Luxury vesselsprove their worthIndustry createsjobs and gives aneconomic boostPage 2

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Spain lightensboat tax loadLobbying victoryexpected to aidcharter tradePage 2

Format changeprices out teamsFears thatAmerica’s Cup isnow too expensivePage 3

Manta rays makeup for glitchVictor Malletmarvels at marinelife close upPage 4

Yacht for sale:with karaokeChina market hasits own dynamicsPage 4

FT SPECIAL REPORT

Yachts & MarinasWednesday September 25 2013 www.ft.com/reports | @ftreports

Sitting at anchor off theFrench Riviera resort ofBeaulieu-sur-Mer, a short hopfrom Nice, Issana launchesits tenders to pick up visitors

who have flown in by private jet fromFarnborough airport in southeast Eng-land. A Rolls-Royce has whisked themto the quayside.

“You have to experience one of theseyachts to understand just what theyhave to offer,” says Chris Cecil-Wright,founder of broker Cecil-Wright & Part-ners, which is showing the 55-metreyacht at the Monaco Yacht Show,which begins today.

Issana is today moored in the PortHercule basin, along with scores ofother second-hand yachts selling at bigdiscounts to the prices that ownerswere seeking just two or three yearsago. Another 100 or so yachts for saleare anchored outside the port.

For superyacht brokers, 2013 is seenas a make-or-break year, and theMonaco show, the most prestigiousgathering of luxury vessels, is wherethese hopes will be realised or dashed.

“I do think we’ve turned the corner,”says Mr Cecil-Wright. “We have beenworking at the bottom of the marketfor 24 months, but things are lookingup. Quality boats are selling again. It’sall about confidence among buyers andI think that’s returning.”

Nicholas Edmiston, chairman ofbroker Edmiston, says that realismamong sellers is a big factor.

“We are placing an emphasis onboats that owners want to sell, and wewant to know that owners are seriousabout that. I am not interested in ask-ing prices. I do not make money onasking prices but on selling prices.”

Educating sellers to face up to mar-ket realities has been tough, says WillChristie at yacht brokers YCO. “At thestart of the downturn, many buyersstood back, looking for distress salesand rock-bottom deals while sellersoften held out for unrealistic prices.The market is now seeing a coming-to-gether on both sides of the deal.”

Sales of second-hand yachts have ledto a steady stream of refit business inthe past few years as some owners andbuyers have chosen to remodel exist-ing yachts rather than to have themdesigned and built from scratch.

Pendennis, a UK-based shipyard, hasmore refit work than new buildingprojects, according to Toby Allies, itssales and marketing director. The yardhas just spent £20m in three new con-struction halls and a wet basin. Otherbuilders are also investing.

Azimut Yachts, part of the AzimutBenetti Group, is committing €29m

over three years, shifting its produc-tion from Turkey and Piacenza to itsmain site in Avigliana. The moveplaces the company’s strategy squarelywithin its Italian roots.

Giovanna Vitelli, a board director,says: “Azimut’s owners, workforce,designers, technical staff and produc-tion sites are all Italian. We focus on‘Made in Italy’ because it is what ourcompetitors cannot claim to be.”

The statement is a thinly-veiled barbat its closest rival, the Chinese-ownedFerretti Group. China’s interest inEuropean yacht brands was confirmed

by last year’s takeover of Ferretti byShandong Heavy Industry, and themore recent purchase of the UK’s Sun-seeker by Dalian Wanda.

The band played “Rule Britannia”on the Sunseeker stand at Southamp-ton Boat Show this month, and Stew-art Mcintyre, its managing director,has stressed the Britishness of thecompany. “It may not be British-owned but it’s British-built,” he says.“The owners are very keen to promotethe British brand.”

Continued on Page 4

Issana, a 55-metre superyacht being marketed by Cecil-Wright & Partners, is one of the luxury vessels for sale at the Monaco Yacht Show, which begins today

Industry endures a crucial yearParticipants gatheringinMonaco this weekare on lookout forreturn of confidence,saysRichard Donkin

2 ★ FINANCIAL TIMESWEDNESDAY SEPTEMBER 25 2013

Yachts & Marinas

Joaquin Fernandez-Davilatakes a call on his smart-phone. Lady M, a 64-metresuperyacht launched thisyear, wants to take on20,000 litres of fuel in theMarina Davila Sport inVigo, north-west Spain.

The yacht’s captain askswhether the marina has suf-ficient depth. “No problem,”says Mr Fernandez-Davila,the marina’s megayachtcoordinator, who has theideal berth alongside a 230-metre pontoon.

The yacht docks in theevening, but departs the fol-lowing day. Yachts this sizeare a rare sight in Spain. “Iwould like them to staylonger, to show them whatour region has to offer,”says Mr Fernandez-Davila,who longs for the day whenbig yachts will charter fromSpanish ports, as they dofrom the French Mediterra-nean resorts.

Now, after persistentindustry lobbying withinthe European Union, thatday may not be far away.

The Spanish governmentin July accepted a bill thatwill allow an exemptionfrom the matriculation taxof 12 per cent for visitingcharter yachts in Spanishwaters. The tax, which pre-dates Spain’s entry into theEU, is imposed on all lux-ury goods, including largeyachts. When added to VATit means Spanish nationalspay a 33 per cent tax onluxury goods.

At present the Spanishtax authorities allow a taxexemption for all privately-owned boats in Spain up toeight metres in length, andcharter boats up to 15metres in length.

The new law, part of apackage of tax measuresput before the Spanish par-liament, will not change thematriculation tax, but itwill remove the 15-metrelimit on exemptions for vis-iting charter yachts.

It means that superyachtcharters will be able to useSpanish waters and portswithout becoming liable forthe tax. “Just now if youbring your $100m charterboat into Spain you saddleyourself with a $12m tax lia-bility. That will go whenthese measures becomelaw,” says Patricia Bullock,tax specialist at NetworkMarine Consultants.

