I am going to preface this piece by saying I truly and honestly want someone to explain it to me.
The Superyacht Report ran an article in their most recent edition about the virtues and pitfalls of fractional yacht ownership and the new club- concept pioneered by Mahá Yacht Club. It was a lovely article and I certainly agree with the need for an alternative way of encourage new participants into our industry. However, the Mahá Yacht Club concept intrigues and bewilders me.
The article included a beautiful chart explaining the cost comparison of yacht ownership vs chartering vs club membership and it is certainly very alluring to the potential club member. See below.
But here is another chart which I have done using the same data and from the point of view of the Mahá Yacht Club management – I just don’t get it.
Let me explain my graph a little. The black column is The Superyacht Report’s estimation of purchasing and running a yacht for 10 years multiplied by six (as that is the number of yachts Mahá Yacht Club expect to have available to members). The red column is based on the net wealth loss over a 10-year period in running a yacht. The blue column is the income from the sale of 60 memberships to the Mahá Yacht Club.
There is a 205.8 million euro shortfall between the black and the red and a 58.8 million euro between the blue and the red. This doesn’t even factor in the costs for the six Vripacks and six 10m tenders they also will offer to members.
Who pays for that shortfall?
If the goal here is to welcome new yacht owners to the industry then, theoretically, it is a great idea. However, what happens when the money in the club funds to maintain the yachts runs out and members can’t access the yachts or have a diminished experience because of it? Surely that is counterproductive.
As much as yachting industry professionals would like to see the barriers to entry lessoned to stimulate the market, there is, unfortunately, no avoiding the cost of purchasing, owning, running, maintaining and ultimately, enjoying a spectacularly luxurious yacht. No matter how you split the pie.
The idea of a club for the uninitiated or those who are time poor is fantastic but perhaps it needs to not differentiate itself on price so much as experience. Why not price it higher to ensure the minimum fleet costs are covered and then create experiences which allow members to fully engage in yachting?
You could partner with a watch brand and dive company then each new member receives a limited-edition dive watch and up to 300 hours dive tuition in the yacht’s locations to fully appreciate why they would choose a yacht over a hotel land-based holiday. Or perhaps have the Blue Marine Foundation provide member-only access to leading oceanographers, researchers and environmental pioneers at the annual club gala dinner; creating a real club community. Why not looking a family-based memberships and cultivate the next generation of yacht owners by facilitating them accrue sea hours?
But again, am I missing something?
I am glad to say that based on my request someone has pointed me in the right direction for some research and enlightenment. Fundamentally, it is a private members club which happens to have six fairly glamorous clubhouses. If you look into the financial structuring of private member clubs, most are not-for-profit (ie sailing clubs) though not all and have fairly sophisticated self-funded depreciation models.
Applying this to the Mahá Yacht Club concept, it means each year cash equating to the value of that year’s capital depreciation will be placed in, what one can only imagine will be, a high yielding account from which the interest earned will be pumped back into the club for ongoing expenses. Then at the end of the 10 years, when the club membership expires, there should be cash in an account to cover the cost of purchasing new yachts so the revenue from the second round of memberships will go directly to the club’s cash reserves.
It will however require two things. A large initial cash injection at the outset from the management and some ongoing outside revenue to ensure cash flow. Going back to the private members club concept, ongoing outside revenue usually comes from non-members being able to use the club facilities; yacht clubs are notorious for being popular wedding venues for instance. So presumably the yachts will be available to non-members for charter.
Aside this revenue, members are responsible for paying for consumables whilst onboard not unlike commercial superyacht charters. These consumables will have a margin which again will ensure the operating and maintenance costs of the yachts are covered.
There will no doubt be some challenges in this model, as is to be expected when changing the status quo. However if it does work, it will most certainly be a pathway to attracting new clients into the industry who, at the end of their 10 year membership, will be likely to get a great deal on a 33m Feadship!
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