David Westwood is a managing partner of TWW Yachts, the Monaco-based brokerage house active across the sales, charter and new-build sectors. He responds to questions about the impact of the coronavirus pandemic on the brokerage market following this week’s webinar on the subject.
What part of your business has been most affected by the COVID-19 crisis?
The charter market, for sure. To my mind, the minute that Italy went into isolation it changed the market for this year. Some companies are saying their last-minute charter business is going through the roof. I don’t believe that is the case in general, as although there was a spike with those looking to isolate on yachts, the reality is that travel restrictions quickly stopped most of that business. As a company, we were 50% up on bookings at the beginning of February based on five years of trading.
Today, I would say 90-95% of those bookings have cancelled or will likely cancel or postpone until the 2021 season. And look where we are today in the UK: we’re only just going into lockdown and it’s the same in the US, which represents 60% of our business for both sales and charter. I don’t have a crystal ball, but ultimately, I don’t think we’re going to have much of a 2020 charter season and yacht owners have a dilemma. What do they do? Do they lay the yacht up, do they prepare for the season, do they lay off crew? It’s a tricky time for the yachting industry and I feel that 2020 will be an extremely tough charter season, but we hope we will make a reasonable recovery for 2021.
What’s the outlook for owners who charter their yachts?
Anyone who relies heavily on charter revenue will have a hard time ahead and I suspect the boats that depend on 6-8 weeks charter to offset running costs will possibly end up on the sales market. So I can see a huge shift coming. In the last three weeks or so since the announcement of the crisis in Italy, there have been 25 decent-sized yachts coming onto the sales market from owners reliant on charter to offset expenses. It would normally be a lot fewer at this time of year. And that’s understandable when you think a 50-metre yacht might cost 2.5 million euro a year just to keep tied up at the dock. There are some tough decisions being made right now.
What about the sales market?
There will be market opportunities to buy and there will be some very good deals out there, but compounded with the pandemic it will be tricky. Sales are still happening: I closed on a yacht sale last week – admittedly very difficult because of issues with permission to leave the dock and close the deal offshore – and I have signed two Letters of Intent on large yachts in the last couple of days. Any new builds that are work in progress will go ahead, although there may be a drop off down the line. But I do believe all the other vessels coming on the market represent opportunities for buyers and those buyers are still there. They may be the ones who have invested wisely and perhaps they’ll be able to buy a vessel for 20-30% less than its market value. Clients in sectors like retail and hospitality are suffering, but those who have invested in food or pharmaceuticals are doing well. People are still making plans on the sales side. The level of enquires on the charter side has dropped significantly for now.
Has the industry learnt any lessons from the 2008 financial crisis?
You know what? 2009 was the best year we’ve ever had in sales. But where there are difficulties, there are always opportunities and people who benefit. None of us knows what will happen, but in all fairness, I think the money markets were massively inflated anyway. I don’t believe we really fixed the problems of 2008; the banks put a bandage on the problem and coronavirus is the scapegoat, if you like. I think we’re still living the problems of 2008 in many ways.
How are you servicing your clients in a lockdown situation?
We are looking to mitigate any potential losses to owners and charters respectively. We have been working with MYBA and several independent law firms to draft new addenda to cover the current COVID-19 situation and to encourage clients to commit to their 2020 summer plans, safe in the knowledge that they and the owners are protected in the event of cancellation due to coronavirus.
Regarding ongoing sales, we’re helping and advising sellers and buyers in any way we can. Given the lockdown on travel, for those looking to buy or sell we’re stepping up our virtual tours and remote evaluations. You have to distinguish between a broker’s survey and an insurance or surveyor’s evaluation, which we’re also asked to assist with given our market intelligence. A lot of things we can do remotely, especially if we already know the boat: the class status, the survey status, maintenance records, hours on the machinery, where the vessel has been and overall condition, and so on. The only thing you can’t do is actually walk around the yacht.
As a company, we’ve invested heavily in the future of yachting and whatever the vessel we have on our listings, we have up-to-date imagery and real-time, virtual 3D walkthroughs. Sometimes you need to have a face-to-face meeting with a client, builder or designer, but there are times to be honest when we jump on a plane when we don’t really need to. It will be interesting to see how the current crisis changes the way we do business.
