s reputation on the charter market, owners can speed up the process by hosting events on board and inviting prominent retail charter brokers to events such as open days, lunches or day sails. This is usually something brokers are very keen to do in order to get to know the yacht and its crew. It’s not until

a broker gets on board that they can really experience what the crew has to offer, and they will be much more likely to offer a yacht to a client when they have confidence in the crew.

From a retail charter broker’s perspective, a charter yacht’s reputation is fundamental. If one of their clients has a bad charter experience, they’ve potentially lost that client forever but if they look after that client, they could have repeat business for many years.

Therefore, such brokers won’t want to take the risk of even proposing an unknown yacht. With all the aforementioned factors contributing to a charter yacht’s reputation, owners looking to succeed on the charter market need to approach it with the right mindset.

“Owners either really need to be committing to charter or not,” concludes Maclaurin. “Hopefully, we can move away from the attitude that because the boat has all the toys, it should be easy to get eight to 10 weeks of charter each summer. The market has moved on and it’s no longer that simple.” BM DO YOU WANT TO KNOW MORE? VISIT SUPERYACHTNEWS.COM AND SEARCH ‘CHARTER’

Image courtesy of Ocean Independence

Case study 1

EFFECTIVE MARKETING: 43M DAYDREAM While this Christensen build is now for sale and no longer chartering, Daydream is a retrospective example of a yacht that had an extremely successful charter season in impressive circumstances. In 2019, the yacht achieved 50 days of charter in Norway, with 36 days from mid-June to mid-August across seven charters, working around a lot of owner use. For an older yacht in an unusual cruising area, this was an impressive feat.

Toby Maclaurin, sales director at Ocean Independence, says, “If someone had told me they were going to take their yacht to Norway and do that many days of charter in that short amount of time, I wouldn’t have believed them. But it shows what you can achieve with an effective marketing programme, as well as great engagement by the owner and a superb yacht and crew combination.

“The crew and captain were highly knowledgeable about the area and also very hands-on. It’s fair to say you would not necessarily expect so much interest in heading to Norway for a summer break, but selling the opportunity and creating a range of bespoke charter programmes really hit the spot.”

The effective marketing campaign that Maclaurin alludes to was largely aided by a 2019 familiarisation trip with journal-

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ists and photographers, which served to provide a range of new imagery of the spectacular Norwegian landscape as well as a flurry of promotional articles and social-media coverage.

A bespoke three-day itinerary programme entitled ‘A Taste of Norway’ was also created to showcase the region, the benefits of cruising on Daydream and what was achievable in a short space of time.

“The summer charters were actually longer than the three-day suggested trip but it definitely fuelled the desire to explore Norway,” concludes Maclaurin. “It planted the seed that this destination was somewhere different, perhaps previously unthought of for summer, and had a lot to offer, facilitated by a knowledgeable crew who had great experience in the area.

“With charter guests always wanting to maximise the precious time they have, it struck home that this was a destination that had a massive tick list. Painting the picture that Norway was accessible to them because of x, y and z was down to consistent PR and marketing of this initiative across the board, creating a broker buzz that certainly paid dividends.”

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Case study 2

COMMERCIALLY MINDED OWNERS: 40M ALL INN

Image courtesy of Fraser Yachts

With 13 weeks of charter this year either completed or booked in (at the time of writing), All Inn has been a hit on the charter market during the pandemic, and this has been largely down to the owner’s and captain’s proactive attitudes.

“This number of weeks is not a typical situation,” says Kellie Shoemaker, head of charter management USA at Fraser Yachts. “But the owners have done everything they needed to do to accomplish that.”

Crucially, All Inn’s owners had a very flexible and commercial approach at a time when the market was full of uncertainty. “Obviously, this past year was really challenging with the ever-changing regulations but All Inn’s owners came from a standpoint that was fair and understanding of the predicament that clients were in,” adds Shoemaker. “By having a fair approach, it enabled clients to book with confidence.”

Another key factor to All Inn’s success this year was a willingness to follow the business in terms of destinations.

Shoemaker says, “We watched for trends, where it seemed possible to do business and where the clients’ interests were.

Earlier in the year, there weren’t a lot of boats moving and

that’s when All Inn really took off, carrying out charters in the Bahamas, Florida and New England. Her relocation flexibility really made her stand out.”

Furthermore, Captain Tony Stewart has known and worked with All Inn’s owners since 2006, and this has resulted in a relationship built on trust that in turn impacts the yacht’s success on the charter market. “I can get any answers or information I need from Captain Tony, and that helps me better curate the opportunities that I know coincide with what the owners are seeking,” says Shoemaker. “There isn’t a lot of red tape to cut through to book the boat, and a broker can usually come to me and within the same day have excellent information.”

Stewart adds, “The owners are new to chartering, so the level of trust needs to be solid because we’re presenting them with a charter and giving them the reasons behind why we do or don’t want the booking. We are trying to educate them along the way in a very fast-moving environment, so there has to be a lot of trust and we work very hard to protect that on a daily basis.”

As well as having a longstanding captain, All Inn also has a longstanding crew, having retained about 80 per cent for the past two years. “The consistency in the programme that I’ve been able to build helps tremendously,” concludes Stewart. “When the brokers put somebody on the boat, they know what they can expect from myself and my crew. It just makes it that much more appealing for the brokers to trust us with their clients.”

