Market Know-how: Seasickness

In April 2007 in the small American city of Corpus Christi (gulf of Mexico) a sailing competition took place. A total of 300 boats participated in the regatta. Among them were small aluminum fishing boats, which cost little more than $1,000 and luxury yachts costing almost $10 million. The direct income of the event totaled $250,000, of which the immediate owner of the mooring received, with the rest going to the main investor American Peter Bryant. Indirect income, according to the local university, was $4.4 million – this is how much money the visitors of the event left in the city.

How they make money

Experienced private investor Peter Bryant wants Corpus Christi to form competition to the city of Fort Lauderdale in Southern Florida where such events, according to South Florida Business Journal, have up to 140,000 supporters and each time provide the city with almost $650 million, even though the population of the Florida town is 120,000 people less than in Christi.

Bryant believes in success, in fact he has organized a similar event in the Bahamas where within several days it made almost $3 million. This will help the municipality of Corpus Christi, which in the next six years will invest approximately $5 million in the development of a marina. Bryant has signed an 11-year contract with the city for joint work on the project. At the same time, as the local marina is a private enterprise, its owner will independently look for additional financing. As such, the marina has issued bonds worth $4.8 million. In addition, the owner of the pier will increase charges for parking and other services. As a result of the reconstruction, the port will be able to moor 600 large and small yachts/boats.

Bryant is going to transform the regatta into a show where there will be live music, a fashion show and even a small car exhibition. He will invite celebrities from England, France and other countries. American Bank and Coca-Cola have already supported the idea of the untiring investor.

While Bryant equips Corpus Christi, another investor has quickly undertaken the development of the Bahamas. Dane Preben Olesen has signed a contract with the authorities of the Bahamas worth $6.8 million for the creation of a megaport on Grand Bahama Island that can accept the largest yachts.

But the reconstruction of the marina is just an insignificant part of the grandiose program, which in total will cost more than $500 million. The infrastructure will simultaneously be created and cardinally transform the vicinities, insofar as the construction of residential buildings, shops and hotels on the water - an obligatory condition for the successful existence of modern moorings. Initially, the construction of more than 60 individual luxury apartment blocks are taking shape near the moorings costing more than $60 million. In all 300 new elite detached houses and apartment buildings are planned to be built.

The investors include legal entities in the sphere of the creation, reconstruction and facilitating of marinas and adjoining territories, among which American company Island Capital Group (ICG) can be noted. According to the International Herald Tribune, ICG has reconstructed a marina on Saint Thomas (American Virgin islands) where it is possible to moor the largest leisure yachts. On the island, magnificent apartment buildings, a high-class hotel and luxury shops have also been built. The total cost of the project was $200 million. The sea complex has 50 individual moorings for mega yachts, four restaurants, 12 apartment buildings costing $2 million each, various shops, and also offices.

One more huge construction has opened thanks to ICG in Dubai. Here the Americans have co-operated with local company Nakheel to create spacious and modern moorings. In total in Dubai 40,000 individual moorings (in 2005 there were only 1,000) will be built making Dubai one of the worlds yachting centers. In Dubai the company has 20 marinas under its management (some at the stage of construction).

ICG is carrying out a similar project, but on a smaller scale, in Genoa where a new marina with 600 places is under construction, which will allow yachts with a length of 250 feet (76.2m) to approach the shore. At the same time social and commercial premises are being built here.

In addition, in April 2007 the company bought New York club Montauk Yacht Club with the purpose of developing local moorings. In total, all over the world, ICG has 12 marinas and is building 15 more.

Andrew Farkas, president of Island Global Yachting, has announced that the company will invest $4 billion in the development of marinas around the world. It has a firm belief that the infrastructure of a marina without doubt should include shopping centers, tennis courts, swimming pools and expensive detached houses or apartment buildings for the owners of yachts to reside in and for their satellites.

The ardent passion

A taste for yachts and boats becomes a characteristic feature of the modern person with sufficient funds. This trend was sensitively picked up on by another American - Stephen Knight, the founder and general director of Yacht Clubs of the Americas (YCOA). He decided to form a business on this and offered licensed brokers the opportunity to earn additional money on the sale of sea parking in Florida and the Caribbean Sea with 3 per cent commission per sale.

