Charter: Is There Light at the End of the Tunnel?

Word on the docks is that the luxury charter industry has suffered a knockdown due to the U.S. financial crisis and the troubled world economic climate. Various sources are putting the recent drop-off in charter bookings at anywhere from 10 to 50 percent.

Longtime charter industry expert Bob Saxon, president of Bob Saxon Consultancy, estimates that business may be off by as much as 40 percent across the board. “It fell off that much after September 11,” he says. “This is a different kind of crisis, but the effect is just as deep.”

By all accounts, the holiday season, traditionally a peak period for the Caribbean charter fleet, was very quiet this year. “I’ve never seen a Christmas and New Year’s where there were boats that were open,” says Jennifer Saia, The Sacks Group president and charter specialist. “We were fortunate that we got some last-minute bookings.”

“I know a boat that had six charters booked in the islands, three of which had deposits and walked from them, and the other three went away, too. They ended up picking up a New Year’s charter, but have been charterless since,” says Capt. Whitney Reiter of M/Y Positive Carry. “I have also heard of boats staying in Florida and waiting for a charter and offering free relocation fuel fees.”

Industry insiders attribute the downturn in winter charter bookings to at least two different causes. The precipitating factor is, as Saxon puts it, “the old conspicuous consumption phenomenon,” brought on by the current economic crisis.

But there’s another factor that’s been playing an increasing role over the past eight or nine years, he says. That’s the exponential growth of the Caribbean charter fleet as new megayacht construction continues at a record pace, and more owners are entering their yachts into the charter market in order to defray operating costs.

“There are four or five times more big charter yachts available. The corresponding marketing for charter hasn’t kept pace with the expanded fleet,” Saxon says. “The yachts used to average eight or nine weeks [of charter over the winter season]. Now it’s three to four weeks.” He adds, “Right now there are about one hundred seventy-five yachts sitting wall-to-wall in St. Maarten.”

“We’re having our own little correction,” Saia says.

Many charter yachts are offering discounts or “value-added” deals like “eight days for the price of seven.” Some are waiving minimum stay requirements in order to stay competitive.

Capt. Jan Verkerk of M/Y Sherakhan reports that business from the yacht’s European clients has been “relatively normal, but, “The American market is a little bit crazier. They want to have more discounts from the Euro boats.”

“By and large, most yachts will negotiate now for Caribbean business…,” says Gaye Joyeau-Bourgeois, director of Burgess Monaco. “We are experiencing more flexibility in the rates, a fact which has not escaped the clients…. Who wouldn’t enjoy booking a luxury yacht at a discounted price for once!”

Experts agree that aggressive marketing is the key to surviving the downturn. “The cream rises to the top. You have to be proactive,” Saia says. In addition to encouraging owners to invest in advertising, she recommends making sure the yacht is visible at boat shows and broker events. Hosting lunches or fam trips for charter brokers is another way to raise the boat’s profile.

Of course, providing world-class, custom-tailored service to the charter client has to be job one.

The good news is that most industry insiders we spoke with have an optimistic outlook for this summer’s Mediterranean season.

“It’s fair to say we experienced at the end of 2008 a slightly slower level of 2009 summer enquiries. From our discussions with other major houses, it would seem that this was a generalized pattern,” Joyeau-Bourgeois says. “Now that the festive season is behind us, we have seen a marked upturn…. In the present climate, we would expect bookings to take place later and spring shall probably be extremely active…. I feel we shall probably see virtually the same level of July and August business for the largest and most sought-after yachts, as has been the case for the past few years.”

Capt. Verkerk predicts, “In the end, everything will be normal.”