Used Cat Market Going Forward

[smj]

Originally Posted by PhiSig1071

I may have misread or misunderstood your original post. I thought you meant that since 95% of the destroyed boats were Lagoon, FP, or Leopard that people would be buying other brands because the damage rate of those boats was somehow indicative of low build quality or poor safety in adverse conditions.

IE: "Lagoon, FP, and Leopard boats all got destroyed in the storm, lets buy a Knynsa or a Voyage instead because they survived and therefore must be much better quality."

Obviously a number of boats in the charter fleets were destroyed. Whether that causes a problem for buyers considering one of those models depends on how quickly and completely the charter fleet gets "restocked". If the insurance payouts and new charter owner incentives are good enough that they plan to get back to pre-Irma fleet sizes as soon as possible then yes, there will probably be a shortage of boats for private buyers. As for them going with a different builder, I think that's pretty likely if there is a shortage of build slots from the big three. I think people are more willing to switch boats than wait an extra 2-4 years.


But all that depends on what Moorings et al plan on doing with their fleet.

I'm sorry, I probably didn't word my post very well. It had nothing to do with quality of the build, just the shear numbers of the top 3 being in the islands as they make up the vast majority of the charter fleet.

[PhiSig1071]

Originally Posted by smj

I'm sorry, I probably didn't word my post very well. It had nothing to do with quality of the build, just the shear numbers of the top 3 being in the islands as they make up the vast majority of the charter fleet.

I understand your meaning now, but honestly I think there are too many variables going forward to make any kind of prediction about the effects on the new boat market.

As for the used market, I think this will have an effect on the used market, and I think prices will increase for some boats for the next five years. All the current charter fleet boats are between 0-5 years old, which means that there will be a slight shortage in used boats coming onto the market for the next five years.

We can assume that the storm had an equal impact across the age range of the boats in the charter fleet. This will be offset slightly by the greater chance of an older boat being written off due to a lower value, but I don't think that will have a significant impact on the age distribution of the vessels that are written off.

There will be a spike in boats at five years from now, because instead of an equal distribution in fleet age between 0-5 years there is going to be a slight increase in the number of 2017-2018 model year boats in the charter fleets in order to replace the boats that were lost, which were anywhere from 0-5 years old.

So I think there will be an increase in used prices for five years, followed by a drop in prices over a period of a year or two as the charter operators phase out the boats that were all added to the fleet at the same time to replace the boats lost in the storm.

[rabbi]

Originally Posted by Thumbs Up

The sooner that you can salvage one of these boats, the better. Everyone is still tiptoeing around this subject. If I could salvage one now, I might be able to save the engines and saildrives still, and there might be some lines and equipment left on it. In six months or so, no way. I want one now! but I don't want to go yet and I don't have the money. But maybe now I will be able to sell Thumbs Up and get a big FP to be my next project. or maybe a hobie cat...

The islands still seem to be in survival mode. Maybe I'm wrong but I think there is not many insurance surveys done yet. Without insurance survey no way of buying a project right now.

even if you could buy one: where can you fix her and how do you get there?

[MountainKing]

Originally Posted by rabbi

The islands still seem to be in survival mode. Maybe I'm wrong but I think there is not many insurance surveys done yet. Without insurance survey no way of buying a project right now.

even if you could buy one: where can you fix her and how do you get there?

I think it's like he said in the video. That the insurance surveyors, and repair companies are down there now doing the surveys, and the repair companies are probably cherry-picking the ones with the best chance for a profitable outcome. This is their jobs, you can be sure they're down there.

[SecondBase]

Originally Posted by rabbi

The islands still seem to be in survival mode. Maybe I'm wrong but I think there is not many insurance surveys done yet. Without insurance survey no way of buying a project right now.



even if you could buy one: where can you fix her and how do you get there?

Agree on survival mode comment.

Disagree on no way without an insurance survey. Unfortunately some of those boats in the photos self-insured and some may want out of sailing this afternoon in a big way. To find that boat you've got to find the seller. I'd post an advert looking to buy hurricane salvage boat any condition and then caveat emptor. Careful with your wording so you don't draw flames upon yourself. For someone with an overseas wreck, no way to deal with it, and let's be honest no way to undo the hurricane, you'd be doing a service. There is someone who wants your deal.

[Kentm]

Could the spread between owners versions and charter version cats tighten? I imagine most of the destroyed yachts are charter four cabin versions, and there has always been a premium for owners versions. Would that premium decrease because more charter versions were destroyed and thus more charter versions are needed? In other words owners versions stay stable in the used market, charter versions increase, especially in the first five year range?

[nwdiver]

I'm with the "you have a what? Where?" Insurance will cost 25-45% of value yearly........come back when you are rich.....

[Kentm]

It sounds like insurance is the key. What they choose to do will determine the market reaction. Maybe it's not the yachts that will determine the price, but the insurance that will determine the demand? Allocate x to purchase and y to insurance, if insurance gets more yacht builders get less? OK now my head is spinning.

[geoff326]

Re the premise that boat builders will be flooded with new orders from the charter boat industry maybe wishful thinking.
The investors in these boats will need to stump up with more cash for the replacements, as the insurance companies will no doubt only pay out on market value. This, together with a probable downturn in customers in the near future will mean the return on investment will be marginal to say the least.
To take the payout and run must be very tempting.

