This December, Ian Petts and Damien Gigoux from the Equiom Monaco office attended the 60th edition of the Paris Boat Show ‘Nautic Paris’, branded as #nautic2021. This marked the end of the 2021 year of yacht shows in what has been a booming year for luxury yachting, making it a busy time for Equiom Group.
France is not only home to Beneteau, the world’s biggest manufacturer of yachts by unit volume, it is also the top destination of superyachts. With more than 200,000 visitors, 785 exhibitors across 110,000m2 of exhibition space and 650 yachts physically on site, this is a big event in the calendar and an opportunity for the French overseas administered territories and historical colonial territories to exhibit their paradise yachting locations to Europe.
The proportion of yacht ownership among billionaires and millionaires has been falling and so it is with urgency that the industry is looking to attract the next generation into the industry. With France being home to 42 billionaires and 110,000 millionaires, it is the ideal location. The show, which serves the integral purpose of attracting new entrants into yachting, is a unique opportunity to meet with clients, yacht dealers, charter brokers, manufacturers, tender manufacturers, RIB boats and ports in the yacht supply chain. It also provides a great opportunity to meet with the French Ministry of the Sea and Nautical Federation to get updated with upcoming regulations on pleasure crafts in French waters.
Caribbean islands such as Martinique and Guadeloupe make a big effort to market their destinations for yachts and superyachts at this event, as do Corsica and Tahiti. Countries such as Tunisia are also on hand to market their proximity to Europe and their appeal as provisioning and fuelling stops outside the European Territories. In addition, France has further connections to St Martin, St Barts, St Lucia, and Carriacou which charter brokers are keen to sell yacht vacations to.
A look back at 2021
It is evident that 2021 was a booming year for demand with brokers reporting low stocks due to post-COVID demand thanks to customers re-evaluating their work life balance and wishing to be closer to nature.
Brokers reported new entrants to the market coming in at a higher value and even buying multiple vessels; a motor yacht for the family and a racing yacht for the owner to compete with. One broker reported an owner investing in a full spec 46ft racing yacht having never even sailed before!
The brokers also reported, following two good years on the stock market, a strong presence of cash buyers. However, this unfortunately comes with difficulty meeting demand. A significant turnaround from two years ago when it was necessary to discount a sale to get it over the line.
Supply chain issues, especially in engines, engine management systems, aluminum for spars and electronics were causing disruptions to supply too, meaning for some brands it will be beyond 2023 and even 2024 before vessels can be ready. This inequality of supply and demand and long lead times led to second-hand market values increasing between 5% to 7%, and bidding wars erupting on sought after models.
Many owners in this price range are still buying their yachts in their personal name without realising the benefits of a structure i.e. minimising risk, enhancing confidentiality and improving the operation of the yacht. It is sensible to purchase a yacht within a corporate structure and set up a crew employment structure especially if crew are to be employed on the yacht.
Many French owners use leasing methods to purchase their yachts with the French banks, to defer the VAT on their vessels and have an option to trade in their boat or buy the boat outright at the end of the lease. Typically, in the structure, the French bank buys the vessel required by the owner, pays any VAT/TVA/IVA due on the boat, and then re leases the same boat back to the owner. This common practice used for superyachts means the owner has peace of mind on the VAT status of the yacht, benefiting from exception from VAT on lease payments when the yacht leaves the European Union, and paying the VAT as they use the boat.
Banks offering leasing on yachts are offering deposits as low as 15% - 20% of the value of the yacht, really making yachting accessible. Different banks, however, have a multitude of restrictions, with some banks specifying the use of the French flag, and only offering their credit on new vessels from a select range of quality builders to French or European residents. But there are some innovative financiers willing to step further afield to include non-residents and second-hand vessels.
VAT sales tax was not the only issue discussed at the show, but withholding taxes, benefit in kind taxes, the impact of Brexit and different flagging options for vessels.
Technology and innovation are key
Another key trend of the show is the advance of computing power in the industry. COVID has been a big driver of virtual yachting with millions of players around the world now playing the Vendee Globe series of virtual regattas. Advances in weather prediction and systems for remote monitoring on the vessels were also evident at the show.
Innovation was keenly exhibited with a range of recycled boat building materials including clothing and the trend for foiling really seems to be ‘à la mode’. As one exhibitor said, if we really want to solve big green issues in yachting, we must get the hull out of the water on foils. His rationale being the energy requirements drop off exponentially with the hull out of the water. The exhibitor elaborated that the industry could talk about different fuels, engines and designs until the cows come home, but until we get hulls out of the water, we won’t as an industry, make a significant environmental impact. The fact remains too that from an environmental point of view, recycling of the building materials of the yachts is still in its infancy with glass fibre taking years to degrade. The French government has introduced a scrappage scheme to remove yachts at the end of their life to combat this and manufacturers are keen to push their ESG qualities. It appears owners too are picking up this ESG agenda.
Other innovations were in sail technology, engine performance and ecology, and of course electric vehicles.
Paris is the location of many family offices and the occasion gave the Equiom team a chance to meet up with Parisian lawyers, family offices, bankers and some jet brokers and representatives from Dassault Aviation, a well-known French luxury jet manufacturer. We were able to discuss with these families and advisors the other solutions that Equiom offers from property structures for holding French based assets, jet structures and family trusts.
Next year’s show will be from 3 - 11 December 2022 in Paris and we very much look forward to seeing you on the yacht show circuit.