The ultimate status symbol

Superyachts are getting big and sophisticated enough to be called small cruise ships ? so it?s no surprise that traditional cruise ship builders are sizing up this booming market

They say size matters and nowhere is this truer than with luxury super yachts which are considered to be the ultimate rich persons? toys. Although these yachts have been around for centuries, they have been mainly confined to royal families and heads of state but now constitute a booming market as an increasing number of wealthy people seek to own the most desirable symbol of wealth and fame. While the official definition of a super yacht is “a boat longer than 24 metres requiring at least one crew member”, there is a growing number of very large semi-custom and custom built super motor yachts of over 50 metres with the larger vessels falling more in the ship category. This development has prompted The Motor Ship to examine this sector of the industry.

Ten years ago, a 50m yacht represented the larger end of the market but now an increasing number of vessels over 100m are being built. The super large yacht newbuilding market, ie the market for the construction of luxury private yachts measuring more than 50 metres long, is one of the fastest growing sectors in the world shipbuilding market. But not every shipyard can build a super yacht to the exacting requirements of their owners. At the same time not just any marine equipment specialist can become involved in the design and supply of specialist equipment to such vessels. These are high quality and luxurious “small ships” and the marine equipment on such vessels is now similar to that of commercial vessels but customised to fulfil the quality and appearance requirements of the sector. The market is image orientated and dominated by a wide range of demanding customers and both ship builders and marine equipment manufacturers must be prepared to meet the owner?s high expectations. The luxury found on many of these yachts is awesome since only the finest materials are used in construction and only the best boat builders are used with highly skilled craftsman. The workmanship on most of these luxury yachts is a treat to see.

The annual operating budget for one super yacht is roughly between 10 – 15% of the purchase price. Given that many yachts cost upwards of $20m, one will look at spending annually around $2m just to keep a boat running and in tiptop shape. The number of crew required to run a super yacht can range from just one to around 60. It is not uncommon to find super yachts with their own helipads and, in fact, a recently built one has two helipads. While the majority of these yachts are privately owned, many are available to the public for charter. This is, of course, only possible if you have the necessary funds and, as a rule, you have to be very very rich indeed! It has been estimated that around 50 to 60% of the owners charter out their yachts and reflects the fact that many people have had their fill of cruise ships and are now looking for something different, offering more exclusivity.

The economic

importance of the

luxury yacht sector

It?s a market that does apparently not know the meaning of “economic crisis” and has literally exploded during the last five to 10 years. Despite the fact that the latest figures collated by ShowBoats International reveal a slight drop of 4.7% in the world order book for luxury motor yachts, the first in a decade, this sector of the maritime industry has shown itself to be remarkably resilient. The current economic conditions have had a greater adverse affect on US yacht builders than those in Europe while, at the top end of the market, in the 50-metre plus range, orders have increased by 15%. This is the only market sector that has recorded an improvement and reflects the fact that these owners are so cushioned by their financial situation that it does not matter how the economy is doing. They are a different breed of people with many large vessels owned by a cross-section of the Who?s Who of the corporate world.

Further evidence that the seriously rich are impervious to the vagaries of the world economy is the 2% increase in the average overall length of motor yachts under construction from 36.7m to 37.4m. By comparison, the largest motor yacht sector, boats in the 24.6 to 27.4m bracket, decreased 19% which may be explained by the fact that buyers of the smaller yachts are more susceptible to declines in international stock markets and struggling investment portfolios. When looking at the statistics, it is important to realise that the figures shown below are based on order books up to 1 October 2002 but, because it takes two to three years to build these yachts, the tables are headed 2003.

The leisure boat industry generates substantial revenues for countries in the Mediterranean basin and is a major economic factor for the South of France and the Principality of Monaco. Luxury yachting brought $230m to the Mediterranean region in 1999 of which about $50m was in renovation and maintenance. On the C?te d?Azur, the luxury yachting sector employs some 16,000 to 20,000 people. Based on data collated by SuperYachts International, a UK marine consultancy, there were just under 2,600 mega yachts of over 24 metres navigating around the world in 2000.

The value of the super yacht marine equipment market according to a recent report entitled Superyacht Marine Equipment Market Study commissioned by the UK?s Society of Marine Industries has been estimated at over $1bn in 2002. This comprises the newbuilding equipment market at approximately $383m and the refit and repair market at around $652m and these market values are expected to grow at the same rate as the fleet. Since the fleet has a very low scrap rate, the market for repair and refit is expected to increase in line with the growth of the fleet.

