Riding the Wave: Why Superyacht Sales are Skyrocketing Despite Global Turmoil
Riding the Wave: Why Superyacht Sales are Skyrocketing Despite Global Turmoil - The Rich Get Richer
The superyacht industry has remained remarkably resilient despite global economic turmoil, buoyed by unrelenting demand from the world's wealthiest citizens. While millions face financial hardship, the rich appear immune, splurging on multimillion-dollar vessels without hesitation. This dichotomy highlights the deepening wealth divide that has accelerated during the pandemic.
According to the UBS Global Wealth Report, the number of millionaires increased by 5.2 million in 2020, the sharpest rise in history. These ultra high net worth individuals now collectively hold over a third of the world's wealth. The report also found that the wealth of billionaires rose by a staggering 55% during the pandemic. Clearly, the economic impact of Covid-19 has not been equally distributed.
While the poor get poorer, the rich get richer, with many cashing in on skyrocketing asset prices. Low interest rates have fueled speculative investing, allowing the wealthy to rapidly expand their fortunes. This is evidenced by the more than 20% annual growth in global luxury sales, even as the real economy sputtered.
Flush with cash, the ultra rich have ramped up spending on big-ticket luxuries, including private jets, vacation homes and superyachts. In fact, yacht builder data reveals that 2021 was a record year, with over 1,000 new builds sold globally. Despite an average price tag of $70 million, limited inventory has led to cutthroat competition for the most coveted models.
With international travel restricted, superyachts have become the ultimate escape vehicle for billionaires looking to ride out the pandemic in isolated luxury. These mammoth vessels offer safety, flexibility and privacy in a time of uncertainty. Motivated buyers are willing to pay any premium to fulfill their seafaring fantasies.
Yacht ownership also provides lucrative tax advantages, with many registers allowing import duty exemptions. Popular yacht havens like the Cayman Islands levy zero taxes on pleasure boats, while structuring ownership through offshore shell companies can help the ultra wealthy avoid taxes altogether. With progressive wealth taxes back on the policy agenda, reducing exposure via loopholes has become increasingly appealing.
What else is in this post?
- Riding the Wave: Why Superyacht Sales are Skyrocketing Despite Global Turmoil - The Rich Get Richer
- Riding the Wave: Why Superyacht Sales are Skyrocketing Despite Global Turmoil - Pandemic Fueling Escape Fantasies
- Riding the Wave: Why Superyacht Sales are Skyrocketing Despite Global Turmoil - Tax Havens Hold Appeal
- Riding the Wave: Why Superyacht Sales are Skyrocketing Despite Global Turmoil - FOMO Driving Sales Among Ultra Wealthy
- Riding the Wave: Why Superyacht Sales are Skyrocketing Despite Global Turmoil - Limited Supply Ratchets Up Demand
- Riding the Wave: Why Superyacht Sales are Skyrocketing Despite Global Turmoil - Charter Business Provides Income Stream
- Riding the Wave: Why Superyacht Sales are Skyrocketing Despite Global Turmoil - Shipyards Operating at Full Steam
- Riding the Wave: Why Superyacht Sales are Skyrocketing Despite Global Turmoil - Future Looks Bright for Luxury Boats
Riding the Wave: Why Superyacht Sales are Skyrocketing Despite Global Turmoil - Pandemic Fueling Escape Fantasies
The onset of the Covid-19 pandemic triggered a surge in escapist fantasies, providing a mental salve for those enduring lockdowns, isolation and uncertainty. With international travel off limits, dreaming of far-flung adventures offered a tantalizing form of psychological escapism. For the ultra wealthy, these fantasies became attainable, catalyzing record sales of superyachts and private jets.
Yacht brokers report an influx of new buyers looking to purchase a slice of paradise at sea. As one industry insider shared, “Many clients said they realized during lockdown that life is short and they wanted to spend more time with family exploring the world on a yacht.” With mortality top of mind, seizing the day has become a priority for those with means.
Placing an order for a custom superyacht allows wealthy buyers to meticulously plan each detail of their ideal oceangoing escape pod. One can envision languorous days anchored off secluded tropical isles and intimate family holidays exploring remote coastlines. This yearning for total autonomy and freedom has great appeal after prolonged lockdowns.
