The final numbers for 2009 show quite clearly that charter business is off. There are, however, a few bright spots in the economic clouds. Charter Index Editor Kim Kavin breaks down the data from the newly released Camper and Nicholsons International Superyachting Index, including future industry projections.

Camper and Nicholsons International recently released the third edition of its annual Superyachting Index, the world’s most comprehensive collection of data about the new construction, brokerage sales, and yacht charter industries for boats larger than 80 feet.

The current edition covers the calendar year 2009, the first full year of the global economic recession. Not surprisingly, the new Superyachting Index is filled with downward trends—for the first time putting hard numbers to the dock chatter among brokers, central agents, and captains.

If you’re a retail broker and your 2009 business was off by 30 percent, then you’re about average. If you’re the captain of an 80- to 100-foot yacht and had to drop your weekly rate by 15 percent to secure bookings, then you’re in line with your competitors. If you’re a central agent whose Florida and Bahamas inquiries seem non-existent, then you are not alone.

Following are the key charter industry trends that the 48-page Superyachting Index identifies. Some are bad, and some are worse, but a few suggest resiliency in the charter industry that will be tough to shatter, even if the global recession continues for several seasons to come.

This is the third year that Camper and Nicholsons International has released a Superyachting Index, giving the charter industry its first chance to track trends across a multiyear period. Next year’s Superyachting Index is already in the works, the company says.

The Fleet Got Smaller, but Big Clearinghouses Made Gains

At the end of 2009, about 850 yachts larger than 80 feet were available for charter. That represents a 15 -percent reduction in the size of the fleet from 2008, a contraction that no doubt helped the industry as the full impact of the recession hit. It’s simple supply and demand.The fewer yachts that are available for charter, the more bookings there are for the yachts that remain.

Put another way: Things aren’t great, but they could have been worse. And some central agents—the ones who adapted quickly to shifts within the falling market—were actually able to increase their share of business. In 2008, charter yachts managed by the world’s 12 largest companies secured about 70 percent of overall bookings. In 2009 that percentage rose to 75, with gains made by CAs who either kept the size of their fleets stable or who grew their offerings in the superyacht segment of yachts 165 feet and larger.

How big of a financial impact did management of those biggest charter yachts have? According to the Superyachting Index, only six companies collected 90 percent of the wholesale charter commissions on yachts 165 feet and larger in 2009. And while those yachts saw charter rates decline percentage-wise just as much as yachts in other size ranges, the superyachts still averaged at least $250,000 a week more per booking than yachts in other size ranges—with demand that shows no sign of slowing.

Charter bookings in 2009 generated wholesale commissions of more than $18 million, a decrease that left central agents right about where they were back in 2007.

“It’s part of the allure, to say you chartered a boat for a million dollars a week,” James Preston of sapphire Seas said a week after his company became the central agency for charter of the brand-new, 282- foot Oceanco Seven Seas. The yacht was immediately listed at a weekly base rate of $1 million starting this winter in the Caribbean. “We had six inquiries the first week after we announced the rate,” he added, “and one inquiry was for a three-week charter.”

Virtually Everything is Down, but Some Drops Were Steeper

The average weekly base rate paid for a yacht charter in 2009 was $132,000, down 10 percent from the prior year in pure dollars.

However, the Index notes, this percentage may be misleading. The number of superyachts in the overall charter fleet increased by a handful, bringing top-dollar rates along with them. Meanwhile, about 70 yachts in the far less expensive 80- to 100-foot range left the fleet. When those average-skewing factors are taken into account, the average weekly base rate for charter yachts actually dropped by about 20 percent in 2009, according to the Superyachting Index.

And those numbers do not include discounts. By August 2010, some motoryachts in prime Mediterranean ports were advertising single-week discounts of as much as 40 percent. (See “How Low Will Discounts Go?” in this issue.) Discounts on already-adjusted base rates were also being offered for charters of less than a week —which is noteworthy, given that the Superyachting Index states the average duration of charters was slightly shorter in 2009 than in 2008. The silver lining in these figures is that some charter yacht owners appear to be embracing clients’ inclination to shorten their charters as opposed to forgoing them altogether, with discounts now being tailored to at least one quantifiable trend.

