It looks as if the Med might squeeze in a short season this year, as lockdown restrictions gradually ease and people start to regain their freedoms. Likely as not, the charter industry will benefit from a rebound as the allure of the open sea becomes enticing after weeks of confinement. After the yachts have been checked over and the crew repositioned from wherever they were confined or in some cases laid off, the helicopters will be once again be hovering onto helipads and the jets lading at Nice with a contingent of expectant guests.
This short term spike belies a long term problem that the industry is facing and the extent of this problem depends on how deep is the damage to the global economy wreaked by this virus. There is going to be a lot less liquid cash around. We are not talking spare cash, chump change lying around in jacket pockets. The global debt before the pandemic was 66 trillion dollars- that is the difference between the value of assets and the amount owed to banks and financial institutions. A conservative estimate is that this figure will rise to 690 trillion dollars, a number pretty much plucked out of a hat but one that shows that sovereign, corporate, and private debt is going stratospherically up, up and away.
The UNWIs, or the filthy rich as we affectionally call them, are not going to be immune from this. Some will ride out this financial embrouillement and will not even notice it. These are the asymptomatics. For others, it will be a minor inconvenience, a headache and some chills. For some though it will be fatal as their business goes on life support, and no amount of nursing will pull them through. Many of the Rich are asset rich, holding stocks, shares and properties. Their yacht is part of their financial portfolio. They don’t keep cash in the bank because interest rates are low.
Everything is heading south – oil prices, stock exchanges, property prices – and along with the decline goes a lot of net worth. Take Richard Branson who has had to mortgage his private island to save his airline. He has given up on the idea of a bailout from the government and is looking for investors. He will still be a UNWI when this is over but a lot less so. Multiply his predicament by a thousand and we are looking at a serious shortage of readily available capital to fund the superyacht industry,
Business as usual for how long?
The new build industry is going to be dealt some heavy body blows over the coming two years. Lenders are going to look closely at the wisdom of lending money on a luxury asset when they are under pressure to lend according to social criteria. As opposed to the 2008 crash when printed money was channelled primarily into corporations, this time the Keynesian stimulus is being directed towards social structures. A reward, you might say, to the billions of ordinary folk who stayed at home for months on end.
With money too tight to mention and unsympathetic lenders, the acquisition of a new yacht is not going to be on the top of the revival of the economy agenda. Refit yards, on the other hand, present a whole other bag of opportunity. As yachts are sold off at bargain prices by desperate owners – or even yacht builders – refit specialists such as MB92, Amico or Pure Yacht are going to pick up new orders, more than compensating for postponed refits because the owner is a little strapped right now.
Opportunity in adversity as the saying goes. Expect office rents to fall in hot spots such as Antibes. The industry will be more digital. A lot of owners will be seriously pissed off at the lack of support from the flag states of convenience and will look more favourably at European and US flags. And it is a great time for the whole industry to aspire to zero per cent emissions by 2200.So said Nostadamus.
