The full Monte (Carlo) [In the News]

This article was featured on superyachtinvestor.com in October 2022 and was written by Conor Feasey.

The strong gales at the Monaco Yacht Show may have prevented superyachts from anchoring around Port Hercule (pictured) this year. But showgoers seemed resilient to the potential winds of change impacting the industry.

Despite immediate fears of recession, supply chain problems and the risk of the demand bubble bursting, industry insiders retain a positive outlook for the year ahead. Strong demand from the US market and growing interest in the Middle East underpinned optimism.

“Businesses continue to grow and it’s fantastic,” Bob Allen, partner, Robert Allen Law told SYI at the Monaco Yacht Show. “It is unbelievable. For us, counterintuitively, 2020 was the best year we ever had, 2021 was even better and then this year has been even better than the last.”

For a superyacht attorney like Allen, success is ultimately measured by revenue. This revenue typically derives from transactions and litigation. “The more the industry grows, there are more transactions and then more litigation with people having disagreements. But this is all a reflection of the growth of the [global] sector,” he said.

Meanwhile, brokers are making the most of the strong flow of transactions and the current health of the sector too. “The industry looks strong [globally]. You can see that with how busy the yards are at the moment,” Bob Denison, CEO, Denison Yachts told SYI. “Things are still extremely positive in the US too. Maybe not as hot as last year, but definitely better than any other year for sure.”

There’s certainly no shortage of wealth to drive demand. Credit Suisse’s Global Wealth Report illustrates that global wealth totalled around $463.6trn (€468.8trn) by the end of last year. This is an increase of 9.8% compared with 2020. At the top of the wealth pyramid stands the US by a considerable distance. More than 140,000 US citizens have a net worth of over $50m, so it is no surprise that the nation hosts the most superyacht owners too.

“About 67% of superyacht owners are from the US,” Raphael Sauleau, CEO, Fraser Yachts said at the Marine Money Superyacht Finance Forum in Monte-Carlo. This completely eclipses ownership from any other country and helps to mitigate fears of damage caused to sales and charters by the loss of the Russian market. “Russians only accounted for 15-18% of megayachts and 8% of superyachts,” he adds.

Despite the optimism, the prospect of recession bursting the demand bubble for luxury yachts was never far from the surface of discussion. Not least because the International Monetary Fund’s World Economic Outlook update in July stated that global growth is projected to slow from 6.1% in 2021 to 3.6% in 2022 and 2023.

“There is opportunity in crisis,” said Geoff Moore, MD of superyacht management firm West Nautical. “This time last year we thought the boom was coming to an end, that it would stop being a seller’s market and start being a buyer’s and that has continued throughout the year.”

The bubble must burst at some point however, Moore said. “But not yet. This industry has always been here and isn’t going anywhere anytime soon. Until real estate becomes available on the moon, this is the pinnacle.”

Denison agreed: “I don’t think we will see a burst of any kind in our industry anytime soon. We have so much demand and so little supply, that even if demand pulls off the supply is so light that I don’t think we will experience a real bust.”

Allen said: “The introduction of so many yachts to the sector means that the brokers and all the industries that service yachts will continue to thrive. It is the manufacturing capacity that will be tested.”

The consensus about the year ahead from many at Monte Carlo was “cautiously optimistic”. Whatever the future may hold, most thought the industry far more resilient now after weathering the Great Financial Crisis of 2008, navigating Brexit and coping with the disruption (and business boosts) of Covid-19. Strong demand in American and European markets will continue to drive long-term industry growth.

“Many people think that it is the Russians or people from the Middle East that steer the industry forward,” said Allen. “Whilst that may be true for gigayachts, this industry is driven by superyachts, and it has always been the case that American entrepreneurs drive that.”