According to the certificated state appraisers of Florida, in the last eight years the price of mooring increased 35 per cent per year. According to YCOA, 15 per cent of buyers of sea real estate are not yachtsmen but normal investors - the prices of residential real estate have started to fall and people are looking for other forms of capital investment. Transactions concerning real estate on the water are controlled by the same regulations as usual apartment buildings. YCOA has invested more than $300 million in the development of the infrastructure of numerous clubs. In each club there is a full set of services, from the boat and yacht repair centers to saunas, heated swimming pools, restaurants and coffee houses. The real estate of each club is under round-the-clock security. The average cost of a mooring ranges from $140,000 to $500,000.

According to official statistics, in Florida alone in 2006 more than 1 million private boats and about 700,000 individual moorings were registered. And demand continues to grow and it seems there will be no end.

Therefore owners are extremely interested in the constant improvement of moorings.

In order, at least, to satisfy its own hunger and to make a decent profit, Turkish development company Mehmet Bayraktar will construct an Island Gardens yacht resort in Miami in the next two years, which should eclipse all others and draw clients from other popular regions of the world. The project is worth $600 million. The basis of the complex will be two tower-hotels – the Shangri-La and Westin. There will be 12 restaurants and luxury shops within the complex.

Authorities keep their eye on the ball

Authorities also understand the trends picked up on by investors, and in every possible way aspire to support yachtsmen in their undertakings. And there are a lot of interesting initiatives. The French federation of owners of moorings for leisure boats Federation Francaise des Ports de Plaisance in support of the European professional federation Euromarina has started a new project called Odyssea, the purpose of which is to form closer cultural and economic relations between adjoining territories and yachting moorings on the Atlantic coast of Europe and the Mediterranean sea. In the opinion of Francesc Xavier Mangran?, chairman of Euromarina, Odyssea will promote the creation of employment and the development of tourism, fishery, agriculture and small businesses, which, in turn, will create more jobs.

Almost everywhere authorities are finding necessary funds, creating favorable conditions for investors, or the two together to stimulate yachting industries.

Serious money - more than 25 million euros - is being invested by Ireland in the reconstruction of all moorings. Closely connected with tourism, they provide the country with 631 million euros.

Therefore great value is given to their improvement. It is supposed that in the next few years private and state investment in the yacht industries of Ireland will exceed 40 million euros. Britain traditionally has a tremulous relationship with yachting. The country cannot brag about a good climate: rain, fog, sleet, and strong winds are the usual phenomenon. Ebb and flows is also not everybody’s favorite thing.

To go on a yacht for pleasure on Britain’s coasts is only possible four months in a year. Nevertheless yachtsmen are satisfied. Recently in Dover the reconstruction of a yachting dock was completed, requiring ?250,000.

Moorings in Spain are actively developing - its coast runs for more than 5,000 km.

The yacht business of Croatia is in full sail going forward, here to much to the pleasure of sea fans there are 47 marinas with 13,000 moorings and a huge quantity of convenient places for temporary mooring among a set of fine islands.

But, perhaps, ahead of everybody in Europe in this respect is Italy, where, as well as in a number of other countries, the development of moorings is included in a national priority program. In the last four years 38 new marinas with 18,492 spaces have been constructed, and 17,339 more individual parking places are planned to open. In total, by 2014, Italian authorities plan to construct 60 new marinas with 200,000 moorings.

In Venice authorities have allowed the construction of a mega-marina for luxury yachts to moor, which had twice as many visits in the last few years. For small boats covered and heated moorings (where necessary) in individual hangars are constructed.

Multi-level many-space moorings, like huge shelves with powerful wheel elevators to locate small boats, are constructed. There are mobile mechanisms with a carrying capacity of 1,500 tonnes, easily capable of coping with heavy leisure boats.

It is expected that yachtsmen with families or friends will periodically stay on the coast. Therefore in the vicinities of European marinas there is parking, taxis, car hire and bicycles and currently under construction and being opened - cinemas and cafes, volleyball tennis courts and banks.