The tax change, whichshould be in place beforethe 2014 charter season, hasbeen welcomed by a Span-ish yachting industry thathas been struggling forbusiness.

New interpretations onthe way VAT is applied onbig yacht charters inFrance and Italy are alsobeginning to level charterfee structures in the Medi-terranean. A French VATexemption was recentlydropped, reducing the taxanomaly that had contrib-uted to its flourishing char-ter business.

“We are hoping now thatthe VAT position is going tobe clearer and fairer foreveryone,” says CarlaBellieni, a Genoa-based taxspecialist. “The way VAThas been interpreted in dif-ferent countries has beenthe problem. A uniforminterpretative line willallow charter companies tochoose a location because ofthe appeal of the countryand its coast, not because ofVAT law provisions.”

Ahead of these changes, anumber of boat builders in

Vigo have been equippingthemselves in the hope ofwinning a slice of thesuperyacht industry.

Freire Shipyard, a builderof offshore exploration sup-port vessels, expandedrecently into luxury yachtswith the launch of Pegaso,a 74-metre oceanographicyacht with a 10,000-milerange and its own mini-sub-marine.

“We were able to marryour expertise in buildingsupport vessels for the off-shore oil industry to thesuperyacht skills of ouryard in Majorca. We

brought those skills over toVigo for this project,” saysMarcos Freire, one of thecompany directors.

Atollvic Shipyard, basedin neighbouring Ponteve-dra, has extended its yachtbuild and refit capacity inthe past few years. But withSpain’s economy in a pro-longed downturn, businesshas been slow. “It has beenhard in the past year. Wehope this taxation changewill repay our investment,”says Diego Gomez, Atol-lvic’s commercial and mar-keting director.

Freire, meanwhile, hasjust won an order to build atraining yacht for the Indo-nesian navy. The vessel willtake 200 passengers andcrew, and will double up forIndonesian government useon state occasions and trademissions.

Galicia is a long way fromthe Balearic islands, whichcan expect to pick up thelion’s share of new charterbusiness resulting from theSpanish tax change. Yetthat has not stopped theport of La Coruña extend-ing its marina in anticipa-tion of a market upturn.

“We have a beautiful oldtown with so much his-tory,” says Jesús González-Aller Lacalle, director-gen-eral of Marina Coruña. “Thefood and the wine of thisregion and the Rias – oursmall fjords – make it per-fect for cruising.”

One of Galicia’s wealthi-est sons, Amancio Ortega,founder of the Zara clothingchain, is known to cruisethe area, but the biggestyachts are not often seen onthe Spanish coast, where 80per cent of boat ownershipis concentrated on yachts ofless than eight metres.

Of the Mediterraneancharter fleet, numberingsome 840 yachts over 24metres, no more than 14 areworking in Spain, and mostare older vessels.

For years, Spanish yachtbuilders, owners andmarina owners havewatched the superyachtindustry expand elsewherein frustration at a tax thathas strangled their ambi-tions.

The tax changes cannotcome too soon for Sala-manca Group, the bankingand risk management busi-ness that has invested inexpanding Barcelona’sMarina Port Vell to provide167 berths for yachts from10 to 180 metres long.

“The tax changes willmake a significant differ-ence,” says Martin Bellamy,Salamanca chief executive.“We will be taking largevessels from this autumnand are very excited aboutthe prospect. Our marinahas the potential to be thenumber one superyachtmarina in Europe.”

Rule change set to increaseattraction of mooring in SpainTaxation

Lobbying pays offand augurs well forcharters, reportsRichard Donkin

‘If you bring your$100m charterboat into Spainyou’ll be saddledwith $12m tax’

Short stop: Lady M docks in Vigo for the night Richard Donkin

Five years after the globalfinancial crisis took the windfrom the sails of the luxuryyachts market, shipyards andbrokers have begun to pro-

mote their industry with a broadermessage: superyachts are economicdrivers.

Industries such as automobiles andaviation often report on the economicvalue of their work. But the super-yacht industry’s largely private andindependent nature has meant thatuntil recently, few outsiders haveneeded to be persuaded of its eco-nomic impact.

However, VAT squabbles and envi-ronmental shipping regulations,which affect the construction and useof larger yachts, have prompted theindustry to commission a series ofstudies examining what it contributesto local and regional economies.

A report last year by the Supery-acht Intelligence Agency, whichtracks the superyacht market, foundthat in 2010 – by all accounts a quietyear – €13.76bn was generated in thesuperyacht industry supply chainthrough sales, wages, expenditure andcharter revenue, with a further€10.24bn generated indirectly includ-ing €4.3bn spent ashore and morethan €1.6bn on crew jobs. The LondonSchool of Economics has also notedthat employment in the superyachtindustry has risen 10 per cent in thepast five years.

Ken Hickling, president of the Inter-national Superyacht Society, whichrepresents the large yachts industryworldwide, insists no other segmentof the luxury market has the capacityto redistribute wealth in this way.

“When compared to art, property,jewels and [different forms of] luxurytransport such as cars and planes,superyachts are the most ethical,” hesays. “Buying boats supports jobs.Buying big boats supports more jobs.”

So where does the money go?Wealthy buyers who want a custom-built superyacht usually spend 5-10per cent of the building cost on top-name design studios and naval archi-tects. Specialist law firms such as HillDickinson and Clyde & Co areengaged to guide the client throughthe design and new-build contractprocess.

For new-build and second-hand pur-chases, yacht brokers and the houses

they work under are brought in tohandle arrangements, introductionsand negotiations, typically chargingabout 5 per cent of the sale price.

Once commissioned, the shipyardwill receive an upfront payment tobegin work. Before 2007, some yardswould begin work with no money upfront, but today, yards expect to seeupwards of a third of the building costbefore hull work begins. In 2012, 169superyachts were delivered with anestimated total price of £3bn.

During the build phase, a range ofprofessionals are employed on every

aspect of the vessel’s manufacture,from planners and project managersto welders, plumbers, electricians,painters and carpenters. The Interna-tional Superyacht Society estimatesthat a 65-metre new-build will providedirect employment for 350 people forthe two years of its construction.

