Why The Ultra-Rich Can't Resist the Lure of Private Yachts

In volatile markets, superyachts rise as tangible assets with unique appeal. Beyond luxury, they promise returns and freedom. Yet, investing requires expertise, merging profit with adventure.

In a world where financial markets are increasingly unpredictable, investors are looking beyond traditional stocks and bonds. Among the alternatives, one stands out not just for its financial potential but for the lifestyle it embodies: superyachts.

These floating palaces, often stretching beyond 100 feet, are far more than a testament to personal wealth. Increasingly, they are being viewed as tangible, valuable assets with the potential for significant returns.

The Rising Tide of the Superyacht Market

Source: Statista, July 2021
Source: Statista, July 2021

In recent years, the superyacht industry has witnessed an undeniable upswing. Despite global economic slowdowns, this sector has remained resilient. In fact, 2020 saw more yachts sold than ever before—a trend that continued into 2021 according to statistics from Statista.

So, what is driving this surge? Beyond the obvious appeal of luxury and privacy, superyachts offer a unique form of escapism—a personal, mobile sanctuary that is especially appealing in a world grappling with travel restrictions and health concerns. In these tumultuous times, the ability to set sail to any corner of the globe is not just a luxury; it’s a form of emotional and mental reprieve.

The Investment Potential of Superyachts

Source: Andy Ginns/Alamy - Superyacht Azzam
Source: Andy Ginns/Alamy - Superyacht Azzam

Acquiring a superyacht is not merely a purchase; it is an investment in a unique lifestyle and, increasingly, in a tangible asset that can appreciate or generate income through charters. This investment bears similarities to real estate. They are physical, tangible assets, but unlike most properties, they are mobile.

For the savvy investor, a superyacht can be chartered out for significant sums during periods when the owner is not using it. The demand for such charters has been growing, as more people seek exclusive and isolated vacation options. Moreover, a well-maintained superyacht can preserve its value remarkably well, offering the potential for capital appreciation over time.

Investors, particularly those with significant wealth, are becoming more discerning. They are seeking assets that are not just a store of value, but also offer unique experiences—the kind that money can’t typically buy. In this context, superyachts perfectly fit the bill.

Investing in a superyacht, while glamorous and potentially profitable, is not without its risks. The initial capital required is substantial, and the ongoing operational costs, from crew salaries to maintenance and port fees, can be significant. Like any other investment, it’s crucial to go in with your eyes wide open.

Below is a non-exhaustive list of costs (excluding the initial and financing price of the vehicle) that has to be taken into consideration when investing in a Superyacht:

  • Crew salaries and benefits
  • Fuel and lubricants
  • Provisions (food and drink for crew and guests)
  • Dockage and marina fees
  • Insurance (hull, machinery, and liability)
  • Communication expenses (internet, phone, etc.)
  • Ship agency fees (customs and immigration processing)

For example, the Superyacht Azzam might set its owner back over $60 million in maintenance and operating costs each year!

Understanding Depreciation

Source: Yachting Magazine - Ocean Alexander 35R
Source: Yachting Magazine - Ocean Alexander 35R

Unlike some forms of real estate, some superyachts generally depreciate. 

However, according to a study by the Superyacht Market Intelligence Report, the average superyacht appreciates in value by 5% per year, signaling that there are exceptions for high-quality and well-maintained yachts. It is crucial to note that this might be an outlier.

In contrast, it is important to note that the appreciation of superyachts is not consistent and is highly dependent on various factors like size, build quality, craftsmanship and even the size of the market. Not every day you hear someone on the street saying they intend to buy a superyacht the next week, right?

In comparison with purchasing luxury cars, superyachts tend to perform better than the former, as according to a study by Kelley Blue Book, the average car depreciates in value by 15% in the first year of ownership. The rate of depreciation then slows down, but most cars will still lose half of their value in five years.

Charter Income Potential

Source: Fortune Business Insights

For those who aren’t planning to live abroad year-round, chartering offers an opportunity to offset some of the costs. The demand for luxury yacht charters has been robust, and it’s a trend that shows no sign of slowing. However, successful chartering requires a well-maintained vessel, a top-notch crew, and often a savvy broker to handle the bookings—all factors that add to the cost side of the equation.

For example, the global yacht charter market size was valued at $7.22 billion in 2022 & is projected to grow from $7.59 billion in 2023 to $11.06 billion by 2030. Talk about growth!

According to a meticulous analysis by the Superyacht Market Intelligence Report, it is suggested that luxury superyacht charters, on average, set sail with a profit margin of approximately 25%.

To cast a sharper light on this, consider the following insights from a 2021 report by Boat International:

  • The typical weekly charter rate for a resplendent luxury superyacht? A cool $100,000.
  • Venture below deck into the operating expenses, and the figure averages out to $60,000 per week.

So, when the anchor is lifted and the numbers are tallied, the voyage seems to chart a course toward an average weekly profit of $40,000—that's a 25% profit margin, holding steady as the yacht cuts through the waves.

The Intangibles

There’s an intangible factor as well: the sheer joy and prestige of ownership, the freedom and privacy that come with being able to sail to secluded bays and exclusive ports of call, and the potential for family memories that last a lifetime. These emotional returns on investment are hard to quantify but are undeniably part of the allure for many owners.

The Importance of Expert Guidance

Given the complexities and significant capital involved, expert advice is invaluable in the world of superyacht investment. Whether it’s a maritime lawyer, a seasoned broker, a tax advisor familiar with the intricacies of international law, or a crewing agency with a reputation for finding the best staff, having experienced professionals in your corner can make the journey smoother and more enjoyable.

Setting Sail Toward a Unique Investment Horizon

Superyachts are more than just an indulgence for the ultra-wealthy; they represent a unique and tangible asset class, offering potential financial returns and a lifestyle that is unmatched. Like any investment, they come with their own set of risks and rewards.

In a world of unpredictable stock markets, the stability of a tangible, enjoyable asset is increasingly appealing. For those with the means and the passion for life on the water, a superyacht isn’t just a purchase; it’s an investment in a future of luxury, freedom, and unforgettable experiences.

Disclaimer: This is not financial or investment advice and should not be interpreted as such. Please do your own research on investments and financial decisions before partaking in any ideas or ventures depicted in this publication. Please note that historical rates of returns may not reflect future returns.