11 Sep Is This the End of Yachting?
Global recession fears are increasing in the latter half of 2019. With a drop of 800 points in Dow in mid-August, investors are fearful a recession is imminent.
But what do these fears mean for the yachting industry? Currently, the superyacht market has trended up, with most brokerage firms reporting gains throughout 2019. But with the chatter of an economic slowdown on the horizon, yacht owners and buyers are cautious. The yachting industry has never recovered from its heights in 2008, before the last recession. Can it sustain the next inevitable crisis?
What happened to the yachting industry during the last recession?
After the 2008 recession, the yachting industry lost 50% of its turnover. Sales fell as both the U.S. and European yacht markets crashed. As a result, owners were pressured to sell, while at the same time, buyers were waiting. Brokerage yacht prices plummeted nearly 40%. New builds were abandoned, and new orders became scarce as yards collapsed.
Current estimates show that the yacht market today has only recovered around half of what it had lost in the last recession before inflation. So, today’s yachting industry contains less than half of its pre-recession volumes.
What’s going on now with the yachting industry?
Before new recession jitters began rattling the market recently, the yachting market was strong but not nearly as robust as before 2008.
But now, owners and buyers are becoming more and more cautious, since the signals of another economic slowdown are increasing in frequency. Inversion in bond yields has only occurred right before a recession. As of this writing, government bond yields are down.
In the last year and a half, speculation builds have increased. Small to mid-sized yards are financing the construction of new yachts, hoping to find a buyer. But the last time the market witnessed this behavior in the yachting industry was right before the 2008 recession.
Further indicators of speculation are forming in new builds for 70 meter plus yachts too. These speculative yachts are selling for far more than their construction costs. Right before the recession, “yacht flipping” reached never-before-seen heights. Some were trading as high as a 20% premium.
As the market begins to look more and more like 2008, some industry specialists are leaving the yachting world, which is giving increased opportunities to capitalists and speculators.
For example, the US-based broker MarineMax bought Fraser Yachts, one of the leading brokerages at one time. This left several brokerages on the market ripe for consolidation. The Dutch-based yacht builder Moonen is preparing to bring in a new investor.
In 2017, the Global Yachting Group went public but now trades at half their original market caps. Traders are leery of yachting’s performance in case another recession shakes the global market.
For owners and prospective yacht buyers, a recession can be an opportunity or a nightmare. In recessions and other panics, cooler heads tend to prevail. Players looking to increase their market share can take advantage of the coming blood in the streets.