Yacht Sales: Review of 2010
By Sue Grant, Managing Director

2010 was a far better year than we at Berthon had any reason to expect. We filed results in line with 2008 numbers on the brokerage side of the business, whilst new yacht sales remained difficult as a result of sluggish demand as experienced by the rest of the industry but exacerbated also by adverse currency - we buy in Norwegian and Swedish Krona, both of which have been particularly strong of late.

However, brokerage at Berthon is our core business, so our nimble approach continues to pay dividends. We have always believed that it is important to pay the greatest attention to currency and also to look carefully at those sectors of the market in which the buyers are most active. Accordingly, we continue to offer unbiased advice on pricing to owners as it is important that yacht owners have an honest appraisal of value and likely disposal time. The market is still not strong and we believe that the lazy brokers' policy of acceding to an owner's expectation of price in the useless hope that you will get lucky (or "drive the owner down on price eventually") is a policy that has no place in professional yacht brokerage today. As brokers, Berthon reflect the market - we cannot set it. Our owners appreciate honesty at the outset and can then decide to either place their yacht on the market or to extract further value by sailing for another season. By the same token, however, some buyers are imagining that with a good deal comes a perfect yacht. It is rare but unusual and as we forewarned last year, most of the "best" deals have already been had.

2010 has seen us expand Berthon USA in Newport RI, in order to uplift standards, and deliver a better service for yacht owners and buyers internationally. Coalitions are clearly cool and by teaming up with a well known team in the US, we are able to leverage both the increased internationalism.

Increasingly the brokerage community is understanding that yachtsmen deserve the best service and that it is up to us to regulate ourselves to deliver on this. If we do not, we are likely to have external regulation thrust upon us.

During recessions prices are driven downwards, and of course we are paid as a percentage of the price achieved and therefore it is in our interest to aim for the best possible price; lower yacht prices therefore have a serious effect on our business as we have to process more sales for the same revenue. At Berthon, however, apart from longer hours in the office, we have limited cost cutting so that the team of experts remain in situ; advertising is carefully targeted; effective use of corresponding brokers worldwide is paramount; and above all, added investment in these difficult times drives buyers to Berthon by dynamic use of the internet and modern methods of distributing content.

Yacht finance has altered hugely with many providers out of the market. There does seem to be a perception that finance for yachts is no longer available. This is not the case, and our friends at Lombard write for us to explain why this is.

An interesting facet of the market that became very apparent in 2010 was that the market has developed definitive sweet spots and these need to be indentified yet not relied on as they change without warning. As predicted last year, there are some yachts which, because of low supply as a result of falling new yacht numbers and currency, have appeared to appreciate in value and yet others have failed to generate any market at all.

2010 has also seen HM Revenue & Customs tighten up on the VAT treatment of yachts and other Revenue Authorities internationally are also following suit, particularly in the traditionally lax Med market where deciding what interpretations of the EU Directive is acceptable is far from an exact science. Of course this is a function of governments' need to generate revenue and to regularise a market which has been largely ignored over the past few years. We spend a lot of time dealing with the implications of this in our job and we predict that this is a situation which is not going to improve any time soon. There is a general perception that sales taxes should be paid by all where no real legitimate business is really carried out, which is understandable.

As with new houses, cars and other high value goods, new yacht sales remain weak across the board. The major manufacturers have now managed a reduction in volume which is important to ensure that they are profitable at these lower production levels. We predict demand will improve in the next three years, particularly as new markets start to develop - India, and Asia being the 2 main ones - but the massive levels of supply pre recession will not be seen again for a very long time. A by-product of this will be less choice with some brands merging and brand names becoming subsumed into others. As the key markets shift, the sort of yachts that are desirable will change significantly too; new markets also bring home grown products to the market in time which will be stiff competition for the old world yachting industry.

As business in general is all about confidence, and as the spectre of 1930s recession recedes, demand will pick up. Those with cash, in the main, still have it but they need to feel confident about spending. Whether we witness a V shaped recovery or a W creeps in, the UK Coalition seems hell bent on sorting the UK's finances which will be positive for the UK in the years to come. We continue to predict a bumpy ride in 2011 as increased taxes, cutbacks and slower growing economies will all do little to assist with consumer confidence. However, as growth figures start to recover we will see demand pick up quickly as evidenced in our office in the USA where we have seen the enquiry rate normalise and boat shows, like Newport last fall, having better attendance figures than has been the case for some years.

Of course living in interesting times has its benefits - it is never dull! With active and profitable offices in the UK, France and USA we are able to offer good advice to our client base and because we have no bank debt we are able to invest in tangible and intangible infrastructure to ensure that our service continues to improve. We are also delighted to work very closely with world class partners - Windy Boats from Norway distributed by us in the UK and France, Najad Yachts of Sweden and Rustler Yachts of the UK distributed by us in the USA and Discovery Yachts from the UK, with whom we have a joint venture to broker pre-owned Discovery yachts worldwide; we also assist Dashew Offshore with marketing the FPB 64' and FPB 112' in Europe.

As ever, the 2011 Berthon Market Report will offer our view of the important changes to the Market in 2010 and update you on how we believe the yacht market is reacting; we hope that you will enjoy our scribblings.

by Sue Grant, Managing Director