Difficult Times in Charter

Yacht builders and developers have been banking on a healthy charter market rejuvenating an industry that has become swamped by second-hand yachts and dominated by sellers looking for buyers.

But chartering too has been forced in to discounting as prospective charterers drive hard bargains for what must be far and above the world’s most expensive holidays. While chartering is growing more popular, the supply and choice of boats has increased, enabling potential customers to shop around.

“The number of charter days per year has increased by between 20 and 25 per cent in the last five years,” says Jonathan Beckett, chief executive of Burgess, the yacht broker. “The problem is that the supply of yachts has doubled in that period so the number of paid days booked to each yacht is down on average from what it was five years ago. So the market doesn’t look so good for the owners.

“A lot of charter boat owners in the market today wouldn’t have put their boats out to charter before but they can no longer ignore the opportunity to bring in an income of maybe €4m a year that can cover the running costs of a boat they may use three or four weeks a year.”

A perennial niggle facing the market is the lack of flexibility among charter buyers, even when handsome discounts are available. “Everyone wants July and August and everyone wants to go to the Med in the summer,” says Mr Beckett. Yet bargains can be had if people are less choosy about dates and locations and brokers are encouraging clients to try new destinations.

Charlie Birkett, partner and group chief executive of YCO, the Monaco-based brokerage, says his company has had some good business at the start of the season. “It’s nice to see the market coming back. We’ve seen a lot of new clients and charter boats and some excellent crews to go with them. We’re also seeing people willing to explore farther afield in to the eastern Mediterranean. Croatia, Greece and Turkey are all proving popular venues.”

Since charter holidays and the needs of charterers can vary widely, brokerage has become the model for the charter industry. Many charter holidays are booked broker-to-broker with both sharing the commission.

The way it works is that owners register their yachts with a broker who then handles charter bookings as the central agent for that yacht. Prospective charterers may make an inquiry through the central agent or through a different broker as all brokers make listings of the charter fleet. Since a week’s charter can cost anything upwards of €500,000 on the bigger yachts, charter buyers will often look at various options before committing to a holiday.

The brokers dealing with the chartering client need to understand their customer’s needs down to the finest detail.

“In this business, having a good time is not enough. They need to come away feeling that they’ve just had the experience of a lifetime. If not, you’ve probably lost them to chartering and this could be someone who will go on to buy their own yacht in time,” says Nicholas Dean, managing partner at yacht broker OCEAN Independence.

“After a charter we interview the skippers and other staff and make notes of the kind of holiday enjoyed by the client, even down to what wines they like and how they have their tea. All that is recorded so that if they come back a few years later we have that information at our fingertips,” says Mr Dean.

“One of our charter clients is a water ski fanatic and wants to have a tender out all day long so he needs a yacht with experienced tender crew and two tenders so that his wife can use the other to go shopping,” he adds.

Equally brokers must know the yachts and their skippers and crews. “It’s not just about putting people on the newest and biggest yacht you can find. I’d say that the yacht was responsible for 30 per cent of your enjoyment. The other 70 per cent is down to the quality of the crew. You can get the most special-looking 70-metre yacht with the most boring awful crew. We’re managing the expectations of our clients and you have to know the product to do that.”

While some new internet services have sprung up that allow prospective charterers to browse online in the same way that people search for holiday villas or houses, they often struggle to replicate the knowledge of an experienced broker, some of whom have spent their whole careers in what is still a fledgling business. While the larger brokers have invested in building recognisable brands, some work as small operators handling a relatively small portfolio of clients.

Chris Cecil-Wright, a former partner and director at Edmiston, has just set up his own business, Cecil Wright, after 20 years in broking.“I don’t even have a card, just a mobile phone that’s switched on 24 hours a day because you need to have that kind of availability for your clients, some of whom have become good friends over the years,” he says.

“I’m advising these people so I have to know everything there is to know about a boat and its crew down to the kind of details some people might not consider,” adds Mr Cecil-Wright. “People are working hard all year and their two weeks on a yacht may be all they get to relax with their families. They can’t get this time back if it’s ruined. Ideally each individual broker should have a core of 10 to 15 really good clients who he handles throughout their whole yachting life.”

(Source: Google News: The Financial Times. View the original story here.)