What do I think about the current state of the market and its prospects for the coming year?
Over the past year the superyacht world has recovered from the economic turmoil and even managed to grasp the opportunities presented by the general confusion. At the time of the previous such recession (meaning the Great Depression of the 1930s - Ed.) there was not yet a superyacht industry as such. Today it is a huge industry on a global scale and the current recession will certainly survive, but it will be different - more mature, I would say. The superyacht market is feeling much better now than it was a year ago.
The free-fall state has come to an end and as a result we have a very different picture before us - where realism rules the ball.
For the brokerage market 2010 was another year of turmoil. Some companies managed to get out of it with profit, some of them just held on well, and some of them are happy that they survived. The most difficult part of the work was, understandably, coordination of prices and conclusion of deals. Many transactions depended on the stage between the final price agreement and the actual signing of the contract. The lower sector of the market (20-40 meters) was still feverish all year long. The medium boat sector (40-55m) was very active, but the market for really large yachts was not in a hurry to come to life, with only about a dozen transactions in the 40+ million Euro range over the course of the year, and only five of them had a price tag above 50 million Euro.
Now, all indications are that 2011 will also follow a very similar scenario. Brokers still have a fair number of yachts waiting to be sold, plus there will be more boats added during the year, which the owners will put at a price "just to sell". Prices will not go up during 2011 - rather, on the contrary - and each deal will still be a great luck for the broker. Some "early rises" in the large yacht sector will appear by the end of the year, but prices will also be low there.
This year has also been very difficult for the new orders sector, both because of the many broker yachts that have been brought to market at tempting prices, and because of customers who have felt the weakness of the market and wanted to place an order for construction on very unrealistic conditions. The situation was also worsened by the large supply of so-called "spec build" yachts, which are laid down at the yard not for a specific customer, but for "sale". Now these boats, already completely ready or close to completion, are thrown out by manufacturers on the market at quite real prices, instead of what was supposed at the moment of beginning of building.
Improvement in this market is unlikely until 2012, and the year will be very difficult for shipyards. Anyway, I would describe the mood in the industry as "cautious optimism". I would even dare to assume that we can expect an increase in the number of construction orders this year. Firstly, customers are already beginning to feel some financial stability, and secondly, there are a number of shipyards that need to get at least one or two orders in order not to stand idle, so they offer the most attractive conditions.
As for the charter sector, it was shaken in 2010 just like the rest of the market, with the first quarter looking particularly pale. The trend towards "short notice" bookings led to a concentrated surge of requests and orders between May and August. Everyone, absolutely everyone booked late and everyone was asking for discounts!
However, in fact, the summer of 2010 was not a bad time for most yachts, especially compared to 2009. Unfortunately, by the winter of 2010-2011, demand had fallen again, as evidenced by the many yachts orphaned on Christmas Day in the Caribbean with no clients at all.
For most customers, the main priority remains the summer charter in the Mediterranean, and the second, winter, "swim", alas, has already ceased to be the norm. Interestingly, the forecasts for summer 2011 already look quite optimistic due to the good flow of early bookings. The upcoming season is expected to be good, although the pressure on prices will remain. The number of orders for Christmas/New Year's Day 2011-2012 should also increase, but the forecast for the rest of the winter season still looks pale. The charter market will be overwhelmed by a large influx of new boats, so a new trend has emerged in the last two years - falling demand for "old" yachts (6 years and more).
It is clear that the superyacht industry is strong enough to survive in a turbulent market and is capable of creating a market for yachts in all sectors - from brokerage to charter to construction. But if there is one thing the world has learned in the past two years, it is that market factors will always rule the ball in any situation.
Jonathan Beckett is CEO of one of the world's leading brokerage companies Burgess Yachts.
