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I write this as I am flying back from the Cannes Boat Show. Here at 30,000 feet, with time on my hands, I cannot help but reflect on the wave of change breaking over the catamaran market. Five years ago I came often to these shores because we represented a small catamaran shipyard called Sud Composites, builders of the Switch 51 performance catamaran. Back then a well equipped Switch ran about 590,000 Euros, or a bit less than $550,000 U.S. Dollars. The Euro was trading then at about 90 cents to the Dollar and many French built cats were wonderful bargains for my clients.
Just around the corner from Sud Composites, in La Grand Motte, they built the Outremer Catamaran, a rather simple, basically finished cat made of solid fiberglass. At the time, the Outremer was the “budget” option for the performance sailor who could not afford a composite Switch or Catana. Today, however, few French catamarans look like a bargain to an American buyer.
It did not take me by surprise to learn at the Cannes Boat Show that Outremer is now in bankruptcy reorganization and Sud Composites out of business. Both of these smaller, specialty yards simply could not survive without at least a handful of American orders to sustain their small production. While the American market represented less than one third of the buyers for these specialized catamarans, the loss of our market placed both companies in financial peril.
During my stay in Cannes, the Euro hit an all time high of 140 to the Dollar. A catamaran priced at the boat show for 440,000 Euros, for example, was $620,000. Sadly, the problem is not the strength of the Euro as much as it is the weakness of the Dollar. Indeed, it has weakened over 30% to the Brazilian currency in the past three years as such that Dolphin Catamarans have had to raise their prices over four times during this period. Much the same thing has happened in South Africa. I can still recall when the Rand was trading at 12 to the Dollar – it is now in the 6 to 7 to the dollar range. We are talking here about a nearly 50% swing in the value of this currency to ours!
To add insult to injury, the cost of yacht construction has skyrocketed over the past few years. Resin prices this year alone have gone up 14%, carbon prices nearly 20%. It simply costs a lot more money to build a fiberglass sailboat than it did a few years ago.
Of course there are winners and losers in any currency shift. The good news for the seller of a used catamaran (particularly high-demand owner’s version boats that are well equipped) is that your boat has likely depreciated very little over the past three years. In fact, for those who are selling low supply, high demand used cats, like Catana’s or Dolphin’s, your boats have likely appreciated since you bought them. I recall purchasing a used 1999 Catana 431 for an American client in France back in 2002 for $380,000. He sold that boat a year or two later for $410,000, and two years later her third owner sold her for $430,000. Owners of cats built by the larger production builders will not experience quite the same good luck due to greater supply and lower demand, but most will experience just modest depreciation if they bought their cats from 2001 to 2003.
The net impact of the rising cost of new cats, together with the weakness of the Dollar, is that many American buyers are getting priced out of the new catamaran market. They are either giving up on their dream of buying a new boat or turning to the used market. Evidence of the growing demand for clean used catamarans is that our sales in this area have been extremely strong over the past six months. Sadly for the American buyer many of these used cat purchasers are Europeans, Australians, and South Africans who are taking advantage of our weak Dollar to pick up the best deals in brokerage boats in the Caribbean and U.S. East Coasts. Because cats can easily be sailed almost anywhere in the world, a bargain conscious buyer is more than happy to take a long flight to save many thousands of Dollars on a used catamaran. But this, of course, drives up the cost of used cats for every buyer, no matter where they are in the world.
When the slide of the Dollar will end is hard to say. As long as the Fed keeps lowering interest rates it is unlikely to occur in the near future. I simply counsel buyers that the strength or weakness of the dollar will play a larger role in the resale value of their cat than any other factor, due mainly to the fact that 90% or more of the catamarans built today are built outside the U.S. As long as new boat costs go up, whether due to raw materials costs or currency fluctuations, used boat prices will remain strong and depreciation will remain far lower than normal. |
