Luxury Afloat: Why Superyachts Are Weathering the Storm in Record Sales
Luxury Afloat: Why Superyachts Are Weathering the Storm in Record Sales - Demand Surges Among Ultra High Net Worth
The demand for superyachts among the ultra-wealthy has absolutely exploded in recent years. While the yachting lifestyle has long been associated with billionaires and celebrities, the sheer number of new builds and sales in the over 100-meter category points to an unprecedented appetite for high-end leisure afloat.
So what's driving more ultra high net worth individuals (UHNWIs) to drop tens or even hundreds of millions on lavish superyachts? For one, the pandemic completely changed attitudes about how and where to spend time and money. When travel restrictions grounded flights and closed borders, the appeal of owning a private floating mansion that can cruise any coastline became that much more attractive. Not bound by flight schedules or hotel availability, superyachts offer ultimate freedom and exclusivity.
Yacht brokers report that many new buyers made their fortunes in finance, tech, and other industries that boomed during Covid. Flush with new wealth, these elites sought to spend it on the ultimate status symbol. Bruno Henriquet, chairman of the superyacht builder Nobiskrug, noted that "money is not the issue" for today's billionaire buyer. Price tags crossing nine or ten figures barely give them pause.
More so than ever before, the ultra-rich are willing to pay any premium for privacy, security, and luxury. Superyachts deliver that in spades, from private cinema rooms and helipads to gyms, spas, and scuba equipment. Docked in a marina or anchored in a secluded cove, they allow owners to entertain family or friends in total exclusivity.
For today's billionaire, going big on their yacht of choice is about prestige first and foremost. The cachet of owning one of the largest personal vessels in the world is extremely appealing. As yacht lengths hit new records year after year, they attract enormous public curiosity and fascination. It's the ultimate status symbol to have the biggest, newest, most decked-out superyacht on the seas.
While the multi-million dollar price tags may seem outrageous to average people, the reality is that yachts hold their value incredibly well. The quality of construction and limited inventory of 100-meter plus vessels means they can be sold later for near or above their original asking price. Financially savvy owners realize they can enjoy all the perks of superyacht ownership, then recoup most of that capital when they decide to sell.
Luxury Afloat: Why Superyachts Are Weathering the Storm in Record Sales - Larger Models Over 100 Meters Most Popular
In the rarified world of superyachts, bigger is better. The most sought-after models today are those that push size boundaries past 100 meters. Only a handful of shipyards worldwide have the capacity and expertise to construct yachts surpassing this elite yardstick. For billionaires in the market for the ultimate seafaring status symbol, a 100-meter plus build is the new benchmark.
Recent deliveries like the 140-meter Sailing Yacht A and the 107-meter Ulysses have captivated yachting enthusiasts and made headlines around the world. The cutting-edge technology and opulent interiors packed into these floating mansions sparks major public curiosity. Yet only a tiny fraction of people will ever set foot on one. Their enormous scale alone is a source of prestige for owners who can afford such vessels.
Yacht builders are responding enthusiastically to demand for bigger builds. 2022 saw a flurry of new 100-meter plus orders, including a 116-meter project from Lürssen. The German shipyard currently has several of the largest yachts under construction. Their master craftsmen work closely with owners to incorporate every imaginable luxury into the design. State-of-the-art stabilizers ensure maximum comfort, while helipads, submarines and swimming pools amplify the uniqueness factor.
For yard owners like Nobiskrug's Klaus Gille, mega-yacht construction is "the most exciting and challenging business" around. Engineers must innovate constantly to meet owner expectations. The materials, technical facilities and specialist skills required make this an exclusive club. Only a few entities like Lürssen, Feadship and Nobiskrug even attempt to play in this space.
Bigger yacht models allow more possibilities for customization by billionaire buyers. More volume and surface area equates to more space for one-of-a-kind features. Helipads, sports courts, sprawling master suites and private gyms are de rigueur. Many new builds even integrate their own "beach clubs" into the stern, deploying fold-down platforms that expose deck pools overlooking the sea.
All this extra space provides plenty of capacity for toys like jet skis, sailboats and submarines. For owners who love to entertain, more room means hosting larger groups in total privacy and comfort. Expansive sun decks with hot tubs, outdoor cinemas, and cocktail lounges accommodate all their whims.