Figures released by Showboats International show that the world-wide fleet of super yachts over 30 metres in 2001 was estimated at 1,700 with yachts over 50 metres set to reach 430 units by the beginning of this year which is significantly up from the 2001 figure of 191. The large boat-builders, ie Americans, Italians, English, Dutch and Germans, have benefited the most enjoying the lion?s share (75%) of orders as well as maintenance and repair yard revenue. This year?s decrease in yacht orders follows a ten year period of strong growth with the last three years producing double digit gains of 18.4% (2002), 35% (2001) and 15.7% (2000). Even taking into account this year?s weak showing, the luxury yacht market is still a vibrant industry with Italy, once again, heading the list of leading boat-building countries benefiting from a strong reputation in yacht building with over 20% of the existing mega-yacht fleet constructed in that country.

Shipyards in this lucrative market have traditionally been mainly European based but over the last decade the Far East and the antipodes have been making serious inroads.

Yachts are built of steel, aluminium or glass fibre and many comprise a mixture of materials, depending upon the architects, designers and shipyards. Costs of these super yachts range from $2.5m to $35m although the largest and most luxurious have a price tag of over $50m. Used or refurbished yachts can fall into the same price bracket. Some of the larger yards will build or part-build a yacht “on spec” in the hope that a buyer materialises while many will also enter into both part exchange and brokerage negotiations.

In the post-show fallout (London boat show), feedback from major boatbuilders is mostly positive with a mix of rises, flat results and closed lips. Reports so far from the equipment sector are also mixed, with some companies suffering as a result of the slower start but claiming better sales late on. The UK retail chandlery market appears as price-sensitive as ever and there are still some signs of disquiet at the relative fragility of this sector.

The “vintage” trend hits yachting

Recycling is in vogue, and the yachting world is no exception with conversion, refitting, and transformation turning yesterday?s hulls into today?s super motor yachts. This trend gives new leases of life to redundant tugs, fishing boats, military vessels and the like in favour of spanking new yachts and is particularly prevalent among passionate sailors seeking new sensations and a look that sets them apart.

Although such conversions still remain comparatively rare, more and more projects are finding their way onto naval architects? drawing boards. The motivation of these “one of a kind” owners is primarily to obtain a low profile and a more discreet boat that will not attract too much attention as they sail around the globe. Often referred to as exploration or expedition yachts, they are rarely seen in the Med or the Caribbean since the goal of the owners is undercover adventure. Designed first and foremost to cope with the most hostile seas, they are also intended for economy and are claimed to be simpler to operate and more reliable than a classic luxury yacht. Another advantage is that a conversion can be completed within six months whereas it can take more than two years to build a large motor yacht. That being said, there aren?t too many second-hand boats on the market, so savings, compared to purchasing a new classic yacht, can be hard to achieve.

One of the most notable conversions was the Christina O. Built in 1943 as a Canadian naval escort, the vessel was acquired in 1954 by shipping magnate Aristotle Onassis who spent some $4m to convert the ship. Named Christina after his daughter, the vessel was Onassis? floating home from 1954 to 1975 and, when he died, his daughter Christina donated the yacht to the Greek government. Little used, the ship was ultimately saved by a private buyer in 1998 (John Paul Papanicolaou had been an Onassis family friend). Following a three-year restoration, with work done by Viktor Lenac shipyard in Croatia, she was renamed Christina O and now available for charter and cruises worldwide for up to 36 passengers.

The power behind the status symbol

With the growth in size of super yachts and with owners demanding increasingly quieter ships, all the major engine builders including Wartsila, MAN B&W, Caterpillar and MTU, are supplying propulsion systems and engines to give the high level normally associated with cruise ships.

Christina O, for example, had her original 1943 steam engines and boilers replaced with two new 2,038kW MAN B&W diesel engines and three MAN B&W gensets, giving her a cruising speed of 18 kts and a top speed of 22.

MTU, which is part of the DaimlerChrysler Off-Highway unit, has been particularly successful in marketing its series 2000 and 4000 which, together with the 183 model range, have helped the company attain a strong position in the global yacht market. Of all of the mega yachts ordered in the course of 2001, i.e. yachts with a length of 25 meters or more, 56% were equipped with MTU or Detroit Diesel engines. The 16V 2000 engine of 1,470kW output performed especially well in this respect, attaining a market share of over 90% in its power range.

The main factor for this success is the high performance at a low weight and compact dimensions which have been traditional features for MTU engines for many years. Another aspect, which is important for the yacht market, is MTU?s ability to deliver complete propulsion systems that contain various propulsion components and integral electronic controls. As a result, the company often equips boats with engines, turbines, gearing systems, on-board power supply units and electronic control and monitoring systems. This electronic system can be further extended to become a multifunctional ship automation system controlling not only the propulsion system, but also tanks, on-board power supply, doors, hatches and other components.

