Chartering Your Superyacht: A Profitable Venture?

As Asia’s superyacht experts, Simpson Superyachts have decades of experience in all aspects of the glorious, life-affirming experience of yachting and everything it entails. One question we have been asked more than most over the years is, ’Is investing in yacht charter profitable?’. In this article, we will take a closer look at the subject of chartering yachts and give an honest overview for those wondering whether it’s worth taking the plunge. First things first:

Can investing in yacht charter ever be profitable?

The business of chartering yachts and other vessels can undoubtedly be lucrative and profitable given the right circumstances, connections and, dare we say it, luck. It takes years of intense hard work, dedication, and expertise to find yourself in the position of making a profit from a superyacht, and even that might not be enough.

The business of superyachts is among the most glamorous and enticing imaginable but it is also fiercely competitive, riddled with administrative/legal requirements, and has the potential to be a logistical nightmare if not handled professionally and efficiently. Not to mention the staggering outlay required at certain junctures and fluctuating, often extreme running costs. In a nutshell, it is not an industry for the faint of heart but can be remarkably rewarding in more ways than just fiscally. 

If the aim is to become a superyacht broker, then the company itself does not own the vessels, rather it acts as an intermediary between clients and the owners. This reduces costs significantly but also reduces potential profits accordingly. 

Owning and chartering a single superyacht

The desire to control an enormous, sensational fleet of vessels is not really the point most people are driving at when they ask us that original question. It is more likely they are considering purchasing a single super yacht and are concerned about the effects of depreciation and rising running costs. In fact, most would be happy to simply offset those two elements and are not hugely concerned with any profit above and beyond the break-even point. This is actually to their advantage, and if the goal is merely to cover costs, and the vessel is already bought and paid for, the challenge becomes a lot easier. However, the question remains, 'Is investing in charter yachts profitable?’, not ‘Can I hope to offset my costs and break even?’ so let’s dig further and find out. 

If you have not yet purchased your superyacht 

This is, perhaps, the ideal scenario in terms of procuring the perfect vessel for chartering to high-end clients. The depreciation of some superyachts can be enough to make your hair stand on end and is a factor you must weigh up beforehand with extreme care and maximum research. You can be sure that if a yacht has lost desirability and pull in the used market, it has also lost kudos and perceived value in terms of chartering and how attractive it will be to your potential clients. 

The elite world of superyacht chartering can be superficial, and the people ready to pay large sums of money to impress their friends, clients, and other yacht owners will be all too aware of the latest trends. Find out what is deemed to be the best superyacht at any given time and pay attention to trends, both short and long-term, especially those in the used market. Avoid vessels that do not hold their value well or have a tendency to fluctuate in terms of their popularity. This is solid advice even if you do not wish to charter out your yacht, as it makes little sense to invest in a vessel that loses half its inherent value before the year is out.  

Do your research meticulously

Some other factors to consider when choosing the ideal superyacht for chartering include:

• Reliability: Look at reviews of each yacht under consideration before making any decisions or even getting up close and personal with them. If you read a plethora of reviews stating that a given superyacht is prone to particular issues or has reliability problems, avoid it like the plague. The last thing you need is a vessel you cannot charter out because it keeps experiencing costly issues. This leads directly to:

• Availability and cost of spare parts and repairs: Not all superyachts are created equal, and while all of them will make your toes curl when it comes to the cost of spare parts and repairs, some will make the others look like bargains by comparison. Imagine you are in the position of having a party on board your vessel when a mechanical issue forces them to shore. How easy is it going to be to source basic parts and essential materials? Is the vessel one that most technicians will recognize and be familiar with mechanically? Much like in the automobile industry, some brands may be more prestigious but can be a logistical, financial nightmare when things go wrong. Don’t get saddled with a superyacht that falls into that category. 

• Size and number of sleeping berths: Size matters when it comes to superyachts, but not just in how impressive they look to potential clients and how many people can be entertained or sleep on board. There are other aspects to consider, including marina berths and associated fees, general running costs, and crew, to name but a few. All of those elements rise exponentially in price as the size of your superyacht increases, so do your homework and make sure the numbers add up before proceeding. 

• Style and features: An obvious point, perhaps, but a valid one nonetheless, the style of your yacht is going to affect its desirability as a charter vessel enormously and to different groups. Huge, lavish parties and decadent corporate events may require the absolute lap of luxury and the most spacious, stylish vessels imaginable, but it would be a mistake to ignore more family-oriented clients or the sports-fishing market. For every event like the former, there might be a hundred groups who want to experience the thrill of hunting for marlin whilst retaining an incredible level of luxury and kudos. Think about your preferred clientele carefully and choose your vessel according to the people you think are most likely to charter it from you. 