Also down in 2009 was the total number of charter weeks booked. The Superyachting Index puts this number at about 2,680—which is lower than 2007 levels. This decline not only affects retail and central agency commissions, but also expectations for captains who count on charters to keep crew happy. While the 2007 and 2008 editions of the Superyachting Index put the average number of weeks booked aboard any given charter yacht at four, this year’s edition says the average number of weeks most captains can expect to see is 3.15. There are of course superstar yachts that out-perform the averages every year, but the muchdiscussed “12-week gold standard” appears to be a far cry from most charter yachts’ realities.

Capt. Phil Lacca of the 112-foot Westport True North, whose charter program is just beginning this winter in Florida and the Bahamas through RJC Yachts, says the current data doesn’t scare him one bit. Previously known for a strong charter program aboard the 121- foot Broward Java, Lacca says statistics are no match for offering brokers and clients what they want in this or any other economy.

“If three weeks is the new average, then my goal is to get six weeks this season, and then nine weeks next season,” Lacca says. “There’s no reason we can’t. We have a great boat, an experienced captain, an enthusiastic crew, and a willingness to negotiate good deals for the client. No way am I ready to say uncle, no matter what the trends and statistics say.”

This type of captain’s enthusiasm is less frequently heard among brokers, many of whom have yet to see a serious turn back toward their previous incomes. Given the lower base rates, shorter-term inquiries, and fewer weeks booked overall, it’s easy to understand why wholesale and retail commissions plummeted.

Retail commissions in 2009 totaled about $54 million, while wholesale commissions were about $18 million. That puts the total value of the charter market at $72 million for 2009—a drop of nearly 30 percent from the $100 million that the Superyachting Index estimated for 2008.

The Mediterranean is Okay, but the Caribbean is Down—and the Bahamas are in Freefall

The number of weeks booked in the Mediterranean— some 2,000—was about the same in 2009 as it was in 2008. And the Mediterranean remains by far the world’s most popular location for luxury yacht charter, with about 75 percent of all bookings in the waters from Spain to Turkey.

In the Caribbean, the story is less rosy. About 375 weeks of charter were booked there in 2009 versus 435 weeks in 2008—bringing the region’s total to less than it was in 2007.

And in Florida and the Bahamas, just 80 weeks of charter were booked in 2009—down from 160 in and 195 in 2007. That represents a 60-percent decrease in volume in just two years. This freefall may be attributed in great part to location: Florida and the Bahamas are a prime destination for U.S. clients, who booked fewer charters in 2009 than in years past.

According to the Superyachting Index, More than 63 percent of the world’s total charter bookings for 2009 were in the South of France, Corsica, and Sardinia.

Interestingly, though, the duration of Western Mediterranean charters decreased while the duration of Eastern Mediterranean charters held steady.

U.S. clients accounted for 27 percent of charter bookings in 2009, down from 35 percent the year before (while demand from clients in Britain, Europe, and Russia remained stable).

Yachts booking charters beyond the Mediterranean, Caribbean, and Bahamas garnered about 215 weeks of charter in 2009, down 30 percent from the year before. It will be interesting to see how this “other” category of destinations is affected by prime yachts such as the 228-foot Dutch-built Sherakhan, the 148- foot Asenav Atmosphere, and the 147-foot McMullen and Wing Big Fish moving into locales such as Patagonia and Antarctica during the winter 2010-11 season.

“Less than a month after announcing that Sherakhan plans to adventure to Patagonia and beyond, we have already secured a Christmas and New Year’s charter there,” said Britta Ax, a charter manager at Camper and Nicholsons International who was handling bookings for Sherakhan this fall. “During the first week of October alone, we also received several serious inquiries for charters in Patagonia and Antarctica alike.”

