Yacht Ownership – the March Towards an Easier Life

By Sue Grant

Yacht ownership is a joy. Your yacht is your rat race escape capsule, for use by you, your family and friends exclusively. She lies patiently at the dock awaiting for your appearance and is there for your yachting programme whatever it is. Outside usage periods, if she is crewed, she may have a charter programme or other members of your family may use her as you wish.

This has been the norm forever, and outside the requirements of a finance house, no one has anything to say about where she goes and what happens to her. With the privilege and joy of yacht ownership comes that wonderful feeling that your yacht is there and ready for you after the next series of meetings and commitments are done. With all this good stuff come the bills… It is normally said that on average a yacht will cost 10% of her value a year to maintain. This can be more if she is due big capital expenditure, or if she is more mature and her residual value is low for her size. If it is less, it is wise to hang onto the surplus against the next breakage or upgrade that needs your attention.

The baby boomer generation have always been super keen on pride of ownership and this, up until just before Covid, was the way it worked. With a churn rate on motor yachts at least of 36 months, the cost of upgrade on yachting was a matter for your enthusiasm and the need for an approving nod from your bank manager.

As the world changed in the 2000s, people owning yachts also changed, with the yacht becoming just one element of her owners’ toy box, so she had to compete with the house by the sea, the ski chalet, the plane and much else. Shocking Northern European weather took yachts to the Mediterranean for its guaranteed sunshine and outside living. People downgraded to smaller yachts or came out of yachting altogether preferring to charter. There was a huge increase in the sales of motor yachts which were comfortable, easy to operate and a more certain investment. Sailing became somewhat side lined and the industry worried that it had the hallmark of an hereditary sport, with only those whose families sailed buying sailing yachts, and that numbers sold would dwindle to a trickle as new entrants preferred the convenience of throttles and getting from A to B in a straight line.

As yacht prices rose and technology increased, and the super and then mega yacht were born, the cost of entry into yacht or motor yacht ownership rose. Importantly the cost of berthing, insuring, and caring for yachts also multiplied. OK for the baby boomers but those millennials that yachting needed to attract to the sport were not impressed with the responsibility, capital investment and cost of ownership. They sailed dinghies, cadged cruising aboard yachts belonging to baby boomer family or friends, or chartered, or just didn’t bother.

Large manufacturing groups like Beneteau woke up to this problem in the 2000s and planned for charter, boat share and the rest. The baby boomers were being overtaken by a new generation that wanted experience rather than a big overdraft caused by their yachting habit.

Of course, Covid turned everything on its head and the freedom of yachting and the ability to have your place on the water for you and your family, which was a safe space, made the millennials think again and they entered the feeding frenzy that was the yachting Covid bump in 2021. They bought small yachts, traded them and spent time on the water, learnt about clockwork yachting and sailing, and found that they loved them both.

With charming optimism, the yachting industry felt for a brief moment that they had captured this new breed of yachtsmen and that they would be able to persuade them to buy into the idea of large capital expenditure, big running costs and to be fully responsible for an asset that needs plenty of love and input. To a degree, whilst yacht prices were rising, this worked. However, the millennial buyer is a discerning one and this was never going to wash for long.

In a normal market, by buying wisely a yacht with proven good residual, and maintaining her properly (and paying the eye watering bills that this brings) you get out with a modest loss, which is a fair bargain for the pleasure, and experience that the yacht has delivered. Unlike a classic car or a property, yachts are not an investment – but they are your magic carpet to a fantastic lifestyle.

Whilst a good maintenance programme removes some of the uncertainties, there are always surprises with any maintenance programme and we wince when our yacht owning clients are cheerfully told when they question an eye watering bill sent by a marine business for fixing their yacht – Welcome to yacht ownership Sir…

Today’s new intake of yachties don’t like surprises. They will pay a fair price for a good experience and don’t have the need to own a particular yacht for the emotional attachment that she provides. After Covid it was always inevitable that other types of ownership were going to be required to keep them coming to the party and spending on yachting. As they take over from the baby boomers, these new systems for using yachts and participating in our sport will become more common and then the norm. Owning, funding, and worrying about a depreciating asset that you use for much less than half the year will be the exception rather than the rule.

