A few developments in the charter market recently have triggered concerns and conversations about its future, chiefly an apparent trend of yacht owners to remove their vessels from commercial registration and out of the charter fleet because of inconvenience, regulation and taxes.
While the charter fleet is a fraction of the recreational yachting sector, it is the most significant factor to yacht owners. More than 75 percent of people who buy or build a yacht have chartered at least once.
“Charter is very important to the industry,” said Bob Saxon, a yacht management and charter veteran who now consults for industry businesses. “It’s the feedstock for boat ownership.”
And three-quarters of the world’s luxury charters happen in the western Mediterranean, which means the hurdles that varying VAT regulations create can be significant to the entire sector.
But there are two issues. First is that there was more demand for charter this summer in the Med than there has been in recent years, with demand far outweighing demand.
“I couldn’t have done any more business if I wanted to,” said Barbara Dawson, senior charter broker with Camper & Nicholsons, which saw a 14 percent jump in its charter activity this year.
But there is also the phenomenon of owners taking their yachts out of commercial registration because of all the regulations and taxation issues.
Is this the beginning of a crisis? asked Ken Hickling, a board member of the International Superyacht Society and moderator of a panel at the final YachtInfo seminar yesterday morning.
“We’re not at crisis level yet, but we’re at an area of high concern,” said Danielle Butler, owner of Luxury Law who specializes in maritime law. “The minute we make it too difficult for these owners, they’re going to go buy the house in Tuscany.”
“Or take their yacht out of commercial service,” Dawson said.
The key was to get a proper yacht for the owner’s intended use, and to make those determinations before a sale has concluded, they said.
“If they [owners] are buying specifically for charter, it makes it much easier,” Butler said. “But those who want to have a yacht for their personal use and want to charter to defray costs, that’s where the problem comes in. It’s just too much of a hassle.”
Those problems include registering a yacht commercially to charter and then having the owner pay the charter fee and tax for private use. Also, commercial regulation requires a higher level of standards be met and inspected against.
The Marshall Islands registry has devised a way to enable owners to do both. (See adjacent story.)
Even though VAT rules are complicated, they are manageable.
“VAT is worldwide,” said Dawson, who has been a charter broker for 25 years. “There is nowhere you can go and charter without paying some sort of tax. … It think the Med is very easy. It just gets complicated when they come out with new regulations all the time.”
Panelists discussed how easy the charter process can be with boats that were bought with the express intent to charter, such as those owned by Bernie Little and Andreas Liveras.
“The industry really needs more commercially minded people like that,” Saxon said.