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Case study 3

Image courtesy of Imperial Yachts

DESTINATION UNKNOWN: 77M LA DATCHA

Available for charter this summer season and next in Kamchatka and the Russian Far East, and Antarctica for this winter season, the 77m expedition yacht La Datcha is fully booked until next summer, with 20 weeks of charter in total.

“Potential clients can now only book in for the next summer season in Kamchatka, which is already filling up,” says Ekaterina Pavlova, senior charter broker at Imperial Yachts. “It’s not just successful, it’s impressively successful.”

Of course, one of the reasons for the La Datcha’s appeal to clients is its charter location, being the only yacht available for charter in Kamchatka, and this is a major attraction for exploration-oriented clients. “There is no infrastructure there for yachts, so it’s a really wild place for charters, but one of the most beautiful in the world,” adds Pavlova.

“There are volcanoes all over the region and you can see bears, birds and lots of really unusual wildlife. People are

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now very familiar with the Mediterranean and are looking for something special, and they can experience everything these remote locations have to offer with the same full service and comfort that you would have on a charter in the Mediterranean.”

However, as Pavlova points out, it’s not just the location that makes La Datcha particularly successful on the charter market; the yacht’s design and carefully curated portfolio of toys and equipment enables clients to experience and enjoy each destination to its full potential. “La Datcha is not the only yacht available for charter in Antarctica, but she can offer clients the use of a submersible, two helicopters, snow scooters, as well as host special guides on board. She was built for the exploration of such regions so you can’t compare her with other yachts. The whole philosophy of La Datcha is expedition.”

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Case study 4

DESIGNED FOR CHARTER: 55M MOTORYACHT SEVERIN*S sunbathing and looking out over the beautiful vistas. But at the same time, if we had 10 younger clients that wanted to party, the boat would still work. The boat caters for everyone, which is important on the charter market.”

While it’s not something that stands out in any brochure, Severin*s’ crew spaces also play a key role in solidifying its success on the charter market. “The boat has a massive crew mess area and beautiful crew cabins because the owner only put two VIP cabins on the lower deck, so that space was made to keep the crew happy,” adds Captain Griffith. “It means that all the crew can sit and eat together whenever they get the opportunity and they’ve got plenty of space. They love their crew area and that is reflected outside of the crew mess with our guests.”

Image courtesy of Edmiston

On the market from April to September, Severin*s has allotted periods for its owner’s usage, but anytime outside of that is available for chartering through Edmiston. Delivered just last year, this is the yacht’s first full charter season and it has already secured 10 weeks of charter for this summer (at the time of writing). The yacht was built and designed for chartering, and this helps it appeal to a wide demographic of clients.

“The interior is designed to everybody’s liking. It’s not outrageous, it’s simple, elegant and beautifully done,” says Captain Tony Griffith. “The deck spaces are big and the beach club and sundeck are particularly popular with guests. We just had a charter with five kids and they didn’t get out of the swimming pool on the sundeck, which is perfect because it’s safe and their parents could sit up there with them while

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SPONSORED CONTENT

The total (paint) package This year, leading paint manufacturer Boero YachtCoatings introduced its latest range to the superyacht market: the Challenger PRO. The Superyacht Group speaks to the team about the benefits of this new system and dives into its exclusive collaboration with The Italian Sea Group.

One of the most important elements of a new build and refit project, paint can often cause a number of headaches for owners. To alleviate the many concerns of clients – namely fading, yellowing and damaging – extensive research went into the development of Boero YachtCoatings’ Challenger PRO that focused on the harsh environments that yachts are exposed to every day.

The Challenger PRO aims to protect the vessel’s surface from ultraviolet rays and weather damage, all while maintaining the high-quality aesthetic that owners expect. The paint system has been designed to maintain its bright whiteness with no yellowing or discoloration over time. These priorities were a direct result of the Boero YachtCoatings team’s interactions and conversations with owners. “The Challenger PRO range has been developed to meet owners’ requests regarding the aesthetic aspects such as the customisation of colours and excellent brilliance, but also for the ease of application and polishability in case of small damage during the life of the boat,” says Luca Serventi, sales manager of the Yachting Business Unit at Boero YachtCoatings.

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The Challenger PRO is available as a full ‘package’ that includes the primer, filler, undercoat and topcoat for complete client assurance.

The Challenger Mix unique tintometric system is available in more than 200,000 shades, setting it apart from many other paint systems currently found on the market. “Owners are looking for particular colours to make their boat unique,” explains Serventi, but he admits that this does have to be decided in the very early stages of the work and communicated effectively to the shipyard which is carrying out the paint job. “The painting cycle must be specifically studied and all the application phases must be agreed in advance with the shipyard and the applicators to achieve the optimal result,” he adds.

Boero YachtCoatings’ collaboration with The Italian Sea Group began with 73m M/Y Planet Nine. “This partnership was a real turning point, as this boat was built with a full-system Boero YachtCoatings with dark grey Challenger PRO finish for the hull and white Challenger PRO for the superstructure,” says Serventi. “The EVO project is also very interesting in terms of performance

and colours we deployed. With the use of our Epolight Win filler – the lightest in the world – we can guarantee the boat a notable weight reduction to meet the expected performance in terms of speed.”