What the Data Indicates for Upcoming Charter Seasons Worldwide

The decrease in bookings among U.S.-based clients is only part of the story when it comes to future booking trends. Traditionally, U.S. and U.K. clients have represented 60 percent of charter demand, but in 2009, that percentage shrank to 52. At the same time, clients from Russia, Ukraine, and other former Soviet Union nations rose to the same level of bookings as clients from France, Switzerland, and Belgium—and the “rest of the world” beyond the U.S., U.K., Western Europe, and Eastern Europe jumped from requesting 8 percent of bookings in 2008 to 13 percent in 2009.

This could mean a couple of things for the charter seasons ahead. The Superyachting Index states “that either the rest of the world was more resilient than the traditional yachting countries [during the recession] and/or that we are gradually seeing a stronger presence of clients coming from new regions.” If it’s the latter, then it’s a flicker of hope—one that central agents and retail brokers might consider fanning into a flame with marketing campaigns in non-traditional parts of the world.

Clients from Russia, Ukraine, and a few other former Soviet nations now book as many weeks of charter as clients from France, Switzerland, and Belgium. In terms of charter value, the former provide more than twice as many dollars to the industry.

Other potential trends come from the Superyachting Index sections that cover the brokerage and new construction markets. While the charter section of the report makes clear that a good number of yachts in the 80- to 100-foot size range fell out of the charter market in 2009, the brokerage section indicates that the sale market for these yachts appears to be stabilizing at a buyer-friendly price point. This could mean that owners will return to this size range in late 2010 and 2011, with at least some of those owners injecting more 80- to 100-foot yachts back into the charter fleet.

At the other end of the size spectrum, the forecast is the opposite. The new-construction section of the Superyachting Index calls the number of new orders for custom yachts 100 feet and larger “the most alarming of all available statistics and data.” The number of orders plummeted from 241 in 2008 to just 90 in 2009. The drop is so substantial that the Superyachting Index suggests some shipyards may go out of business altogether.

While that would be bad for the yachting industry’s overall growth, it may indicate a coming financial bubble for the charter segment. Only 15 percent of the yachts available for charter in 2009 were more than 165 feet long. If only a handful more are going to come out of shipyards and onto the charter market in the next three to five years, then supply will remain scarce as the economy improves, and rates may return to their best-ever levels—or, dare we say it in the current climate, push even higher for that top segment of the charter market.

“Discount” was a four-letter word in the charter industry until 2009, when the boot heel of the global recession all but strangled the yachting business. By summer 2010, discounts were being advertised instead of whispered—and in some cases, deepening at an unprecedented rate.

Motoryachts and sailing yachts alike, even in prime Western Mediterranean locations, blew right past 10- or 15-percent discounts to offer head-turning incentives.

Free champagne welcome brunches and free picnics ashore are another added-value incentive that some charter yachts are now beginning to offer.

Examples included the 141-foot Holland Jachtbouw This is Us, which dropped its rate by 25 percent and eliminated delivery fees during the month of August. The 144-foot Feadship Kingfisher offered the equivalent of a 30-percent discount during high season, changing its seven-day base rate of $180,000 to an eight-day base rate of $145,000. The 192-foot Lürssen Capri offered an almost 50-percent price break in July, with a regular base rate of €290,000 plummeting to €150,000.

“The year 2009 saw a nearly complete halt to charter activity, and it’s better to have some business than none at all,” says Sacha Williams, Monte Carlo-based
charter marketing manager for Edmiston & Co. “Some owners say no to discounts. Some say yes, but not publicly.
Others understand that it’s an extremely competitive environment, and that what we have is a reaction to what we are seeing throughout the industry.”

Most retail and wholesale brokers say negotiations are the new normal, that the charter industry has gone down a path from which there is no return, even when the economy rebounds. Early announcements for the upcoming Caribbean season are evidence of this reality, with yachts like the 252-foot Devonport Samar having offered an eye-popping winter discount of €100,000 way back in mid-July.