New players enter the market

Some of the more traditional large scale shipbuilders are making serious moves to enter the super yacht market especially those with experience of building fast warship. IZAR, the Spanish shipbuilding conglomerate has demonstrated its capability in this field with the construction of the Royal Yacht Fortuna, a 42m mega yacht with combined diesel/gas turbine propulsion enabling the vessel to achieve an incredible 68 knots making it the fastest mega yacht in the world. The new vessel, with its three RR Allison gas turbines and high-tech computerised bridge cost $19m and is reportedly able to outpace the Spanish Navy?s fastest vessels.

The Spanish shipbuilder aims to achieve a foothold in the super motoryacht market with its recently introduced design for a 42 metre boat powered by a pair of 820kW Caterpillar 3412E high-speed diesels giving a maximum speed of 15 kts.

Another shipbuilder of note which has just succeeded in breaking into the mega yacht market is Alstom, which owns Chantiers de l?Atlantique. The company has gained its first order for the construction of a luxury yacht measuring more than 70 metres in length. The contract was reportedly awarded as a result of building the small deluxe cruise ship Le Levant which was delivered in 1998. This 3,500 gt vessel, with a length of 100 metres, carries 90 passengers in great luxury and, in 1999, the ship was awarded the prize for the best exterior design. The super yacht will be built in Alstom?s Leroux Naval shipyard in Lorient.

Established yacht builders not

complacent

Italian luxury yacht builder, the Ferretti Group, has acquired Cantieri Navali Mario Morini (CNMM), an Italian yard that previously specialised in the construction of commercial vessels. A spokesperson for the Ferretti Group said the deal to acquire the yard had been completed recently, and that it would begin building leisure craft shortly by exploiting the synergies that exist between CNMM and Ferretti?s adjoining boatyard in Ancona, which Ferretti acquired in 1999 and is dedicated to the construction of CRN designs.

CNMM already has some experience of building large yachts, but has concentrated primarily on the construction of high specification commercial vessels ? such as chemical tankers ? and military vessels, oceanographic and research vessels. Ferretti?s CRN yard in Ancona is itself the subject of a wide-ranging improvement programme at present, and focuses on the construction of super yachts of 30m-70m in length, built in composites, steel and aluminium. The Italian boat-building group is investing approximately $7.5m at Ancona which will soon be one of the largest yards of its type in the Mediterranean. Outside the yard, there will be a helicopter landing pad and two private docks, one of 80m and one of 60m.

In September last year the Italian shipbuilder Rodriquez Cantieri Navali (RCN) acquired the shipbuilding facilities of Intermarine, thereby giving it a greatly expanded capability in production fibreglass yachts up to 45m in length. Based at Sarzana, Intermarine has added to its traditional fibreglass product range the complete aluminium and steel special craft range of Rodriquez which includes super yachts up to 150m at its Pietra Ligure yard near Savona. Both locations are in close proximity to specialists in the interior decoration and outfitting of luxury yachts.

Last summer, Intermarine delivered the 45 metre GRP yacht Balaju and is currently constructing a 36m Wally Power 118 yacht capable of 70kts and powered by three 4,115kW gas turbines coupled to waterjets. To sustain these high speeds, the hull is being built using fibreglass, carbon fibre and balsa wood designed to absorb the very high impact forces. The yard is also building a series of 35m patrol boats for the Italian customs services which will have their GRP hulls reinforced, in certain areas, with Kevlar fibre to afford a measure of protection from gunfire.

With the acquisition of Intermarine, Rodriquez is now in a position to offer military and paramilitary vessels in fibreglass as well as steel and aluminium, thereby satisfying all hull material preferences in these markets. Both companies have, throughout their existence, invested heavily in technological research devoted to the best development and exploitation of GRP and light alloys as well as hull optimisation and stability systems claimed to be at the cutting edge of the maritime technology.

Leight NotikaYachts, which claims to be Turkey?s largest super yacht manufacturer, has announced that a European investor is to take a majority shareholding in the company. Located in Antalya, a southern resort city about an hour?s flying distance from Istanbul, the yard builds yachts from 24m to 45m in epoxy composite fibreglass construction. The resulting financial stability will help the boat builder to market its Centaurian series of motoryachts.

Notika currently builds around four boats a year although its production capacity is eight boats. Currently, it is has orders for five motor yachts ranging from 24m to 35m all due to be launched this year while a new 45m design is at present on the drawing board and scheduled to go into production in the second half of the year.