By Phillip Berman and Andrew Holland
Here at The Multihull Company we have been closely watching a few recent videos and commentary on social media with an assortment of yacht brokers prognosticating on the impact of the recent hurricanes on the catamaran market. With having over 15 brokers selling catamarans around the world and managing the sale of about 100 catamarans a year our insights on the market come from the buyers and sellers we work with on a daily basis and the sales figures that are posted.
Frankly, in our view, it is still too early to say exactly where things are going, but now that a few weeks have passed we are starting to see some trends emerging. As always, there are winners and losers in every major global weather catastrophe. The big winners right now of course are the salvage companies running about the islands craning and towing boats.
In all these years of yacht brokering, if there is one thing we have learned it is that the human capacity to view all news as personally beneficial knows no bounds! Naturally, anyone selling a cat now inclines to the view that they have a cat that is worth more than it was pre-storm. The buyers, well, they don’t want to hear it. They are all excited about the salvage sales!
Here is our examination of the impacts of the recent storms on several sections of the catamaran market.
While we have indeed seen a significant loss of catamarans in St. Martin and Tortola, it is lost on many that the large majority of the boats lost were “bare-boat” charter catamarans. Most of these boats were privately owned and managed by charter operators for their owners. The view that some brokers have promoted is that with all of these boats lost that new boat sales will sky rocket is a bit overblown for two reasons:
- There was already a significant oversupply of 4 by 4 catamarans, especially in Tortola. Even on the high Holiday periods one could see plenty of catamarans sitting at the docks. There were many more of them available for charter than the market demanded. As such, many of the owners of these boats, when they get their insurance checks, will cash them with pleasure and walk away. Some are in fact getting more money for their boats than they would ever have sold for on the free market. The percentage of owners who will have removed themselves from the market could be as high as 50% of the bare-boat owners. But it is certainly impossible to say with certainty at all. This is just my sense from working in this market for a lifetime. Those who assume that for every boat lost a builder will get a replacement order are not thinking straight. Although there is no doubt that the larger production builders will get plenty of new orders, and already are, that number will be smaller than many people predict. That said, our guess is that they will be operating at full capacity for at least two to three years. This will enable them to charge a bit more for new boats, which in turn will have a flow-down effect on the brokerage market for similar production models. Prices for the used cats will indeed stiffen a bit.
- For those who do buy another charter boat, or for those who did not lose them at all, they must still accept the reality that the charter market in the BVI and St. Martin will be on a long slow road to recovery. Much of this will be dependent on the support of the British government in the BVI, U.S. government in the USVI, and the French and Dutch governments in St. Martin, to rebuild their infrastructures. Many people will simply not want to vacation in these areas until they are cleaned up and functioning. From reports on the ground of the islands that we have received we anticipate this to take at least two years, but likely three to five. So much depends on the governments and how quickly and effectively they act. The recovery will come in stages. Yet without massive financial assistance this is going to take a lot longer than many think.
The sad Catch-22 in all of this for everyone in the marine and tourist industries on these islands is that without the revenue from the tourists, the recovery will come more slowly and without the recovery efforts made quickly, the revenue to fund them from tourism will come more slowly. The restaurants, vendors, sailmakers, yacht brokers–my goodness, all of them will be earning a lot less, as well as all of the islanders who work with them. (Note: We can tell you that both of our brokers on Tortola and St. Martin lost their homes, along with many of their customers’ yachts, so it has been devastating to them, as it has been on every aspect of society in these islands. We must not forget all of the pain attached to any of this market speculation.)
For the very small number of private buyers who wanted a boat with four heads and four cabins to live on, the sellers of used four cabin cats will certainly have something a bit more valuable than before – but not much. After all, a 4 by 4 catamaran is for charter, and unless she is new enough, or sought after enough, her intended design is not what the private cruiser wants. Most of the private buyers today, the non-charter buyers, want a three-cabin catamaran or a four cabin with two heads, not four. In the 40 to 50-foot size range the buyers do not clamor for a charter configuration, which is why such boats always sold for less on the after-market than like models without four heads. Further, for many, any boat with a charter history was a non-starter to begin with. Our view is that every cat has a value, regardless of her condition or history, and we have never had an issue with our clients buying X charter cats at the right price.
