The ABCs of the APA

27 January 2011 By Leigh Ellis

As every seasoned charter client knows, the words “plus expenses” invariably follow the quoted weekly rate for a luxury charter yacht represents another 20 to 35 percent of the rate in the form of the Advance Provisioning Allowance (APA). The APA is written into the charter contract and is collected 30 days prior to the start of the charter. The crew can use these funds to provision for the trip before the client comes aboard.

The charter rate covers fixed costs such as the boat’s upkeep and maintaining the crew, including their salaries, meals, uniforms, etc. The APA covers the variable costs that arise from the client’s actual charter experience.

“The APA is used for every expense incurred while the client is on the yacht,” says Patricia Codere, charter manager with Fraser Yachts Florida, Inc. “Dockage, fuel, fuel for tenders, food, beverages, customs, agents’ fees, flowers (not including the initial flowers), etc., are paid by the APA.”

Ann Landry, charter broker with Northrop and Johnson Yachts, adds a few more items to the list: “Ground transport, tours ashore, local harbor fees, communications made via the yacht’s systems.”

What percentage of the charter rate a boat should collect from the client as the APA depends on a couple of factors, starting with the type of vessel being hired, its rate of fuel burn and the distances involved in the charter itinerary. Landry says typical APAs are: “30 percent for motor yacht charters and 20 to 25 percent for sailing yachts.”

An important factor, of course, is the client’s desired lifestyle during his or her charter vacation. If the client and guests plan to consume Krug and beluga daily, it will cost a bit more than Cabernet, crackers and cheese. And if special foods are to be flown in fresh to the boat during the week, the APA should be ratcheted up accordingly.

“Planning in advance with the client’s people as soon as the contract is signed or sometimes before is crucial to having enough funds to do the job,” says Capt. Herb Magney of M/Y At Last, who gives the following example of a five-day charter trip he did in The Bahamas for a client and guests with lavish tastes.

“Before the client had made the decision to sign with us, we had been in a competition with two other boats as to who could come up with more WOW. We won,” Capt. Herb says. Then the client proceeded to add even more WOW elements to the list, including: “sushi from NOBU, airplane rides, triple the size of the fireworks show, 50 bottles of Dom Perignon (because each guest had to drink one bottle per day), custom-made vodka, lots of caviar, two bands, (including a 30-piece junkanoo band to welcome the guests on arrival in Nassau), Humvee limos, seven-course white truffle dinner on the beach (the first truffles of the season were flown from Italy), four persons added to the crew....” In the end, the APA for that client was close to 100 percent of the charter fee.

Other clients are far more moderate in their requests. “Some people want frugality to the bone,” maintains Capt. Herb. “I have a repeat client who wants to go real slow, save diesel; the kids eat burgers, weenies and Kraft mac and cheese; they drink Bud Light and don’t bother with Champagne. Rock on low APA.”

The key is to work with the charter agent and the client or his or her representatives well in advance to accurately gauge the amount of APA needed for the individual client and his or her party. “Hopefully I do a good enough job collecting APA that the captain does not need to go to the client for additional funds,” comments Landry. Her advice to charter captains is to, “Manage the APA like it is your own money. I request a copy of the APA Accounting Summary from every charter and I do review it carefully as a fiduciary duty to my client. Most of my colleagues do the same,” she says.

Even when the APA is sufficient to cover all of the charter’s expenses, the captain still should keep the client apprised of all APA expenditures during the course of the charter. “Catch the principal charter client at a good moment halfway through the charter and sit down with him to go over the expenses,” says Jordanna Joffe, charter manager at International Yacht Collection. Adding that it’s important to keep accurate records of APA expenditures, she recommends that captains invest in a user-friendly accounting software program like QuickBooks. Detailed accounting is especially important for first-time charter clients, she continues. Even if they are prepared in advance by their charter agent, “They may be sticker-shocked by the price of a bag of Tostitos in The Bahamas.”Cordere agrees. “Be sure to have receipts and keep up the accounting on a daily basis,” she says. “Show your guests the accounts often so there are no surprises at the end of the charter.”

If there is money left in the APA account at the end of the charter, in some cases the client will put it toward the crew’s tip. “Sometimes, but not always,” says Cordere. “The captain shouldn’t ask for a large amount of APA hoping that the leftover will be used for gratuity. That doesn’t always ensure a big tip.”

“If the tip is to be leftovers from the APA, some clients will send the APA knowing that if the crew is prudent with the fund, then there may be more leftovers to fight for. I do not promote this thought,” says Capt. Herb. “I give the client a baseline estimate determined by the preferences, travel times, types of booze and food, and then advise the client if they are so inclined they can go home and wire additional funds to the management company or the captain for disbursement.”

Exceptional service with no surprises is the best way to ensure a good tip.

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