Megayachts … friend or foe?

The Vava II

The Vava II – (Photo by Jack E. Thomas, some rights reserved)

Sitting down to write this article, I was interrupted by the roar of a helicopter low overhead. Poking my head out a hatch, I saw a sleek-looking machine lifting off, pivoting, and swooping off over the lake — our new neighbors on the 314 foot Vava II, heading out for an afternoon spin. I ducked back inside to work. Suddenly, 36 feet no longer seemed like the lap of luxury.

Later this month, on May 28th and 29th, a collection of yachting industry buyers and vendors will gather together in Vancouver to attend the Pacific Yacht Conference. The primary topic of the event? Megayachts!

The event will be held aboard the M/V Magic Charm, moored in Vancouver Harbor. Magic Charm is billed as a harbor cruise vessel, but at 110 feet, she’s smaller than most of the megayachts that attendees hope to cater to.

The definition for “megayacht” is nowhere cut and dried. Wikipedia thinks it is anything over 164 feet, but for many smaller boat owners it may just be “anything my boat can fit on the deck of.”

Megayachts represent the tip of a $56 billion industry worldwide. That figure is itself the estimate of a megayacht trade group, so it may be suspect, but it’s beyond contention that many independent operators in the maritime industry are scrambling for a slice of that pie.

Although the Pacific Northwest is not traditional megayacht territory, we’ve seen a few here in recent years: Stolichnaya vodka titan Yuri Schefller’s Serene was on the Seattle waterfront last fall, and Ethereal, Erica XII and Tamsen, all sailing megayachts, have been on Elliott Bay in recent years. A few megas head up the Inside Passage each year, to the occasional trepidation of locals.

The folks putting on the Pacific Yacht Conference would like to increase that number.

Our region has some significant challenges when it comes to attracting megayachts, whose owners generally have their pick of luxury destinations. Weather and distance are two of them: our climate is not what you would call balmy for much of the year, and we are a long haul away from anyplace where it is.

That combination of factors both limits the cruising season for the owners, and reduces their market for putting the boats into charter (as many owners do to help cover costs when not using the yachts themselves). Lack of existing facilities in the Pacific Northwest for such large vessels turns this into a vicious circle, and complex port clearance requirements along the border create further obstacles.

Discussing restrictions on foreign-flagged yachts entering Canada is in fact on the agenda for the conference, as are the availability of services for megayachts, marketing efforts, and other regulatory concerns.

Why is it worth so much effort to attract megayachts to the Salish Sea?

Well, you see the acronym “UHNWI” tossed around quite a lot when looking into these conferences (“Targeting Asian UHNWIs and other prospective Owners in the Pacific north-west” as a session title, for example); after a bit, you realize it stands for “Ultra-High Net Worth Individual.” The scale of spending that goes along with such individuals is staggering: $10,000 Costco runs, $400,000 tabs at the fuel dock. More megayachts means more profits for businesses providing those, and other, services.

Would such an increase be good news for recreational boaters in the under-60 foot range? Or will the inflation and focus on megayacht scale services squeeze out more affordable services and moorage for the little guys?

There are arguments for either position. In an industry that has been hit hard by the global recession and demographic declines in the number of boaters overall, megayacht revenues represent a ray of sunshine for vendors trying to stay in business even as their traditional customer bases have dried up.

At the same time, owners of smaller vessels can feel edged out in terms of both price and availability when marine services are built to cater to megayacht owners. And there is that sneaking sense of inadequacy the small boat owner feels when they realize that no matter how hard they try, they’re just not going to be able to squeeze that helicopter platform in on top of the radar arch.

Boat US contends that improvements to boating infrastructure frequently benefit cruisers on smaller boats, but the effects are far from universally beneficial. The “enhanced waterfront facilities” that Boat US cites often have enhanced price tags to go along with them, and the enhancements aren’t always what small scale cruisers want or need. Cruisers in the Caribbean can be heard to complain of price inflation engendered by an influx of big boat operators with deep pockets. Marinas devoting water space to megayacht facilities don’t have as much space for small vessel moorage.

