The brokerage community has made a significant contribution to the growth of the superyacht fleet over the years by introducing new owners into the market: The relationship between brokers and shipyards is as old as the industry itself and plays no small role in dictating where a new build project will be built. In return, sales brokers have historically been awarded finders’ fees, built into the bottomline cost to the client, and awarded by the shipyard as a commission. In fact, there was a halcyon period – before the financial crisis reared its ugly head – when these commissions reportedly hovered around the 10 per cent mark, although the barren conditions of recession dictated that this figure fell to a more modest three to five per cent of the build cost.
In a recent conversation with TSR, International Yacht Collection’s Bill Sanderson highlighted the fact that, post-recession, new owners entering the market are doing so because they really care about yachting. Gone are the days, he said, of the industry being able to cash in on UHNWI’s fleeting fancies; today’s owners need to be wooed and that explains why the annual number of orders first dropped then plateaued.
However, this new wave of knowledgeable owners has brought with it a worrying trend for brokers. In essence, some owners don’t feel they need the brokers. As John Leonida, partner at Clyde & Co acknowledged, “[In recent times] we’ve seen the rise of the project manager as the person the owner goes to first.” Leonida said that in his experience of new build sale and purchase contracts, there has been a noticeable rise in the number of projects that undergo design and pre-engineering before being put up for tender by the client’s team, circumventing the need for any thirdparty fixer.
Of course, the solution to this among the top brokerage houses has long been the establishment of their own project management divisions, to oversee the build that they brokered. For Richard Lambert, senior sales broker at Burgess, who are one of the proponents of this model, this umbrella package has been effective. He said that the company has actually enjoyed a new build renaissance over the last 12 months. “Over the last five years it has been possible to purchase a relatively recent secondhand yacht in good condition for approaching 50 per cent of the replacement cost”, he explained. “As the brokerage market has seen an increase in activity over the last 12 months, and residual prices have begun to strengthen, combined with the diminishing availability of quality, recent secondhand yachts clients are looking to the new build market once again.”
Lambert believes that the market remains attractive and that it still retains an important focus for Burgess. He also feels there is potential across the size spectrum. “We believe that clients do still find that there is an allure with a new build contract – the excitement of creating a bespoke and unique project is still an experience and an achievement that clients find enthralling. Many of the semicustom yards are offering increasing flexibility on the interior design and layout, allowing clients to create a look specifically suited to their requirements within a shorter delivery timescale.”
Equally, Camper & Nicholsons broker Simon Goldsworthy insisted the new build market has regained its lustre for brokers, and while he admitted that it’s no longer a halcyon market, he feels that it is offering stronger returns for brokerage houses than in recent years.
“Only a fool would not recognise that new construction was the area of yachtbroking most adversely affected by the financial crisis”, Goldsworthy said. “Some of our new constructions already underway were stopped or delayed, and others that were on the verge of being signed were cancelled at the last moment; it was not a good time.” However, he said that their new build sales division remained remarkably resilient and is now enjoying something of a resurgence. “Although our number of new builds under construction is not quite as healthy as it was in 2009, we are doing quite well and we have, this year, seen a number of new orders signed. We believe very strongly that there really has never been a better time to order a new construction and also that the window of opportunity is slowly closing.” Furthermore, Goldsworthy predicts that a recovery is underway for the new build market and he believes that prices could soon return to pre-recession levels.
Although there is optimism from within the brokerage community, Leonida said that “While there are still owners who have a very traditional relationship with their brokers, it appears there aren’t as many of them.” Leonida does feel that a more experienced owner demographic has contributed to the decline in brokerled contracts. “In the early noughties, right up to 2008,” he explained, “we had a lot of new big-yacht owners who were coming in at the 60–80-metre mark, not having owned a yacht before. There were also smaller boat owners who grew up [in size terms] with their yacht broker. Since the crash”, however, “we’ve seen more experienced owners with their own backroom staff who say ‘go and find the 10 best builders’ … many of them have their own private broker, who may not even be involved in yachting.” This trend towards utilising one’s own ‘fixers’, rather than turning to conventional superyacht brokers, has contributed to a partial changing of the tide.
The emergence of this new breed of expert owner has induced changes in the way Floating Life works with brokers. The Swiss-based full service company’s CEO, Andrea Pezzini, said the change in recent years has been ‘remarkable’ and attributes it to the same trends as Leonida. Not only have yards bolstered their own sales divisions but “Yacht owners are using their own legal offices and owner representatives to build up a shopping list, along with details on ‘final choices’. That was previously a broker’s territory.”
Owners have become more savvy and more prudent with their purchases, and the prospect of a 5-10 per cent fee on top of the build cost is less palatable to today’s owners, Pezzini added. They would rather utilise the services of essentials such as lawyers and technical advisors, costs that are incurred anyway.