Herbert Aly, chief executive of Ham-burg-based Blohm + Voss, a subsidi-ary of the industrial conglomerateThyssenKrupp and the shipyard thatbuilt Eclipse for Russian businessmanRoman Abramovich, says: “A medi-um-sized shipyard employs 500-700

Luxury vessels prove their worthEconomics Superyachts contribute significantly to employment, writesDonHoyt Gorman

Expensive signing: Eclipse was built by Blohm + Voss for Roman Abramovich Getty

workers, four times that number inservicing and supporting the yard,and at least 10 times as many workingas suppliers, subcontractors andassembly workers.”

Peter Lürssen, chief executive ofLürssen Yachts, which this yearlaunched Azzam, the world’s largestprivate yacht, says that depending onthe type of vessel involved, the rule ofthumb is that for every hour workedin the yard a further four to six hoursare worked in related industries.

He says: “When a shipyard takes300,000-400,000 hours to build a super-yacht, six times that many hours inthe support industries make about2.5m to almost 3m man hours to finisha yacht. That equals two thousandpeople having worked for one year.”

Superyachts require registrationwith classification societies, surveys,insurance and regular visits fromtechnical specialists to maintain eve-rything from the air conditioning tothe satellite communication systems.Not forgetting crew, food and fuel.Operational and management costsfor a typical superyacht are roughly10 per cent of its build price per year.That is another £3m for a £30m yacht.

Once they are launched, super-yachts – like cruise ships – ofteninject large sums of money into thedestinations they visit.

Data collected by the US SuperyachtAssociation, a trade body, show thaton average, a 55-metre superyacht willannually spend about £70,000 on pro-visioning, £220,000 on dockage feesand £250,000 on fuel in the ports itvisits.

Then there is the charter industry.There are more than 1,200 superyachtsavailable worldwide to rent for anaverage rate of about £200,000 a week(the most lavish can cost more than£1m a week). Guests on board can beprofligate, spending money on any-thing from helicopter flights and secu-rity to food, drink and lavish nightsout in town. Tips (usually 10 per centof the charter fee and shared amongthe crew) are often spent within walk-ing distance of the marina.

“A superyacht can contain 30-40times the value of a passenger vessel,freighter or other commercial ship,”says Henk de Vries, chief executive ofRoyal de Vries, part of the DutchFeadship yard. “[There is] economicvalue in what we do.”

Monaco’s Port Hercule will this weekbe abuzz with candy-coloured tenderboats holding their own beautyparade among the bigger yachts. Thelarger the vessel, the more likely it isthat the owner will want somethingspecial in yacht-to-shore transport.

The trend today among the biggestyachts is for so-called limousine ten-ders, often with enclosed roofs, to con-vey guests ship-to-shore in comfort.

Sailing yachts, on the other hand,will often demand fast ribs and chaseboats able to keep up with the high-speed luxury racers at an event.

The market for tenders has grown inresponse to demand among wealthybuyers for ever-larger superyachtswith two or more smaller boats to serv-ice their needs. Often these tenderswill be garaged below decks, or trans-ported on a support vessel that travelsbehind with the owner’s other toys,such as mini-submarines and jet skis.

Southampton-based Pascoe Interna-tional manufactures the SL Limousineand SL Landau, two tenders that com-bine classic and modern styling in asleek exterior. Pascoe emerged fromthe build of the Maltese Falcon,launched in 2006 and one of theworld’s largest privately owned sail-ing yachts. Ken Freivokh, one of theFalcon’s designers, worked with MarkPascoe, a powerboat racer, to producetwo 10-metre tenders for the yacht.

“Owners are often looking for a go-faster toy, so we are building ribs,limousines and everything inbetween,” says Tom Southern, salesmanager at Pascoe.

Manufacturers have also picked upon the desire in some yacht owners tohave tenders styled like those in daysgone by – such as the 1960s and 70sItalian-made Riva yachts that tradedstrongly on film-star appeal and theidea of la dolce vita. The Riva rangetoday extends beyond its classicAquariva Super to include larger,more modern-styled boats, moving upinto the superyacht market.

Radenko Milakovic, owner of Swed-ish-made J Craft, on the other hand,has carved out a niche for a singledesign, the 13-metre long Torpedo. Mr

Milakovic bought the business afterrenting a J Craft in the mid-2000s. “Asa typical ‘weekend warrior’ without alot of boating experience at the time, Iwanted something more manoeuvra-ble,” he says.

The Torpedo incorporates twinVolvo Penta 500 engines custom-tunedto deliver 44 knots. The internal pro-pulsion system causes two sets ofcounter-rotating propellers to swivel,dispensing with the need for a rudder,and making the boats much easier tobring alongside a mooring.

“Our boats have crossed the Medi-terranean and the Baltic many times.It is an uber-practical boat,” says MrMilakovic.

The J Craft is an expensive proposi-tion, with 5,500 man hours devoted toeach build. “We could have it mademuch more cheaply in Turkey or Italybut that would be letting down thepromise of building the very bestboat,” says Mr Milakovic.

Other options include the RivaramaSuper, also from Riva. This 13-metrepowerboat is moving beyond the ten-

der market – although not beyond themeans of some superyacht owners,who will trail their yacht with a sup-port vessel that may include a powerboat secreted in the hold.

The Corsair 32 from Florida-basedChris-Craft, one of the great names inworld powerboating, was also namedBest Sport Boat at the recent China(Shanghai) International Boat Show.

Not everyone wants the retro look –some prefer the angled lines of theWally tenders, the avant-garde appealof a VanDutch or a one-off miniatureversion of their larger yacht.

The British-made Hunton Power-boats combine racing pedigree andwhat might be described as cross-overappeal for superyacht owners whowant something a little more than aconveyance.

“Our aim is to remain relativelysmall, with short production runs tokeep the exclusivity that we know isone of the things our clients appreci-ate,” says Fiona Pool, Hunton manag-ing director.

