The rich get richer, the yachts get larger
Posted on 12 November 2008
Written by Jim Flannery
As wealth spreads to many corners of the globe, yachts are surpassing small cruise ships in size
So how big is “super,” as in superyacht, when the benchmark for extravagance is now a 532-foot yacht named Dubai?
Is it 80 feet? 100? 120? Nope. “I think over 50 meters [165 feet] is closer to what superyachts are these days,” says Paul Madden, vice president of the International Superyacht Society. “Anything under 160 feet is pretty much a production boat.”
Francois Van Well, president of the Dutch superyacht builder Feadship, agrees. He says Feadship now builds anything less than 150 feet on a semicustom basis, which means buyers have a limited number of choices in the way the yacht comes together. This keeps costs down in what is now this industry’s “low end.”
Superyachts of more than 150 feet are today’s fastest-growing segment, according to Showboat International’s 2008 Global Order Book for yachts larger than 80 feet. Orders in that category grew by a quarter in 2008 and account for 35 percent of the 549 new builds of more than 100 feet expected this year. And their numbers keep growing.
Lest one think that, in yachts, bigger brings economies of scale, Madden notes that a piddling 130-footer costs around $20 million, while the price of a 200-footer jumps to $70 million — more than three times the price for a boat that is far less than twice as big. “Prices go up exponentially with size,” he says — not just building costs, but other costs as well. Crews increase from four or five on a 130-footer to eight or nine on a 170-foot superyacht. Annual operating costs more than triple — from $1.5 million to $5 million — and displacement soars from 225 to 950 tons.
The growth in superyachts parallels the incredible growth of wealth around the world. Superyacht owners are super-wealthy, often billionaires. Forbes magazine — the great chronicler of wealth — reports 1,125 billionaires in 2008, up from 100 in 1987 and 500 five years ago. Forbes counts 226 new billionaires this year alone. “I’m assuming that, as a rite of passage, [they all] will want to have a large yacht if they want to have any self-respect,” Madden says.
The billionaire club is becoming more diverse, reflecting the wealth of emerging nations, says Andrew Cosgreave, president of Merrill Stevens Yacht Service and Charter Management in Miami. A few years ago, 10 of the top 20 billionaires were Americans. Now four are Americans, four Indians, four Russians, two French, two German, and one each from Mexico, Sweden, Hong Kong and Saudi Arabia.
“Follow the money. This is where it’s at,” says Cosgreave.
Three years ago, Microsoft co-founder Paul Allen was at the summit of the superyacht world with his 414-foot German-built Lürssen, Octopus, a yacht that carries — in addition to Allen and his guests — 60 crewmembers, a 63-foot tender, two helicopters, a 40-foot submarine and miscellaneous sport craft. Today, two other Lürssen, Saudi prince bin Abdul Az’s 457-foot Al Salamah and Oracle Corp. CEO Larry Ellison’s 452-foot Rising Sun, have dethroned Octopus as the world’s largest privately owned yachts. The crown prince of Dubai’s 532-footer — aptly named Dubai — dwarfs even those yachts, but it is state-owned.
“There’s always someone who wants the biggest whatever,” says Larry Pimentel, president and CEO of the SeaDream Yacht Club, which has a U.S. office in Miami (www.seadreamyachtclub.com).
Because of that, the high end of the superyacht market is starting to look a lot like the small end of the cruise ship market. It’s no accident that the annual International Superyacht Symposium convenes at the same time and place as the Seatrade Cruise Shipping Convention. The two industries see themselves converging in the 300- to 500-foot range of yachts and small cruise ships.
Pimentel’s SeaDream operates two 344-foot mini-cruise ships, each with 55 cabins and 110-passenger capacity. SeaDream I and II have a spa and fitness center, golf simulator, pool, beds topside for those who want to sleep on deck at night, a library, fine dining and wine cellar, and a water-sports marina — a retractable deck at water level where guests go kayaking, water skiing, tubing, boarding, waverunning, snorkeling, sailing, or just swimming. “This is yachting, not cruising,” Pimentel says.
Describing his offering as a “yacht-like product,” Pimentel says his SeaDreams cruise on scheduled itineraries, but also charter out to private parties 30 times a year. The mini-cruisers were in charter in the Caribbean in spring 2007 for the Cricket World Cup, but the most popular charters are 50th birthday parties. “People are looking for a yacht experience, and that’s what this is,” he says.
The SeaDreams cost several hundred thousand dollars to charter for four-day cruises in the Caribbean, or several thousand dollars per person when they operate on a per-passenger fare basis, he says.
Fractional ownership, or timeshares, also are bringing new owners into the mega- and superyacht arena, says James St. John, president and CEO of ResidenSea, of Miramar, Fla. At least three companies — YachtPlus, Monacle and PrivatSea — offer fractional ownership of megayachts and superyachts. The PrivatSea Club has converted a 400-foot yacht, the Alexander, to cruise the Mediterranean in summer and Caribbean in winter on a timeshare basis for club members.
St. John’s own company, ResidenSea, sells condominiums and passages aboard a 644-foot “superyacht,” The World, which voyages to ports around the world and domiciles condo owners and guests in 110 private residences and 88 guest suites (www.residensea.com). St. John says the ship has an Internet café, playground, cigar club, theater, church, four restaurants, golf practice range, tennis court, swimming pool, and retractable marina at the stern with eight to 10 sportboats. He has identified five similar ships now in planning or building. “This is a middle niche between the cruise ship and the private yacht,” he says.
Worldwide, 916 yachts of more than 80 feet are on order, an 18 percent increase over 2007, according to Showboats. Annual growth of the 80-plus-foot order book is 12 to 15 percent and gaining momentum, says Bob Saxon, president of Camper & Nicholsons USA, a luxury yacht builder with offices around the world. “We may see a doubling of that in five years,” he predicts.
The average size of a megayacht today is 130 feet, and the number of new boats of more than 80 feet is growing so fast there aren’t enough yards to build them, crew to run them, or marinas to berth them. Also, charters, which help pay the enormous cost of buying and operating these yachts, have not kept pace with the growth in their numbers. Yacht owners need to spend more on advertising to grow this elite end of the charter market, Saxon says.
As rosy as the outlook is for new builds, “We’re facing issues of growth, and how to sustain and retain the client base,” he says.
This article originally appeared in the November 2008 issue.