Savvy yacht manufacturers, clubs, marinas and other operators woke up to the joys of the Boat Club very quickly, and so now there are lots of them. We predict that 5 years from now they will scarcely be a port without a Boat Club being enthusiastically used by clients. The client pays a fixed fee per year for a set number of days of usage and books the days that suit. They can choose from a variety of different class of yachts and if they are not experienced, they pay for a captain to teach them the ropes.

This is very good business for the yacht manufacturers who can build for their own Boat Clubs and offer a selection of their product. The yachts pay for themselves and can be sold at the end of the term for an attractive price. The hope is that Boat Club users will then want to upgrade to full ownership. For the marinas, it guarantees that berths are taken and brings people into their port who may buy a yacht and want a berth in the future. For the normal Boat Club operator it is also a winner as fees are collected up front, so they have good cash flow and a programme for the year. Of course, this works best for smaller yachts although it can be scaled.

Millennials love all this. They pay a sum annually for a number of days and if they change their mind about a day or it’s rainy – they can go to the pub instead. The thing that we find interesting about this trend is that the baby boomers have started to jump onto the train, loving the lack of organisation, hassle and knowing that for a modest fixed fee they have all the yachting that they need, they can use different yachts in the fleet and crucially, if something breaks it is just not their problem.

We have always seen charter yachts in somewhere very sunny, where you buy the boat on easy terms and she’s in a charter programme. Over time you become her owner and at the end of the period you either keep her or she is sold and you recover some of your investment. Rather like an elaborate timeshare but still with strings and lots of paperwork. The Boat Club on the other hand, has a delightful simplicity that appeals to all.

Shared yacht ownership has always been with us. In the past, it has normally worked best when friends or family members club together and own a yacht with a common cruising programme, sailing aboard both together and apart, and very often the yacht has a charter programme as well. Many yachts have circuited the globe, entered regattas and done amazing things that way, with cost, experiences and capital costs shared. However, it is never that easy to organise and if a partner wants to leave the party, finding someone else to replace them was a problem. Sometime there are squabbles about running costs – does the yacht really need a new generator, mainsail, new Satcom or whatever? But many partnerships work well and the arrangement can flow over a number of yacht sale and purchases and this is a practice that we still see, and we have acted for a number of clients who have owned their yachts this way. The watchword for this working on an informal basis has always been mutual tolerance – in abundance!

But now we are seeing the development of fractional ownership systems administered by businesses who take the emotional sting in the tail out of the traditional shared ownership system and offer a fixed price for a set number of weeks of usage, with a set cruising programme and the yacht and her crew if she has them, are professionally managed. No more the irritation of deploying the dinghy and finding that one of the davit arms is broken which your partners forgot to mention. Or spending three days in port waiting for the air con which went down when your partners were aboard (not their fault but it worked perfectly for them grrr!) or grumbles about the cruising programme for next year.

Fractional ownership is a simple transaction that provides a fixed price for a number of days, in a set location aboard a yacht of which you own a slice of but which you do not manage. Run as a business, you buy for a fixed term and the asset is sold and you exit or move into a new arrangement with a new yacht. How very modern, hassle free and very twenty first century!

Of course, these new systems favour new yachts with warranty on both them and their kit, and manufacturers have a new outlet for their products. Yachts are released from the programmes at an early age, well depreciated and so relatively easy to sell into the brokerage aftermarket or are traded by the manufacturers against a new replacement.

We predict that brokerage yachts will start to enter systems like this as they become more developed and there is more confidence in the longevity of the programmes. The brokerage market after all, offers more choice and delivers a larger, more elaborate yacht for the same budget. Bringing larger yacht ownership within scope for more potential shared owners, or provides fewer owners with more time aboard the yachts that they share. The key to making this work is a short ownership period with a thorough refit to bring all kit and structure up to tip top shape before the programme commences.

All this is very encouraging in our view, for the future of yachting in all segments. Whilst technology has made yacht operation easy in many respects, the costs of ownership are rising, but the more relevant thing is that despite much talk about work life balance and spending time doing what you want to do, we are all time poor. Releasing yourself from time at the office to go sailing is surely rather more worthwhile when you don’t spend those saved hours arguing with yacht service teams or with your head in the bilges trying to fix a fault, rather than enjoying what the millennial group call – the experience…

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