Yachting Associations Take a Stand

There is an urgency in the air these days. It is a feeling that hovers over boat shows and boardrooms and shipyards alike – weighing on the decisions that are made.

Five years after the onset of the financial crisis, the superyacht industry is only now beginning to regain its footing.

Until the crisis hit, the image perpetuated by the industry was one of exclusivity and opulence. But after the crisis, this was like having a bull’s-eye on its chest, and yachting  found itself under increased scrutiny by governments scrambling after easy money.

These days, the tone has changed, as has the message. While it is not necessarily beneficial for specific companies to back away from selling exclusivity and opulence – after all, this is the very thing that draws many owners and charterers in the first place – it has become necessary to push a very different message to a very different audience.

For perhaps the first time, it has become necessary to fashion a more sympathetic image for government officials and the public at large.

Increasingly, the superyacht industry has had to push a message of inclusivity and economic betterment to governments and the general population as a way to reverse the stigma it has developed as being simply a stage for millionaire playboys. Finding itself on the defensive, a much more pragmatic argument has arisen: An argument focused on jobs and economic impact.

In order to achieve this, the industry has largely turned to its trade associations. These organizations – many of which were developed as networking conduits and social clubs for the industry’s power brokers – have gained increased power and influence in helping direct the industry out of the crisis and into the future.

“It becomes more and more important for us to communicate amongst ourselves when we’re trying to put across the value – the economic value – of our industry,” says Fiona Maureso, the vice president of MYBA The Worldwide Yachting Association. “We have to be sending out the same message. And that’s why it’s becoming increasingly important for all the different organizations within the industry to speak with one voice and to talk with one another.”

After a bit of a rude awakening, the industry’s trade associations have begun to realize this. Many have consolidated and streamlined regulatory and advocacy efforts within an Associations Alliance, now being led by the International Superyacht Society (ISS).

“One association on its own has a very quiet voice. But as soon as you get a bunch of associations together, you have a very loud roar that catches the attention of legislators,” says Ken Hickling, the president of the ISS. “That’s what we need to do.”

Already, some say, the effort has yielded some positive results.

A rude awakening

In the years leading up to the financial crisis, sales in new builds and charter were at an all-time high. It was an open, booming market – a haven for the smart and ambitious entrepreneur. Many of these entrepreneurs were drawn to trade associations like the ISS due to the networking possibilities that were available – a pre-established list of potential contacts and colleagues.

That’s what initially drew Dieter Jaenicke, the chairman and founder of Viking Recruitment Ltd., to the ISS. “We became members, and we felt it was a very good conduit to meet those people in the industry that would help us move forward,” says Jaenicke, who is now the vice president of the ISS.

 

And then came September 2008, at which point the winds of economic growth abruptly ceased to blow.

Just as suddenly, exclusivity and opulence were under attack as public scorn honed in on a simple message: The rich were having a wonderful time of it while the rest of us were suffering. Large luxury items like private jets and yachts suddenly left buyers wary and open to attack.

Predictably, this caused a chilling effect within the market. Shipyards lost orders for new builds, and had contracts that were left unfulfilled.

However, a hidden side-effect was that this negative attention caused the economy to bleed even more jobs and further exacerbate the effects of the crisis. With each cancelled contract, hundreds of workers were left without jobs. “Attacking the 1 per cent didn’t hurt the 1-percenter, but it did hurt the 99 per cent,” says William S. Smith III, the vice president of Trinity Yachts, and an active member of the U.S. Superyacht Association.

In spite of this, governments caught on to the popular public sentiment and decided to go after the wealthy with additional taxes without regard to whether they were harmful to the superyacht industry and the tens of thousands of people it employs. Some of the hardest-hit nations – Spain, Italy and Greece – considered superyachts to be easy targets and went after them with increased VATs and matriculation taxes. Many in the industry claim that these tactics drove yachts away en masse.