Luxury Afloat: Why Superyachts Are Weathering the Storm in Record Sales - Exclusivity and Privacy Main Purchase Drivers
For today's billionaire yacht buyers, exclusivity and privacy reign supreme. More than just a mode of transportation, superyachts offer access to a level of seclusion and luxury that money literally cannot buy anywhere else. As such, they have become the ultimate vehicle for escaping public scrutiny and enjoying complete peace of mind.
Russian oligarch Andrey Melnichenko commissioned the outrageous 468-foot Motor Yacht A to indulge his desire for total privacy. Its unconventional architecture even includes an underwater observation pod that descends beneath the vessel while at anchor. Fellow reclusive billionaires take similar measures, making their superyachts more like floating mansions than modes of transport.
Security is also paramount for many owners who wish to unwind without being disturbed. Superyachts are staffed accordingly, with highly trained crews manning everything from communications to medical facilities. Former eBay CEO Jeff Skoll ordered the 126-meter Eco with a helicopter hangar and onboard hospital to be fully self-sufficient while cruising remote destinations.
That level of capability lets billionaire VIPs bring their entire entourage aboard and disconnect completely. They can host business associates, family or friends without interruption. Even in port, superyachts restrict access via security gates and checkpoints. Paparazzi, solicitors and curious onlookers are kept firmly at bay.
While oligarchs dominate ownership of the largest yachts, Silicon Valley tech tycoons have also jumped aboard the trend. WhatsApp founder Jan Koum reportedly paid over $100 million for his new 107-meter superyacht. After selling his company to Facebook for many billions, he prioritized finding the perfect private oasis.
Koum specified enormous staterooms and a sprawling owner's deck to relax in seclusion. With a crew of 30 catering to his every need, he can disappear for weeks of incognito cruising with total comfort. Even the famously reclusive Larry Ellison of Oracle cannot resist showing off his billion-dollar yacht collection.
Luxury Afloat: Why Superyachts Are Weathering the Storm in Record Sales - New Launches Fetch Record Asking Prices
The demand for ever-larger and more advanced superyachts has driven asking prices for new launches to unprecedented heights. Where a 100-meter plus vessel may have cost around $250 million a decade ago, today's top builds sell for dramatically more. Limited supply and intense competition at the very top end is enabling yacht builders to charge premiums they never could before.
Recent deliveries give a sense of the soaring asking prices in this market niche. The brand new 140-meter Sailing Yacht A commanded an eye-watering $600 million-plus price tag. Commissioned by Russian billionaire Andrey Melnichenko, it eclipsed the $500 million he previously spent on Motor Yacht A. That kind of repeat business is a testament to owners seeing superyachts as sound investments.
But Sailing Yacht A is far from the only nine-figure build. In fact, eight and even nine figure launch prices are becoming almost normalized for 100-meter plus models. The 107-meter Ulysses commanded around $300 million fully finished. And Lürssen currently has multiple yachts well over $500 million under construction.
Yacht brokers note the vigorous demand at the top end of the market. Owners are less sensitive to price than ever before. And with so few shipyards attempting megayacht construction, they exert enormous influence over the build. Personalization adds millions in one-off design, engineering and materials costs.
Yet billionaires spare no expense embellishing their yachts as ultimate status symbols. After all, what does another $50 million matter when you’ve already committed $500 million? The extra splurge gets you proprietary features no one else has.
Lürssen manages owner expectations masterfully throughout this process. Their brokers and designers invest enormous energy curating the build. Customizable everything is the name of the game. That might mean an interior decked out in exotic woods or a tailored helipad viewing lounge. No request is too ambitious if the client has the vision (and pockets).
This dynamic lets Lürssen in particular maximize revenues from a very limited number of contracts. While they construct more mainstream yachts as well, their 100-meter plus projects have extraordinary margins. Strong preexisting relationships with billionaires give them great latitude to meet incredible expectations.
In the end, owners feel they’ve built their dream yacht completely from scratch. Of course it comes at a sky-high asking price. But when money is truly no object, buyers want the assurance they’re getting a totally unmatched vessel. Lürssen has mastered the art of making each launch feel like a pure one-off.
