The fight for capacity
With demand for second-hand vessels and charter high, will the market suffer from a lack of capacity in 2021?
With reports highlighting an incredibly active year for the brokerage community in 2020 – as well as various stakeholders suggesting a shortage of quality tonnage – a charter season that will be congested with postponed charters on the horizon and limited slots available at the market’s leading shipyards, will 2021’s performance be coloured by capacity issues?
“According to the data, 2020 was the best year for brokerage since 2009. There have been 490 yachts over 24m sold, 13 more than in 2018 that had previously been the record holder. There were 18 per cent more yachts sold in 2020 than in 2019,” starts Raphael Sauleau, CEO of Fraser. “As global UHNW wealth continues to increase, new wealth is coming in and the upshot of this is that it impacts the yachting industry. The growth of the yachting market is still slower than the global wealth increase, but this means that there is a large gap to fill and we can look positively at this challenge.”
Sauleau explains that, in conjunction with the global increase in UHNW wealth, the pandemic has been a trigger for many individuals who have simply decided that life is too short to not act on their wants and desires, a sentiment that is currently shared by most wealth brackets. It is also worth considering the notion that superyachts are increasingly being viewed as safe havens in an uncertain world. While it can not yet be proved that the safe haven motivation has directly led to sales, Sauleau confirms that a number of clients who would typically charter a superyacht have chosen instead to buy, suggesting that perhaps the inclination to share assets in a COVID environment is waning. However, with such an active market in 2020, there are concerns about the inventory of quality tonnage on the market for prospective buyers.
“The sales and purchase market is still quite busy and we have several deals and requests coming our way - I don’t see any signs of a slowdown yet,” continues Sauleau. “The stock markets have responded well to the US election at present and there is still the feeling caused by the pandemic that buyers are eager to purchase yachts and get on board as soon as possible. However, despite the demand, at times we have already found ourselves unable to meet the specific demands of a client because of the lack of quality inventory on the market. These customers are not keen on waiting three-to-four years to complete a new build and, therefore, there may be an opportunity for the owners of recently delivered projects to put their yachts on the market and attract some very serious buyers.”
Unlike the brokerage market, 2020 was unsurprisingly not a success for the charter industry. With a variety of national lockdowns and various travel bans in place globally, the Mediterranean summer charter season was severely impacted by the pandemic. While a number of charter contracts were cancelled as a result of the pandemic, more still were postponed until 2021.
“Taking into consideration Fraser alone, we cancelled around 13 per cent of our bookings and we postponed a further 16 per cent, which will be completed in 2021 all being well,” explains Sauleau. “If you assume that most other major brokerage houses will have postponed 15-25 per cent of their charters, a lot of inventory for the 2021 season has already been taken away. I am expecting 2021 to be a busy year, assuming the success of the vaccination programmes and the ability to travel globally. However, we may find ourselves in a situation where we are not going to have enough quality boats to meet all the demand and this will be a challenge this summer.
“Furthermore, owners who would typically charter their vessels may well decide to use them this summer, because they were unable to do so in 2020, further reducing capacity. Therefore, given the addendums that are now available within charter contracts to protect owners and charterers, I would advise clients to make their choices early enough to ensure that they are still able to select from the superyachts they want to charter.”
The coming year will be another strange one for the superyacht industry. While 2020 was anomalous for all the obvious reasons, 2021 will also prove to be somewhat of an anomaly given that its perceived performance will be somewhat skewed by the hangover from 2020. Nevertheless, with demand high across brokerage and charter, there is plenty to look forward to.
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