Tender buyers are spoiled forchoice.

A little something toget you to the shoreTenders

Craft that accompany thebiggest superyachts can beimpressive in themselves,writes Richard Donkin

The trend today amongthe biggest yachts is forlimousine tenders

FINANCIAL TIMESWEDNESDAY SEPTEMBER 25 2013 ★ 3

Yachts & Marinas

Giovanni Tamburi standson the afterdeck of hisgleaming Perini Navi yachtand puts his arm aroundthe shoulder of its skipper,Marco Castelli.

“Marco has been my skip-per for 20 years,” he says.“We are one big family. It’swhy I like to be here.”

The Tamburi yacht, Xnoi,is lined up at the docksideof Porto Cervo on thenorthern tip of Sardiniaalongside 14 other gleamingboats, their towering mastsdwarfing the smaller yachtsand power boats that berthhere all summer long.

Mr Tamburi is chairmanof Tamburi InvestmentPartners, a company thattakes minority investmentsin a range of companies.Today, he is racing in thePerini Navi Cup – one of anumber of branded sailingregattas established byyacht builders to help thembond with their customers.

The special atmospherein Porto Cervo is helped bycomplimentary mooringsfor owners, shore partiesand 1,000 bottles of Pom-mery champagne thatguests will guzzle in threedays of racing and socialis-ing. Fabio Perini, founderof Perini Navi, says: “Forour owners, it’s a great wayof coming together, stayingin touch and enjoying somefriendly competition.”

The event attracted 15 ofthe 52 yachts in the Perini

Navi fleet, including thedistinctive three-mastedMaltese Falcon owned byElena Ambrosiadou, the co-founder of Ikos, the hedgefund.

“I am Greek, so this loveof sailing comes frominside,” says Ms Ambrosia-dou. “My work means Ican’t be with the yacht asoften as I would like, but Itry to join it where andwhen I can.”

Like many of the bigyachts, Maltese Falcon isavailable for charter; thenext group of clients will beboarding a few hours afterthe owner has left.

It is a reminder thatsuperyachts are expensiveand that the charter busi-ness can make a significantcontribution to upkeep.“Maltese Falcon is an eco-nomic entity; we have to beconscious of that,” says MsAmbrosiadou, who char-tered the yacht herselfbefore buying it in 2009.

The brand relationshipwith owners is precious,both for feedback on per-formance and quality andfor future sales and refitopportunities.

Owners enjoy moor-ing together, com-paring yachts andusing PortoCervo’s exclusiveYacht Club CostaSmeralda, whichhas become afavourite venue forhigh-end sailingevents.

Some of theyachts havedrafted inprofessionaltacticiansand racingcrew, butcompeti -

tion is friendly rather thanfierce.

“Everyone wants to win,”says Riccardo Bonadeo,commodore of the club,even if the boats are notprepared in the same wayas they will be for the MaxiYacht Rolex Cup held thefollowing week. Maxiyachts arrive daily, so thatby the weekend the smallharbour is heaving.

Porto Cervo in Junehosted the Dubois Cup, thedesigner-led event thatstarted in 2007. Ed Dubois,founder of the naval archi-tects, says: “A couple ofowners came to me suggest-ing an event for Duboisyachts. We’ve run it everycouple of years since then.”

Nautor’s Swan, the Finn-ish yacht builder, is a pio-neer of branded events.When Leonardo Ferragamo,scion of the Italian foot-wear family, and a group ofinvestors bought Nautor’sSwan and its two Finnishfactories in 1998, they setup Club Swan for Swanowners. Beyond its flag-ship, the Rolex Swan Cup,events now extend to aregatta in the British Vir-

gin Islands and others,some organised byowners.

Rolex, thewatchmaker, hasbeen a titlesponsor for

more than a

decade, and last yearGazprom, the Russian state-controlled gas company,came in as title sponsor forthree other Swan events.

Jennifer Hall, marketingdirector at Nautor’s Swan,also credits the Yacht ClubCosta Smeralda. “They sawthe opening for suchbranded events, and it wasthere we held the firstSwan Cup,” she says.

Oyster Yachts has goneone step further by launch-ing a world rally, which isnow in its ninth month. Asupport team has beenaccompanying the rallysince its start in Antigua,guiding the 28 participatingyachts through a detailedroute that includes callingat ports in 15 countriesalong the 27,000 mile courseover 16 months.

Brand loyalty underpinsnot only sales, but alsoreturn business in servicingand refitting. Even classicbrands of long defunctyards and makers live onamong enthusiasts.

Luxury brands such asPanerai, the watchmaker,have capitalised on thisneed for support in regat-tas, hitching their brandsto the sailing lifestyle. Pan-erai hosts an annual seriesfor classic yachts, enablingowners of once famousyards such as Fife yachts,to come together and race.

Other traditional classesof yachts, such as the nowthriving J-class, can oftenbe slotted in to existingregattas such as Maxievents.

“It’s a lot of work . . . butit’s important to our busi-ness,” says Mr Perini. “Ourowners want to cometogether – it’s part of sail-ing and of what we do.”

Branded regattas help createstrong bonds with customersCustomer relations

The events areproving popularwith owners, writesRichard Donkin

Larry Ellison’s grip on theAmerica’s Cup is finally loos-ening. Three years after hisBMW Oracle team won sail-ing’s most prized trophy off

Valencia, the software billionaire’sdefence has been crumbling under theweight of Emirates Team New Zea-land’s impressive challenge.

Barring a miracle, the prestigioustrophy will be heading to Auckland,with the homegrown New Zealandoutfit outperforming Oracle TeamUSA and its star-studded crew in twoweeks of competition off the San Fran-cisco coast. As the FT went to presson Friday, Emirates New Zealand was8-2 up, one race from victory.

Losing will be painful for the Oraclechief executive, although it may be ofsome comfort to know he has injectedrenewed vigour into the 162-year-oldevent. Some observers, however, alsohold him partly responsible for theevent’s descent into acrimony and theexclusion of all but the super-wealthy.