It’s hard to quantify these effects locally, but you can see some of the trends at play. The only new marina development in Victoria Harbour (a popular and busy destination for small cruising boats), for example, is a megayacht terminal: the Victoria International Marina will add only 29 slips total to the harbour, exclusively for vessels 65 feet and larger. Meanwhile, 30 and 40-footers are hard-pressed to squeeze in at the Causeway Floats on busy summer afternoons.

Similarly, the newest, and currently the only, marina on the downtown Seattle waterfront, Bell Harbor, built in the mid-nineties, is conspicuously overweighted toward larger slip sizes, with only 16 slips out of 70 under 40 feet (and that number generously assumes not all the larger slips are filled, which blocks out some of the smaller spaces; otherwise, there are only five slips under 40 feet available).

Considering that there are still wait lists at many Puget Sound marinas for smaller slips, boaters might scratch their heads at these design decisions … the demand seems to be at the other end of the market from what is being built. But building big can pay off, as Seattle’s Salmon Bay Marine Center (SBMC) proves.

Since its opening in 2009, the megayacht terminal and service center has done land-office business. But although the center caters primarily to megayachts, its tenants include plenty of vendors that smaller boat owners use also: S3 Maritime, Kadey Krogen, Grand Banks, and others. Even if small vessel owners don’t directly appreciate the constant outflow of dollars from megayachts at SBMC, or care about the resulting tax revenues, the megayachts help subsidize those businesses.

The economics of over-water development in the Pacific Northwest may continue to favor projects catering to larger vessels: with scale comes profit, and the increasing costs of waterfront property and environmental compliance with shoreline regulation demand a significant return for any investment to be financially feasible. Two 30-foot slips are more costly to build and maintain than a single 60-footer, and bring in only about 3/4 the revenue.

There is also the uncomfortable reality in the United States that the middle class, traditional owners of small boats, is shrinking. Although boat sales numbers have been improving of late, they are doing so in a way that is less profitable for manufacturers. “The boating ‘middle class’ is doing so in smaller, more affordable boats,” said Northwest Marine Trade Association president George Harris earlier this year. What businessman wants to target a market that is steadily shrinking and spending less from year to year?

In an era where both shoreline residential development and regulation increasingly edge out waterfront property from traditional marine uses, having allies with truckloads of money and powerful connections may help win some political battles that the relatively small constituency of recreational boaters otherwise seem bound to lose. The interests do not align exactly, but when you are a minnow swimming with sharks, sometimes you just have to hope they’re hungry for something else that day. Maybe five slips under 40 feet are better than none at all. And a neighbor with a helicopter is a conversation starter, even if they never let you borrow it.

The relationship is bound to be more complicated than friend or foe. The megayachts, if they come, will bring some benefits for all boaters along with them, and will create some impacts that small boaters would not otherwise have to bear. And in the meantime, I believe it’s still polite to welcome new neighbors in the cruising world, no matter what grungy old tub they happen to sail in on. So I’ll be heading over to the Vava II with my bottle of Night Train shortly … just as soon as I hear that helicopter come back in.

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10 Responses to Megayachts … friend or foe?

  1. james nemeth May 18, 2014 at 8:08 am #

    Minnows swimming with sharks means you go where they choose and take what they leave. Putting a good spin on mega wealth only serves to increase the disparity. I for one do not intend to live in the land of kings as a pawn.
    I do feel you tried to balance the article in a positive vs negative way. And the information is eye opening.
    Two things do not work well however, very big things in small places and Night Train on this working man’s 48 foot sailboat.

  2. Elena May 17, 2014 at 1:43 pm #

    If we haven’t learned that the “trickle down theory” is at the very least baseless, then we have not been paying attention.

