A luxury investment is always intriguing for the rest of us who can only dream about them. The ever-growing ‘hyperbolic’ superyachts are becoming so popular. In this article, Roselle Tenefrancia provides us with a snapshot of the mega-world of superyachts beyond the superficial.
During Adele’s recent visit for her Australian concert series this year, media had us reading about her relaxing time spent in Sydney with her son on Ghost II, a 38m yacht built specifically for the Australian charter market. Another celebrity who was spotted in a superyacht in Melbourne early this year was Justin Bieber. It was rumoured that he was on the charter boat Pearl hosting a private party.
The world’s super rich have been investing in their own superyachts for over a century now. Their motivations and objectives for building these yachts are probably as diverse as their businesses and passions in life. Many superyachts are used for charter, and the rich traveller will always find a superyacht to relax in for their off-the-chart holidays anywhere in the world. There are superyachts that are privately owned and are used for other meaningful purposes, aside from leisure and pleasure.
First things first
It has been suggested that the first known superyacht was built in 1865 for the ruler of Egypt, Khedive Ismail Pasha. The SS Mahroussa (meaning “guarded by God’s blessings”) was a 478-ft (145.7m) iron-hulled yacht built in England by the Samuda Brothers. She was the Egyptian royal yacht until the monarchy was overthrown in 1952.
In the early 1900s, luxury yachts had become popular as symbols of wealth and pleasure. It was also during this period that the term “superyacht” began to be used. The Jemima F., III was the “largest yacht in the world driven by motor power” at the time, launched in July 1908. This 111-ft yacht was owned by Charles Henry Fletcher, and named after his wife Jemima. More superyachts were built in that era, mainly by American billionaires. Some examples are: SS Delphine (1921), an 80m yacht built by Horace Dodge of the Dodge cars; Jezebel (1927), an 80m one built by Russell Alger; and Nahlin (1930s), a 91m yacht built by Lady Yule, a textile heiress.
Billionaires from other countries took to building yachts after WW2, with the most famous one built by Aristotle Onassis, called Christina O, named after his daughter. It was a 90m long warship that he converted into a private yacht in 1954. Decades on, yacht builders have built many more impressive and beautiful superyachts. Between 1997 and 2008, there was a massive growth in the number, size, and popularity of large private or super-sized luxury yachts in the 24- to 70-metre size range.
A superyacht defined
It may be safe to presume that the term “superyacht” was coined to describe the enormity of the early large yachts that were built for personal and private use, and perhaps to also distinguish them from commercial and military ships of similar size.
Today, the superyacht is loosely defined as a very expensive, privately-owned, professionally crewed sailing or motor yacht. However, technically, and for purposes of applying quality standards and safety regulations, a “superyacht” is a large pleasure vessel that is at least 24 metres in length. In the international regulatory framework of yachts, this definition is the only one that is universally accepted. The terms “megayacht” and “gigayacht” are hyperbolic names coined by media, and thus, are not distinct from the term “superyacht”. The rules that apply to a superyacht in any jurisdiction equally apply to a megayacht or a gigayacht.
Regulations for commercial use
In Australia, the Department of Immigration and Border Protection defines a superyacht as any high value luxury sailing ship or motor vessel which is all of the following: 24 metres or longer in length; not carrying cargo; and used for sport or pleasure. This definition is obviously for purposes of determining the coverage of the regulations on importation or transit. Further, this definition also determines the applicability of biosecurity standards. The Department of Agriculture considers superyachts as high-risk vessels due to the exotic locations visited and the biosecurity volume of timber used in the construction. Biosecurity inspections for superyachts are conducted at the first port of arrival in Australia. These border agencies are instrumental in conducting inspections in points of entry.
In 2016, the Australian Marine Safety Authority (AMSA) issued Marine Order 52, which became effective in March 2016. This marine order adopts LY3 Code (The UK’s Large Yacht Code of 2012) as modified for Australia, for regulated Australian vessels that are large yachts as defined in the Code. The AMSA determines whether a yacht is used for commercial purposes.
