NetworkNewsWire Editorial Coverage: With the global economy booming, the wealthy are making the most of their earnings by buying boats.
- Yacht sales are rising, with both new and pre-owned yachts in high demand.
- This trend is creating a boom for associated services such as brokerages, consultancies, financing, aftermarket extended warranties, and trailer manufacturers.
- Other boat-building businesses are also profiting, including yacht charters, boat rental clubs and other sea-based leisure activities that offer people a break from everyday life.
Savvy companies in the boating and yacht industry are recognizing these unparalleled opportunities and exploring ways to position themselves to make the most of them. Victory Marine Holdings Corp. (OTC: VMHG) (VMHG Profile) has expanded its brokerage team and is looking into commissioning specially designed boats. America’s largest retailer of yachts and recreational boats, MarineMax, Inc. (NYSE: HZO), is expanding through the acquisition of companies in the northeast. Malibu Boats, Inc. (NASDAQ: MBUU) is maintaining its edge as a manufacturer through state-of-the-art design and new technology, including its award-winning docking trailer camera, as well as its latest acquisition of Pursuit Boats based in Ft. Pierce, Florida, for a sum of $100 million. The sale of a wide range of pleasure boats has led to financial dividends for Marine Products Corp. (NYSE: MPX). And Brunswick Corp. (NYSE: BC) has incorporated boats into a wider set of recreational holdings, developing new boats and new technology for a growing market.
The Popularity of Yachts
Yachts are among the world’s greatest status symbols. Luxury items affordable only by the wealthy, yachts represent both having the money needed to purchase them and also having the time and the skill to sail them — bringing great prestige to the owner. Someone who can afford a yacht can clearly afford much more.
There are reportedly almost 4,500 individuals around the world who own high-end “superyachts,” worth an average of $10 million each. But there are plenty of yacht enthusiasts living on more modest budgets, and for those who can’t own their own yachts, rentals or charters offer opportunities to spend a few weeks at sea.
The State of the Yacht Industry
The growing success of the yacht industry is great news for companies such as Victory Marine Holdings Corp. (OTC: VMHG). A surge in the global economy has put more money in the hands of the world’s rich. More people than ever can afford to buy and run a yacht, and many of those individuals are looking for a chance to enjoy their money. In America in particular, a yacht appears to be a symbol of a happy, healthy life among the nation’s elite.
The economic upturn has led to increased sales of both new and pre-owned yachts, each of which offers a different set of advantages for buyers. New yachts are more expensive to buy and insure than used models but less likely to need repairs or refurbishment, while pre-owned yachts may need work to become ocean ready and generally require more maintenance. This makes used yachts a natural entry point for first-time yacht owners or those looking for a more affordable options.
Pressure on demand is also buoying up the pre-owned market. Many boat manufacturers are currently working at capacity, with lead times of 18 months or longer to produce a new boat. Speed of delivery as well as price favor the pre-owned market, on which Victory Marine Holdings subsidiary Victory Yacht Sales is currently focused. With 25 years of experience selling yachts in Miami, the yachting capital of the world, the company has developed a wealth of knowledge and contacts to ensure a steady supply of high-quality yachts to a market that keeps expanding.
Investing in a Yacht
The main reason for investing in a yacht isn’t financial, it’s quality of life. For those who enjoy the seas, yachts are an ideal way to get away from the pressures of the world. Whether relaxing off the coast of a Caribbean island or racing through choppy seas, yachts offer those on board a range of pleasures from active sporting to gentle cruising.
Making a profit from owning a yacht is difficult without the support and expertise of a professional yacht firm such as Victory Yacht Sales. Upkeep costs amount to around 10 percent of the buying price per year, meaning a steady drain of money. And like cars, yachts depreciate in value over time.
However, there are viable ways to make a yacht pay for itself or even to turn a profit, including purchasing a yacht and using it part-time but offering it as a charter vessel during times when it is not in use. This can cover costs such as maintenance, insurance and anchorage.
