The Wallflowers of a Buoyant Market

By Sue Grant

There is no doubt that 2021 broke all records for yacht sales across the board, not just at Berthon but amongst our colleagues throughout the yachting industry. Much was talked of a sellers’ market, of rising prices and lack of supply relative to the demand for yachts of all shapes and sizes.

Of course, all of this is true, although like the fish that got away, stories of the massive uplifts in price and queues of people waiting to purchase a particular yacht or yachts are normally greatly exaggerated.

This buoyant market has allowed us to sell more yachts off market than ever before. However, these have been in very specific segments. Virtually all these yachts have been of recent build, production yachts in straightforward locations with simple title and VAT status. This has applied to both power and sail but the thing that bound them together as one group was the fact that they were serviced, in good condition (aside from the inevitable minor gremlins brought up by pre-purchase survey) and in all cases plug and play, so that their new owners could experience yachting either sail or motor immediately.

New yacht sales have also been extremely brisk. For many manufacturers, supply chain problems have been an issue in an environment where yachts were flying off the shelf and with dealers taking all available production in many cases up to 2025.

Hanse is a case in point and for our other new yacht offerings there is a healthy forward order book for them all.

However, amongst this rosy, healthy picture of happy sellers, buyers, yacht builders and brokers, there are also the forgotten wallflowers remaining on the market, as well as a few marine company failures at a time when to be frank, we’ve never had is so good…

To start with, the wallflowers have remained on the brokerage market throughout this feeding frenzy of market activity, with few to no suitors. The website portals are not kind and it is easy to see how long many of them have been for sale. We work on the basis of a 6 month marketing cycle for a significant brokerage yacht and we are monitoring the market carefully throughout the period. As ever, apart from local and international marketing conditions, there are three core things relating to any yacht’s marketing which dictate if and when a sale is achieved – condition, location and price.

Following on we will unwrap these three issues.

Condition

The market was driven in 2021 by the need to get out on the water immediately, and to experience life afloat with families and friends, to be in a safe place, to have that adventure that was thought of but not actioned as life got in the way. In the days of Covid-19 and all that this means, buying a project that doesn’t work, or a yacht lacking in reliability, comfort and capability is not attractive. The moment is now. Who wants to struggle with difficult supply lines, Covid protocols and delays caused by staff shortage, shut downs and all the other baggage that Covid-19 has brought with it? The point of the yacht is to sail away from all that! In short, in the 2021 market – now is where it’s at – turn the key, raise the mainsail – and thunderbirds are go…

To make the most of the market, yachts need to be well maintained. In order to maintain residual value, owners should be doing this work in any event. It has the added value that the yacht is more usable and so the owner can get more out of his or her yacht whilst they still own her. Yacht buyers do not want to see a long work list or to be told that the generator and air conditioning needs replacing or the batteries are at the end of life. Do it now – in many cases the wait time for the kit is many weeks out, so at least get it on order. We have lost sales in 2021 because of kit that is mission critical for a yacht was on back order and unavailable for many months. 2021 buyers were not interested in waiting. Better to move on and buy something that is good to go. Who knows what will 2022 will bring?

Location

This has always been an issue and Covid added a new dimension to the conundrum. In 2021, we became adept at organising virtual viewings, either with ourselves or with colleagues in the industry, and to being inventive to get the needed information to potential buyers. They in turn took a leap of faith in many cases by buying blind. This was particularly the case in 2020 where travel was just not possible. In 2021, although difficult, travel was easier but buyers wanted to be as sure as possible about a yacht before making a trip to view, mostly with a price already agreed.

Yachts that were attractive were in areas where the tentacles of Covid-19 were not all encompassing, and the key was to be able to get there (and back) without being invited to spend time in a national hotel for a fortnight or going to an area where the R rate was alarmingly high. This made elaborate treks involving many changes of aeroplane, transit through multiple airports and travel on local transport deeply unattractive.

After the sale was complete, having the option to leave the yacht where she was and enjoy her immediately was a bonus, as was having her close to where you want to use and keep her. UK waters were rammed with UK yachtsmen during the 2021 season, who’d repatriated yachts from the Mediterranean and elsewhere and used them in home waters to avoid the complications of overseas travel and the risk of isolation that this entailed. This happened also in Sweden and elsewhere in Europe and the USA. Those choosing to cruise the Mediterranean took longer breaks than normal and built in the isolation periods to their holiday time, giving them the freedom to use their yachts in the sunshine.

