“We had a very good start to the year in terms of new business and charter yachts coming onto the market, although I am not sure that this is necessarily representative of a market trend,” starts Ben Harwood, head of charter management at Burgess. “Speaking of the owners that have come on board during the COVID-19 crisis, many of them are individuals that would have been putting their yachts on the charter market anyway, although I am sure that for some there is an element of whether their businesses have been effected, or perhaps they are bracing themselves for a recession. In uncertain financial times, it certainly pays to have an asset like a superyacht working a little bit harder.”
Harwood concedes that there have been a number of discussions with owners that are considering going down to minimum crewing standards and reducing running costs. However, he maintains that, at least until the picture becomes clearer, the prudent decision is to keep crew employed where possible, explaining that even a reduced charter season has the ability to make up for any potential savings incurred by operating on a reduced manning basis.
“If you keep your superyacht manned and on the charter market it will be kept in good condition and fully operational and, therefore, so long as we are able to do some charter business, especially during this summer and beyond, then the charter income should still outweigh any operational savings,” continues Harwood. “If you mothball your vessel at this point, you are really limiting its appeal and capability to engage in charter activity, or indeed sales activity with regards sales visits and inspections. Not to mention that the good reputation of many top charter vessels is founded on the reputation of the crew.
“That being said, the right course of action depends on the owner’s current circumstances as charter revenue cannot be guaranteed at this time, although we are quietly confident that there will be some business to be done. There is some positive news coming out of a number of European countries where it seems like tourism will definitely be on the agenda. We would like to think that yachting will be a part of that. As long as people can fly in and get on a yacht, then there is definitely going to be some charter business done.”
Speaking on Burgess’ charter fleet growing throughout the crisis, Harwood believes that, in times such as these, there is a “flight towards quality and security on the part of owners”. In other words, when the continued health and viability of various businesses is being called into question because of economic downturn, there is a natural movement on the part of clients towards businesses that are perceived to be more stable. “That is part of the message, to a degree, although we focus on what we are able to offer the client and how we add value to their superyacht’s specific programme.”
“Initially we saw a large number of cancellations and rescheduled charters, primarily for those trips that were due in May and June,” explains Harwood. “However, we have a number of clients that remain hopeful that their charter will go ahead, especially in July and August. Perhaps even more promising is that we are now starting to see some new enquiries. At first these enquiries focussed on local charters, such as Monegasque residents wanting to charter in the South of France or Italy, or US clients wanting to charter in the Bahamas, and some were people looking for a good deal. Their expectations for chartering this summer are obviously different, with a focus on entertainment on board rather than visiting bars, beach clubs and so on. Over the last couple of weeks, we have started to see enquiries come in from further afield, UHNWIs who intend to fly privately to the vessel.”
There has been much speculation as to whether or not the global pandemic will result in a cascade of reductions and last-minute charters akin to that which was experienced in the wake of the 2008 global financial crisis. In the post-financial crisis era, reductions became common and only slowly filtered out of being an industry norm year-on-year, becoming an almost rarity towards the tail end of the decade. Harwood, however, does not believe that this is likely.
“With most enquiries right now, the client is looking for a deal and there will be a number of clients that find a good deal, but generally speaking I don’t think owners are prepared to give large discounts, especially for the busy months that, arguably, hold a far greater emotional premium today,” he says. “There are a number of yachts that have gone down to minimum manning and there are others that have been unable to travel to Europe. Yes, demand is down, but so is supply. If there is to be discounting in 2020, I believe it will be a short-term solution and unlikely to persist like it did post-2008.”
While there is no doubting that the Mediterranean charter season in 2020 is going to be dramatically affected by the COVID-19 crisis, Harwood, and indeed Burgess, remain optimistic that there will be charter business to be done and, for those owners who keep their vessels on the market, they may yet still be able to help mitigate some running costs.
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