As a spokesperson for The Italian Sea Group explains, the collaboration was born out of a mutual shared interest in delivering the best to its clients. “Boero YachtCoatings was first chosen not only because it was a first-range product and represents Italian excellence in its sector, but also because it was one of the options hand-picked by the owner.” They add that a highlight of Challenger PRO is its performance after application. “One of the main benefits of Boero YachtCoatings paint is definitely how the paint looks after it’s been polished; it shines even more than when it’s simply applied.”

The new Challenger PRO illustrates the new technologies and products that are alleviating the historic pains associated with significant works for yachts. As its collaboration with The Italian Sea Group continues to flourish, this new product range offers owners unparalleled levels of customisation as well as complete peace of mind when it comes to quality.

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Creating Remarkable Experiences Disconnect from the hustle and bustle and reconnect with experiences that feed your soul. Let us share the beauty and nature of the Pacific Marine Lifestyle with you.

Guest Column with Amanda Armstrong

A bite-sized guide to the ‘perfect’ charter yacht Amanda Armstrong, founding partner at Yomira, draws on a combined 50 years’ experience to set out the essential elements that appeal to clients.

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Guest Column with Amanda Armstrong

It goes without saying … toys, toys and more toys, the newer the better. Get two of everything.

Is there any such thing as the perfect charter yacht? Does it exist? Owners do not always build their yachts with charter appeal in mind, but the commercial aspect of chartering is very appealing – if only to offset some of the running costs of the yacht and keep the crew motivated when the family aren’t on board.

With a combined 50 years of experience of chartering vessels, the Yomira team has plenty of experience working with owners and captains across a broad spectrum of superyachts, both motor and sail. There are, of course, countless elements that go into making a ‘perfect’ charter yacht and we can break these down into digestible bite-sized important pieces.

All successful charter yachts certainly must have one key ingredient and that is a professional, proactive crew.

Whether an owner is keen to manage certain aspects of chartering or leave it up to a company to handle all the details of the fiscal, operational and legal requirements, a very successful charter yacht is one that is properly looked after by a trusted captain and crew – from the mechanics, through to the cosmetic presentation and, ultimately, the front-of-house team who will interact with a variety of demanding guests.

Choosing the right representative to help position your yacht in the market is also both a personal and commercial decision. Does the size of the company really matter? Will you benefit from your yacht being serviced along with the rest of the fleet? How will the company market your yacht to stand out from the numerous other vessels they look after? Conversely, is a small, boutique, more focused and agile approach necessarily better? Will

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they have the appropriate reach in the market? Can they service your needs across the spectrum of requirements required for running a successful charter yacht, while also protecting your valuable asset and maximising your charter revenue? No matter how many offices the company has, will your representative have the necessary gravitas, experience and knowledge to market your yacht accordingly? The key is all about relationships and trust with your superyacht partner.

‘The Pressure of Leisure’ is an excellent fictitious name for a superyacht when considering the level of design that encompasses both the owner’s personal requirements, taste and own use of the yacht (perhaps as a semi-permanent residence or part-time office), as well as maximising the appeal for potential charter clients whose predominant reason for chartering is a holiday.

Motivations that drive client decisions can be very specific, but certainly understanding how your yacht might be used by other clients from an objective and practical point of view, compared to your own personal preferences, is essential. Can the beds convert to be either a double or twin? Will charter clients actually use a dining room positioned inside behind the galley?

Would clients prefer more sunbathing areas rather than a Jacuzzi if there is also a swimming pool on board?

Of course, this is all rhetorical, but the reasoning behind all decisions is a very personal one. Having the right relationship with your superyacht representative is the answer; best practice for how and where you want your yacht to be represented. The photography needs to be excellent and ideally not the same as the majority of the yacht’s competitors; videos

and 3D walkarounds are becoming ever more popular. Crew interaction, whether virtually or at boat shows, is important to ensuring clients have a human touchpoint for the yacht. And it goes without saying … toys, toys and more toys, the newer the better. Get two of everything. Clients rarely like to go Seabobbing on their own or take out the only kayak by themselves when all the other guests are enjoying cocktail hour.

The best charter yacht in our experience is one where the owner is happy with the yacht they have designed and has a contented, motivated crew, while also appreciating the requirements of charter clients. Rent yachts first. It may sound crazy, but are the crew personable?

Are they able to switch from being very friendly with charter clients to being ultra-discreet, obviously on demand?

Can they change from running an owner’s schedule to a charter itinerary?

Is your chief steward(ess) able to be the main point of contact when the captain is potentially better employed driving the yacht?

It’s also worth bearing in mind that charter guests love continuity with crew; it’s ultimately the crew who make the charter. No other experience is as intimate as being on a yacht with the crew, so look at rotational positions. In our experience, crew who are on rotation tend to be happier as they have the opportunity to have some home life as well as being refreshed when they come back on board, and they also don’t look for work on other yachts quite so often.

In conclusion, the perfect charter yacht delivers an exceptional experience for the client, whether this is the owner or charterer. And this summation is completely personal. Luckily, no two yachts are the same or our job would be decidedly harder than it is already! AA

SPONSORED CONTENT

Futuristic bridge systems for the modern yacht In the past year, Seastema has unveiled two highly innovative bridge systems for the yachting world.

These sleek new designs illustrate the technological advancements found in navigation equipment, as well as the confluence of both style and function ...