Partly because of its history, theAmerica’s Cup is a sporting contest ofglobal repute. First raced off the Eng-lish coast in 1851 between the bestBritish yacht and a schooner from theNew York Yacht Club named Amer-ica, the contest has always attractedentrepreneurs and industrialists.

From Sir Thomas Lipton and SirThomas Sopwith to the Vanderbiltsfrom the US and Australian tycoonAlan Bond, the cup has always foundindividuals willing to sink time, effortand most of all money into the pur-suit of sporting glory on the seas.

But its reputation has been sulliedin recent years and sponsors havedrifted away, as have many of theteams. Much of the damage wascaused by an unedifying legal battleinvolving Mr Ellison and Switzer-land’s Ernesto Bertarelli, heir to theSerono pharmaceutical company andcup winner in 2007 in Valencia.

The 33rd edition of the cup, agrudge match in 2010 between Oracleand Mr Bertarelli’s Alinghi team,went Mr Ellison’s way. The defendingchampion has the right to set thespecifications for each edition of therace, and Mr Ellison has set aboutchanging the tone of the event, mostof all in constructing an event toattract an audience beyond sailing.

“Fundamentally, this series hasbeen designed as a television prod-

uct,” says Richard Simmonds, jointmanaging director at Sunset+Vine, asupplier of sports programming tobroadcasters.

The cup was traditionally raced insingle-hull boats out at sea. But MrEllison championed a change of for-mat involving fast, multihulled boatsracing closer to the shoreline, withthe San Francisco coastline an entic-ing urban backdrop this time round.

The 34th edition pitted two catama-rans racing at speeds of up to 30

knots, with the boats often tippingdangerously on their side to gainmaximum racing thrust. At timesthey looked like they were flyingabove the surface of the water.

Television viewers were given dataon boat speeds and direction of cur-rents, while on-board cameras andmicrophones showed close up thefrantic efforts of the crews to jibe andtack. “It is exciting to watch and ithas captured imaginations,” Mr Sim-monds says.

But to sailing traditionalists, someof the beauty of the cup has been lost.The main criticism is that the modernversion resembles nothing more thana drag race, the artistry of sailingsacrificed on the altar of speed.

Warnings about the risk of exces-sive speeds came horribly true in Maywhen British Olympian Andrew Simp-son was killed after his boat, Artemis,capsized during the Louis VuittonCup, the play-off that determines theAmerica’s Cup challenger.

Stephen Barclay, chief executive ofthe America’s Cup Event Authority,which organises the race, says rulechanges following the fatality havedone much to improve safety. But heis unapologetic about ruffling thefeathers of the sport’s purists.

“We do not want to disenfranchisesailing’s aficionados,” he says. “Butin this world, where a lot ofattractions and sports are thrown atyou, to retain interest you must bedoing things to effectively grow youraudience.”

Sailing, he adds, must compete in awider US sports market. “When youmention the America’s Cup, it opensdoors. The problem is no one knowsanything about it after that,” Mr Bar-clay says. “Our objective is to have itsit below the top four [US sports] butto be well recognised.”

From a global perspective, theAmerica’s Cup needs strong interna-tional competition.

But the cost of building vessels toachieve such high speeds has pricedout many teams. The Louis VuittonCup was meant to attract a host ofteams, but only three entered.

Sir Keith Mills, who mastermindedLondon’s bid to stage the 2012 Olym-pics, has long dreamt of bringing thecup back to UK shores. But his abilityto raise funds for a British challengehas been curtailed by the extortionatecosts. “They changed the format afterthe deepest economic recession in his-tory and came up with one thatmeant unless you were prepared tospend north of $100m you shouldn’teven bother,” Sir Keith says.

While acknowledging the quality ofthe racing and TV product, Sir Keithinsists the event needs to be moreaccessible.

“This America’s Cup has been a bigmistake,” he says. “If the object wasto get more teams engaged, to expandthe audience and bring in more spon-sors, then it’s had the completelyreverse effect. It has emerged as asport for billionaires.”

Mr Barclay does not disagree: “Weneed to look at reducing the costs.”

Sir Keith hopes that the New Zea-land team, if they win, will look toretain the gains that have emergedfrom this series of races while inject-ing some much-needed competition.“We’ve got to make it successful forteams, sponsors and fans,” he says.

Change of format for television prices out teamsAmerica’sCupEfforts to attract an audience beyond sailing have contributed to the prestigious event becoming too expensive, writesRoger Blitz

‘Unless you were preparedto spend north of $100myou shouldn’t even bother’

Home grown success: Emirates Team New Zealand has outperformed Oracle Team USA in two weeks of sailing off the coast of San Francisco Reuters

Robert OrrCommissioning editor

Steve BirdDesigner

Richard Gibson, Liz DurnoSub-editors

Michael CrabtreePicture editor

Roger BlitzLeisure industriescorrespondent

Richard Donkin

Sailing correspondent

Don Hoyt GormanBusiness editor, TheSuperyacht Report

Sarah MishkinTaipei correspondent

Victor MalletSouth Asia bureau chief

All content in this report isproduced by the FT. Foradvertising contact IanEdwards Ian.Edwards@ft.com+44 020 7873 3272

Contributors »

Superyachtowner ElenaAmbrosiadou

Bloomberg

4 ★ FINANCIAL TIMESWEDNESDAY SEPTEMBER 25 2013

The yacht market in Chinais growing despite an uncer-tain economy and a govern-ment fight against corrup-tion which has turned themood against conspicuousconsumption. But manypotential owners have littleexperience of seafaring, andyacht builders are warningthat cultural obstacles, stiffimport taxes and thebureaucracy that hamperscoastal passages will taketime to overcome.

An attraction to Europeanluxury brands has directedChinese investors intoEurope’s yacht market, asevidenced by two high-pro-file deals: last year’s pur-chase of Italy’s FerrettiGroup by China’s ShandongHeavy Industry and DalianWanda’s takeover of the UK-based Sunseeker in June.

