Superyachts: depreciating quarantine machines
Gust of demand filling industry’s sails may be the last before a prolonged slump
Self-isolation aboard a $590m superyacht furnished with a cinema and wine cellar sounds a tolerable — even pleasant — experience. When billionaire David Geffen posted his view of the Caribbean sunset on Instagram, not all of his 84,000 followers offered commiserations.
Fellow billionaires have joined the DreamWorks Pictures co-founder in isolating — and even home schooling — on superyachts for months. For those without their own superyacht, a charter costs an average $150,000 a week. This gust of demand filling the industry’s sails may be the last before a prolonged slump.
The pandemic has left the travel industry as a whole — from airlines to cruise ships — fighting for survival. Luxury travel, including private jets and yachts, is an exception as the wealthy flee to safer places. Charter companies remain open for business. The number of yachts in the US surged last month. Business in the Bahamas and the Caribbean has taken only a limited hit.
One of the reasons is that superyacht marinas have largely remained open. A coronavirus disaster on the Diamond Princess cruise ship has closed most cruise ports. Nine cruise ships carrying about 8,000 passengers are still stranded at sea.
Cruise ships are riskily crowded places, as are the ports they frequent. PortMiami in Florida, the world’s busiest, has up to 50,000 passengers passing through daily. In contrast, yacht marinas have just a handful of families travelling through them on any given day. Superyachts can set to sea with a minimal crew, making them ideal for social distancing.
Yet these months may be the last of the good times for the industry. After the two stock market crashes in 1929 and 2008, yacht sales plunged. Prices more than halved. Unfinished orders faced mass cancellations as banks stopped financing yachts and shipyards.
Superyachts are depreciating assets with steep operating costs. Fuel, insurance and dockage fees are about $1m a year. When maintenance and crew salaries are included, operational costs come out to about a 10th of the price of the yacht. Those are too high to support a profitable charter business in a sharp downturn. They also limit the second-hand market. You may be able to dodge coronavirus aboard a superyacht. But you cannot avoid the hit it delivers to asset values.