- Business - Opportunity and barriers to entry

By SuperyachtNews

Opportunity and barriers to entry

We speak to the team at Edmiston about some of the industry's central trends and themes to try and draw some candid conclusions…

With the superyacht market’s core sectors, new build, brokerage and charter, all booming, we consider what the core barriers to entry are for those individuals that have the necessary financial clout to engage with the superyacht market, as well as exploring a number of other ‘trends’ and asking whether or not, at times, the industry does itself a disservice by providing buyers with so much credit for change.

“One of the main barriers to entry is education in the sense that it is near impossible to convince someone who has never experienced a superyacht to make the leap and buy one, or indeed charter one,” Alex Holden, strategy director at Edmiston. “There is also simply a group of UHNWIs for whom owning a superyacht isn’t of interest. UHNWIs are not all the same, some are incredibly frugal or may wish to spend their spare time on charitable endeavours. Equally, there are a variety of other interests, from collecting art to owning and operating vineyards, that may take precedence – time is in short supply.”

In support of Holden’s analysis, the above graph shows a snapshot of the top 30 interests, passions and hobbies for individuals with a $5million-plus net worth. While $5million may seem like a low boundary for buying, it still very much includes potential charter guests. Boating (yachting) only ranks 20th with 4.2 per cent of VNHWIs showing interest.

Various businesses, stakeholders and commentators often repeat statistics relating to the steep increase in global UHNWI numbers versus the relatively slow growth of the superyacht market. These statistics, however, whilst useful for highlighting optimum market potential, are often a little harsh on the superyacht market. Superyachting is always likely to be a niche industry that only the world’s smallest social category will be able to engage with. Indeed, there simply is not the capacity at the shipyards or the marinas to service the large numbers of UHNWIs should they all decide to buy a superyacht and, furthermore, would this reality be desirable when even the most remote superyacht locations become saturated?

Alex Holden, strategy director at Edmiston

“What we are seeing in our data, however, is that the growth in the charter market is far closer to the growth in UHNWIs,” continues Holden. “Ownership for some will simply never be an attractive option, for all manner of reasons, but the growing charter market clearly highlights that the superyacht experience remains incredibly attractive regardless of the determination to buy.”

Sales, whether new build or brokerage, have become a near obsession for measuring the health of the superyacht industry. However, in recent years an increasingly large amount of attention has shifted towards alternative usage models, such as fractional ownership, membership clubs or potential for the delivery of large charter fleets. While new-build and brokerage sales have admittedly excelled recently, the future of the superyacht market is, arguably, providing a range of ownership and usage models that consider the full breadth of UHNWIs consumption habits and preferences.

One trend that has been highlighted by the brokerage community at large is that superyacht owners are, generally speaking, getting younger and Holden confirms that it is exactly the same situation in the charter market. However, at times, the wider market might be at fault for slightly overexaggerating the impact that this shift is having on superyacht, design, technology and usage.

“The data shows that both the buyers and the charterers are getting younger, the charters have got longer and the vessels themselves have got larger. The requirements on board the vessels have also changed, but has this just been driven by age profiles? At the least this is an oversimplification given how many other variables at play such as nationality, family structure and so on, I don’t think you can solely pin it on age,” explains Holden. “There have been some widening trends based on what is actually technically possible for a superyacht, but a large part of this has to be credited to the shipyards, designers, OEMs and various other stakeholders that have made these evolutions possible. Certainly, buyers have had an impact, but the progress has been on both sides. What we are seeing is that buyers are pushing shipyards harder today on the green credentials.”

Sustainability, of course, is one of the topics at the very top of the superyachting agenda, whether that concerns the use of hybrid propulsion systems or the development of philanthropic experiences for owners and charter guests alike. It is easy, looking at the numbers today to fall into cynicism given that so few superyachts currently have hybrid propulsion systems in place, but Holden correctly points out that those vessels that are able to include such systems typically have extended build cycles. Indeed, he predicts that in the coming years we will see a significant increase in the number of superyachts being delivered with hybrid systems. Additionally, Edmiston, as well as a number of other brokerage houses, have been adding philanthropic options to their charter packages.

“From a buyer perspective, hybrid will become more common as the knowledge levels of the advisory parties, such as the brokers, increase. Brokers and management teams will increasingly need to be able to demonstrate a strong understanding of the various propulsion options in order to sell into them,” says Holden. “From a charter point of view, and part of the reason we created the Edmiston Foundation to work with Conservation Collective, it is about being able to prove where the money is going into grassroots projects so guests can see how their money is being used and the good it is doing.”

In terms of Edmiston’s 2022 agenda, Holden highlights a few significant projects amongst many that are top of the priority list for the full-service brokerage house this year. Chief among them are significant technical enhancements to Edmiston’s internal systems, preparing for a cooling off in sales activity whilst staying responsive to unforeseen opportunities, growing its sustainable initiatives and exploring boat show options and alternative means of promotion, buyer contact and sales.

Profile links

Edmiston & Company - Brokerage

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