Both deals underlined theChinese move into luxurygoods. People in mainlandChina are becoming evermore interested in deluxeliving, and the popularity ofthe Hainan Rendez-Vous –an annual showcase of high-end wares ranging from fursand jewellery to exotic cars,private jets and superyachts– increases every year.

Some European manufac-turers are warning that thecountry will take time tocome around to yachting.“Chinese owners rarelysleep on board their boats,and use them mostly forbusiness and entertaining.A must-have cabin on manyyachts is the karaoke room.It is taken quite seriously inChina,” says Will Green,sales director at the UK’sPrincess Yachts.

Ferruccio Rossi, Ferrettichief executive and a regu-lar visitor to China, saysluxury yachts are valued fortheir lifestyle appeal. “Theyacht is mostly for statusamong corporations andimportant entrepreneurs,who use it as a place todevelop business relation-ships,” he says.

Cultural differences havenot deterred the CIMC Raf-fles shipyard in Shandongprovince from building an88-metre superyacht, Illu-sion. Due to be completednext year, it will be the big-gest ever built in China.

European boat buildersand brokers are making for-ays into what is still animmature market. RoyalHuisman, the Dutch yachtbuilder, has just appointedtwo executives to build itsbrand in Hong Kong andChina. Twizzle, a 57-metreRoyal Huisman-built ketch,which has been cruising andchartered around the regionthis year, recently won theAsia Boating award for bestAsian-based charter yacht.

The Netherlands’ Fead-ship recently sold the 45-me-tre Blue Sky to a Chineseowner – the first exclusivesuperyacht order for main-land China. “We expectmore to follow,” says Jan-Bart Verkuyl, Feadshipsales director.

Chinese-owned Ferrettiand Sunseeker, however,seem the best poised amongEurope's yachtmakers toexploit these markets. “Theacquisition [by ShandongHeavy Industry] meansnew investment and givesus access to a rapidly grow-ing market,” says StewartMcintyre, Sunseeker manag-ing director.

One of the biggest barriersfor European yacht export-ers is a 43 per cent importtax on yachts sold to main-land China. Most sales,therefore, are in Hong Kong,which has no import tax.

As a result of the tax bar-rier, a home-based yachtbuilding industry is emerg-ing in China. The country’syachtmakers togetherranked eighth in the worldin 2012 for production meas-ured by length, according toShowBoats International, amarket researcher.

The growth in a Chineseyacht building industry andthe development of internalsupply chains were aided bythe economic downturn inthe west, says Mark Evans,joint managing director ofMcConaghy Boat, an Aus-tralian group that opened ashipyard in China a decadeago. He has found westerncustomers more willing tosave money by buying a“Made in China” boat.

Roger Liang, founder ofKingship, one of China’shome-grown yacht brands,imports precision parts fromoverseas, and brings inskilled craftsmen to trainhis workforce. “I have 130guys living in a dormitory,not going home. That’s dedi-cation,” he says.

Yet the home-grown sec-tor faces its own problems.Mr Liang says his labourcosts are a tenth of thosepaid in Europe, with theresult that, without theprestige of a Europeanbrand, his boats have to sellat two-thirds of the price ofequivalents made by his old-world competitors.

Another hurdle for Chi-nese yachting is a shortageof high-quality marinadevelopments. Yachts oftenhave to moor alongside fish-ing boats, away from shop-ping centres and the besthotels. Hong Kong too isshort of marina space.

Keppel Land, part of Sin-gapore’s Keppel Group, isbuilding a “lifestyle marina”in Zhongshan – a short jour-ney from Hong Kong – thatwill include residential andcommercial properties.Trevor Fong, head ofmarina management, saysKeppel is also seeking arelaxation of regulations toallow boats to sail directlyto the nearby gambling hubof Macau.

Difficulties in obtainingtravel permits to move fromone province to anotherdeter all but the mostadventurous yacht owners,and China’s military isvery sensitive to yacht traf-fic encroaching on itsmanoeuvres.

Yachtmakers are persist-ing in developing their Chi-nese connections, however.The Italian Sanlorenzo Spayard has just entered into a€30m joint venture withSundiro Holding, a ShenzenStock Exchange-quoted com-pany that makes Hondamotorcycles under license,to produce Sanlorenzo-de-signed 10-20 metres boats inChina under the Sundirobrand.

Yacht for sale:with karaokeroom includedAsia

China market hasits own dynamics,says Sarah Mishkin

Myanmar teak is stackedfloor to ceiling in an aer-ated shed at the Royal deVries shipyard in the Neth-erlands. The racked woodenplanks, which must seasonand dry for 10 years, arevalued at €10m at today’sprices, with teak trading at€25,000 per cubic metre.

“Each tree is about 100years old. It is a limitedresource and the industrycannot go on using it – weknow that,” says Henk deVries, Royal de Vries chiefexecutive. “In 10 years, wewill not be using teak anymore.” He shrugs, walkingthrough to the shop floorwhere carpenters are work-ing the wood, which hasbeen selected specially forits tight grain.

“The average age of ouremployees is 36 or 37 – thatmeans they’ve worked on30 to 40 ships in theircareers,” he says. “That’s a

lot of experience – fewother companies can matchthat.”

Royal de Vries is one oftwo builders that produceyachts under the Feadshipbrand. The name is recog-nised across the industryfor its workmanship, andproduces some of theworld’s finest superyachts.The other yard, Royal VanLent, is owned by LVMH,the luxury goods group.

They are separate busi-nesses, which market theiryachts jointly under theFeadship name. A thirdcompany working withinthe brand, De Voogt NavalArchitects, jointly ownedby both yards, handles theirdesigns.

Along with the leadingGerman yards, the Fead-ship brand has weatheredthe world yacht-buildingrecession better than manyothers. Feted for theirobsessive attention todetail, the yards have a rep-utation not unlike those ofRolls-Royce or Bentley car-makers – not necessarilythe most stylish, butrenowned for their buildquality.

