Yachting industry in the United Kingdom
6 min read

Yachting industry in the United Kingdom

Yachting industry in the United Kingdom

"Ours is a business that thrives on people feeling good. Unfortunately, there's currently a lot of collective negativity,"

                                                       – Michael Breman, head of sales, Lürssen Yachts.

In this report, we will explore the yachting industry, major yacht builders, various business models of yacht ownership or chartering, the clients' background, and the effects of COVID-19 on the industry in the United Kingdom.

INDUSTRY BACKGROUND

According to Superyacht UK, the United Kingdom is the world's third-largest manufacturer of superyachts, trailing only Italy and the Netherlands. Princess Yachts and Sunseeker yachts are among the most well-known, demonstrating that 'British made' remains in great demand worldwide.

In 2019, the UK superyacht industry had a turnover of nearly £700 million. A total of £308 million gross value added (GVA) to the UK economy compared with FY 2018, supporting 5,155 full-time jobs.

What makes a boat a yacht?

In the 1980s, a vessel that was more than 100 feet (30.5 meters) in length was considered a superyacht, though it is now considered to be on the smaller side.

A yacht is a boat that can house a large number of people comfortably for extended periods. Aesthetics are also important and the typical length starting at 78 feet (24 meters).

According to Jay Gustin, yacht captain who spent twenty-eight years chartering vessels in Alaska, Panama, and Mexico, a yacht “is like a mansion; it's anything you want it to be — it's a perspective."

Classification for larger yachts is very general and based on their length rather than their construction.

Superyachts are those that are 120 feet (36.5 meters) or longer, while mega yachts are those that are above 200 feet (61 meters). Giga yachts are new breeds of yachts that are 400 feet (122 meters) or longer.

Why do you rent a boat but charter a yacht?

The practice of renting out smaller watercraft for a short length of time, ranging from an afternoon to an evening and beyond, is known as boat rental. You're the captain, there's no one else on board, and you're in charge of your supplies. Taking larger vessels for prolonged periods of time is really what chartering a yacht implies.

There are three sorts of charters, based on price, personnel, and other considerations.

1. Bareboat – You are responsible for hiring a crew, supplies, and ancillary expenditures such as gasoline, food, and other expenses.

2. Cabin – You rent a room rather than the full boat. It's the yachting equivalent of a small group trip, and it's best for those who may not have enough acquaintances or money to hire the full yacht.

3. Crewed – This is a full-service option that includes all staff and supplies. This is portrayed as the pinnacle of luxury in the media and hip-hop videos.

Benchmarking UK wealth

After the United States, China, and Japan, the United Kingdom is the fourth biggest affluent market globally, ranking ahead of Germany in Europe.

At the end of 2019, UK consumers’ spending power was valued at £6.45 trillion. Individual millionaires with a net worth of £2.34 trillion or even more make up 36% of the nation's wealth.

There are 760,000 millionaires in the UK, each with a net worth of $1 million (£0.71m), and there are nearly 240,000 multi-millionaires in the United Kingdom, each with a net worth of $10 million (7.1 million).

The UK boasts 95 billionaires with net assets of $1 billion (£710 million), trailing nations such as the United States, China, and India.

WEALTH MANAGEMENT TRENDS

According to Knight Frank, UK-based wealth managers managed $2.3 trillion in HNWI assets, making it the world's third-largest wealth management center behind the United States and Switzerland. London is one of the most important global hubs for family offices, with more than 200 estimated to manage $850 billion in total wealth.



Effects of COVID-19

According to Goldman Sachs, the effects of the pandemic will cause the US economy to decline by 3.5%, compared to the average of 4.4% anticipated by other industry analysts such as Barclays, HSBC, and UBS. The Eurozone will shrink by 7.9%.

Other significant superyacht markets, including the United Kingdom (which itself is projected to have a 9.4% decline in GDP) and Russia, have also been affected hard (4% ).

China, which was struck hard by COVID-19 in the early stages, but managed to gain some control over the virus, is a rare bright spot. According to Goldman Sachs, the Chinese economy will expand by 2.7% this year.

The global financial industry is in far better health than it was in 2007-08. According to Credit Suisse, the number of millionaires globally was expected to reach 51.9 million by the end of 2019 and has been stable since then.

On the bright side, the pandemic has pushed more people to rethink their lives and prioritize their choices and needs differently.

Superyachts –  like big mansions – are isolated and are increasingly being seen as an attractive proposition for HNWIs. They offer a safe place for them to spend time with immediate family members and friends.

COVID-19 has had an especially severe impact on the travel and hospitality sectors. Orders have been revoked, planes have been grounded, and even if you can find a location, many people are wary about staying in hotels and interacting with strangers. Though affected in the early stages of the pandemic, the market is rebounding in yacht sales, and for certain destinations, the rate of charters is also improving.

IYC— a specialist firm dealing in yacht sales and charters –  sold more than $450 million worth of yachts in 2020 and was the only brokerage house to list more than 100 yachts in its charter fleet. Industry reports from Q1 2021 indicate that the global yacht market is the strongest in four years.

“One of the most appealing features of yachting is the ability to spend time alone with your family,” says Richard Lambert, senior partner and head of sales at Burgess Yachts. He adds: “You can isolate to a certain degree and build virtually a bubble around you."

“Yachts are the safest, best, most enjoyable bubble for vacation and travel with the pandemic,” says Mark Elliott, IYC sales & charter consultant.

“Whether chartering or buying a boat, individuals discovered they could manage their surroundings while traveling in absolute luxury with the yacht and crew.”

According to Alfred Law, there has been a major shift in purchase and usage habits, director of yacht manufacturer Sunseeker. Instead of buying a new home, one couple in Singapore chose to live in a "floating home." This is becoming a more regular occurrence.

Similarly, the buyer profile has shifted. More HNWIs are banding together to purchase a yacht and assume responsibility for its upkeep.

There are other HNWIs who do use bank financing and others who opt for long-term leases.

Fresh demand for explorer boats and adventure travel trips has resulted in the emergence of the shifting demographic of HNW and UHNW persons.

This new breed of rich people wants to go to places other than the Mediterranean and the Caribbean onboard exploration yachts. Instead, they want to travel to Antarctica, Scandinavia, Australia, or Southeast Asia to discover new habitats.

FORECAST

According to Technavio, the luxury yacht industry is expected to expand by 310 units between 2020 and 2024, with a compound annual growth rate (CAGR) above 11%.

Europe will have the greatest growth rate among the regions, at 55.15%. As a result, throughout the projected period, the luxury yacht market in Europe is likely to provide substantial commercial possibilities for suppliers.

The key factors driving the luxury yacht market growth are:

CONCLUSION

Even though demand for British yachts was substantially decreased due to the pandemic, the ultra-rich continue to prosper.

They have realized the advantages of yachting, particularly the ability to create a bubble against possible infection. As a result, boats have been brought as second residences of the sea.

The UK and European region are expected to grow until 2024, allowing luxury British yacht builders such as Princess and Sunseeker to continue to prosper and ride the wave of a booming industry.