A second option is to buy a second-hand boat, renovate it and sell it at a profit. Repainting and replacing soft goods can make a significant difference to the value of an existing yacht, much like flipping a house after making basic upgrades.
Whether made with an eye to a financial investment or a leisure enjoyment, buying a yacht is a complicated business. The purchasing process itself involves a memorandum of understanding, an offer, financing, insurance, survey, sea trial and potential renegotiation based on the results. Knowing what sort of boats are available and when prices will be lowest is invaluable information. Consequently, most buyers go through yacht brokers, specialists who understand the details of these deals and are in demand. Victory Yacht Sales recently added veteran broker Gary Beaver to its team, bringing his 20 years of experience and large portfolio of yacht listings into the company, according to a Sept. 13 shareholder update.
For those looking to invest in yachts for profit, an even better option may be to invest in a yacht company.
The best yacht companies don’t simply act as brokerages. They provide all the services needed to buy, sell or run a yacht. For example, Victory Yacht Sales does this by offering brokerage and consultancy services as well as a range of boats. And as the market continues to grow, the company is increasing its options.
In response to the growing demand for boats, Victory Marine is expanding beyond its current sales of pre-owned yachts into new models with its own custom design. “Victory Marine Holdings is currently in negotiation with several yacht manufacturers to build and distribute our own unique, private label design, which would allow us to deliver a superior product in the most expeditious fashion,” CEO Orlando Hernandez stated in the shareholder update press release. “In pursuit of this opportunity, our management team will be visiting several manufacturing facilities in Asia, Europe and the Middle East to continue these talks and pursue a final deal.”
The company also owns a subsidiary, Excalibur Trailers USA, which is soon to produce and sell custom aluminum trailers for boats of all sizes. Excalibur recently received approval from the Society of Automotive Engineers to produce custom trailers for recreational boats, expanding its range of products.
With consultancy services to help with the running of yachts, a brokerage selling both new and used models, and subsidiaries providing equipment such as trailers, Victory Marine Holdings is now positioned to cover all the needs of potential yacht owners.
A Rising Tide
The saying that “a rising tide lifts all boats” is particularly relevant for the yacht industry, where rising demand is benefiting a range of boat-related companies.
America’s largest retailer of yachts and recreational boats, MarineMax, Inc. (NYSE: HZO) is using the market’s good fortune to expand its operations. Following a successful merger with Boston’s Russo Marine in 2016, the company is now acquiring Bay Pointe Marina in Massachusetts. This expands the company’s ability to provide services to its customers, including winter storage for more than 300 boats. Storage is one of the larger expenses of owning a yacht and a potential valuable source of income for yacht companies.
Since its inception, state-of-the-art boat manufacturer Malibu Boats Inc. (NASDAQ: MBUU) has been focused on using technology to provide the best possible designs in the boating sector. Its docking trailer camera, which improves captains’ views of what’s happening, allows safer docking and handling, and the company won an Innovation Award for Safety Equipment at this year’s International Boat Builders Exhibition and Conference. In addition, Malibu Boats is also expanding, with the acquisition of Pursuit Boats.
Yachts aren’t the only boats doing well in the current economic climate. Marine Products Corp. (NYSE: MPX), a manufacturer of jet boats, pleasure boats and outboard sport fishing boats, has been using premium brands and an increasingly diverse product line to capture a good share of the market. Its success has led to regular dividends for shareholders over the past year, as well as giving the company the cash to repurchase its own shares.
A market leader in the marine, fitness and billiards industries, Brunswick Corp. (NYSE: BC) combines an investment in boats with other recreational and lifestyle brands. Its Sea Ray brand is heading to the Fort Lauderdale International Boat Show this October to show off its latest developments in boating technology. This includes Sea Ray Connect, a system that provides peace of mind by letting users check the location of their boats and the condition of the systems.
From boats and trailers to consultancy services, the continued strength of the global economy is providing opportunities for all sorts of yachting and marine leisure company investment.
For more information about Victory Marine, please visit Victory Marine Holdings Corp. (OTC: VMHG)
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