As global wealth levels continue to rise, one valuable way to put flesh on the bones of growth trend figures is to look at what the wealthy are spending their money on. And if it is the ultra high net worth segment which is of interest, you would do well do study that most luxurious of luxury markets: super-yachts.
As with most luxury product sectors, Asia-Pacific is the market on everyone’s lips, and super-yacht construction is no exception.
The Blue Eyes, at the Monaco Yacht Show
Speaking at the prestigious Monaco Yacht Show last week, Matteo Belardinelli, sales manager at Italian super- and mega-yacht design and construction firm CRN, told WealthBriefing that “Asia is giving us very strong signals” and his firm would not miss the opportunity to tap the region’s burgeoning appetite for these sumptuous vessels.
Much has been said about the rising fortunes of firms such as LVMH as they tap the Asia-Pacific region’s thirst for luxury products and prestigious Western brands. The region’s wealthiest individuals are looking to emulate - and outdo - their Western peers, and so while a beautiful Swiss timepiece may have a certain cachet, for those Asians with the deepest of pockets, it seems that in the future only a super-yacht will do as the ultimate status symbol.
The ultimate status symbol
To give the initiated an idea of the figures involved, a 60 metre-hulled yacht will cost the lucky owner in the region of $55 million, depending on the level of modification put into a custom-build, not to mention the extremely high running costs associated with ownership. Put this in the context of the fact that owners tend to spend only 60-70 days aboard per year then it is little wonder that Matteo’s colleague, Luca Boldrini, brand manager and sales director at CRN, calls super-yachts “the luxury of luxuries.”
Once largely the traditional preserve of the European, US and Middle Eastern uber-wealthy, the super-yacht market is now set for stunning growth in Asia-Pacific, particularly in China. Yacht sales in China are expected to grow in the region of 20 to 30 per cent per year, and these growth prospects are backed by some pretty compelling figures.
Impressive growth across the wealth segments
According to Forbes, China now has more billionaires (115) than any other country excluding the US, and it is showing equally impressive growth in the lower wealth segments, with China recently announcing its millionth millionaire, for example. Its UHNW figures are also noteworthy; according to summer 2011 figures from Boston Consulting Group, China is now home to 393 individuals with a net worth of over $100 million, putting it in eighth place globally – not bad for a country heavily reliant on agriculture up until not so long ago. However, for sheer concentration of “centi-millionaires” one need look no further than the Special Administrative Region of Hong Kong, which is home to 223 such individuals, ranking it tenth globally.
Growing numbers of high net worth individuals is of course a theme right across Asia-Pacific: according to the latest Merrill Lynch/Capgemini World Wealth Report, in 2010 there were big rises in HNW populations in Vietnam (33.1 per cent); Sri Lanka (27.1 per cent); Indonesia (23.8 per cent) and Singapore (21.3 per cent). The report additionally said that over 2010 Asia-Pacific HNW individuals’ wealth rose by 12.1 per cent to $10.8 trillion – overtaking Europe at $10.2 trillion.
It is also worth noting that many commentators say that wealth levels in Asia-Pacific may in fact have been grossly underestimated as it is hard to get a true grasp of what clients own in terms of tangible assets and collectibles such as art, wine, and cars – notoriously important asset classes to Asians. Given their rising popularity, it is likely that luxury vessels will form an increasingly important part of Asian clients’ assets.
But while demand from Asians for super-yachts may be gathering strength, Matteo says it still has some way to go before it reaches the inflection point which will prompt firms from all over the world to fully pile into these new markets.
The problem, he explains, is that while the desire for super-yachts is certainly there in Asia, the necessary infrastructure to support the super-yacht lifestyle is not. While “the scene” has been flourishing in Europe, the Americas and Middle East for several decades now, this is not the case in Asia. At the moment at least, Asia-Pacific largely lacks the resorts and marinas to support the super-yacht community in the style to which they are accustomed. The rankings of the world’s most expensive marinas typically runs Capri, Porto Servo, Portofino, Ibiza Magna, St Tropez, Monaco, Miami, Cannes, St Barts and Abu Dhabi – a top ten which really brings home how US/Euro-centric superyachting has historically been.
But if a lack of infrastructure and resorts has hitherto held back the development of a domestic super-yacht scene, that is all going to change, says Matteo. And fast.
He maintains that it is only going to take the Chinese “a couple of years” to catch up with the West in terms of infrastructure, supports services and resorts. This is admittedly a very short timeframe, but as Matteo points out the Chinese “are not known to be slow.”
Investment pouring in
The Chinese super-yachting scene seems to benefitting from a “virtuous circle”: the huge amount of waterfront development taking place all along the country’s massive coastline is fuelling demand for boat ownership and regional authorities are keen to promote all things maritime as they recognise it as “big business” which will create jobs and rapidly increase an area’s wealth. Since the world’s top marinas can command up to $3,000 for an overnight berth, it is easy to see the attraction for local authorities.
Following the Chinese government announced "leisure boating" as a priority for tourism development, several cities are vying to become China's “Riviera”, including Tianjin, Qingdao and Dalian in the north, Shenzhen, Sanya and Xiamen in the south, and Shanghai and Hangzhou in the east. There are currently 35 marinas in operation in China, but China Elite, the tourism marketing firm, has predicted that the number of Chinese marinas will likely almost double to 60 by 2014, as regulators move to cut the red tape related to boat operation. (For example, as yet there is no national yacht driving licence, only regional ones, making it a headache to cross borders)
In Matteo’s view, Hong Kong is going to be “the hotspot” of Asia-Pacific, and that is where CRN will be focusing its growth efforts in the region. Indeed, the firm already seems to be doing pretty well in Hong Kong: one client there only took delivery of a super-yacht in June and is already in the process of having a bigger one built, he said. And it’s not just male Chinese who are diving headfirst into the super-yacht market, CRN has one female client who is interested in buying two boats, Matteo revealed.
As well as CRN, other big yachting names such as Sunbird, Azimut, Princess, Sunseeker and Northrop and Johnson, are all turning their attention to the Asia-Pacific region – particularly since clients there have a tendency to prefer well-established brands. And there is certainly at least some time for fast-moving players to steal a march on their competitors due to the infrastructure gap outlined by Matteo.
But if his predictions of rapid infrastructure development are correct it won’t be long before we see a fully-fledged super-yacht scene across the across China, Hong Kong and elsewhere in the Asia-Pacific region. In the words of Matteo, “they are not used to enjoying the boats as the rest of the world has for the past 30 years.” All that is about to change, it just remains to be seen which firms are best able to ride the wave of rising demand.