For others there were areas that were and still are closed. The Pacific is in this category, with yachts in New Zealand in particular stuck and with yachts in areas like Tahiti out of bounds to some southern hemisphere countries. Much of the Pacific remains unavailable for bluewater cruising and in 2021 the cruising world was a very small place…

Adding to the woes of an inconveniently situated yacht have been the restrictions on insurance cover and the great difficulty and cost of yacht shipping. The spiralling cost of container transport by sea has inevitably affected the cost and availability of deck space for yacht transport. Having your yacht delivered by a delivery crew has become the best option for many.

Small wonder that even in a buoyant market, a difficult location moves a yacht onto the ‘too difficult to deal with pile’ and there she stays.

Price

Many owners think that, as it is a sellers’ market, there is no problem in pricing optimistically – a shortage of yachts for sale means that people will be so keen on the yacht that they will pay more. If not, people will make a bid and there is lots of scope for negotiation. This is I am afraid, simply not how it works. Yacht buyers are savvy; they search on size, type and budget and if a yacht is out of scope in terms of price either for their budget or in relation to other sister ships, they will simply not enquire for the yacht, on the basis that she is clearly not seriously for sale, or that the owner is unrealistic on his price expectation.

The argument on pricing always goes along the lines that we should keep the price high, and then there is lots of room to move, or we might get lucky and people will make an offer. This is not correct. They will assume the worst, not engage and the broker of a yacht that is too highly priced never knows who could have been interested, because they don’t get in touch. The argument continues that if the price is dropped, people will make an offer way below the new lower asking price. This is correct, we might well do so. The difference is that we are then negotiating which we can’t do when people aren’t engaging with the yacht and if the offer is too low, we can say no…

In this market, as with every other, the mature, the one off, the weird, the complex and the expensive to own, run with the ever present worry about future residual are sale barriers. Residual is a real concern as at its most basic level whether you will ever be able to sell the yacht again after purchase puts these yachts firmly in the too difficult to deal with pile. This issue has remained just as challenging in this market as in the harsher markets of 2012 and later.

However, at least in this market, if these yachts are beautifully presented, well priced and in a sexy location, they stand a better chance than ever before of being asked to dance. If yacht owners are able to put themselves in the place of the new owner to be and present their yacht as they would have liked to have owned her, then there is a new yachting family for them all. Being realistic about the shortcomings and limitations of your yacht as her seller is key, as well of course, as following your brokers’ advice!

Undeniably, there are new as well as pre-owned wallflowers amidst the flurry of new yacht activity. There are those new yachts that are not flying off the shelf and in 2021 we also saw yacht business casualties, particularly in manufacturing. There are those who have brought yachts to the market that the market simply doesn’t get and doesn’t want, there are those that are massively overpriced and there are businesses who haven’t innovated and understood the way yacht design, build and use have developed, and as a result have been swept away by their more savvy competition. All this was ever so, but it has been particularly obvious in such a strong market. Some manufacturers have had to trim their product lines, as that older design that was brushed up with a new swim step and some vertical windows are nonetheless well past their sell by date.

However, in an industry that really is very tiny, smaller in the UK than the UK ice cream industry (please think about that for a minute), what this gold rush of yacht sales has meant is that the fault lines in the business model, funding and costings, have become very evident and has in a few cases caused total collapse. Marine businesses have to be nimble to survive.

At a time when parts from masts to engines to fan belts are hard to source, and where material costs are rising at an alarming rate, it is easy to see how yacht builders who do not buy all materials at the time of order, get caught out when the time comes to order the rig, for example, only to find that the unit cost has gone up by 25%. The owner is on a fixed price contract, even though the builder was not financially strong enough to cash flow the mast build and to lock in the price at the time of order. This cycle leads to a world of hurt with yachts selling at cost or worse, and the whole problem being replicated going forwards. Oh, and the yachts are late too… Which is simply not acceptable in the here and now world of yachting, when your options are reduced by Covid rules.

So the wallflower (or flowerpot as we call them at Berthon) was a feature of a very buoyant market in 2021. However, by making the right changes to the offering and making her less flowerpot and more magic carpet, there has never been a better opportunity to find a new owner for the more unusual and unique. The new yacht wallflower is a problem that solves itself as old designs are dropped, and underfunded, vulnerable businesses fail.

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