What have we learned?
It is fair to say that 2020 was an absolute nightmare, but out of adversity comes opportunity. Let's not forget the lessons we have learned…
Broadly speaking, 2020 can be characterised by one simple term, ‘change’ - although a few choice expletives may also fit the bill. The disruption caused by the COVID-19 pandemic forced us to change nearly everything about our lives. It changed the way we interacted with friends, family and loved ones; it changed the way businesses operated; it changed the way children were educated; and it changed the way we travelled. In essence, it changed nearly everything we took for granted. However, perhaps most importantly, it also changed how we perceived accepted norms. So what then did we in the superyacht industry learn in 2020?
When the scale and threat of the pandemic became clear, and various lockdown measures were imposed globally, thoughts naturally turned to business continuity. How were businesses to continue functioning when the vast majority of personnel were required to work from home? For some businesses, the transition was easier than for others. Those that had already adopted flexible working arrangements and that regularly used video conferencing technology reaped the rewards of their foresight. For others, it required a more comprehensive rethink. What this digital shift taught us, however, was that many of the business practices that were considered to be unshakable prerequisites of standard operations were, in fact, redundant.
As it turns out, out of sight does not necessarily mean out of mind. The fear that business communications and client contact would exponentially breakdown proved to be unfounded…
Ed’s note. At this juncture, I must express the caveat that, for many businesses, 2020 represented a terrible financial year and for many individuals, it represented a year of loss and diminished quality of life and mental wellbeing. The target of this article is not to gloss over the realities of the pandemic, rather it is to seek out positive lessons that we can take forward into 2021 and beyond.
…One of the most prevalent characteristics of the human condition is adaptability. While very little of 2020 could be described as ‘business as usual’, within a matter of weeks most businesses were effectively operating digitally. Indeed, many individuals have spoken to me about the effectiveness of working from home when it comes to streamlining communications and reducing white noise. Rather than filling the silence with unnecessary meetings and business chatter, people have communicated what they needed to and when they needed to. For a number of businesses, it has already been decided that there will be no return to the standard 0900-1730 office hours model. For others, it has called into question the need for having an office at all.
The shift in reliance to digital communications technologies also correlates with our changing attitudes towards travel and the environment. One thing that 2020’s geographical restrictions have proven is that it is entirely unnecessary to travel for half a day, taking multiple planes, trains and automobiles, for a meeting that will last just an hour. Such extravagance is not only environmentally irresponsible, but expensive and a poor use of limited time resources. I am not for a minute suggesting that Zoom, Teams or Hangouts will be able to replace an exhaustive client meeting in person; we all know that there is no genuine replacement for face-to-face engagement. Nevertheless, I think it is fair to say that many businesses will be looking more rigorously at their attitudes towards travel.
Another by-product of the pandemic was the near-total collapse of the boat show season, with some notable (not for the right reasons) exceptions. The sheer bloody-mindedness of those boat shows that were determined to go ahead regardless of how inappropriate their continuation was, proved to me that the boat show organisers are not operating in the best interests of the market, their exhibitors, or indeed, the clients. This was perhaps best illustrated when SYBAss and LYBRA wrote to Informa, the Monaco Yacht Show event organiser, explaining that both associations would not be taking part in the event regardless of whether or not it took place.
The letter explained that the associations had doubts over the safety of the show, the ability and/or willingness of clients to attend and questioned whether the continuation of the show, that is essentially a celebration of wealth, was appropriate within the context of a global pandemic. Tellingly, when the show was eventually postponed until 2021, the organisers failed to acknowledge any of the issues raised by SYBAss and LYBRA. SYBAss and LYBRA’s letter, however, went one step further.
As well as outlining their issues with the continuation of the 2020 event, the associations went on to outline a more general concern that, for several years, the relationship between the event organisers and the exhibitors had soured and become imbalanced. By working together, SYBAss and LYBRA have begun the process of redressing the balance of power between boat shows and exhibitors and in Q3 of 2020 the two associations met with Informa to address a number of issues. It would be somewhat naïve given the size and primacy of the two associations involved in this process to expect their involvement to be purely altruistic and, as such, I would urge other associations, businesses and individuals to engage in the process if possible.
While the discussion above focuses on Monaco Yacht Show, there is a larger project facing the superyacht industry, to analyse the viability of the entire boat show season. Indeed, Monaco Yacht Show is the best target for criticism because the event remains the superyacht industry’s premier boat show. But while Monaco Yacht Show may require amendments, other boat shows’ long-term future must be called into question. Considering, once again, the environmental impact of the superyacht industry, the sheer number of shows and how congested they are is completely unsustainable given how many times the same superyachts are moved around the world to take part in what are essentially the same shows, not to mention extremely expensive for exhibitors, and there may come a point where the market has to start taking action for itself by simply boycotting certain events.
Beyond digitalisation and the generation of alternative means of communication and client engagement, taking back greater control of the event calendar and implementing more environmentally and individually considerate business practices, perhaps the most positive lesson to take away from 2020 is the knowledge that the market is more robust than some might have guessed and that the desire to engage with the superyacht market on the part of clients remains incredibly strong.
When restrictions were implemented globally as a result of the pandemic, thoughts naturally turned to the reduction of UHNW wealth, missed payments, cancelled contracts and force majeure clauses. The fear was that some clients would simply lose their appetite for superyacht projects when there were so many other concerns to consider, including but not limited to, the safety of their families and businesses. The introduction in many countries of fairly stringent lockdown restrictions, social distancing measures and travel bans had a huge effect on the global economy, bringing to an immediate halt the essentially unbroken upward trend in the global growth of the ultra-wealthy over the past decade. The sudden shock to a large part of the global economy, a slump in financial markets, and sharply heightened consumer, business and investor caution resulted in an 18 per cent decline in the UHNW population in the first three months of 2020. The tumbling fortunes of the ultra-wealthy seemed to support the market’s initial fears.
However, when speaking with various shipyards at the time, many expressed confidence in their clients’ desire to complete projects. Naturally, there have been many delays imposed on projects as a result of the pandemic and it is more than likely that some clients, especially those buying at the lower end of the superyacht market, will be forced to engage in distressed sell-offs. And yet, for the most part, the news coming out of the market is positive. As the stock markets recovered, UHNW wealth continued on its upward trajectory. Furthermore, the relative isolation that many have felt throughout 2020 has caused some clients that were sitting on the fence about a superyacht project to commit. If anything, the pandemic has done the perception of superyachts as an asset class a massive favour. They are now no longer just seen as unnecessary extravagances; they are seen as floating, mobile safe havens for friends and family. One market commentator went so far as to suggest that the desire to purchase superyachts has been so powerful of late that the typical cycle downward one might expect in the year of a US election may be overridden.
In a world that has been characterised by restrictions, the appeal of a superyacht has never been greater and that has been proved by both the performance of the new-build market and by the excellent number of sales by the brokerage community in Q4 of 2020. There can be no denying that, all in all, 2020 has been awful. For all the positive messaging and silver linings, we cannot hide from the fact is has been disastrous for many. However, those silver linings and positive by-products do exist; we just have to find them and learn from them.
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