“I can live with that com-parison,” says Mr de Vries.

Will Christie, a broker atYCO, says: “These yachtshold their value better thanmost.” Mr Christie isattending the MonacoYacht Show this week tohandle the sale of Sea-flower, a 40-metre RoyalVan Lent yacht priced at€16.5m after a recent refit.

A characteristic of Dutchshipbuilding is the willing-ness of leading yards torecognise the quality ofdomestic competition. Thatbetween Royal Van Lentand Royal de Vries tends tobe at yard level, amongmanagers and the teams of

workers who take pride intheir skills.

But the yards co-operatein sharing innovations.Outsiders say it is difficultto distinguish betweenthem on build quality.

The rival Amels yard hasbeen pushing Feadshiphard in the past few years.Its 60-metre Tim Heywood-designed Event is one of themust-see yachts at Monacothis week.

Rob Luijendijk, Amelsmanaging director, says:“Event is a benchmark insuperyacht exterior design.It will definitely turn manyheads – even in Monaco.”

Among that competitionis another Dutch yacht,the Heesen-built 65-metreGalactica Star, owned byKola Aluko, the Nigerianoil tycoon.

Built with an aluminiumfast-displacement hull,Galactica Star delivered atop speed of almost 29 knotsduring recent sea trials. Italso comes with design fea-tures including a beachclub, swimming platform,tender garages, helideckand a glass-bottomed poolabove the bar.

But it is the featuresunder the waterline that

Heesen believes will give itthe edge in a market that isslowly waking up to theneed for fuel conservation.

Another of its yachts, cur-rently under construction,is being fitted with a “hullvane” – an underwater foilattached to the underside ofthe yacht to provide betterstability and performancethrough the water.

Meanwhile, the Dutchsailing-yacht maker RoyalHuisman has bounced backafter suffering the cancella-tion of two importantorders during the financialdownturn. It has threeyachts currently in build,and recently completedBlue Papillon, a 43-metresloop designed by GermánFrers, the Argentine navalarchitect.

Alice Huisman, managingdirector of the family busi-ness, says that, having tra-ditionally concentrated onsailing yachts, the yardwould be willing to buildmotor yachts if the rightkind of contract camealong.

“We have every kind oftrades capability in-house,from traditional joineryskills to space-age electron-ics and IT,” she says.

“Our focus is thatof a custom-builder creatingbespoke yachts . . . [for] cli-ents for whom quality iseverything. There’s nothingthe team likes better than anew challenge to their engi-neering ingenuity.”

Royal Huisman has beenactive in the J-class revival,building Hanuman for JimClark, the information tech-nology entrepreneur. Theyard also built Mr Clark’sclassically-styled schooner,Athena.

One of the biggest sailing-yacht projects in the world,however, is being under-taken by a rival Dutchyard, Oceanco, which isbuilding a 108-metre supery-acht, Solar, to be deliveredin 2015.

The yacht is adopting aDynaRig mast and riggingarrangement similar to thatused on the revolutionarythree-masted Maltese Fal-con owned by the Greekhedge fund owner ElenaAmbrosiadou.

With expertise such asthis, the Netherlands islikely to be in a strong posi-tion to capitalise on areturn to confidence amongbuyers at the top end of thesuperyacht market.

Dutch yards maintain a focus on quality

It seemed too good to be true, andit was. After a week of frustrat-ingly windless Mediterraneanweather, Sea Flower was finallyrelishing a good breeze and storm-

ing from the island of Ischia acrossthe Bay of Naples towards Capri.

Then our friend Patrick, who sportsa reassuringly seamanlike grizzledbeard, bellowed “No steering!” fromthe helm and showed us the wheelspinning uselessly as the 11-metrecutter began to veer off course andhead gently up into the wind.

It may not be the most unwelcomeshout a skipper can hear (“Man over-board!” and “Fire!” are worse), butthe inability to steer the boat cer-tainly gets you thinking fast aboutdangers to leeward, ports of refugeand the possibility of foreshortenedvacations and unhappy teenagers.

Fortunately the rudder was intactand we had taken the precaution atthe start of our cruise in the cityof Pisa of checking the emergencytiller, which slots over the top ofthe rudder post and allows you tosteer the 12-tonne boat like a ratherheavy dinghy.

So we made it safely into harbourat Capri, which has the twin distinc-tion of being the most expensivemarina in which we have ever ber-thed, and probably the best value formoney, given the cost of the island’shotel rooms.

A price of €130 does not sound sobad when you divide it between thesix of us on board (our family of fourand a couple of old friends eccentricand tolerant enough to spend twoweeks in June with us).

But the failure of the steering cablewas a harsh reminder that all boats –

from the multimillion-dollar luxurymotor yachts that towered over us atCapri to the smallest sailing vesselpottering about the Solent – dependon constant maintenance and repairof the multiple systems that makethem work.

Passengers on professionallycrewed superyachts may be blissfullyunaware of what goes on behind thebulkheads, but skippers of their ownboats know the need for eternal vigi-lance about sails, rigging, plumbing,electrical systems, electronic instru-ments, refrigeration and auxiliarydiesel engines.

It means for example that my 82-year-old mother in Kent finds herselfeach winter taking delivery ofmysterious packages from onlinechandleries containing toilet repairkits, fanbelts or solar charge regula-tors that allow the batteries to besafely charged by the boat’s flexiblesolar panels.

Even so, I reflected at the end ofour cruise in Salerno as I struggled inthe bowels of the boat to dismantlethe broken steering system, it was allworth it – for the manta rays alone.

We had eaten well and drunk goodItalian wine, having started our holi-day on the banks of the Arno rivernear Pisa.

We had enjoyed swimming in theclear blue waters of the Mediterra-nean and walking through the fra-grant scrub of the islands of Elba,Giglio and Capri. We had seen thesights, classical and Renaissance,including the Roman galley harbourdug out of rock at Ventotene and theruins of Herculaneum on the shorenear Naples underneath a steamingMount Vesuvius.