Feadship’s marketing and sales director Bas Nederpelt acknowledged that broker-led deals are no longer the only way to secure a contract. “But there has been no active change in policy at Feadship”, he explained. “It is not easy for brokers to sell a Feadship because they need to be very experienced to sell a full custom project, or more experienced than selling production or semi-custom yachts, at least.” Nederpelt feels that Feadship’s top-end pricing can be a hard sell for brokers, and it requires the best of the best to truly convey the residual value of such a purchase to clients.
This, coupled with a commitment to transparency of the sales process, has long been part of the Feadship ethos and has fuelled its pragmatic approach to sales. However, Nederpelt insisted that the vast majority of deals in the industry are still done via brokers although he admitted that, because of Feadship’s position at the higher end of the market, the yard does do more direct deals than most. This stands to reason, as Feadship owners are invariably active participants in the industry, “and it’s rarely their first yacht”, he said. “People who are very experienced tend to have a very good captain and a very good team around them. Therefore, they are able to define what they want and negotiate with less broker involvement.”
Likewise, Michel Karsenti, global sales agent at Yacht-Ology, said Canados, who he represents, invariably sells directly to repeat clients. “They know the shipyard inside and out and love to participate in the [development] of their new yachts at every stage of the process”, he said. “Having built boats with us in the past, I can only assume they feel they don’t need the help of a third party. That being said, we always push them to hire a surveyor to oversee the build process.”
Karsenti said it has been “ages” since Canados signed a brokerled deal. But when it comes to the recently launched Oceanic range, he feels the brokerage community will play a far more pivotal role. He said that there have been plenty of initial broker enquiries regarding the first Oceanic yacht, due to hit the water in August 2014. “In one way, this is a testament to the brokerage community, as it’s always looking for the newest concept. On the other hand, they have not brought their clients to us yet, as they want to see it first, and then decide if is worth showing their client.”
Karsenti feels that brokers remain a crucial constituent in the sales process. “I believe brokers play an important role”, he concluded. “To be honest, they are the best media we can use. If they believe in [our product], they are far more valuable than any advertising campaign to drive us business!”
For Nederpelt a state of equilibrium has been achieved, with a fall in broker-driven deals in mature markets offset against higher demand in new markets. “Overall”, he proffered, “there may actually be more broker deals being done because of greater demand in new markets where the owners have less experience.”
Pezzini agrees with this sentiment, feeling that clients in “new markets” still demand high levels of support from brokers, whereas in more established markets, he feels brokers are seen as “old style figures”.
However, in the case of Dubaibased builder Gulf Craft, which is arguably the most well-established superyacht builder among these “new markets”, there has actually been a downturn in broker collaborations. “As a manufacturer our sales model has slightly changed over the past few years”, said CEO Erwin Bamps. “We have seen more requests from our [potential] clients to speak directly to the yard rather than just deal with the brokers/dealers we have.”
In a similar vein to Nederpelt and Feadship, Bamps says that builders have entered a new era where the client wants to play a much more active role in the project, not only to discuss traditional subjects such as customisation, but to gain a better understanding of the yard itself. For this reason Bamps and his team find themselves negotiating directly with more and more clients. “More than ever before, we find we’re mainly focused on establishing a confident, trusting relationship between the customer and ourselves, rather than discussing product features and advantages.
“It’s in this light that word-of-mouth publicity has become even more important in securing and enhancing new sales, rather than mass marketing, boat show presence, printed ads or social media. Referrals prove to be the most efficient way to build that initial trust that allows us to sit around the table and discuss new build projects.”
Bamps’ view is in direct contrast to that of Mark Cavendish, sales director at Heesen, dismissing the idea that broker-driven new build contracts are on the wane. “It fluctuates quite enormously, and for no discernible reason”, he said of broker-led contracts. “Sometimes we get almost all of our sales through brokers, and other times we may get more direct sales.” Heesen has retained a broker-driven sales focus throughout its history and even stages the Heesen Cup, an annual skiing and networking event for brokers.
In 2014, three out of four Heesen sales have been conducted directly by the yard, but Cavendish said this is exceptional, and estimates that brokers normally contribute to around 70 per cent of deals. “If you look at the situation since 2008 I’d say it hasn’t changed, and brokers are still responsible for the bulk of the sales.” Seventy per cent is a figure that is corroborated by Benetti’s CEO, Vincenzo Poerio, who reiterates the integral role that brokers play in the new build market. However, for Poerio, it is precisely because this role is so important that he feels the industry should be doing more to improve the contractual process. “In the future, for the benefit of the industry, it will be very important to improve the laws [governing the relationship] between broker, seller and buyer for a more professional and efficient sales process.”
While the role of brokers clearly divides opinion among the world’s top yacht builders, it is clear that their role is evolving as a new breed of educated owner emerges. These owners expect more bang for their buck and take a more active role in the evolution of the project, and it is now up to each stakeholder involved in the sales process to justify their existence.
This article originally appeared in The Superyacht Report.