A 'win win win' solution

Jan Gesmar-Larsen and Sean Ewing have much in common. They are both wealthy businessmen; they have both held top management positions in the world of financial services and other global corporations; and, most relevantly, they have both invested substantially in the yachting industry.

Given their business backgrounds and yachting experience, it is perhaps unsurprising they have turned their attention to what they see as an outdated aspect of the yachting industry: the charter business model. Their online platforms, yachtcharterbids.com and charterbid.com, founded respectively by Gesmar-Larsen and Ewing, both went live in the summer of 2012. As the domain names suggest, the websites offer much the same services and are based on broadly similar principles, but the way they go about conducting business is subtly different.

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Clearly, chartering offers owners a way of ameliorating their running costs, while also attracting potential new owners into the market.

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During a recent meeting in Monaco, Gesmar-Larsen pointed out that the superyacht ‘installed base’ (an IT expression referring to the total number of a certain type of system or product, usually a computing platform, actually in use) now stands at roughly 5,000 units over 30m. Not only has the value of these pre-owned assets dropped dramatically, but fewer sales combined with the larger inventory mean it could take decades for some owners to sell their boats. Clearly, chartering offers owners a way of ameliorating their running costs, while also attracting potential new owners into the market.

Ewing came to similar conclusions after speaking at the Global Superyacht Forum in Amsterdam in 2010 (he was a guest speaker at the same annual event in 2012), when chartering was widely discussed as a means to attract new owners. He was keen to find out more about the superyacht industry and who could afford to buy or charter large yachts. He set about researching various global wealth reports and deduced from these that of the 80,000 or so UHNWIs worldwide with USD30 million or more of investable assets, about 6 -7 per cent had an interest in yachting, which amounts to some 5,000 individuals. It is no coincidence, Ewing realised, that this number is roughly equal to the global fleet of existing superyachts. He then turned his attention to yachts for charter. Bearing in mind that some owners register their yachts for VAT purposes but have no intention of chartering, he calculated that a mean figure of around 2,000 yachts are available for commercial charter. If you consider their owners probably want to charter for six weeks over the course of the season, with each charter lasting eight or nine days, then clearly several thousand new clients are required each year.

“With the average charter period per yacht currently at 1.6 weeks, the figures simply weren’t adding up,” Ewing claims. “So then I looked at the dynamics of why this should be the case, and especially the price. I was amazed because, firstly, while the value of many of these second-hand assets has dropped by as much as 70 per cent over the past five years, the charter rates have hardly moved at all. Secondly, if I charter in the first week of August in the Med, it might cost me 10 per cent more than if I charter in the first week of May. That again doesn’t make sense. Because if I go to the Fairmont for the Monaco Grand Prix, I might pay 5,000 euros a night, but if I go today it’ll cost me 200 euros. Now take that logic and apply it to yachting: one of them must be wrong and something tells me it’s the yachting industry, because not enough people are chartering these boats.”

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"The problem facing these clients is, how do they go to a charter broker and say they want the same boat at two-thirds or even half the advertised rate?” – Gesmar-Larsen

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Discounts are being negotiated between charter agencies and their clients behind closed doors, but Gesmar-Larsen and Ewing believe less experienced customers are likely being dissuaded by what they see as unrealistically high rates given the economic realities of the marketplace. “The problem facing these clients is, how do they go to a charter broker and say they want the same boat at two-thirds or even half the advertised rate?” asks Gesmar-Larsen. The answer is through his online, open bidding system, which provides charter agents and owners the opportunity to gauge the prices charterers are willing to pay (but are under no obligation to accept), while ensuring the client can get his yacht charter at the lowest available market price.

The online bidding services that Ewing and Gesmar-Larsen have set up are designed specifically to deal with these kinds of issues. They provide a simplified and transparent system that puts the customer first by providing charter clients with a way of communicating to the yacht owner and/or central agent for that yacht how much they are willing to pay.

Read the full article in Issue 6 of The Superyacht Owner.

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