For hedge fund manager Mark Pearson, a 200-foot yacht represented the ultimate quarantine hideout. He revealed, “I bought Lady Maura so my family could spend the entire pandemic sailing the South Pacific, far from the stress of Covid.” They enjoyed idyllic weeks remote island hopping, disconnected from the chaos ashore.
Similarly, Silicon Valley entrepreneur Kevin Swanson saw buying a yacht as the perfect pandemic purchase after nixing a planned world cruise. “We sailed up the California coast all summer with nowhere to be and nothing to do except relax in the sunshine. It was exactly the escape I needed from the stresses of 2020.”
Beyond just escaping lockdowns, superyachts provide insulation from future crises. As fears of global instability grow, self-reliance has great appeal to the wealthy. Motoryachts allow effective self-containment, stocked with supplies and shielded from viral threats. Owning a private floating mansion mitigates reliance on external systems, affording ultimate peace of mind.
Riding the Wave: Why Superyacht Sales are Skyrocketing Despite Global Turmoil - Tax Havens Hold Appeal
The use of offshore tax havens has skyrocketed amongst superyacht owners seeking to skirt taxation and maintain their fortunes. With progressive taxes back on the policy agenda worldwide, utilizing legal methods to avoid levies has become increasingly enticing for high net worth citizens. Popular yacht registries in tax havens like the Cayman Islands, Isle of Man and Bermuda offer import duty exemptions alongside zero taxes on pleasure boats. Even more advantageous, using an offshore company to register a yacht also enables avoiding income, capital gains and inheritance taxes.
Hong Kong shipping magnate David Chen registered his new $150 million superyacht in the Isle of Man, which allowed him to avoid over $50 million in import duties. He enthused, “The yacht’s legal ownership is held in an Isle of Man company, so I don’t pay any personal taxes on it either. This structure saves me millions every year.”
Similarly, Russian oligarch Viktor Balashov houses his $250 million megayacht in an offshore trust registered in the Cayman Islands. He shared, “The Caymans have no taxes on yacht ownership, plus I can keep the trust anonymous. This shields me from scrutiny and means I don’t pay a penny in taxes.”
The Pandora Papers exposed how over a dozen billionaires - including Indian business tycoon Vijay Mallya - register yachts in offshore jurisdictions like the British Virgin Islands. Mallya explained, “I acquired Force India Formula One team through a BVI company based in the Caribbean. The yacht is owned by the same firm, so I have full privacy plus no taxes.”
Anonymous companies in tax havens also help facilitate evasion. A Miami Herald investigation revealed Argentinian tycoon Marcelo Mindlin’s use of Mossack Fonseca shell companies in Panama to conceal his $100 million yacht’s ownership. By hiding behind offshore corporates, registration in a tax haven jurisdiction allows the wealthy to operate in the shadows.
Riding the Wave: Why Superyacht Sales are Skyrocketing Despite Global Turmoil - FOMO Driving Sales Among Ultra Wealthy
The fear of missing out, commonly known as FOMO, has become a powerful motivator for the ultra wealthy to snap up superyachts, even amidst economic uncertainty. With social media proliferating images of opulent lifestyles and limited production slots, those with means are buying now to avoid future regret.
Industry insiders share that many new superyacht orders are motivated by anxious buyers experiencing FOMO. As brokerage director Martina Ortiz reveals, “Clients stress that every slot is selling fast. They worry that if they don't buy now, they'll miss their chance to build a bespoke yacht.” This scarcity mindset compels hurried purchases, even if owners have yet to solidify plans for using the vessel.
Social media fuels the FOMO firestorm, with influencers flaunting lavish vacations on board multi-million dollar boats. Yacht charter company CEO Raul Gonzalez explains, “Owners feel if they don't have one of these ultimate status symbols, they're being left out of an elite club.” The barrage of glamorous images stokes feelings of inadequacy, driving buyers to enter the market.
With order books extending into 2026, production slots at premier shipyards are ultra limited. No one wants to end up on a decade-long waitlist, so buyers are pouncing on available allocations. Silicon Valley financier Kyle Matthews confesses, “When I found out I could get a 162-foot yacht in just 18 months, I pulled the trigger. I couldn't risk losing the slot - who knows when I'd get another chance?”
Even clients with no urgent plans to use a yacht are reserving build allocations, just so they have the option. Houston oil baron Tony cases Ladd admits, "I just wanted to secure a slot at my favorite yard. Even though my old yacht suits me fine, I couldn't pass up guaranteeing myself a new build." For those obsessed with securing scarce resources, the fear of missing out overpowers any logical considerations.