The bridge on board a yacht has historically been the domain of the captain or senior crew, with many owners considering this part of a vessel a vital cog in the machine, but not somewhere to focus on aesthetically. However, the industry has started to incorporate sleeker systems into this area, as the technologies available can accommodate the complex needs of navigating a yacht into more stylish designs. One such company is Seastema, a supplier of integrated marine automation, navigation and communication technologies that works extensively with the Italian navy but also equips yachts with its bridge systems.

With more than 100 yachts utilising its equipment and thanks to a longstanding relationship with Benetti, in 2017 Seastema began discussions to develop two innovative new pieces of bridge equipment, the Light Bridge Console (on board the Diamond series) and Captain Chair (on board the Oasis series).

The Light Bridge Console provides users with an advanced system that dramatically reduces the cabling, electronics and controls of the bridge console, as well as a simplified user interface. The integrated system is controlled by two

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touch displays for safer and more efficient operation while minimising the amount of hardware needed. This equipment is also freestanding, which offers the crew unparalleled views of their surroundings.

“The console is so small and sleek, it completely transforms the design of the wheelhouse and facilitates control of the entire ship from the captain's position,” explains Antonio Spadoni, director of BU Systems and Foreign Markets for Seastema. “It looks so open and futuristic, owners are very happy to have it on board.” Throughout the design process, the Seastema team looked to Apple’s iPhone as inspiration for the system’s compact size and user-friendly interface.

On board Benetti’s Oasis models, the Seastema team developed the Light Bridge Captain Chair to be an even sleeker design, with the minimum of operator interface equipment resulting from the high level of integration required by flag states, installed in two touchscreen consoles either side of the captain’s armchair for completely uninterrupted views of the ocean. The equipment and computers are cleverly hidden away and the result is a highly minimalist design that could easily be at home in an ultra-modern sci-fi film. Cap-

tain Roberto Cuomo, of 40m M/Y Rebeca – the first of the Oasis models to have this system on board – reports that the owner and each of the yacht’s visitors “are impressed with the beautiful cleanness and futuristic design of the bridge” and that the new technologies allow the bridge to feel “like a living room overlooking the sea”.

The modern look of both the Light Bridge Console and the Captain Chair is also a result of its carbon-fibre construction. The material’s curved design is not only aesthetically pleasing but also dramatically reduces the weight of the equipment. “We are very happy with the result of using carbon fibre,” says Spadoni. “It’s very beautiful, lightweight, malleable resistant and technologically advanced.”

Seastema believes that these innovative concepts for the bridge not only elevate the captain’s experience navigating the vessel but also add an additional special space for guests to enjoy on board.

By moving away from just functional design and clunky pieces of equipment, the modern, stylish bridge system can seamlessly blend with the rest of the yacht’s aesthetic while delivering all the functions necessary for day-to-day operations.

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FUEL CELL TECHNOLOGY

by Philipp Himmelein, Head of Project Design and Naval Architecture Yachts When considering the shift to green energy, it is vital to get the maximum energy from these systems as efficiently as possible.

The hydrogen fuel cell has a long history of providing an efficient, sustainable solution across many varied applications. As well as the environmental considerations, an additional benefit of a fuel cell is that it is practically silent compared to a diesel engine, and the owner experience is greatly improved.

At Lürssen, we have been carefully examining and researching hydrogen fuel cells, along with our partners, since 2009.

Cooperation, collaboration and integration are a vital part of the Lürssen brand, and our fuel cell development exemplifies this. We have committed to a strategic partnership with Freudenberg, one of the leading experts for maritime fuel cells.

We both aim to bring fuel cells onboard ships in the near future and revolutionize the yacht’s energy and propulsion system.

We have built a state of the art innovation laboratory on site, and the first fuel cell will arrive this summer. Under real-life ambient conditions and with all required auxiliary systems, this demonstration plant will be the final preparation necessary to bring fuel cells onboard a yacht successfully.

The challenge for a cleaner and more sustainable fuel system is that it needs to deliver on these promises without compromising the design and operational profile of a highly performing superyacht.

Lürssen’s and Freudenberg’s concept is a fuel cell driven by hydrogen which is reformed from methanol on request.The choice of methanol rather than elemental hydrogen has been made due to its higher energy density, the simplicity of handling and easy world wide availability. The lighter energy density of methanol compared

to diesel requires increased tank storage volume. Still, crucially, there is significantly less impact on the guest spaces, such as would be seen due to the installation of explosion proof areas and complex ventilation systems that gases such as elemental hydrogen and LNG require.

A greener energy source must be judged across the entire process, and methanol presents a solution that is already a biproduct of many other chemical reactions.

Additionally, it can be produced using green energy such as solar. At Lürssen, these technologies are a part of every new build discussion. We have pioneered the use of diesel-electric prolusion on our projects in the past. These early hybrid systems

provide a model of innovation that we can follow to drive our next step, creating a new generation of Lürssen superyachts with sustainable propulsion solutions.

At Lürssen, we now have a pioneering, technology driven client for whom we are incorporating this history of technological development and research into a groundbreaking new-build superyacht. This revolutionary methanol-hydrogen powered vessel will be able to cruise at slow speeds for 1000 miles or spend 15 nights at anchor emission-free and silent. Customer and industry expectations for a sustainable yacht are growing; we will do everything we can to continue to lead the way ahead and make the dream of an emission-free yacht a reality.

THE LÜRSSEN THINK TANK We all see that the world of energy is changing, and the ethics of the traditional methods of energy production are being debated across all industries. The superyacht industry is a vital part of the evolution of this debate.

