top of page

What lies ahead?

Updated: Sep 15, 2022

Recent reports of record order books, busy shipyards and buoyant brokerage markets have painted a positive picture of the superyacht sector.


However, such data even when credible or authoritative, is arguably a lagging indicator of past enthusiasm for yacht construction, ownership and business success working through orderbooks and published sales inventories.


So what does the future hold? What are the implications for different industry players, is it possible to formulate a forward-looking view and summary of external forces that may influence the direction the yachting industry steers?


The following change drivers are not intended as a definitive list, nor a concrete position. Although it could be read as ‘net-negative’ it is not meant to be pessimistic or an alarmist perspective, more a collection of thoughts and ‘what-ifs’ that can inform forward planning for decision makers and stimulate further discussion.


Political

  • Ongoing uncertain geopolitical outlook, war and regional instability in historically key geographical markets for yachting such as East Med/Ukraine/Russia/Middle East

  • Sanctions and financial controls affecting customer segments

  • The rise of nationalism, protectionism, tariffs and subsidies


Economic:

  • The pandemic high representing a double-wave of pent-up delayed gratification and ‘pulled-forward’ demand fuelled by Covid restrictions, stimulus spending and low interest rates. Likely followed by a post-pandemic trough due to demand returning to the mean or trending lower

  • Uncertainty, fluctuations and lack of confidence in financial markets, possible contagion from stress in the financial sector and a lack of liquidity

  • Rising interest rates, increased cost of debt servicing, rising public and private debt default

  • Reverse wealth effect due to downward asset repricing and market corrections

  • Reallocation of buyer attention and capital towards more defensive and value producing assets

  • Reduction in luxury, travel and consumer discretionary purchases

  • Supply chain bottlenecks in materials, parts and labour result in delivery delays and quality issues


Social:

  • Yachting represents a tangible and visible statement of increasing wealth inequality in the media and public domain

  • ‘Bi-flation’ where the wealthy can cut back but the less financially fortunate cannot afford basics

  • Inter-generational succession and transfer of wealth

  • Covid winter resurgence


Technological:

  • Ongoing digitalisation, disruption and disintermediation for legacy business models

  • Decarbonisation and climate investment

  • Material science, bio-materials, 3D printing/additive manufacturing

  • Edge computing, data fusion and system integration

  • Artificial Intelligence/machine learning


Legal/Regulatory:

  • Emissions targets, carbon measurement and taxes, environmental exclusion zones

  • Supply chain transparency, circularity and recycling targets

  • Enhanced 'KYC' know your client/Anti money Laundering requirements

  • Wealth transparency and taxation, extra-territorial regulations enacted by governments


Environmental:

  • The overall defensibility of an increasingly visible resource-intensive industry producing and operating large discretionary luxury products is questionable.

  • Extensive supply chain of many secondary and tertiary suppliers, lack of transparency and traceability.

  • Market resistance to more sustainable approaches is based primarily on cost/price and a perceived lack of proven alternatives

  • Greenwashing and token efforts towards longer-term sustainability goals are marketed as ‘good enough’ or ‘box ticking’.

  • ‘Woke-lash’ against sustainability and greenwashing hides or hinders real progress.

  • Climate protests and disruption directed towards high profile industries and events considered to be polluting.


Outcomes

What could be possible outcomes of these change drivers influencing the direction the yachting sector takes? Some initial thoughts below:

  • Price sensitivity and margin compression in an increasingly competitive market

  • The increase in orders, supply chain constraints and price inflation conspire against shipyards and service providers to deliver successfully at agreed contractual prices, timeframes and quality

  • Lack of price discovery due to mismatched expectations between buyers and sellers, a ´wait and see’ sentiment from buyers stalls or lowers transaction volumes at any price level

  • ‘Stealth wealth’ decreases in conspicuous consumption, for example an increase in charter activity vs purchase or more remote ‘over the horizon’ operation

  • Client cost cutting, for example vessel downsizing, skeleton crews and single season operation

  • Capital flows to more business-friendly jurisdictions

  • Bankruptcies, defaults and liquidations across supply chains

  • Job losses and relocations

  • Distressed opportunities and bargain hunting

  • An industry consolidation around more resilient products, services and business models

It is important to highlight that differential effects may be felt in different sectors of the industry, one business’s threat may be another’s opportunity. Such factors also need to be weighed against an objective assessment of business strengths and weaknesses in order to evaluate issues that inform planning.


The key is also to focus on the Un/Certain and High/Low Impact aspects, for example:

  • If it is certain it is not an unknown, but could still have a high impact.

  • If it is uncertain it may have a low impact, so might not be that important in strategic planning terms.

Any and all feedback welcome. Thanks for reading.

70 views0 comments

Recent Posts

See All
SPARK MARINE PROJECTS logo.png
bottom of page