However, another trend line is also beginning to emerge, one that aims to stop the discount “race to the bottom” and instead offer clients additional value. Bonus days, which began to appear during summer 2010, are already being offered for the winter holidays aboard popular motoryachts such as the 115-foot Crescent Kapalua. The owner of the 169-foot Alloy sailing yacht Mondango conceived the idea of holding firm on his base rate, but including the crew’s gratuity (a client savings of €9,250 to €27,750 based on a 5- to 15-percent tip). Several yachts are offering free dinners ashore, treatments at local spas, and free wine and ship’s bar as part of their regular base rates, hoping to stabilize those rates while focusing the client on added value.

“We are negotiating everything, but we are looking at more imaginative ways of marketing the yachts, rather than just discounting,” Williams says. “I think creative is the key word now.”

Derek Holding, CEO of International Yacht Charter Group, says his company’s retail brokers now expect negotiations to be part of every contract process, no matter what happens with the economy going forward. By his estimation, the charter business was unique in having existed for so long without the traditional push-and-pull of deal-making that occurs in almost every other industry on earth.

Further, both Holding and Williams say that some owners are now adapting to the new normal by promoting deals and discounts with alternative motives in
mind. Some owners, they say, do not necessarily want to gain immediate bookings, but instead want to send a signal to retail brokers that they are open to negotiations in general.

“The announcement of specific offers as a basic marketing tool is a proven marketing technique outside of our industry,” Holding says. “They form a secondary message. That’s an important informational tool for good brokers to have.”

Williams, along with several other charter managers at competing companies, says she hopes retail brokers will work with CAs to find a new equilibrium – and soon. Without a mutual effort by the people representing owners as well as clients, the discounting trend could continue to an unsustainable level for the industry in general.

“I think the discounting is getting silly, to be honest,” she says. “I’m rather fed up, as I’m sure a lot of other charter managers will tell you. I get calls requesting 50-percent discounts on five-day charters. We need brokers persuading their clients that these offers simply aren’t genuine. We’re not going to get back to where we were before the recession, but we can be more creative in the way we approach making good deals.”

Yacht owners with long-term berths at marinas like IGY’s Isle de Sol are considering including free dockage as a way to lure charter clients.

Here are 10 key data sets that you can track with Google Analytics:

1. Unique Visitors. This is different from “hits,” which can include software programs in addition to real people. As soon as software programs start booking charters, you can care more about their visits. For now, focus on unique visitors—the number of human beings who visit your website.

2. Time on Site. It doesn’t matter how many people visit if they all leave inside of five seconds. You want visitors to stay at least a minute or two, which indicates that they’re actually reading your content. Don’t smirk at times of two to four minutes, either. The mega-site Facebook has an average time of
seven hours per month, which is only about 14 minutes per day.

3. Bounce Rate. This is the number of people who land on your website and then, without clicking any of your internal links, bounce away to another website. If your site is e-commerce based—say, you want somebody to click through to fill out a contact form—then you should consider a redesign if your bounce rate is above 50 percent. If your site is information based, the bounce rate can be higher without cause for concern, since readers often find what they
are seeking by clicking a single link from a Google search to a single page on your website.

4. Browser Capabilities. Are people viewing your website through Internet Explorer, or Firefox? Are you getting more smart-phone visits from Blackberries or iPads? Google Analytics will tell you, so that you can tailor your website’s design.

5. Screen Resolutions. How big are the monitors where people are viewing your website? Can your visuals be clearly seen on the smallest monitors people are using? This data helps you determine your site’s visual sweet spot, so you can adapt the design accordingly.

6. Traffic Sources. Is most of your traffic coming from search engines? Have you developed a good number of inbound links from other websites? This data gives you the overall percentages of traffic sources, plus specifics like the names of referring sites that are driving the most traffic to you (so you can advertise
there even more).

7. Keywords. What are people typing into Google that leads them to your website? Keywords tells you the exact phrases—as well as how long the people
who typed them stayed on your site, the number of pages they viewed, and more. Hint: If the words “yacht” and “charter” appear nowhere in your first 10
to 20 keyword results, then you need to work harder on search-engine optimization.

8. Top Landing Pages. Is your website’s home page the first page that most people see? Not always, and most likely a lot less often than you think.
This data segment lists your landing pages in order of popularity, so you will know what’s working best.