But to our surprise, the highlightsof this trip in the overfished Mediter-ranean were undoubtedly provided bythe marine life.

The manta rays were the most spec-tacular and unexpected of all. As weapproached Ponza one morning afteran overnight sail from Giglio, I waspuzzled to see what appeared to be abig wet blanket leap into the air fromthe sea and flop back into the waterabout half a mile ahead.

Closer to Ponza we were treated tothe extraordinary sight of at leastthree of these big rays chasing eachother elegantly through the water afew inches below the surface. Theyappeared to ignore us completely aswe gawped at their antics.

Occasionally one would leap highinto the air and perhaps do a somer-sault before splashing down again.We immediately assumed they were

engaged in some kind of matingfrenzy, although from the littleresearch available on the habits ofrays we later concluded that theirbehaviour might equally have hadsomething to do with feeding.

Either way, we all felt privileged tohave witnessed the sight because it isthe kind of experience you can haveonly on a boat.

Last year, I nearly ran over a largesea turtle off Elba. This year we sawdolphins, several sunfish – the mas-sive, inedible creatures that flopabout on the surface – and a bizarreblack-cloaked sea slug about fourinches long that looked like a swim-ming Phantom of the Opera, butturned out to be a sea hare.

Next year, we aim to head southagain and see the Aeolian islands andthe live volcano of Stromboli. I justhave to fix the steering first.

Somersaultingmanta raysmake up for asteering crisis

MediterraneanA problem that could haveruined the trip was forgotten as VictorMalletwas given a chance to marvel at marine life

High flyer: sightssuch as the giantmanta ray arebest enjoyed fromthe sea Bloomberg

Henk de Vries Richard Donkin

Competitor PrincessYachts plans to invest £35mdeveloping part of theformer naval dockyard inDevonport, Plymouth, thatwould give it the capacity tobuild yachts up to 60metres. While Sunseekerand Princess are optimisticabout growth, a smaller UKbuilder, Sealine, went intoadministration this year.

The leading Dutch andGerman yards, meanwhile,report healthy building pro-grammes, even if – in somecases – the order books arenot as strong as they werefive years ago when the

Continued from Page 1 industry was hit by thefinancial downturn. Build-ers at the high-end of themarket are working for anexclusive club.

“I always say to potentialbuyers: ‘Never spend morethan 10 per cent of your networth on buying youryacht.’ So if you have€100m, you can afford oneat €10m,” says Mr Edmis-ton. “If you have more thana billion, within reason, youcan do what you want.”

According to Forbes mag-azine, the global economyhas produced just over200 new billionaires in2013, but only a sprinklingof these will want to buy a

new superyacht. “I thinkthe number of people crazyenough to commission oneof these yachts is between30 and 40 a year,” says Henkde Vries, chief executive ofRoyal de Vries, one of thetwo Dutch yards construct-ing yachts under the Fead-ship brand.

“We are dealing with tre-mendous egos. Why have anew yacht when there’s afantastic selection among1,000 used ones out there?But they want the ultimateboat. In the mind of oneowner, he was the painterand we, the shipyard, werethe paints and the canvas.That’s how he described it.”

While 2013 saw the launchof the biggest private yachtto date – Azzam, built byGermany’s Lürssen – someyards and brokers believethat the trend among motoryacht buyers in future willbe towards quality and effi-ciency, rather than size.

The downturn hit theindustry when some of thebiggest yachts were underconstruction. Every one ofthe world’s 100 largestsuperyachts is more than 70metres in length, and 39 ofthese was either built ordelivered in the past fiveyears, according to the lat-est Camper & NicholsonsSuperyacht Index, produced

in collaboration withSuperyacht Times.

Heesen, the Dutch yacht-builder, has been workingon new hull developments,some of which went into thebuilding of its latest supery-acht, Galactica Star. TheDutch Feadship yards,meanwhile, continue tofocus on quality.

“Explaining the differ-ences in build that distin-guish the very best yachtsis not always easy whenconfronted with a buyerwho simply says: ‘I want abigger yacht,’” says MrCecil-Wright.

Size does still matter forsailing yacht buyers, with a

number of 100 metre-plusyachts currently being built.Still on the drawing boardas Project 380 – but nearingthe stage when contractswill be signed, according tothe naval architect Ed

Dubois – is a giant sloopthat, if built, will be thelargest Bermudan rig in theworld. The 101-metre yachthas been designed with a125-metre mast that woulddwarf London’s Big Ben.

Equally exciting are thetechnological leaps in sizeand speed made by the 72-metre wing-sail catamaransthat contested the recentAmerica’s Cup.

While the world’s mostexperienced crews worrythat the technologies are indanger of overtaking theirefforts to tame this newgeneration of racing yachts,most believe that there willbe no going back to mono-hulls. Technology pioneeredfrom these yachts will alsofeed through to other formsof racing

Despite the optimism,Monaco this week will againbe a buyers’ market where

potential owners can pickover some of the jewels ofthe world’s superyacht fleet.While brokers will lay onthe VIP treatment for pro-spective clients, builders areshowing some of their latestlaunches.

Stand-outs include Lürs-sen’s 88-metre Quattroelle,Heesen’s 65-metre GalacticaStar, the 60-metre scimitar-bowed Event from Amels,Perini Navi’s 60-metre sail-ing yacht, Seahawk, andPalmer Johnson’s 64-metreLady M.

Looking at these gleamingarrivals, it is hard to believethat yachting has beenthrough the doldrums.

Crucial year for industry on the lookout for signs of confidence

Netherlands

Competitionbetween yards keepsstandards high, saysRichard Donkin

125mHeight of the mast on aproposed giant sloop

Yachts & Marinas

IndiaA shared dreamVictor Mallet meetsShakeel Kudrolli and ZiaHajeebhoy, the husbandand wife team aiming ‘toget Indians to sail’

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