At Lürssen, we believe that we have, as an industry, a chance to strive ahead. With the freedom in design from visionary owners, and the willingness to innovate, we can integrate ground-breaking technologies.

The difference.

An exploration of how to choose a shipyard

CAVEAT EMPTOR

BY RORY JACKSON

TSG talks to a broker, an owner’s representative and a lawyer to ascertain how clients should approach choosing the right shipyard.

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“It takes a highly skilled broker to sell a superyacht that comes from a yard without an established brand.”

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xcellence is the accepted quality standard in the superyacht industry – but not all shipyards are equal. Those looking to commission new builds should consider a number of factors before engaging in a build contract. How financially stable is the yard? How efficiently are they managing their current projects? Is the pricing fair? How should the relationship with the shipyard be managed?

“The first consideration is to understand the balance between what the client’s expectations are on quality and what their budget might be,” says Will Christie, founder of Christie Yachts.

“Generally, I will try and persuade clients to go for as high a quality as possible, and maybe give up a bit on the size, because living with a superyacht that isn’t great quality really isn’t a fantastic experience for any owner.

“A further consideration is the resale value of a project. Brokers are acutely aware of how easy or how difficult it can be to sell a boat after a few years when the owner inevitably decides to move up in size or, occasionally, move away from yachting altogether. We can steer them towards features that will increase resale value and advise on any that will make resale more challenging. Building a custom superyacht is the ultimate luxury as you get exactly what you want but when you make the decision to move on, you want to end up with a product that you can also sell without losing your shirt. That can come down to interior design, the layout, number of cabins etc.”

Ultimately, when buying a superyacht, clients are paying for quality and, to a certain extent, they are also paying for the brand. Christie explains that

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when it comes to a second-hand sale, the last thing a broker wants to be doing is first having to convince a buyer to consider the product of a lesser known yard, although it is always possible.

Indeed, in instances where the brand name and pedigree are immediately recognisable, at least part of the job is already done for the broker. There is always a ready market for yachts from those recognisable, pedigree yards.

“Most clients do a quick 10-second analysis when they see a boat for sale.

They look at the length, the yard, the delivery year and the price and, unless they are completely new to the market, they will be able to make a decision quickly as to whether or not they are interested in a vessel,” adds Christie.

“It takes a highly skilled broker to sell a superyacht that comes from a yard without an established brand. That being said, it is perfectly possible to commission a successful superyacht project at a less established shipyard but the onus is then on the owner to create a team that has sufficient experience and expertise to account for the areas in which the shipyard might be lacking.”

To illustrate Christie’s point, a previous Feadship owner was able to put together a team of established designers, naval architects and project managers, all of whom with experience of established yards in Northern Europe, and in doing so completed a very highquality project without the associated premiums of Northern Europe at a less established Southern European shipyard. Indeed, even the subcontractors used typically worked with the Northern European yards and the interior came from Germany. However,

Will Christie, founder, Christie Yachts.

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Giovanna Cabbia, shipping lawyer, Clyde & Co.

getting a client to view the vessel when it came on to the market still took a great deal of persuasion and Christie maintains that clients, by and large, will get what they pay for when it comes to quality, brand and resale value, but with the right team you can get good quality at a lower price.

“Building the right team is vital to choosing the right yard because due diligence on any yard is incredibly important,” says Derek Munro, owner’s representative and director at Divergent Yachting. “This process is helped a lot by having the right brokers, lawyers and wider team in place. What is the history of the shipyard like? How well financed is the yard? How stable has the yard’s order book been? How often has the yard changed hands?

“The more questions that need to be asked, the more research needs to be done. That being said, it is absolutely possible to build a good quality superyacht at a shipyard with some question marks provided the team and the specification is right. Ultimately, everyone is complying to the same codes, classification requirements and everything else. The machinery is all built by the same people. How you

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“It is always worth checking with other people in the industry ... to determine how the builder is performing towards its other contracts.”

write your spec and monitor the build is vital.”

While legal assistance has always been a vital part of any superyacht transaction, in recent years the growing size and complexity of superyachts – and indeed the requisite contracts – has necessitated that the legal support has become an increasingly engrained part of every new-build transaction. Indeed, the market’s top legal professionals are widely considered to be some of the industry’s most important advisors.

“Clients should seek advice at an early stage of commercial discussions,” explains Giovanna Cabbia, shipping lawyer at Clyde & Co. “Even at the stage of a letter of intent, legal counsel is able to set out the main boundaries of the contract before beginning the next stage of the process.

“In terms of choosing the shipyard there are two prerequisites. Does the shipyard have the skills and experience to build the specific type of yacht you have in mind and have you considered the financial standing of the shipyard and the extent to which the buyer will be protected should something go wrong?

Can the buyer get their money back if the shipyard is unable to complete the build, in the event that the yacht doesn’t comply with the contract or if there are major defects in performance?”

Cabbia explains that while it is absolutely possible, and indeed essential, that one carries out various financial checks on a shipyard, the yard’s books may not necessarily yield all the answers. Historical performance and financial records will, for instance, not be able to tell a buyer whether or not there are any issues with ongoing projects, if there are outstanding liabilities on the shipyard, if there are third-party claims against the yard or if the yard is up to date with payments to its suppliers or subcontractors.

