After the banner year of 2008, which saw deliveries of 261 superyachts including 14 of the world's 100 largest, yacht makers saw a dramatic drop in new orders worldwide. Only 80 superyachts were ordered in 2009, 105 in 2010, and 108 in 2011.
But deliveries were not concomitant with sales and prices. According to leading media group Boat International, which serves the superyacht industry, last year's sales figures of superyachts marked a 29 per cent increase over the 2010 figure of 205. Although 155 yachts between 24 and 30 metres were launched in the market in 2011, only 80 were sold. They also reported 650 price revisions in 2011, compared to 441 in 2010, and 231 in 2009. The price reductions in 2011 ranged from 1 per cent to a massive 80 per cent, averaging out at 13 per cent.
Admittedly, people who own luxurious yachts are not easily affected by the recession, but the industry is not necessarily recession-proof. The absence of enthusiastic new buyers and the presence of a large number of owners who want to sell have created an unbalanced market, and sailing seems set over rather silted waters. The industry has responded to the chaos and confusion in many ways, mostly innovative.
Worldwide demand remains soft for superyachts, some of the world's largest yachts that are at least 80-feet long and require on-board staff. Vancouver's Christensen Shipyards says their customers keep coming back. With 18 repeat customers, it is an unprecedented phenomenon in this industry. But like many of their contemporaries, Christensen Shipyards has had to apply the global economics of recent years. After laying off 80 per cent of their workers, they had to halt construction on a second shipyard in Tennessee after spending $16 million (about Dh58 million). The company embraced rapid change — not easy in a manufacturing process where it takes two years to build a product — and applied the principles of lean manufacturing. As a result, the shipyard now operates at full capacity with 250 employees, halving its pre-recession employment figures. While that is good news for the shipyard, it is reflective of the larger US economy as companies accept the challenge of full productivity with fewer workers.
Europe's yachting industry showed great resilience at the 2011 edition of the PSP Southampton Boat Show in September. Although there was a 9 per cent dip in visitors to the ten-day event, encouraging sales were reported despite tough economic conditions across the region.
Strong demand from China
Having recognised the buying power of China's burgeoning upper class, many international yacht manufacturers are now making a beeline to cash in on what seems like a fantastic opportunity. According to the China Daily newspaper, the demand for private yachts has gained traction in China over the past two years. The 2010 Hurun Wealth Report states there are at least 875,000 millionaires on the Chinese mainland, and half have indicated they intend to purchase a private yacht.
While many Chinese regard yachting as a sport for the rich, Les Glover, Chairman of Success Group International, wants to make it more accessible. "Boating is a pastime everyone can enjoy at their own level and budget in Australia," says Glover, and it is what he plans to realise in China. The Australian firm has started the Sino Australia Royal Yacht City project in association with Tianjin Marine Economic Area Administrative Commission. Located over 2.2 square kilometres in the central fishing port of Tianjin Binhai New Area, the $1.1 billion project will launch in 2018. "The high-end luxury market is very attractive, but for recreational yachting in China to be truly successful, it should focus on all levels, including average income people," points out Glover.
Horizontal growth
Glover's comments were endorsed at the 2011 China Yacht Forum held in Haikou, where the 400 delegates used the term ‘boating industry' in lieu of the ‘yachting industry'. The small but significant step reinforces the call for widening the marketplace and looking for horizontal rather than vertical growth.
In the middle of the worst economic recession to hit the region, the yachting sector of Grenada sent out positive signals, spearheaded by the Marine and Yachting Association of Grenada, and corroborated by industry players Spronk Provisioning, Horizon Yacht Charters, Camper & Nicholsons, and Port Louis Marina. While most economic sectors suffer, the buoyancy of Granada's yachting industry is primarily attributed to increased occupancy, with Port Louis Marina doubling its occupancy in 2011. Yachts also stayed longer on the island, and thereby, guests spent more. While yachting itself has existed for decades in Grenada, the industry has finally become more organised, generating several new businesses.
Leading global yacht chartering companies believe that the Middle East has immense potential, with its rapid expansion of marinas, ease of accessibility, and a growing vessel support network. The Caribbean, the Bahamas, the Mediterranean and the Indian Ocean remain perennial favourites, but with clients always on the look-out for new destinations, infrastructure development could prove to be an irresistible magnet for the Middle East.
Gliding into the UAE
The many fascinating marinas taking shape across the region may also see the Arabian Gulf become the yachting industry's biggest growth market in the next decade. But industry experts caution that aspiring alternatives to well-established Mediterranean and Caribbean destinations need to make tangible offerings of convenience, diversity, culture, and safety — at comparable costs.
And finally, the Arab Spring has sprung some surprises in the region. A year ago, The New York Times observed that yacht makers could look at cashing in on turmoil in the Middle East, and that new growth was pegged to grandeur in size and scale. UAE manufacturer Gulf Craft explained, at the time, that its new Egyptian dealership would tap into a new customer base of people whose aspirations were largely oppressed during the Hosni Mubarak era.
Last year, the Dubai International Boat Show recorded its biggest sale with a 40-metre Sunseeker superyacht that sold for a staggering Dh100 million. Seven of the top ten superyachts in the world, and 28 of the top 100 superyachts currently belong to Middle Eastern owners. Not only is this indicative of the great concentration of wealth in the region, but also of a broadening of the yacht owners' market extending beyond the realm of royalty.
Yacht makers around the world are optimistic that instability will not dampen the spirits of those who seek palatial boats, or seek to moor them in safe havens in the region, like the UAE.
EVENT
Dubai International Boat Show 2012 — 20th Edition
Dates: March 13 to 17
Venue: Dubai International Marine Club — Mina Seyahi
Timings: 3pm to 9.30pm
For more details, visit www.boatshowdubai.com