9. Top Exit Pages. This is the opposite of No. 8, telling you the pages that people most often view before leaving your website. If you are trying to get
visitors to click through to an inquiry form but they’re all leaving from your home page, then you need to restructure to get visitors where you want them to go.

10. Map Overlay. Are most of your visitors coming from the United States, where many charter clients are based? Or are they browsing from an Internet
café in Botswana? The map overlay gives you a pointby- point breakdown of users’ nationalities, including the number of pages they view, the time they spend on your site, and more.

Fraser Yachts Worldwide

I worked as crew in the Mediterranean and Caribbean for 10 years and feel the same way about gratuities now as I did then: They are a gift. They’re not guaranteed.

I address the issue four times once a charter is booked: The client receives an etiquette sheet, which explains that a typical gratuity is 10- to 20 percent, scalable depending on service; I put verbiage regarding the gratuity in the charter agreement; I review it verbally before embarkation; and, finally, I offer to escrow the gratuity.

Gratuities can cause bad feelings from several perspectives. A client once said, “Do you mean to tell me that my expenses are going to increase by as much as

20 percent because I have to tip the crew? Where is the owner? This is absurd.” Conversely, a captain once said, “I want a guaranteed tip in the agreement.” He believed I was earning a 15-percent commission, and he wanted one, too. I explained that I only earn a portion of that percentage, and that since I do not earn a salary, it isn’t a tip. It is my pay.

Reputable charter brokers do their best to educate the client and encourage them, but I cannot chase a client if he fails to leave a gratuity. Crew who feel they are underpaid need to discuss their salaries with owners, not the level of their gratuities.

Central Agent: Lara-Jo Houghting,

Northrop and Johnson

The charter agreement states that gratuities are the sole discretion of the charterer. Period. In reality, crew workload doubles on charter, so they anticipate and deserve a bonus. As a charter manager, I reiterate to owners and crew that gratuities are encouraged—but that the percentage cannot be guaranteed.
Each culture has its own definition of gratuities. In South Africa, where I was born and worked in the hospitality industry, 10 percent truly was a bonus. In America, where I am now a citizen, gratuities are often larger.

Even the term “service” is relative. Some cultures want warm and fuzzy, whereas others seek “be-seen-and-notheard.” Each perspective plays into the equation.

Northrop and Johnson’s charter fleet of 18 yachts range from 100 to 200 feet. Even in today’s economic times, our fleet’s gratuities have remained generous.

The common denominator among yachts that do well is the captain’s attitude. If a captain and crew can assess the charter party quickly and understand what is expected, then gratuities naturally follow.

Retail brokers are obligated to inform clients that (a) gratuities are not included in the charter rate, (b) gratuities are customary, and (c) a guideline is available.

MYBA suggests a 5- to 15-percent gratuity. I believe this is appropriate for charters in European waters, where those percentages are customary, but in the Americas, the guideline I suggest is 10 to 20 percent.

Charter Captain: Alec Cunningham,

151-foot Delta Katya, Ocean Independence

Tipping is a taboo subject for a captain, because in discussing it we are assuming that the gratuity already exists. My philosophy is that if you are being

compensated by an agreed salary, then anything extra is truly a gratuity. All too often, crew consider a tip as an entitlement or the prospect of one as a part of their overall compensation. Instead, crew should negotiate an annual compensation that they feel comfortable with, excluding the gratuities that may or may not materialize.

Gratuities can vary depending on the level of service the charterer feels he received. If it is a percentage of the charter rate, then it is like any other gratuity in the service industry: 5 percent and below is low, and excess of 20 percent is above and beyond. But there are many variables. A 5-percent gratuity may be considered low after a hectic 10-day charter, while 5 percent is not a bad tip if the crew worked only eight hours a day for seven days.

In my opinion, there is no right or wrong amount. It is truly a case-by-case scenario and, above all else, it’s at the sole discretion of the charter client. Many variables help determine an appropriate gratuity. In the end, though, it is a personal decision with more emotional factors than just a percentage.