One more curious innovation in Europe is the mass manufacture of stationary 1 and 2-storey boathouses. These are offered by Danish company Waterliving for inveterate yachtsmen and waiting staff in cold countries. Such houses are set on moorings on a steel sheet filled in with cement for stability. In the house, which is warmed by water, it is possible to live in the winter and in the summer, the external walls have q minimum thickness of 250 mm, and the ceiling - 300 mm. In addition to water heating there are solar panels on the roof.

In other parts of the world the authorities also don’t want to lose out on the possibility of earning extra money from yachts and everything connected with them. In Mexico the government is sponsoring a project worth $1.9 billion on the development of moorings to attract 76,000 yachtsmen annually, in the first instance Americans from California.

Cuba has taken the same route, where there are currently only 19 marinas with 696 places. By 2010 Cuba plans to construct 38 marinas with 6,422 places. They also rely on Americans. All moorings will be secure and have modern infrastructure.

In the Dominican Republic developers have carried out the Ocean World Marina project. Currently boats with a length of up to 250 feet can moor at the port. Here Casinos, nightclubs and restaurants have opened. On the western coast of Canada a marina for yachts with a length of 230 feet is being reconstructed.

Requirements and possibilities

Farkas, as well as other world developers, have set the goal of building developed chains of refined resorts where the largest yachts can moor. At Saint Thomas, for example, there is the possibility to moor 150-400-feet and more yachts. Even the five-deck yacht of the general director of Oracle Larry Allison that cost $200 million and has a length of 452 feet (138m) and 8,000 sq.m of living space, can moor there (as newspaper The Wall Street Journal writes, Larry Allison probably got bored of his big yacht, and has recently ordered another smaller one with a length of "only" 80m).

On Madeira (Portugal) moorings are being reconstructed for yachts measuring 150 feet and at the same time a 5* hotel is under construction. In Monaco where there are now 700 yacht moorings functioning, by 2010 there is expected to be an increase of 40 per cent. There is planned to be two moorings for luxury yachts measuring more than 100 m and 10 moorings for yachts measuring 60-80 m. The cost of the project is about 300 million euros. Finally there will be a huge mooring where yachts measuring 250 feet can be moored, and in the vicinities apartment buildings will be built and there will be restaurants and shops.

In Venice a mega-marina for large luxury yachts is also under construction - the frequency of their visits in the last few years has doubled. In Turkey a quay for super yachts with 623 places is being constructed. The cost of the project will be $52 million.

Mega moorings in the Near East: in Qatar, Dubai and Saudi Arabia are growing like mushrooms after a rain. Investments in local yacht industries are in the tens of billions of dollars. Here whole artificial islands are being created, with the grandness of Arabian fairy tales.

However while the Caribbean Sea and the Middle East are just starting to develop resources, according to the estimations of experts, in the Mediterranean they have all already practically been used. During high season in the Balearic Islands, for example, the sea is completely covered by boats/yachts, and it is literally impossible to get close to the coast. The same happens in other popular vacation spots in the Mediterranean Sea. It is necessary to open new moorings in unconventional and less convenient places. The situation is aggravated by the fact that people wanting parking for a yacht, simultaneously want residential real estate in the same place.

According to official data, 160,000 owners of small boats across the Mediterranean are waiting to get a permanent mooring. In the Spanish province of Andalucia alone there are more than 2,300 people and by 2020 there will be more than 5,000.

Unprecedented scales are taking place on the coast of the Costa Del Sol where yachtsmen are attracted by the excellent natural climate where you can enjoy the sea all year round. To satisfy the constantly growing demand for moorings, it is necessary to increase them by 300 per cent, which is obviously far from possible.

The situation has developed not only from the physical shortage of suitable coastal territories for further development. Locallers (as a rule, they are mostly all fishermen) act categorically against strangers squeezing them out from old residential quays and bringing disruption to their way of life. It is possible to understand the discontent of local residents, in fact already now, officials supervising tourism testify that almost 60 per cent of owners of sea moorings in the Costa Del Sol are foreign citizens, including Germans and English.

The voice of green people is getting louder in saying that yachts, especially, motor yachts, pollute the environment. According to Euromarina, the average 40m yacht whilst at sea at full people, fuel and food capacity, emits 500 liters of waste daily. Defenders of nature say that many resort sites on the coast of the Mediterranean Sea, including the Costa Del Sol are at their limits and if nothing is done immediately, an ecological accident is inevitable. In connection to this in a number of countries emergency measures have already been taken.