Suddenly, the industry had to respond to criticisms that it had not faced before. It was a small industry with a deliberate image of grandeur, and it hadn’t yet learned how to defend itself from the assails of the outside world.

“We just have to get the correct messaging to the markets,” says Bert Fowles, the marketing chair at the USSA and the vice president of Marketing and Sales at IGY Marinas. “Not only to the end user of the vessels, but also to the local legislators to say: ‘Listen, boat is not a bad word. The more boats you have, the more support they need, the more things they’ll buy, and these are the things that will push the economy in the right way.’”

Finding its voice

There was some initial disappointment as the industry realized just how unprepared and isolated it had become. Not only had it insulated itself from much of the general public, but it had also insulated itself from the lawmakers.

“We know it’s important not to work in a vacuum,” says Maureso, whose day job is charter director at Northrop & Johnson. “That’s where it all went horribly wrong with the MLC [Maritime Labour Convention]. We didn’t react quickly enough within the industry. So the powers that be went ahead and created new legislation that was completely inappropriate and we learned a big lesson from that.”

By the time yachting professionals did react and brought officials from the MLC and the Maritime and Coastguard Agency (MCA) down to the south of France, it was largely too late.

“We were not party to the conversations on the MLC at the critical stage,” says Toby Maclaurin, the president of MYBA and a commercial manager at Ocean Independence. “So we weren’t able to stick our hand up and say, ‘That’s not going to work for us!’ Now, the fishing industry was there and they did stick their hand up and they got some exemptions.”

The loss taught the industry and its associations an important lesson. While a seat at the International Maritime Organisation (IMO) is far from inexpensive, being a party to the conversation is invaluable, says Maclaurin. “We’ve been fighting a rear-guard action ever since,” he says. “But if we’d been there at the very inception then it wouldn’t have been a problem.”

Due to this, for the past three years, MYBA has financed a seat at the IMO for the International Council of Marine Industry Associations (ICOMIA), which doesn’t have the money to finance its own seat. “In fact, recently, our man there who sits on the ICOMIA seat, has been able to redirect one or two quite critical things that, if he hadn’t been able to redirect, could have been just as damaging as the MLC.”

Associations got in on the ground level with the new VAT legislation and have been lobbying national governments and the European Commission. “It’s been an uphill battle getting governments to understand,” says Maureso. “I mean, can you imagine? They look at these big white yachts and just see dollar signs. But what they don’t see is that if they’re too punitive, they’ll chase those big white yachts away and lose all the income.”

This was the message brought forward to many of the European governments.

“As we found when we met with the government of Italy who are planning to put in an expensive boating tax which would drive people away – what we found was that when we put together a concerted effort that was made by a consortium of associations all delivering the same message, was that the Italian government listened,” says Hickling, who is also the global manager for business development in yachts with AkzoNobel.

The Associations Alliance was formed with this in mind. It consists of a wide array of trade groups involved in yachting. They now meet regularly at several of the more prominent boat shows where they discuss strategy, combine efforts and share knowledge. Many involved feel that communication is at an all-time high.

“One of the things we’ve tried to make some progress on is capturing best practice,” says Hickling. “So when one or even a group of associations has collaborated on a particular area of interest, and made progress in one way or another, we’re able to share with other associations how that’s been done.”

One Industry, Two Messages

The economic crisis has uncovered many of the superyacht industry’s weaknesses. One of them has been the manner in which it has portrayed itself to the rest of the world.

“For a long time, we wanted people to think it was a rich man’s playground,” says Maureso. “I think we wanted that because, in the boom times, it was all very competitive.”

Now, there has been a kind of tectonic shift in messaging. “We have to shift the emphasis and underline the fact that this industry creates a lot of employment in many different areas – you know, white-collar, blue-collar,” says Maureso. “And for local economies, like the south of France or Palma, it’s absolutely vital.”

Fowles and the USSA have broken down the issue simply by saying: “The bigger the boat, the bigger the economic impact.”

 “If you have megayachts, you’ve technically won the economic lottery,” he says. “And you need to do whatever you need to do to keep that economic lottery.”

