Challenges and opportunities for 2018
Our analyses of the yacht industry state and luxury market
Looking back, 2017 was an interesting year for the yacht market, with some economic uncertainty, new trends and emerging markets changing the face of the industry
The yacht market is always a challenging market; sales of such enormous size and price cannot be easily predicted, and things can change very quickly, even after months of negotiation. Naturally, the economic climate has an impact on the luxury market.
In spite of macroeconomic pressures, however, there has been a significant increase in large new-build projects; the 70 metre-plus market is now growing at an incredible rate, with a predicted fleet increase of over 36 percent in the 70-100 metre range by 2020.
Supply is still exceeding demand, so the yacht industry remains a buyer’s market
The new-build market changes
The new-build market is growing substantially in the larger yacht segment; which means that by 2020 there will be a fleet increase of nearly 49 percent. This large yacht segment is fiercely competitive, and there are a number of good quality shipyards targeting the sector.
These construction projects incur significant costs for shipyards, so we are seeing far fewer yachts being built on speculation than in the lower end of the market. The mid-range market, which covers the 40-70 metre range, has remained relatively stable, particularly for the well established European pedigree yards. Unfortunately, we have noticed the demise of many US shipyards; even US clients seem to prefer to build their yachts in Europe.
2017
Overall, 2017 was a fairly mixed year, with periods of peaks and lows. Supply is still exceeding demand, so it remains a buyer’s market. Selling prices are stable, and we actually saw a slight increase in the value of the yachts sold in 2017. We also noticed an increase in the number of sailing yachts sold throughout the year, though this is still a very small share of the market, at just over 10 percent.
Recent trends in the market
Whatever happens in the marketplace, we are always making efforts to find new clients; they may come from established markets, but may not be familiar with yachting yet, or they could be people from newer markets, such as Asia. We participate in luxury lifestyle and yachting-focused events, while we also work with local partners to make connections, as well as local or international publications to promote our brand. In recent years, we have focused increasingly on our project management division, ASSET V Yacht Manager is promoting our experience and the expertise of our parent company, H Vassallo, with whom we work closely on large projects and have won numerous new contracts in this area.
I think we’ve all agreed that the luxury market is not what it was. The rise of emerging economies and the growing global middle class has changed luxury beyond recognition. The last 10 years has seen a relentless period of unprecedented growth for the global luxury market as a whole. When you scratch the surface, luxury growth in recent years has been largely sustained by emerging markets such as China and Russia. But rapid growth necessitates rapid change. New opportunities have changed traditional market norms, forcing luxury brands to adjust and adapt.
"As brand marketers we need to believe that we are at the very beginning of our journey, and not at the end of it. "
1. Tech Makes A Real Impact
Tech’s appeal to the luxury audience is clear – the world’s wealthiest people are also the most likely to own the best tech, and everyday items such as phones, tablets and phablets have become luxury products in their own right.
The technologies that drive these devices are relatively democratised, so the real differentiator for the luxury audience comes in the look, feel, design, and adornment of the hardware
What will the future of the luxury look like? No-one really knows yet but it is both simultaneously exciting and frightening in equal measures.
2. The Rise Of The Luxurian- Becoming a thought leader
The luxury audience is becoming less interested in attaining status from labels or from a price tag. So if luxury brands can’t compete on monetary value, they need to find worth and substance elsewhere.
We’ll see more of this in 2018. The luxury audience is intelligent and curious.After all, it’s the worlds of history, science, art, geography, the philosophy that provides inspiration to the luxurian in their own daily analysis of the world. Brands should take a leaf out of their audience’s book if they want to create the kinds of stories worth discovering.
3. The Explosion of Luxury in Malta
In 2017 the Maltese luxury market rose by 25% and is forecasted to grow further.
Ignore it at your peril. There are a multitude of reasons for this, but one of the biggest is that Malta’s population of ultra-high-net-worth is growing at an impressive rate.
“ Whilst this consumer base is eager to be impressed, customers are also ready and willing to switch allegiances ”
How will things change in 2018? Well, whilst this consumer base is eager to be impressed, it also means we have customers ready and willing to switch allegiances on a whim. Brands, therefore, need to recognise the need to build loyalty. That starts with data and research – so far so underused in this yacht market.
4. Saying Hello To Henry (High-Earners-Not-Yet-Rich)
In 2018 you’ll want to meet HENRY – the gatekeeper to the luxury market and the future of ultra-affluent consumers.
Although HENRYs spend almost half as much on luxury purchases in comparison to ultra‐affluents.HENRY males, in particular, are increasingly turning the heads of brands. With their high disposable incomes, highly driven attitudes and a desire to spend on exclusive products and the best experiences, this demographic is driving luxury brands to expand their offerings and boost the service that they provide.
“ HENRYs prefer to spend it on experiences and lifestyle enhancing products ”
And as attitudes shift, priorities shift too. Contrary to traditional spending habits such as investing in a property, HENRY's now prefer to spend it on experiences and lifestyle enhancing products.
It’s clear this demographic is disrupting the luxury market, so for 2018 brands need to reassess how they connect and communicate with HENRYs, and what it means for them.
5. The Sharing Economy Goes High-End
The theory behind the sharing economy is very rational: people understand the costs and benefits of owning a product and now even a yacht versus simply using it. The experiences and the activities that we take part in, shape who we are.
The new generation wants multiple experiences and options. They have a desire to be spontaneous, without the pressure of permanent ownership. Whether that’s flying via private jet to Ibiza one weekend, staying in a luxury ski chalet the next, or hopping on a yacht a few weeks later – all with a luxurious wardrobe to match.
“ It’s this sense of variety, uniqueness and individuality that the next generation of affluent is looking for ”
It’s this sense of variety, uniqueness and individuality that the next generation of affluent is looking for. Traditionally luxury goods may have been a reflection of our identity, but experiential luxury is now seen as a true reflection of ‘brand me’. Uncovering unique experiences makes us much more individual than owning the physical goods themselves.
6. Embracing the Digital
It is often assumed that all brands are online, but one sector is still a step behind. Luxury.
Historically luxury companies have been hesitant to make the online leap, with fear that it signifies the contrary to a luxury retail experience – lacking intimacy, personal touches and above all, exclusivity.
“ Exclusivity has always been the traditional heartland of luxury brands, so successful moves to sell online will leave this perfectly intact ”
But the next generation of luxury consumers are here. They are younger, digital-savvy and have higher expectations of brands. Not only do they expect brands to be available online, but they also expect a seamless experience to go with it.
Exclusivity has always been the traditional heartland of luxury brands, so successful moves to sell online will leave this perfectly intact. By fashioning online stores that showcase exclusives, rather than the full product range, consumers remain eager to buy.
This ‘fear of missing out’ on a limited range intensifies traditional exclusivity to create a new kind of demand, so brands can retain their elite status.
Far from marking the death of authenticity and style, the online world can facilitate new evolutions. And in a sector that has always praised being at the top of the pack, this can be no bad thing.
What does the future hold for ASSET V? We work in a service industry, so the most important thing for us is people; thankfully, we have a great team at Asset V, and we want to ensure that they have all the support and efficient systems available to allow them to do their jobs effectively. Currently, we are busy working with several partners from various sectors, in order to enhance our exposure, attract a new customer base.
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