During the 2012 Monaco Yacht Show, the UK Maritime and Coastguard Agency (MCA) launched the new “Large Yacht Code”, or LY3. The LY3 has been developed to keep up with developments in the industry and amendments which have subsequently taken place with the international conventions for which the codes provide an alternative means of achieving compliance, more suited to these particular types of vessels. The LY3 is generally used as the quality standard and safety regulation globally. The LY1 of 1998 was superseded by LY2 in 2004; but the LY2 remains effective. The MCA Codes are used as the basis for flying the Red Ensign flags on yachts, which shows that the highest safety and quality standards have been fully met. Many superyachts in the world fly the Red Ensign to signify strict compliance with the MCA Codes.
These regulations are only some of the sets of codes and rules that apply to large yachts or superyachts. Different countries and different international bodies have specific rules that apply within their jurisdictions.
How super is the price
Reports show that “eight out of the ten most expensive luxury acquisitions of all time fall in the superyacht category”. It seems that superyachts are at the top of the mega-rich shopping list. The price tag is obviously not an issue with the world’s billionaires. But how much do these large pleasure yachts really cost?
Experts claim that the smallest yacht built to spec would be around $10M. Any additional customisation is “only limited by physics”, if one has access to the required funds. The most expensive superyacht to date is the 180m Azzam, owned by Khalifa bin Zayed Al Nahyan, President of the United Arab Emirates. Azzam purportedly cost at least $800M to build, with its own missile defense system and personal submarine.
The industry has pegged 10% of the build price as the cost of maintaining a superyacht every year. At $800M build cost, Azzam must spend at least $80M just to keep it running every year. Maintenance services, fuel expenses, crew, and berthing are just among the major expenses.
The unique features of superyachts add to the “power” that large luxury yachts provide its owners – and obviously add to the price. But then again, the price does not matter. The more special features there are, and the more unique (or more eccentric), the more appealing it is to those with unlimited funds. A recording studio, a submarine, helipads, infinity pools, on-board waterfalls, a missile defense system – you are only limited by your imagination.
Published reports provide many claims on the growing number of superyachts being built and sold, and on the price ranges. Some, if not all, present exaggerated numbers that are based on what they refer to as the global order book, and not the actual global fleet of superyachts. It has been claimed that there were 370 superyachts sold in 2016, with a total of €3.37B in asking prices. The largest one sold was purported to be the Project Grande 98, a Lurssen motor yacht.
There are currently 760 new projects in the pipeline all over the world, according to some reports. The longest one under construction is being built by Lurssen Yachts in Germany, a 146m motor yacht, due for completion in 2018. In Australia, there are currently three projects underway. Echo Yachts is building two motor yachts, a 46m shadow vessel and an 84m luxury trimaran, to be completed in 2017 and 2018, respectively. Silver Yachts is building Silverloft, an 83m motor yacht, due to be completed this year.
Not just for pleasure
Despite the notoriety of the world’s superyacht owners as being “tax evaders” or holding the rowdiest of parties offshore, some superyachts serve more meaningful purposes.
Paul Allen’s Octopus, a 126m yacht Octopus, with a staff of 60, 41 suites, two submarines, and a weekly cost of $384,000, has been used for a variety of rescue and research operations. It is equipped with a submarine and a remotely operated underwater vehicle (ROV). It has assisted in a hunt for an American pilot and two officers whose plane disappeared off Palau. It has been loaned to scientists to study the coelacanth, a “living fossil”, that was once believed to be extinct. In March 2015, the Allen-led research team aboard the yacht successfully found the remains of the largest battleship ever constructed – a Japanese WW2 vessel, which was sunk off the coast of the Philippines. Allen, after leaving the frontline of Microsoft, became an outspoken environmental campaigner and philanthropist.