Italy, for example, has passed a law forbidding motorboats from coming closer than 200 m to the coast unless it has a specially equipped mooring that corresponds to the environmental protection regulations of the European Union.

In Mediterranean countries the construction of new moorings sometimes gets blocked in parliaments in every possible way. All this makes the price for parking high. Annual rent for one yacht-place on averages is 8-15 per cent. And the cost of one varies from 50,000 euros to several million euros depending on the geographical location, the size of the mooring and its quality. Probably, prices will continue to grow.

Oligarchs trample the market

Average world demand for leisure boats/yachts in 2006 was $24 billion. Annual growth in this segment was 7 per cent. The market is growing quickest in Europe. The inevitable increase in the price of moorings and all infrastructure is backed by increased demand for huge yachts. After all mega yachts, notes the New York Times, demand mega moorings. According to Jamie Welch, chief editor of Yachts International Magazine, 820 mega yachts were being manufactured at shipyards in 2007, 3 per cent more than in 2006, and 58 per cent more than in 2002. In his opinion, this is firstly caused by successful Americans wanting to live life to the full, and secondly, rich Russian men want to live the same way and need the most expensive and biggest yachts.

Increased demand for big leisure boats causes the expansion and intensification of moorings and, of course, demands the improvement of the technical infrastructure. This includes petrol stations, electrical-transformer stations, boat washes, repair docks, access roads and parking for cars.

This trend pleases developers who have started the construction of such complexes. Every month, says Welch, 3-4 new seascapes appear, more often in the Caribbean Sea or in the Middle East (mainly in Dubai).

Bob Saxon, president of Camper & Nicholsons USA, which provides consulting services, says that the trend of increased demand for large yachts is also being observed in the rental segment. Rich tourists during their holidays or significant events are renting large yachts to travel the Mediterranean and Caribbean seas more often.

For this purpose attendants and a team of sailors led by a captain can be hired. Sometimes leased yachts already have a completely formed crew. On the large yachts there are helicopter pads and other extras. Chefs with Michelin stars cook the food, Moet & Chandon flows like a river and people’s evening dresses are freshened at a dry cleaner every day.

Obviously, the price of personal parking for such a ship is representative - $1-2 million, and this is not the limit. In the summer of this year mega yachts shone with magnificence at the sailing regattas in Valencia. Among the celebrities, Larry Allison and Harold V, the king of Norway, were spotted.

The presence of blue-blooded people and rich men from all around the world has become possible due to the reconstruction of the port. According to Bloomberg, it was private businessman Garcia Montes’ idea to reconstruct the marina at Valencia with a purpose to carry out international competitions. He managed to convince local authorities of the advantages of the project for the city and has received significant funds from the city to carry out a regatta.

In his plans Montes was guided by the growing interest in yachting all over the world, pushed forward by fantastic demand from Russian oligarchs, says Tork Buckley, editor in chief of the Yacht Report published in London. In his opinion, as a result of such pressure, some shipyards have unprecedented queues for producing yachts – up to six years, and in the Med there is a shortage of quality individual parking.

The number of orders at enterprises that produce different sorts of equipment and mechanics, intended for the lifting and moving of bulky sports-leisure boats, and also for their maintenance, have simultaneously risen considerably.

Participants of the sea shows in Valencia, notes Bloomberg, pay exorbitant prices for mooring. For example, one businessman paid 370,000 euros ($498,000) to moor his 46 m yacht from April to July (the competition season). Owners of larger yachts - 150 m - paid up to 1.5 million euros.

Further on from the "royal" marina there is a less expensive marina for 600 yachts where prices for one place during the competition season are rather modest, ranging from 4,900 to 47,300 euros.

At the same time, the crazy rates have frightened away some yachtsmen, who have been compelled to look for other moorings - cheaper and simpler. Because of this when some competitions took place, says Buckley, about a third of all individual moorings were vacant.

However it does not refute the correct calculations of far-sighted Garcia Montes, in fact, international yacht shows provide organizers with billions (both dollars and euros). This means that mega moorings have a big future.