At the same time, this message is largely intended to put out legislative flames and to bring a level of understanding and openness to the wider public. It isn’t directly aimed at owners.

“The dilemma now,” says Maureso, “is that, on the one hand, you have to maintain that image of exclusivity and rarity, whilst still banging the economic drum and getting people to understand the importance of our industry financially. So it’s a bit of a juggling act at the moment.”

However, for prospective owners from Western countries where public scorn is still a concern, offering a message of yachting as an economic boon could help boost sales. It must be taken as a given that the wealthy are going to spend some of their money on luxury goods, says Hickling – whether that’s art, jewellery, cars, real estate, a private jet, or a yacht.

“If you look at each one of those in turn and ask yourself the question: How many jobs are created for each million spent? The superyacht beats all of them hands-down,” says Hickling. “It’s the most work-intensive because it’s a craftsman’s industry.”

This information can protect owners from any potential firestorm, should it come their way, Hickling says.

“So maybe, if you can’t put out the fire, you give them a fireproof suit,” he says.

The key then is finding the numbers to back up exactly what everyone within the superyacht industry already knows.

Concrete numbers

It is quite surprising that until recently, no one really had any good data on the economic impact superyachts have on the economy. There were a few studies here and there, but usually small and focused on a hyper-local economy.

It’s the kind of inconceivable oversight that could only have happened in an industry so insulated by years of stunning growth. “This is quite a recent realization for a lot of us – that we need to understand ourselves the economic impact, and we need to promote it,” says Maureso.

“To be truthful,” says Maclaurin, “it’s almost because nobody had really thought about it. But now we’ve had to, because it’s become apparent that leaving things to their own devices doesn’t work.”

So, last year, MYBA commissioned an economic impact study from the London School of Economics. The study – with data gathered from 550 superyacht companies in Italy, the Netherlands, France, Spain and Greece – was released in March. Among other things, it found that there were 30,000 jobs supported by the industry across those five countries.

Of those 30,000 jobs, the study found that more than 85 per cent of them were in the physical labour force, which consists of suppliers, manufacturers, new builds and refits.

And not only that. It turns out that, over the last five years – during the worst of the crisis – industry employment rose by more than 10 per cent.

“Now we can say, ‘Look: Across the few countries where the figures were available, there was over 5 billion worth of positive impact in their economies,” says Maclaurin. “It seems logical to many, but sometimes it’s not logical on a political level. But there is really a benefit to encouraging the wealthy to spend their money.”

The data wasn’t entirely complete, but it proves the substantial impact the industry has on the G.D.P. of nations even like Italy, the Eurozone’s third-largest economy.

“That was really very interesting,” says Maureso. “We were able to take that around to various governmental bodies, including Spain, and say to them, ‘Look: this is what our industry represents in economic and in human and in employment terms. You’ve got to preserve this and nurture it and not chase it away.’ And it was very well received.”

Similarly, the SuperYacht Builders Association (SYBAss) has commissioned a study from the University of Amsterdam, says its Secretary General Theo J. Hooning. And that study should be even more comprehensive.

“They are quite well-known for their economic impact studies. And they will be looking at what is the worldwide impact of the building of superyachts,” he says. “It’s very difficult to get the right data and it needs to be processed. That’s going to take another two years to do that.”

In addition, the IMO granted SYBAss full consultative status on December 4 last year. The association had received provisional consultative status two years ago, according to SuperyachtNews.com. The move now offers the superyacht industry further clout within the international body.

Hickling uses figures which have been backed up by the MYBA study, according to Maureso. The average 65-meter superyacht directly employs around 350 people; but since it is a manufacturing industry, the indirect and induced employment adds up to something along the lines of 2,450 jobs, says Hickling.

“So for a 65-meter superyacht, you have 2,450 people who are putting their kids through college, or paying off their mortgage, or doing all the things that regular people do,” he says.

By using these numbers, the message sinks home.