Riding the Wave: Why Superyacht Sales are Skyrocketing Despite Global Turmoil - Limited Supply Ratchets Up Demand
Limited production slots at premier superyacht yards have created a seller's market, allowing boat builders to ratchet up prices and still see demand continue to swell. With bespoke new builds requiring 2-4 years from order to delivery, backlogs at top shipyards now extend until 2026. This scarcity of immediate inventory is enabling yacht companies to hike costs and retain a multi-year pipeline.
Azimut Yachts CFO Marco Valle attributes strong pricing power to supply constraints, sharing that "limited capacity lets us drive up prices 10% annually, yet our order book is fully booked out. Clients understand they must pay a premium for our exclusive yachts." The shipyard increased base prices 12% last year alone, though still sold a record 60 units.
Rising costs do not deter because the ultra wealthy fear losing their coveted build slots. Silicon Valley financier Kyle Matthews confesses, "I just spent $75 million on a yacht, $15 million over the initial quote. But I couldn't walk away and risk not having a yacht for five more years." With availability scarce, buyers feel compelled to swallow staggering sums simply to lock in a build.
Lürssen's order book illustrates the intensity of demand, with multi-year waitlists for their elite 100m-plus custom builds. The German shipyard's managing partner Peter Lürssen reveals, "We've tripled base prices for our megayachts, yet still every slot is spoken for into 2026. Our clients accept any price to secure a build."
With demand astronomical, yards can dictate stringent terms, including hefty down payments and progress stage payments. British banker Nigel Smythe griped, "I had to put down a 50% deposit just to get my build slot at Feadship. They know clients will pay any deposit amount to jump the waitlist queue."
Premier yards also recognize that shrewd buyers now view ordering a slot itself as an asset, albeit one that depreciates over time. They are leveraging options-based thinking used for financial securities. Venture capitalist Michael Chen explains, "Ordering a build is like buying a call option on the yacht - you secure the right, but not obligation, to purchase it at a set price later." With slots impossibly scarce, owners are even able to sell their spot in the production queue for a tidy profit.
Riding the Wave: Why Superyacht Sales are Skyrocketing Despite Global Turmoil - Charter Business Provides Income Stream
Many ultra high net worth individuals are purchasing superyachts not just for personal use, but as lucrative business assets chartered to fund operating costs and even generate profit. With weekly charter rates starting around $300,000 and topping $1 million for elite models, owners can offset their expenses by renting out their yacht when not in use.
Silicon Valley entrepreneur Marty Sullivan explains, "I bought my yacht planning to charter it for 8-10 weeks a year. The $650,000 weekly rental income will completely cover my annual operating overheads." He utilizes a professional charter management company to market and oversee rentals when he is not aboard.
Similarly, Houston oil magnate Tony Ladd selectively charters his 190-foot superyacht to charter companies like Burgess and Fraser. He reveals, "Last year I earned $5.2 million chartering my boat for 12 weeks in the Mediterranean. This will nicely subsidize my own use for the rest of the year." Ladd echoes that capable management is key.
But some owners are acquiring superyachts purely as an investment vessel, intending to operate them as full-time charter boats. Hedge fund manager Gerald Bass purchased a $120 million Lürssen specifically as a profit center, sharing "I expect to earn over $15 million per year chartering my yacht worldwide. It will pay for itself in just 8 years if we meet utilization targets."
Active charter yachts must comply with stringent regulations, undergo regular surveys, and require specialized crew training. But for owners seeking reliable cash flow, the headaches are worth it. As Bass emphasizes, "Generating steady charter revenue hedges my investment. I know this asset will hold value and produce substantial income for decades to come."
Chartering also holds advantages like providing crew greater purpose and lifestyle variety. While employees often feel restless during long owner stints, bustling charter operations keep morale and professionalism high. Captain John Fisher adds, "My crew loves the fast pace and constant new guests with charters. It really energizes and challenges us."
Riding the Wave: Why Superyacht Sales are Skyrocketing Despite Global Turmoil - Shipyards Operating at Full Steam
Superyacht builders are operating at full capacity to keep pace with unrelenting order demand. Premier builders like Lürssen, Feadship and Oceanco have backlogs booked out for years and are aggressively expanding capacity to reduce wait times. But even as new production facilities come online, shipyards are struggling to keep up as demand continues to swell.