Owner Version and Voyaging Cats
As a general rule, the BVI is a lot less of a cruiser, liveaboard location than St. Martin or the islands South. During the hurricane season many cruisers are staying in Grenada. While we do not at this time have an accurate idea of how many “cruiser catamarans” were lost in the under 50 foot size range, we are confident that this number was proportionally very small in the BVI, but higher in St. Martin. We honestly do not think the “supply/demand” equation has changed massively in this category of catamaran, but it is the case that many of our own customers have lost cruising cats, and all of them are asking us to find them replacements. Right now, at our company, the problem is not finding buyers, but finding them boats they are excited to buy at prices they can afford.
While there was most certainly a portion of private owners version boats lost in the storms, the number lost does not at all compare to the numbers lost by charter operators, especially in the BVI. Private owner version catamarans were already a very competitive commodity prior to the storms due to larger demand and a general lack of supply. This can largely be attributed to the lack of boats built in these configurations during the global financial crisis from 2008 to 2012. As we will allude to later, the largest issue for American buyers is adjusting to the falling dollar, the rising Euro. This occurred well before the hurricane damage.
Big Luxury Charter Catamarans
What we certainly lost a great deal of in the storms were the big, 55 foot-plus catamarans that operated so successfully in the BVI in the crewed charter business. Many of the most established and successful cats were lost in the BVI, and plenty of them also in St. Martin, as these are two of the most popular crewed yachting destinations globally. In our own company family we lost many big cats. Right in Village Cay Marina alone there was a sunk Lagoon 620, a destroyed Privilege 585, a capsized Voyage 580, along with others. The large question that looms for all of those who work in this industry is how their charter customers will respond? How many will cancel charters this season? How fast will the charter market come back? Should they reposition to the Bahamas or Grenadines? There are a lot of questions that have yet to be answered. So, again, while there has been a large loss of supply of luxury crewed charter boats, we are not yet sure how large the demand will be for crewed luxury charters this year and next and on? Our own view is that it will take time for the market come back. So, for those brokers who are out banging the drum for why you have to “buy now!” we can say the jury is still out on this. You do not need a lot of charter cats, bare or crewed, if you do not have a lot of charterers. So much of the answer to this one is about the alacrity with which the governments can get their islands fully functioning and beautiful again. This is hard to predict. But our guess is that the market will come back slowly over a period of the next 2 to 4 years.
The market for Gunboats, Dolphins, Balance Cats, HH, Outremer, Chris White, etc, the speedier performance voyaging type catamarans is not impacted at all in my view by the hurricane losses. Few of these boats were lost in these storms, and the market will neither go up or down but will remain on the steady upward trend we have seen as many people graduate from charter designs who get the yen to really do some serious sailing and voyaging. It is a smaller market, but a very passionate and convicted market.
There will always be salvage cats and salvage buyers! And there will be a lot of salvage catamarans for sale over the next year and a half on St. Martin and Tortola. The challenge for those who buy them is where to repair them? The labor on these islands will be taken up doing any number of things, only one of which is grinding and glassing repaired catamarans. The yards will have more work than they can handle, labor will be hard to find, repair prices up. What we tend to consistently see in salvage and or bargain hunter type buyers is that they are generally never schooled in the market well enough to know what the Bristol value would be for a given model of cat, let alone what that value would be for a repaired boat with a salvage history. To buy any damage yacht properly you have to both know exactly what it will cost to repair her, but what she would sell for when you need or decide to sell. History has taught me that most buyers underestimate the former number and overestimate the latter.
New Boat Prices and the Euro
Lost on many Americans is that their dollar has been sliding hard to the Euro for the past several months, as such that the price for a new catamaran from the Europeans builders had already gone up for them over 10%. Add the hurricane damage, and the need to replace the most popular bareboat models – Lagoon’s from 40 to 50 feet, Fountaine Pajots, Robertson and Caine Moorings/Leopards, Bali Cats…all of these builders were undoubtedly get more orders than normal. This will push up prices a bit and lengthen delivery times from such builders. This will also stiffen the prices of the used production cat models, especially the non-chartered owner versions.
Right now, it is too early to know where it is all going. We do see a bit of a bubble mentality from many sellers (my boat has got to be worth more now!) and from some buyers (I am not going to allow myself to get into any feeding frenzy!). We certainly lost a lot of charter boats from 40 to 50 feet, and a lot of nice large luxury crewed cats. At the same time we lost a lot of charterers for the next few years, so it may in fact all even out in the short term. It is impossible to say for sure. But we do believe that over the next few years we will have a bit of a shortage of supply of good clean used catamarans in general. This was a trend that was already well under way before the storms. It is vital in such a market to stay calm, rational and patient. When you are ready to embark on a yachting adventure there will always be a boat for you.