“It is always worth checking with other people in the industry, whether that is subcontractors, owners, project managers or another knowledgeable stakeholder that is working at or with the yard, to determine how the builder is performing towards its other contracts,” adds Cabbia.

The superyacht industry is a small one, and for people in the know it shouldn’t take long to determine how healthy a particular shipyard’s opera-

Tom van Oossanen

Tom van Oossanen

83m Here Comes The Sun, launched from a Damen Yachting facility.

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tion is at any given moment. A few pointed questions asked in the right direction will typically be incredibly elucidating.

“There have definitely been shipyards in recent times where, if you did a little bit of due diligence, you’d quickly find out that subcontractors weren’t being paid,” says Christie.

“Another great way to determine how financially healthy a shipyard is to ask what bank guarantees can be provided against initial payments because until you actually have a hull that can be towed away and finished elsewhere, essentially you just have a piece of paper [the contract] and you may have paid 10 per cent of the contract price up front for the privilege with nothing to show for it. If a shipyard can’t offer a bank guarantee it may be that they are unable [to] or that they would prefer to use another system but it is an initial question worth asking.”

It could be the case that the shipyard would prefer to use a parent-company guarantee, as might be the case with shipyards with large commercial parents such as Damen and Lürssen, given that refund guarantees provided by banks do incur an additional cost to the shipyard. Alternatively, the shipyard may have such a vibrant order book that a further guarantee is not required.

However, in instances where question marks remain over a shipyard’s financial security or the performance of its order book, a refund guarantee comes highly recommended.

“Most of the large yards today are capable of providing refund guarantees, but in the case of smaller yards that only build a few projects a year and that don’t have the credit line to support a guarantee, there might be other ways to

180m Azzam at Lürssen’s facility in Bremen.

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negotiate the contract in a protective way for the buyer,” says Cabbia. “This may, for instance, be achieved by negotiating a more favourable payment schedule so that very little is paid upfront until there is some value in the build that can be secured by a progressive transfer of title, or cash that is put into escrow until there is a vessel that is registerable as a construction.”

However, the issue with stage payments is that one must be wary of squeezing a shipyard too tightly on the provision of payments and a project’s eventual margin. Superyachts are expensive to build and typically require significant upfront payment to get the project off the ground. Subcontractors, for example, need deposits before they are able to start working and placing orders. Cash flow for a shipyard can be difficult and if they are pushed too hard on price to the extent to which the margin is prohibitive from the yard’s perspective, it’s likely that the buyer will pay for the hard negotiating tactics when it comes to variations to the contract.

“If you push a yard really hard on price then you will probably pay for it later because every time they can see opportunity to request a variation to the

contract (VTC)/change order, they will do so,” says Christie. “There is a balance between working towards a good deal and pushing the yard so hard that the project will no longer be financially viable for them. If they are losing money, they will try and find a margin during the build by pushing you with VTCs for even the smallest changes.”

Munro adds, “We all want the shipyards to survive for the simple reason that we want them to be there to give us our warranty. But not only that, we want them to be there so that when the broker comes to resell the boat, he can talk about a shipyard that is in existence and a vessel that has come from that yard.

“It benefits everyone if the shipyards make money. If you are fighting them throughout the whole project, regardless of how much of a spec review you do, there will be VTCs at some point and probably a number of them. You’re going to need these people for the lifecycle of your yacht ownership and therefore you want to negotiate fairly.”

In order to ensure that a build at any given shipyard runs as smoothly as possible, it’s always advisable to engage in amicable negotiations. Indeed,

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“ Ultimately, everyone involved wants the same outcome – a happy owner – so it’s best to work together towards that common goal.”

Derek Munro, owner’s representative and director, Divergent Yachting.

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Munro concedes that in years gone by owners’ representatives and various other owners’ team members were perhaps too confrontational with shipyards. As with the pricing pressure and the inevitable addition of VTCs, confrontational negotiations will lead to a souring of the relationship between shipyard and owner’s team before the project has even really got off the ground.

“Good open communications are paramount. After all, we are all working towards the same goal – a great vessel for the client,” he says.

Christie recalls a time when he was working on behalf of an owner for a large custom project. During the build, he became aware of another project that was being completed at the same yard at the same time in an altogether different working environment. “We did a project while there was another project at the same yard being run by another team. I know for a fact that they were getting a lot of VTCs that we weren’t and the reason was because the owner’s team had been so belligerent the whole time that the shipyard had just had it to the back teeth with them.

“Whereas with us they were letting minor VTCs go as we were working with them, not against them. Every project will have heated moments, but you need to choose your battles as it’s a threeto four-year process. Large custom projects in particular are never smooth sailing and sometimes you will have to really fight for your client, but there are ways of approaching disagreements constructively. If you go in spoiling for

a fight when a fight isn’t necessary, you’ll pay for it. Ultimately, everyone involved wants the same outcome – a happy owner – so it’s best to work together towards that common goal.”

It’s also important to be wary of the willingness on the part of a shipyard to lower their prices and please the client. If certain shipyards quote prices that are significantly lower than their competitors, one has to question why there is such a steep price differential.

Is it that the shipyard is inexperienced and simply doesn’t know what a project should cost or is the shipyard desperate for business? Either way, low pricing should always be a red flag.

While the focus here has been on yard pedigree and performance, one must also be wary of who the client is when deciding which shipyard to choose. Does the client have the necessary wealth profile to afford a particular type of vessel? If they can afford the initial capital outlay, are they aware of the continued running costs?