  3. Randy Trautman May 13, 2014 at 7:44 pm #

    The current state of Washington tax laws make a large influx of super yachts unlikely. You will not reposition one of these yachts from Mexico or the Caribbean, to charter in the U.S. Northwest, with a 8% use fee after 60 days. They will want to return every year which forces them to pay. Additionally, yards will not be in a position to perform refits and maintenance that would exceed this time limit. The Washington revenue department seems to be preempting the benefit local yards, shipboard labor, guides, fueling stations, chandleries, provisioning, and of course the wine suppliers would experience.

    I’m just a sailboat owner from Oregon that is a bit baffled by this. I am quite willing to pay to support parks and services, but the laws seem unfriendly to those of us wanting to visit and buy stuff.

    • Avatar of Scott Wilson
      Scott Wilson May 13, 2014 at 8:43 pm #

      My understanding is that it’s actually 10% after 60 days currently, but that only applies to vessels owned by business entities. If you own your sailboat privately, you can stay up to 180 days without paying tax, which I believe is more in line with how other states handle the matter.

      But regardless, one of the purposes of the Pacific Yacht Conference is to discuss ways of changing those laws, and the NMTA has been working with state legislators in Washington to do so.

  4. Mike Penney May 13, 2014 at 4:34 pm #

    Victoria is a good example of catering to the wealthy at the expense of average boat owners. The stench of airplane fuel, noise, and restrictions to the use of the harbor by boats are reasons I will never be taking my boat back to Victoria again. Lake Union will be the next airplane take over spot… coming soon.

  5. Doug May 13, 2014 at 10:39 am #

    How do these big yachts deal with the food and alcohol limits at customs? Do they have an exemption for their ship stores? Do they meet the requirements for oil pollution plans that are required for vessels over 400 GT?

    • david May 13, 2014 at 2:28 pm #

      it’s probably the same as cruise vessels, planes etc. I think the actual laws pertain to taking goods INTO a country. I.e. actually leaving the vessel with it. For most of us,it’s hard to enforce that. Once you are in Canada in a bay who knows what you are going to do. So, it’s easier for the border patrol to associate visiting with stepping on shore but the larger vessels may have guarantees they are trusted with.

  6. SaffyThePook May 13, 2014 at 6:44 am #

    There are a number of smaller sailboat owner who will be kicked out of Salmon Bay Marina so they can replace their old wooden dock suited to lots of small vessels with a new one designed for a few large vessels. If this is happening broadly, I would say there is a downside to the boating community in the scramble to cater to the HNWIs, VHNWIs, and UHNWIs.

    • david May 13, 2014 at 9:26 am #

      There are adverts all the time for slips on lake union. Don’t get me wrong, I’m not making light of your situation. It’s never a good feeling to be evicted but I don’t think this is happening broadly and sadly, marina space is not fully utilized right now. I’m on Westlake and I’m staring at two empty slips as I type. The only place I can see they are in any way catering to 100+ vessels is the mega yacht facility on westlake and the new marina, which is barely full on eastlake. (And I see a lot, we are also liveaboards).

      Yes, they are going to inconvenience us, but anything that keeps the marine industry going has to be a help. I might not want to pay more next year for services, but if the companies can’t keep afloat, there will be no one, cheap or not, to go to.

      • Avatar of Scott Wilson
        Scott Wilson May 13, 2014 at 11:11 am #

        There is definitely a lot of moorage available (although I can’t help but notice that slip fees keep increasing anyway, sometimes dramatically–ours went up 20% this year!) but that may change.

        Something I didn’t mention in the article–but which is a hot topic for the Pacific Yacht Conference–is that Washington State’s somewhat arcane tax structure effectively limits most megayachts to stays of 60 days or less (or they incur a 10% tax on the value of the vessel… you do the math!).

        NMTA is working on a bill to eliminate that structural oddity, in which case demand for permanent moorage for the big boats may increase. Again, only if a multitude of other factors can be addressed (see Doug’s comments above, for instance, or problems cited in the article).

        The sky is not falling, but there will certainly be costs as well as benefits for small boaters, and we can only guess at what they might be right now.

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