[PhiSig1071]

Originally Posted by geoff326

Re the premise that boat builders will be flooded with new orders from the charter boat industry maybe wishful thinking.
The investors in these boats will need to stump up with more cash for the replacements, as the insurance companies will no doubt only pay out on market value. This, together with a probable downturn in customers in the near future will mean the return on investment will be marginal to say the least.
To take the payout and run must be very tempting.

The charter companies rely on people buying boats for their program. If there isn't enough interest, they'll have to create incentives to increase interest. Moorings makes quite a bit on the whole process, they broker the initial sale, make money off the charter, then broker the used sale. They can't afford for the market to decrease. This might be a great time to buy a charter boat.

[nwdiver]

Originally Posted by PhiSig1071

The charter companies rely on people buying boats for their program. If there isn't enough interest, they'll have to create incentives to increase interest. Moorings makes quite a bit on the whole process, they broker the initial sale, make money off the charter, then broker the used sale. They can't afford for the market to decrease. This might be a great time to buy a charter boat.

You are presuming that any insurance will be availble for boat that are year round in the Virgin Islands..........

[GordMay]

Speaking about Florida citrus (devastated by ‘Irma’), Atif Kubursi, professor emeritus of economics at McMaster University in Hamilton said:

"... Pure economics tell you that if you have something in short supply, the price will rise. The extent to which it will rise depends on three factors.
First, the extent to which the supply has been knocked out,.
The second is the extent to which it can be replaced, say from Brazil or Mexico (sub' boat builders' names here). Mexico and other places are really in trouble.
And the third one is the extent to which people are going to go without ..."

➥ Higher orange juice prices on the way in wake of Irma's damage to Florida groves - Toronto - CBC News

This might just as well apply to post-storm(s) boat prices.

[PhiSig1071]

Originally Posted by nwdiver

You are presuming that any insurance will be availble for boat that are year round in the Virgin Islands..........

Aren't the boats insured by Moorings? Their price might increase, but in this instance were talking about a relatively small percentage of their total boats.

[tmccaffery]

I own a new Moorings 4000 / Leopard 40, but fortunately not in Tortola.

Actually, the number of Moorings/Sunsail/Footloose boats in Tortola is in the 200+ range, vs an average 20 - 30 boats in their other bases. So the losses in Tortola will have a tremendous impact on their total fleet. The big deal is that the contract between the owner and Moorings / Sunsail stays in effect until the boat is declared a total loss. At that point the contract, and the monthly payments end. So, Moorings / Sunsail have to continue paying the monthly payment while the boat's fate is being determined. If not a total loss, but too badly damaged to charter, the payments continue until the boat can be chartered again. This amounts to a real blood letting in terms of cash flow, which may, or may not, be adequately covered by business interruption insurance.

As far as ordering more new boats, it took almost nine months from signing a purchase agreement until our boat was actually delivered to the base it operates from. So, I just don't see how ordering more boats from R&C is going to get them delivered any faster without them expanding their plant & etc., which takes time and money. The bottom line is that the only way Moorings / Sunsail can re-stock their fleet in Tortola beyond what is already scheduled to go there from current production is to convince people that have purchased boats that have not been delivered yet to shift them from the base they wanted to have their boat at to Tortola. This may be a hard sale, although the contract gives Moorings / Sunsail the right to shift boats around. However, the delivery / re-delivery ports are defined in the contract. So, theoretically, a boat under contract could be re-allocated to Tortola, but would have to be re-delivered at the contract port.

[rabbi]

Originally Posted by geoff326

Re the premise that boat builders will be flooded with new orders from the charter boat industry maybe wishful thinking.
The investors in these boats will need to stump up with more cash for the replacements, as the insurance companies will no doubt only pay out on market value. This, together with a probable downturn in customers in the near future will mean the return on investment will be marginal to say the least.
To take the payout and run must be very tempting.

Depends on your insurance policy. Mine states hull value when I bought and thats what they pay out. If it was a new boat, the value would be for a new boat.


Some charter owners will take the insurance check and run.
But others will look at what this really is: a business risk. You buy a boat, put it into charter to earn money and make sure its insured. Pure business, with some emotional attachment because its a boat.
If this works out well financially, people will continue to do so.

But if insurance cost rises significantly and eats too much of the charter income cake, people won't put their money into charter boats. In that case I expect that charter companies will find creative solutions, as otherwise the whole charter industry will go bust. Maybe they will self-insure their owners, maybe they will have to move & store boats out of the risk areas, or maybe they will start to own their fleets.
I am sure chartering will become more expensive at the end.


I agree with the video interview that boat builders will have busy years ahead to restock the charter fleets. We will certainly see outrageous lead times and some rising list prices (they were sold out for months to years before Irma!).
This will also lead to an increase in asking prices for young boats, which are still fit for chartering or good enough for those wanting a new boat but unwilling to wait a few years for the build.



I expect demand for used cats (like those that used to come out of charter) will remain strong, as its driven by private owners / cruisers with a different usage pattern compared to charter fleets.
I don't see why a cruising couple should drop the idea of sailing the world just because of some well known local and temporary weather threat. Afterall this was no unexpected freak storm in the Med, this was a strong hurricane in a hurricane prone area during hurricane season.
Should this affect snowbirds who are moving with the season? Or those cruising the Med?
I don't think so. Unless we are going to see heavy rise in storm activity all over the world of course.



We will see how much this chaos will affect the market for older cats, those not made by FP/Lagoon/Leopard, and those not located near the Caribbean.

Maybe I should put my 380 on the market??