It’s all well and good highlighting the world’s top shipyards and encouraging people to choose quality, to be wary of financial red flags and so on, but at the end of the day it entirely depends on what people can afford. Nevertheless, the creation of a strong owner’s team and sufficient due diligence can go a long way to ensuring clients choose the right shipyard. RJ DO YOU WANT TO KNOW MORE? VISIT SUPERYACHTNEWS.COM AND SEARCH ‘SHIPYARDS’

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A route to a greener future Baltic Yachts has seized the sustainability initiative in its implementation of processes and practices that resonate across every element of its operation …

Sustainability and a greener future are integral to growth and success, as Anders Kurtén, CEO of Baltic Yachts, conveys, “Any part of the industry which doesn’t take sustainability seriously doesn’t have a future; it is that simple”. With this in mind, Baltic Yachts has set about defining and working towards its own sustainability targets, but as Kurtén explains, defining the targets themselves is the first hurdle to be overcome. “One of the challenges that come with setting a high standard for the environmental aspects of production is that there is no sustainability standard to measure from.” As Kurtén continues, “We decided about three years ago, given the absence of such a standard, that we would apply our expertise and experience and decide on our own set of parameters from which to measure and quantify our progress.”

The critical differentiator for Kurtén and the team at Baltic Yachts is the willingness to engage with the smaller, less headline-grabbing changes that need to be made. Sustainability solutions, very often, are greater than the sum of their

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parts, as Kurtén explains the philosophy further. “It is a trickle of multiple small streams that pull together to contribute something greater. There may be this frustrating sense that there is no ‘silver bullet’; however, the industry must keep track of these small contributing influences. The positive being that many of them are very easy to change, it just requires a focus and cultural shift.”

Baltic Yachts have implemented a series of sustainability solutions across its shipyards, and by its own high standards have made significant positive steps towards sustainability. Baltic Yachts has recently converted all power consumption to locally generated windfarm and hydroelectricity, with all fossil fuel generators replaced by organic, bio-pallet heating systems. Baltic has also reduced unsorted waste to zero and also reduced the waste per labour hour by over 10 per cent.

Baltic Yachts are also pioneering the use of more complex technologies. One of which ironically draws on a natural solution steeped in maritime tradition: flax, as Kurtén explains further, “We are

delighted to have launched the 68ft Café Racer, which to our knowledge is the largest boat that has ever been built where flax has structural properties; in over 50 per cent of the hull and structures we have substituted carbon fibre for flax.” When asked about the potential for this green solution on larger superyachts, Kurtén and Baltic Yachts are ready. “There is no technical obstacle to scaling this up to a 100-foot superyacht, we just need the right project. We believe it is only a matter of time before the right combination of owner and circumstances will align and we can implement this technology on a larger scale.”

The presumed un-recyclability of GRP (glass reinforced plastic) vessels has long been an inconvenient truth of the yachting industry, and the end-of-life process for these yachts is usually to be resigned to the scrap heap. With Baltic’s pioneering use of carbon fibre for a generation, it was natural to see the re-proposing of carbon as a sustainability standard that they can adopt. As Kurtén explains, while nascent, these technologies will likely play a crucial part in a sustainable future.

“There is another really promising technology, which is not quite there yet, but it looks extremely promising: recycled carbon fibre through solvolysis, and reversing the lamination process.”

Baltic Yachts will keep driving their sustainability targets forward because, as Kurtén explains, “Sustainability, as a term, is evolving and is more than a simple PR exercise. When talking about sustainability and superyachts, it has transitioned from being an interesting icebreaker at a cocktail party with clients, influencers and gatekeepers. Now the world has changed to such an extent that it’s a genuine competitive advantage, as well as an environmental imperative.”

Guest Column with Howard Lowe

‘It’s unwise to pay too much, but it’s worse to pay too little’ Howard Lowe, managing director at Mayfair Marine, sets out the key questions that both owners and shipyards should ask before signing a build contract.

The Superyacht Owner Report ISSUE 209

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Guest Column with Howard Lowe

Projects need to be matched to suitable shipyards and not selected only on the best price.

There’s accelerating growth in the superyacht industry, so why is the role of Europe’s shipyards declining? This is a pertinent question given recent headlines concerning the difficulties some well established shipyards have run into.

Many years ago, when dealing with a demanding project, I found this John Ruskin quote to be particularly relevant and it’s still very true: “It’s unwise to pay too much, but it’s worse to pay too little.

When you pay too much, you lose a little money — that is all. When you pay too little, you sometimes lose everything.”

An owner entering into a new-build project with a shipyard needs to be well represented from the outset by an experienced team to cover all aspects including technical, legal, financial, design, ownership – not just those parties focused on achieving the sale.

One of the most fundamental questions both owner and shipyard need to ask is whether the price and timescale are realistic and achievable. If the answer is no, an owner should not be pressured into signing a contract. Taking more time at this stage to evaluate, negotiate and ensure terms are agreeable to all parties is essential. These project fundamentals are very difficult to correct once under contract. If they are addressed from the start, the project will encounter fewer difficulties for both parties throughout the build process.

It’s also imperative to give due consideration to how changes will be managed rather than simply stating the mechanism and providing a sample form in the contract. Identifying what changes will be allowed at what time, and how they will be calculated, will save a lot of potential conflict at a later stage. There are often hidden impacts

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to changes which can be hard for the shipyard to quantify initially.

