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Chartering Enables Yacht Owners to Upgrade Their Boats
John Dane and Bill Smith of Trinity Yachts sat down with YV&C publisher Fuat Kircaali to speak about the yacht charter industry
By: Jamie Matusow
Jan. 5, 2007 11:00 AM
The principals of Trinity Yachts, John Dane, CEO, and Bill Smith, VP, sat down with YV & C publisher Fuat Kircaali to speak about the growth of the charter industry and how it affects them as yacht builders.
Trinity Yachts, founded in 1988, is already known as the number one American shipyard. Since 1990, their 38-acre Louisiana facility - including 10 roofed acres - has turned out 33 hulls. Seven yachts are currently under construction. How did this dynamic company grow so rapidly?
John Dane, CEO of Trinity Yachts, was running Trinity Industries' marine group in 1988, with 22 shipyards around the country building mostly commercial and military boats. Bill Smith, who was doing sales and marketing for the company, foresaw the rise of the yacht business and the two decided to diversify.
Their first yacht commission was fortuitous. It was designed by the leading German designer Gerhard Gilgenast, and the leading interior designer at the time, Paola Smith, and was executed flawlessly. It got them into the business and taught them a lot about yacht building. They began to get regular commissions, averaging two boats a year, then moved on to special projects like the largest sports fisherman ever built in the world (a 126 footer), and the special order they carried out for George Bacardi, a member of the Bacardi family.
"Bacardi had a few requirements," says Dane. He needed a 4-1/2' draft, a 25-knot cruise speed, and a 500-nautical-mile range. He couldn't find that in a fiberglass standard, so he needed a custom boat. We were the only yard that would guarantee the boat's draft. He said, 'If it draws more than 4'6", I can't use the boat,' so we guaranteed that if it was over 4'6" we would give him all of his money back. You know, that's kind of a risky proposition, but when you have the engineers that we had, and the ability to manage the weight and drafts in naval architecture, it wasn't a risk for us, so we took that job. "
Needless to say, Trinity kept their money, and their reputation grew quickly. They have just negotiated the sale of their 30th boat, six of which have been to repeat customers!
Thirty yachts since 1990 is an impressive number, considering the size of the orders. How do they get new orders, other than from brokers or repeat customers? Dane says they spend a great deal of money on advertising and PR, and get numerous inquiries a week.
Trinity's Greatest Challenge
Although Trinity had no problems competing with the aluminum, the piping, the steel, or the naval architecture of Feadship, their greatest challenge in acquiring a "yacht pedigree" was to provide European craftsmanship for the interior millwork. It has taken time, training, and millions of dollars of investment in custom woodworking shops, and then an extensive search to find capable people who could install the interiors in their shop.
But the effort has certainly paid off. Of the seven boats currently under construction, the three 157-footers are all for Americans who in the past would have probably gone to Europe, says Bill Smith, Trinity's VP. "It's funny," he says, "It's taken us 13 years to become an overnight success!"
"And," adds Dane, with the Euro's current strength against the dollar, we're getting many more inquiries from Europe right now."
Part of the reason for the company's increasing popularity may be attributable to the four to six Trinities that have been actively chartering in the Mediterrannean over the past few years, giving Europeans increasing exposure to the luxury line.
How Charter Affects Sales
"We think the charter business is exposing a lot of people to the yachting lifestyle who 50 years ago wouldn't have been exposed to it," says Smith, "not because they didn't have the money, but because 50 years ago yachts were private, so if you didn't know the owner, you didn't get on board. Today, there are a lot of people who can afford yachts - those who have made a lot of money in entertainment, business, or sports. We've seen some studies, that of the people who can afford a yacht over 100ft, less than 3% own one," says Smith.
There's a lot of upstart potential to the market, says Smith "These people may not know anybody who owns a yacht," he says, "but all of a sudden they decide, 'you know what, we've got a vacation coming, let's try a yacht charter. Our cruise ship was nice, but let's see if we can strive for even higher luxury' and that's what the yachts are for - the very high-end people. It affords them a sense of luxury that the finest cruise ship in the world can't provide."
The Best of Both Worlds
The yacht owner or charterer can now go on a two-week cruise and work for a couple of hours in the morning, check the office, and take care of e-mail. By 7 or 8 am, he has breakfast, maybe spends an hour on phone calls, and he's done. He can go fishing if he wants, but anyone can get in touch with him if they need to.
"The people that can afford these boats," says Smith, "have long ago mastered the art of delegating jobs. All they need to do is be involved in some decision-making, but the day-to-day operation can be handled by someone else."
Smith says that with new developments in satellite communications and satellite TV, and the ability to generate their own fresh water and electricity, yachts can visit very remote areas but still maintain their guests' high standard of living. In addition, cryogenics can be used to freeze meats and seafood, eliminating the risk of buying uninspected foods.
"In fact," says Smith, "we just heard this about a yacht that visited Russia this summer. The guests went to Norway and Sweden, and then entered Russia in the summertime. They would get off the boat and do the Russian tourist things, and at night, would go back to their boat where they could have a gourmet meal, get on the Internet, check their e-mail, and call home!"
In the past, affluent people owned villas all over the world. The problem with a villa is that it's a fixed location. If the government changes, you've got a problem. If the neighborhood changes, you might have a problem. Or the family may say that they've been there 10 years in a row and don't want to go there anymore.
Yachts solve all these problems. With a boat you can go anywhere you want in the world and be in complete charge of your own domain; you can visit exotic areas without giving up air conditioning, fresh water, good food, and communications.
Chartering Makes Yachts More Valuable
Dane says that about 50% of yacht owners charter their boats to defray expenses. If the owner wants to go yachting for 10 weeks a year and it costs him $500,000, he will buy a 110 footer. But by taking advantage of the benefits of the charter industry, he can get over $500,000 in charter revenues; it allows him to buy a much bigger boat and still get the weeks he wants for his own use.
According to Smith, as the wealthy get to know the yachting business better, demand will continue to increase. He predicts that the same thing will happen that happened with the aviation industry, with fractional ownership plans coming along. Once people find out how much more business gets done by doing a fractional-time ownership, they will decide to purchase a yacht and when not using it, put it into the leasing business.
Many of the owners don't actually voyage on the boats, they don't do transatlantic trips. They're businesspeople. According to Dane, there is only one common denominator among all of Trinity's clients, and that is that they're all self-made: they're used to taking risks - analyzing a situation and taking action.
Many of these entrepreneurs are baby-boomers who don't want to spend all their time working. They want to enjoy the fruits of their labor and spend time with their families. The appeal of yachting, unlike say, golf or fishing, is that the whole family can enjoy being on a boat. One member of the family may want to go snorkeling, one may want to collect shells, one may want to just sun and chill out, and one may want to shop in out-of-the-way ports. There is a vast number of activities and "toys" to choose from, including fishing boats, jet skis, and wind surfers. Still, the whole family can share meals and spend time together. People who have been chartering these big yachts say the one aspect they really enjoy is the family time. There aren't many things you can find today that the whole family can enjoy, from grandparents down to 3- and 4-year olds.
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