EXTRACT FROM “ THE STATE OF YACHTING 2019” BY SUPERYACHT TIMES)

Before we look ahead, let's take stock of where the superyacht industry is today. It took a long time to reorganize the construction of superyachts following the difficulties encountered ten years ago. Even today, some unfinished projects from this period can be found all over the world. In addition, during the same period, many yards disappeared from the industry or were taken over, which led to a reduction in the general number of active yards and a concentration of activity around a certain number of specific major yards. Between 2004 and 2008, 226 sites were able to deliver 1,049 new constructions. Ten years later, between 2014 and 2018, this number has dropped to 170 sites for 752 new constructions. The decline in the number of active construction sites continues today. Indeed, there are 483 yachts for 147 shipyards. Of these 147 shipyards, the top 25 account for 58% of the order book in terms of number of yachts. In sum, the industry seems to have become more concentrated around a smaller number of large manufacturers and has recently had a few successful sales years, particularly in 2017 and 2018. Does this mean that industry can look to the future with confidence?

The move by several builders towards larger-sized yachts could be explained by the fact that many well-reputed large yacht builders now have full order books. Customers who want to move up in size but do not want to wait for many years for a fully bespoke yacht will gradually get more newbuilds to choose from. It is somewhat telling that a builder like Amels, which offers a number of yachts over 50 metres built on speculation, has been selling very well lately. In addition, the yard has recently updated and stretched almost all of its yacht models by several metres.

The move towards more explorer-like yachts seems set to continue, as especially at the smaller end of the market we see many builders building yachts with explorer-like characteristics. We use the word “explorer-like” as many of these yachts do not tick all of the boxes traditionally associated with explorer yachts. In addition, the discussion about what constitutes a true explorer yacht is still ongoing and will probably not die down anytime soon. Yacht owners are becoming more and more curious about cruising in new areas off the beaten track and need a different type of yacht in order to do that.

At 194 yachts, sales of new superyachts in 2018 were at their highest level since the extreme peak of 241 yachts in 2008. However, several challenges lie on the horizon in terms of regulations, sustainability and economic circumstances.

Looking at sailing yachts, the market is becoming more diverse in terms of new builds. Builders formerly dependent on the 30 to 60-metre segment have all had to take a close look at their strategy going forward, as sales in that segment have been low for several years now (around 10% of new yacht sales, whereas sailing yachts are currently 16% of the operating fleet). Some yards are diversifying their product mix by getting into motor yachts, while others are gearing up for bigger projects over 60 metres. In that segment, however, the traditional sailing yacht builders will also meet large motor yacht builders getting into sailing yachts and coming in with a fresh approach to the market. Nobiskrug and Oceanco are best known for this, but there are also other well-reputed large yacht builders who are known to have been working on designs for very large sailing yachts.

Economic factors still remain the major concern. The spectre of trade wars is looming above the US and Chinese economies, while many European economies are expected to experience a slowdown in economic growth in 2019. The economic growth of superyacht powerhouse Italy almost came to a standstill in the early months of 2019 and this could potentially negatively impact the financial stability of superyacht builders in that country, as many mid-sized Italian banks are already in dire straits and will have to cut back lending. This comes at a point in time where quite a few Italian shipyards are still recovering after years of hardship.

We cannot write this outlook without mentioning the word Brexit. The United Kingdom, a major hub for the superyacht industry, is facing uncertain times due to Brexit. The country hosts a number of successful yacht builders like Princess and Sunseeker, renowned refit yards and a large quantity of equipment, brokerage, insurance and design companies among others, but most importantly, a high number of very wealthy people from all over the globe call London their home. What will all these companies and people do if the UK does indeed plunge into a no-deal Brexit? The uncertainty around Brexit has already made many major companies across multiple industries set up shop elsewhere in the remaining EU countries.

These days, Asian countries are a key source for the growth in the worldwide number of ultra high net worth individuals, but superyacht ownership is not yet as widespread among them as it is among the wealthiest in the USA or European countries. At the same time, Asian yacht buyers are becoming a more prominent group every year. They now account for over 7% of the known owners of 40-metre plus yachts in the construction book and, as also indicated in our analysis of market trends earlier on, we believe the share of Asian ownership in the world superyacht fleet will continue to grow.

Russian customers have been key to the huge growth of the superyacht industry since 2000, and they are still valued customers, particularly in the higher end of the market. 11% of the sold superyachts in build over 40 metres are destined for Russian owners. However, North American customers have been the driving force in the market in recent years and their role remains key, with a share of 17% of sold superyachts in build. A lot will hinge on the continued appetite of North Americans for superyachts going forward.

Superyacht builders also notice that their customers are getting younger and some of these young customers are buying very large superyachts. Meanwhile, the global superyacht fleet has been growing by 150 to 180 yachts per year in recent years. At 483 yachts, the current construction book guarantees close to another three years of deliveries and more speculation projects, in particular, will be started up in the intervening time. The market for refitting and maintaining yachts is also buoyant, with yards in that industry gearing up to receive the rising number of very large superyachts.

We predict around 160 to 180 deliveries per year during 2019 and 2020. For the picture after 2020, a lot will depend on the level of new yacht sales during 2019. If the market can sustain the level of demand experienced over the last two years for another year, then deliveries in 2021 and 2022 can also be expected to remain at a high level. However, the growing economic uncertainty after a number of very good years presents a significant downside risk. An economic downturn seems likely, as we are approaching the end of an economic cycle. Superyacht builders are currently very busy and working hard to satisfy their hungry customers. However, going forward they will need to be even more flexible and show that they can go along with new demands from their changing clientele in order to remain successful.