Before you buy

When you think you have found the perfect vessel and might even be able to run a profit chartering it, be sure to do your due diligence before any dotted lines are signed upon. It is crucial to engage the services of an excellent ship surveyor, preferably one with yacht-building experience, and have them give the vessel a thorough going-over. The goal is to procure a vessel that will serve your purposes perfectly and do so with a minimum of fuss and additional expenditure. 

Reliability is the key to success when chartering out your superyacht, and if you are solely interested in turning a profit, dependability will always trump anything else. It can look as stunning and luxurious as you want, but if your yacht is sitting in a dry dock for half of its life you will do nothing except watch your time and money disappear down the drain. 

If you already own your superyacht

So, you're already the proud owner of an incredible superyacht and wondering if you can make a profit out of it. Unless you managed to purchase the vessel for an absolute steal then the answer to this is probably no. It's hard to think of such engineering masterpieces of sublime, other-worldly quality as anything other than rock-solid investments, but in reality, they are financial liabilities. The value of your vessel is only ever going one way, and with average running costs hovering at around 10% of the vessel's original cost, the profit margin dwindles further. 

However, if you manage to charter the vessel out regularly for a good price and are lucky with repair costs, there is nothing to say you cannot recoup and surpass those losses in time. But you will always be fighting against a pool that is constantly draining from one end as you try to fill it from the other. Sudden, unexpected costs when repairs are required can be a major setback to any thoughts of profit and as potential money-making purchases go, a luxury superyacht is not one that would be high on the list of most professional investors. 

Other factors to consider

• Tax: If your superyacht is generating income, it must be accounted for and declared, even if the amount is less than the depreciation and running costs of the vessel. Your accountant should be able to write off any losses, but you will be liable to pay tax on anything above and beyond the break-even point. 

• Insurance: Insurance costs are no small matter when it comes to assets with such enormous value and potential to be irretrievably lost no matter the precautions taken to mitigate the risks. Some devastating occurrences outside of the owner’s control include:

• Freak storms or natural occurrences

• Accident due to the negligent actions of another party

• Fire

There are others, but these serve to illustrate the point. Owning a superyacht is risky when we consider the value of the object itself and the fact it will be sitting on a body of water that renders it irretrievable should it disappear beneath the surface. Insurance rates are already bound to be astronomical due to the inherent value of the object itself but when you factor in the fact that total strangers will be given free rein to use it on a regular basis, the risk of damage or catastrophic loss rises exponentially. 

Any vessel the size of a superyacht will undoubtedly be professionally captained and have a crew well-versed in mitigating the potential damage clients can cause. But that will do little to assuage the fears of any insurance company responsible for replacing such an expensive item should the worst happen. Staggeringly high insurance costs are bound to eat away the profit margin, perhaps more than anything else. 

Conclusion

Before you proceed any further with your investigations into chartering a superyacht for profit, it would be worth spending some time pondering the following questions and being as honest with yourself as possible.

• What is the primary reason for chartering your yacht?

• Do you really want to do so, or is it a necessity? 

• Are there any alternative methods to raise the required funds before resorting to chartering your yacht?

• Does the potential income from chartering affect your ability to purchase the vessel? 

• Is this an attempt to mitigate the expenses associated with such a high-end lifestyle and recoup some of the money already spent?

Addressing these and other questions is a great place to start your journey, but it requires some soul-searching and brutal honesty. If your plan to charter a yacht you already own is purely to generate income, accept that and make it part of your modus operandi to keep costs to a minimum moving forwards. 

If you are in the enviable position of being able to purchase a superyacht purely to profit from it, ask yourself if there are no safer, more predictable ways you might generate income from such a huge financial investment. So, to return to our original question, ‘Is investing in charter yachts profitable?', the answer is, perhaps somewhat unsatisfactorily, 'it depends'. It can be done, but it had better be something you are passionate about because it is going to eat away a lot of your time and energy. It is somewhat akin to gambling in that the rewards can be huge but the losses even more so, and it is always unwise to gamble with that which you cannot afford to lose. 

Contact us

If your interest in chartering has been piqued by this article and you would like to learn more, please contact us here at Simpson Superyachts. Our dedicated team members will be only too happy to give you the benefit of their experiences in the industry and any honest advice and guidance you might need. While you’re here, why not browse our sensational fleet of vessels to further whet your appetite?