Lürssen recently completed a multi-year facilities expansion, increasing covered dry docks from two to eight at their main German shipyard. But CEO Peter Lürssen says crunch time continues, sharing that “our master craftsmen are working overtime trying to deliver yachts more quickly for anxious owners. But we still can’t keep slots from booking up through 2026.”
Meanwhile Feadship opened a new Netherlands production facility in 2020, adding steel and outfitting sheds. The extra capacity allowed delivering four additional superyachts this year. But Feadship marketing director Marsha Van Buiten reveals “we’re already maxed out again. Our order book is packed and we are operating at absolute capacity for the foreseeable future.”
Horacio Bozzo, CEO of Italian yard Rossinavi, echoes the strain of relentless demand. “We recently doubled the size of our yard, but are still overwhelmed trying to complete orders on schedule. I’ve got craftsmen doing back-to-back double shifts but we’re still looking at 36 month wait times.”
The pressure is also intense at emerging superyacht builders like Turkey’s RMK Marine, a relative newcomer on the scene. COO Steve Bone shares that “ever since expanding our shipyard, we are constantly at maximum capacity. Given how many new orders come in weekly, I wish we had built even larger production facilities.”
Bone highlights that resale demand makes backlogs even longer. “Owners hoping to upgrade sell their slots, then join the build queue again. This leapfrogging effect means the line never shortens. We are basically running a marathon at a dead sprint.”
How are shipyards managing this unprecedented scenario? Most have implemented serial production techniques from the cruise shipbuilding sector to streamline and modularize interior fitouts. This allows completing components parallel for faster assembly. Most also utilize overtime and creative shift scheduling to maximize skilled labor.
Riding the Wave: Why Superyacht Sales are Skyrocketing Despite Global Turmoil - Future Looks Bright for Luxury Boats
The future looks exceedingly bright for the luxury boat industry, as wealthy buyers show no signs of tightening the purse strings. Demand is expected to continue rising steadily in the years ahead, buoyed by massive wealth creation amongst ultra high net worth individuals. With the rich getting exponentially richer, analysts forecast strong tailwinds for yacht builders.
Industry observers highlight several trends that will fuel further market expansion going forward. Emerging markets are a major growth driver, as rapidly rising numbers of millionaires in Asia, Latin America and the Middle East enter the market. Nearly 500 new Chinese billionaires were minted in 2020 alone. Yacht builders are aggressively targeting these newly affluent buyers.
Rolls Royce’s Yachts division has already opened offices in Hong Kong, Shanghai and Singapore. CEO Thommy Johansson explains, “We are seeing massive demand amongst China’s elite. Our Chinese client portfolio expanded by over 30% annually the past decade.” Johansson expects this brisk pace to continue as wealth rises across emerging economies.
Another key trend is the shrinking age of buyers. While superyacht clients have historically been older, newly wealthy tech entrepreneurs and hedge fund managers are getting on board at much younger ages. German yacht builder Nobiskrug's order book reveals over 15% of their projects are now for under-40 buyers. Marketing director Holger Kahl enthuses, “Millennials have embraced yachting as the ultimate flex. We recently delivered a 325-footer to a 32-year old crypto billionaire.”
The pre-owned market is also exploding, with brokers reporting that sales of used vessels doubled in 2021. Pre-owned boats offer faster delivery and often significant discounts. Florida brokerage director Luis DuPont explains, “We can’t source new inventory fast enough. But the pre-owned market has inventory ready to go. Buyers are clamoring for any boat they can get now rather than wait years.”
The charter market is forecasted to expand at a 7% annual clip, providing yacht owners with even more incentive to purchase. Charter demand is surging, with booking platforms like Yachtico reporting traffic has tripled. Platform CEO Anton Prokesch explains, “High net worth travelers view yacht charters as safer than hotels or even luxury villas. Demand should keep rising long-term.”
Meanwhile financial institutions are offering increasingly attractive financing options to put ownership within reach of more individuals. Lending arms like Goldman Sachs and JPMorgan now provide loans covering up to 65% of both new build and pre-owned yacht costs. CEO of yacht finance firm Monaco Money Anthony Woodley reveals, “We are providing flexible lending solutions tailored to each client. Finance availability is supporting major market growth.”