Billionaire superyacht couple, Christopher and Regina Catrambone, bought a 1973 40m steel-hulled boat and repaired it for a total of US$5.2M, specifically for search and rescue of migrants, operated by Migrant Offshore Aid Station (MOAS). In August 2014, the Phoenix sailed for its first mission, heading for waters close to Libya. The MOAS was running on monthly operating costs of up to €600,000. The couple had to purchase two rigid-hulled inflatable speedboats with twin 70-horsepower engines used to ferry migrants to the Phoenix. They also hired an experienced search and rescue crew as well as leasing two helicopter drones and their operators.
In 2015, when a cyclone hit Vanuatu, the 73m Dragonfly, which was anchored off Pohnpei (an island in Micronesia) at that time, became a rapid response emergency relief vessel. Skipper Mike Gregory contacted Vanuatu’s National Disaster Management Office and explained what they could do for the hardest-hit area. In one report, Gregory said, “We saw and treated over 250 casualties. We arranged and facilitated three medical evacuations by helicopter, cleared numerous helicopter-landing zones and access roads, and delivered and built shelter in several villages.” The owner of Dragonfly covered all the expenses.
Other superyachts have become humanitarian vessels way back in 2006 through Yacht Aid Global (YAG), a US charity set up by Mark Drewelow to mobilise superyachts that are already in the disaster areas. The YAG motto is “to change the world without changing course”, with one of their objectives being to streamline the process of aid without disrupting the yacht’s schedule. Superyachts, such as the 45m ketch Timoneer, Richard Branson’s 32m catamaran Necker Belle, and other expedition yachts have been mobilised through YAG.
Economic benefit to a local destination
With a growing mega-rich market, it is clear that the superyacht industry will continue to see some significant positive advancement. After all, the increasing number of digits for superyacht prices, as well as their sizes, seems to be enough motivation for the ultra rich to continue investing in them. In the 2016 article The Superyacht Industry Is Poised For Growth, Forbes contributor Doug Goulan wrote, “There are over 200,000 Ultra High Net Worth (UHNW) households, meaning there is a large opportunity for the industry to see strong growth in the coming years if it can tempt more of the super rich to give the yachting lifestyle a try.”
While we have been enthralled by the blitz and bling of the superyacht world, an aspect of the industry that does not get as much media coverage is how a superyacht contributes to the economy of a destination, and how it translates into jobs. As we begin to see dizzying numbers of how much it costs to build and maintain a superyacht, we can perhaps divert our attention to how these translate into economic benefits.
To illustrate, in a recent economic impact study on the superyacht industry in Australia, released in April 2017, it reported the economic benefits of superyachts to the Australian economy. These include:
· Local jobs – 14,500 full time equivalent (FTE) jobs, paying $1.2 billion in wages and salaries (2016)
· Tourism – near $190 million annually for the local tourism market
· Luxury goods and services – foreign guests and crew spend an estimate of $15,000 to $25,000 per day on land in Australia (in the days before and after their cruise), including an average $7,500 for luxury goods and services (jewellery, clothes, food, drinks)
· Local maintenance and construction of superyachts – $400 million in gross product (2016)
In Australia, superyacht crew training is also an emerging industry, providing crew around the world in growing numbers. (This important sub-industry requires a separate discussion.)
Australia, and the Gold Coast in particular, tick most of the requirements for being a superyacht destination, but there is still much room to improve on significant aspects to fully enjoy the benefits of superyacht visitations. In an interview with Nick Nichols in the article Rising Tide for Gold Coast Marine Industry (2015), MaryAnne Edwards, the CEO of Australian International Marine Export Group (AIMEX) & Superyacht Australia, said, “Australia has an excellent reputation in superyacht refits with our expertise, facilities, infrastructure and the quality of our workmanship. We are renowned for getting the job done to specs, on time and to budget, which is something our Asian counterparts struggle with. xxx There is one key barrier to this growth, and that is the fact that foreign-flagged vessels are not able to easily charter in Australia.” AIMEX is the peak body representing the Australian marine export and superyacht industries.
There remain unanswered questions and unresolved issues when it comes to Australia’s superyacht industry. Discussions have been many and have been published. There have been significant efforts to encourage the growth of the industry, and these have been supported by the government. For instance, the Queensland government helped fund a study, ‘Economic Impact of the Superyacht Sector on the Australian Economy’, which was completed by the Superyacht Australia in April this year. The study reports that the sector directly supports more than 1,100 jobs and directly contributes $103.7 million to the Cairns and Whitsundays Gross Regional Product, according to a Queensland media statement.