The yachting industry can suffer from being a ‘yes’ culture, and while we all have our part to play in turning an owner’s ideas and vision into reality, we also have to be pragmatic about what can be achieved. Demanding unrealistic standards for some items and making significant changes late in the schedule are key issues an owner’s team has to be careful to avoid. Making excessive demands on the shipyard could put not only the project but also the shipyard into jeopardy.

The shipyard is responsible for setting realistic budgets from the outset. If they are always trying to increase revenue by the cost of changes this will frustrate the owner’s team and lead to conflict. The shipyard should also ensure it is delivering what is expected and clearly defined by the contract and specification. For example, terms such as ‘model x or equivalent’ should be used with caution to avoid becoming an excuse for the shipyard to provide whatever they see fit. Reference to undefined shipyard standards or a reference vessel that can never be checked in detail is another contentious area where an owner can often feel they are getting less than they have paid for.

Due diligence on behalf of an owner is still fundamental, and adopting a ‘buyer beware’ stance is always prudent, particularly now. While reasonably good data is published this should never be solely relied upon for decision-making because things can change and each project is different. For any custom project, the owner should commission an independent report on the proposed shipyards to assess their strengths and weaknesses, with their overall suitability for the project in question.

There have been too many cases of owners having to finance (and even going to the extent of purchasing) shipyards to ensure completion of their project. Projects need to be matched to suitable shipyards and not selected only on the best price. An independent view is always invaluable in this selection process.

In assessing the shipyard, the finances need to be looked at closely and the question ‘Is the yacht project profitable?’ has to be asked. It’s also important to determine what financial reserves the shipyard has and what would be the impact on the project if payments are not met. How much is done in-house and how much is sub-contracted?

Traditionally, shipyards carried out many things in-house whereas, increasingly, these days specialist sub-contractors are used.

Engineering design is a crucial area, and this should be sufficiently developed prior to a contract being signed for a custom project. Increasingly, this design development is also sub-contracted, and if the shipyard is using a new contractor it’s more likely that difficulties will occur in obtaining production information. Ultimately, more interfaces require more time and effort from a project-management perspective, and the shipyard needs to be suitably resourced.

In conclusion, an owner should ensure they have done their due diligence on the shipyard, that the design and specification are clearly defined and they are also able to proceed without any significant changes until delivery. The shipyard must be certain of delivering a profitable project in the agreed time frame. With these fundamental criteria established by both parties, the chances of a successful outcome are significantly better. HL

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STERN WORDS

GENERATION LET DOWN

BY MAX STOTT

We introduce Max Stott, our intrepid new news reporter, who’s not prepared to hold back on his first impressions …

While the pandemic wreaked havoc on the world economies, stakeholders in the superyacht industry managed to seek financial shelter where they could quietly maintain operations and watch their profits soar. As a ‘class of COVID’ university graduate, I was lucky enough to find a way to get my foot in the door of that shelter. Two weeks after graduating, I left London with -£2 in my bank account and two months of overdue rent payments, and headed for Spain.

I left my comfortable inner-city student life to work for my father’s company as a labourer in a Catalonian shipyard. “Ayyy, you’ll earn yer money wit me lad,” my father told me in his proud Lancashire accent. “Proper work this is.”

He wasn’t lying. For almost a year I worked 70 to 80 hours a week, with little to no social life. My days were filled with chipping filler, cleaning up filler and assisting in the process of reapplying filler. It’s safe to say that my £27,000 BA Journalism degree wasn’t exactly being put to great use, and the idea of becoming a journalist was seemingly a pipe dream.

Yet I was one of the lucky ones. At least I was able to make a pretty penny.

Far too many of the brilliant young designers, musicians, writers, artists and creatives who I had come to know had spent months unemployed, only to be swallowed up by corporate giants such as Amazon and Starbucks. Then again, I guess that’s also in part due to the ruthless nature of the gig economy.

But what about the superyacht industry? I was by far the youngest in the yard, and that was down to sheer nepotism. The average age of the workers I spent time with were middleaged at best. So why should we simply accept that ‘this is the way it is’ when the industry is in dire need of skilled and knowledgeable workers?

I’d like to think that the days of CEOs and employers turning up their noses at the younger generation are in the past. Opting to tarnish the next generation with the familiar brush of flat-white-drinking, avocado-on-toastloving, social-media addicts while looking abroad to hire cheap labour is not sustainable. Companies need to get better at investing in young people.

Nepotism is king in the superyacht world. It’s a small community, with a lot of people who have a lot of influence in very niche channels of an already niche industry, and so friends and family are often given a leg-up. I don’t mean to criticise this aspect of yachting too harshly; after all, I’m a benefactor of this unscrupulous feature that we accept as the norm.

The superyacht industry has been good to me, it gave me a way to make ends meet when times were tough, and now I’ve found a company that is willing to give me a chance. My only hope is that other stakeholders in the industry follow suit and invest in a generation who, like me, felt fed up and let down. MS

The Superyacht Report (ISSN 2046-4983) is published six times a year by TRP Magazines Ltd and distributed from the UK by Pureprint, Crowson House, Bellbrook Park, Uckfield, East Sussex TN22 1PH, UK. Postage is paid in the UK by Pureprint on behalf of TRP Magazines Ltd. Send address changes to: hello@thesuperyachtgroup.com

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