Luxury Afloat: Why Superyachts Are Weathering the Storm in Record Sales - Charter Revenues Help Offset Ownership Costs
While the upfront purchase and outfitting of a 100-meter plus superyacht runs $500 million and up, the ongoing costs of operation, maintenance and staffing are equally daunting. Estimates run from 5-10% of the build cost per year to keep a megayacht running smoothly. That could mean $30 million annually even while docked!
Many billionaire owners choose to offset some of this financial burden by chartering out their yacht for part of the year. While their personal use takes priority, opening calendar slots for charter guests generates sizable revenues. Rates for a fully crewed week aboard a top-tier superyacht can easily exceed $1 million.
Consider Motor Yacht A, the infamous 400-foot giant commissioned by Russian fertilizer oligarch Andrey Melnichenko. With its unconventional futuristic profile and luxe Art Deco interiors, it attracts huge charter interest when not in use by the owner. A week aboard M/Y A starts around €3.5 million ($3.75 million USD).
While that seems outrageously expensive, it's a relative bargain for charter clients accustomed to five star luxury. Toni Vitale of luxury broker Camper & Nicholsons notes that with Covid limiting travel options, elite travelers are chartering bigger yachts for longer periods. "Guests want to spend three to four months cruising instead of one week," she remarked.
M/Y A exemplifies the profit-making potential of megayacht charters. Just four weeks booked per year at the €3.5 million weekly rate nets €14 million, covering a large chunk of operating costs. Owners can enjoy their floating palace extensively, then offset down times by marketing select windows to charter guests.
Of course, bored billionaires have been chartering out their yachts for ages. What's new is the booking frenzy at the extreme high end. Demand has gone ballistic for the largest, most excessive superyachts. Where there may be 200 yachts over 70 meters competing for charters, there are only about 20 over 100 meters.
With ultra-wealthy VIPs stuck at home during Covid, many placed their names on waitlists for first availability of the newest megayachts. Top tier vessels like Flying Fox and Ulysses were booked solid 18 months in advance. As more megayachts launch each year, charter revenues will only increase.
Yacht management firms like Imperial handle every aspect of marketing, booking and chartering these elite vessels. From vetting potential clients to hiring crews, legal compliance, maintenance and more, they aim to maximize income for owners during idle periods. Even a partial charter calendar brings in millions to offset operating costs annually.
Luxury Afloat: Why Superyachts Are Weathering the Storm in Record Sales - Price No Object for Billionaire Boat Lovers
For the ultra-elite cadre of billionaire yacht owners, money is truly no object when it comes to realizing their nautical dreams. Price tags crossing into the hundreds of millions barely register when their chief aim is owning the absolute biggest and best vessel on the water. As luxury expert Simon de Burton noted, “They want something that looks beautiful and makes a statement about themselves and their tastes.”
With a nearly unlimited budget, exclusive perks like an onboard helicopter or submarine are must-haves. Interior fittings rival those of five-star hotels, incorporating every decadent touch imaginable. As de Burton quipped, “If you’ve got the money to have lobster and caviar flown out by private jet to your yacht, then that’s what you’ll do.”
While such extravagance seems outrageous to average folks, it’s simply daily life for these billionaire boaters. For instance, when Russian fertilizer oligarch Andrey Melnichenko commissioned the outrageous Motor Yacht A, he made it very clear that money was no object. The unconventional, Philippe Starck-designed exterior bears a cost rumored to exceed $300 million alone. Add in the luxe Art Deco interiors, helipad, mini-submarine and three swimming pools, and the total crossed $500 million easily.
For Melnichenko and fellow oligarchs, those fantastic sums simply represent the cost of privacy and prestige. They vie to own the biggest, most decked-out yachts as bragging rights. As yacht designer Espen Oeino said, “If someone parks their 100-meter yacht in front of your 80-meter yacht, you either go longer or get out of the competition.”
Silicon Valley tech billionaires join their ranks in sparing no expense on the ultimate seafaring status symbol. Oracle founder Larry Ellison has lavished over $200 million apiece on multiple meticulously crafted yachts. WhatsApp founder Jan Koum also shelled out over $100 million outfitting his new 108-meter superyacht with sprawling staterooms, pools, and a helicopter hangar.
For today’s billionaire, customization is king when building their dream yacht from scratch. They want proprietary amenities no one else has, like an underwater viewing pod or onboard art gallery stocked with their personal collection. Lürssen and other elite yacht builders cater to their every whim. As long as they keep signing nine-figure checks, nothing is impossible.