Beyond superfluity of the seemingly infinite money being invested in superyachts, megayachts and gigayachts around the world today, we also see significant value in these rich people’s “luxury toys”. Aside from the growing economic future for the industry and for local economies, there is also an increasing importance of superyachts in providing aid in offshore humanitarian events, in delivering basic goods and services to the more remote islands of the world, and in assisting research for the betterment of humanity.
By Roselle Tenefrancia
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Superyacht Hub requirements
Considering the requirements of a superyacht, berthing facilities that have addressed these effectively produce attractive transiting or homeport destinations. In the recent conference, Future of Superyachts, speaker Gino Cutajar from Malta, highlighted attributes of a superyacht hub. He listed the following:
· Having the right legislation is a prerequisite (tax incentives; competitive charter tax legislation)
· Good telecommunications and international air connectivity
· Minor repair and complete refit facilities
· Well-stocked chandleries, with access to fast supply and delivery of specialised spare parts
· Good training facilities
· Other academic facilities offering educational courses that could also be beneficial to the crew
· State-of-the-art hospitals and private clinics
· Lifestyle (warm hospitality; an engaging local culture and heritage; a relaxed and safe environment; chic boutiques, theatre, smart bars, clubs and casinos; hip and classy restaurants; international and boutique hotels, spas)
· Diverse sports facilities
· Private jet park with a repair and maintenance facility
· Attractive cruising grounds for two-day and week-long journeys
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Facts and figures for Australia and the Gold Coast
· There are around 65 superyachts cruising in Australia currently reported, accounting for around 1.5% of the number of superyachts globally. From this number, more than half of them visit the Gold Coast on the way through their east coast travels. Southport Yacht Club reports that it accommodated 10 superyachts in the last year, seven Australian-registered, and two foreign-flagged vessels (Cayman and Marshall Islands, respectively).
· The average stay of superyachts on the Gold Coast is around a month. But superyachts have stayed from a period of one week and some have stayed for up to 12 months.
· There is a wide range of services involved for superyachts. Some of these are: marina berthing, fuel bunkering, refit and repair services, provisions for guests and crew, food and beverage supplies, homewares and new furnishing, transportation (including helicopters and private planes), among many others.
· “A superyacht can spend up to $20,000 per day on charter supplies, and guest and crew experiences. Tourism is a major benefactor of a superyacht visit,” according to Cameron Bray, managing director Northrop & Johnson Australia.
· On average, a 50m yacht will employ 12-15 staff. In general, depending on size, it can range from three to 20 crew. “There will be at least one captain, one engineer, one or two hostesses, a chef (although a hostess can also be the chef),” according to Keryn Spriggs of the Boutique Boat Company.
· The Gold Coast is currently able to host at least 30 superyachts. The Gold Coast City Marina publishes that they can accommodate 24 superyachts, while the Southport Yacht Club reports they can accommodate seven, at any one time.
· As part of the continuing efforts to showcase the superyacht businesses in Australia, members of the Australian International Marine Export Group (AIMEX) will be exhibiting at the Superyacht and Marine Export Alley at the Sanctuary Cove International Boat Show The exhibit will be held after the Australian Superyacht and Marine Export (ASMEX) Conference, which will feature high profile national and international guest speakers who will address this year’s conference theme ‘Staying relevant in today’s global business environment’.
For further reference:
· Gold Coast as ‘point of entry’, HoR Question 874, Parliamentary Debates (15 September 2009).
· Bringing superyachts into Australia, www.border.gov.au.
· Superyacht Australia, www.superyacht-australia.com.
· UK Maritime and Coast Guard Agency (MCA), www.dft.gov.uk/mca.
· UK Passenger Yacht Code (2014), for yachts carrying 13-36 passengers.
*Cover image courtesy of Silverfast
