Are we being screwed by marina operators?

[aod]

I am probably well known on the forum for complaining about being screwed or ripped off by suppliers to the totting community and I still firmly believe this is the case.
I have in large part decided that boat ownership for me is prohibitive in that I simply can no longer afford it. It's much cheaper for me to charter every now and again and also sail with friends so the boats up for sale, the bank balance is already looking healthier and I'm flogging off 10 tons of spares, equipment, charts and the such like which I no longer need.

I heard the other day that Haslar is increasing it's berthing fees by 10% this year and that just about tipped the scales for me. The straw so to speak!

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[Sybarite]

Re: capital costs of a marina

(1) << approx £10,000 to build each berth >>

If building for oneself, I am sure you would not spend £10 k per berth. A lot depends on the size and the degree of sophistication.

(2) << Assume 30% pbit >>

If you remove the commercial element the 30% PBIT is not applicable. The notion of depreciation in this non-commercial context is also dubious. I would think rather in terms of constituting an asset replacement fund.

I would look at it the other way round. What size of a marina would you need in order that berthing charges were no more than than £25 per foot per year. At those rates I am sure you would have no problem in filling it whatever size it would be.

If there were some imaginative south coast council which would have the vision to say " OK we are going to give you this 99 year free lease on a site for a 3000 berth marina." (NB La Rochelle has 3000 berths and it is over 300 miles from Paris; what would the potential be to fill a similar sized one within 100 miles of London? ) Just think of the business such a marina would bring to the town.

Most French marinas are run by joint venture companies between the local chamber of commerce and an independent operator.

Just a thought.

John




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[alant]

Why do marinas charge/metre of boat, not / metre of pontoon? Many pontoon fingers are of similar lengths, but marina's charge/ length of boat. As long as there are no overhangs, surely these fingers should all cost the same.

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[EdEssery]

There's been empty berths in Shamrock Quay all season and also, I think, some up the Hamble as well. If they are pricing to the point of what the market will bear, then based on the empty berths, it's been reached....

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[oldgit]

Re: Poor Britons?

Can only speak of what I know.(Yes,I know this makes a change)Our local MDL marina and its competitors seem fairly full.They appear to be an attractive proposition to a large section of our boating community.Several other boatyards close by offer a half way house between them and much cheaper(but harder to access) local authority trots which nobody appears to want.My own little boatclub in dying on its feet because no one wants to slum it any more ie. laying own moorings etc. The cheap berths are out there if you search.



<hr width=100% size=1>If it aint broke fix it till it is.

 

[ParaHandy]

Re: capital costs of a marina

It's reasonable to assume that a new marina would require dredging, piling and other marine works which would exceed £10,000 ... the presumption is that the "easy" sites have long since gone?

I don't think you can assume a non-commercial outfit would not have to bear similar costs. The capital of the loan still has to be repaid etc

All the organisations from whom the land has to be rented - the Crown & local government - are only too happy to maximise the rent. Arguably they are as avaricious as the marina operators. I doubt that a free lease from either source would be likely.

French marinas are heavily subsidised ... enjoy it while it lasts!


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[MainlySteam]

Re: capital costs of a marina

I am not sure how one can create a 99 year "free" lease - it will certainly cost someone something. Unless the property was worthless, then in giving it the giver is foregoing the income the property could otherwise have earned. In the case stated the councils ratepayers would be foregoing the benefit of the earnings off the property for whatever other use it could be put to, which they would otherwise have realised either through a reduction in their rates or the application of it to better services for them. If the council wanted to encourage a marina to be established, then it should do so by cash grants or visible loans which are entirely transparent rather than being cosily confused from being resolved as a cost by the common man.

Similarly for the concept of a mutual where you state along the lines of people not expecting a return from the capital. Well, I do not really know what the difference is between my "investing" some money in a marina and not getting a return on it in exchange for a cheaper berth, and my investing the money in something that does give a return and paying more for my berth (there may or may not be a small tax advantage to me for the former, as unrealised profits on investments are not yet taxed). The only thing about mutuals is a comfiness of feeling that by one denying oneself a return on the capital you have at least denied some capitalist somewhere a profit - something about noses and spite and cutting perhaps.

John

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[PeterGibbs]

Re: Yes, and here\'s a worked example

A couple of years ago YM ran a lead feature on the launch of the Poole marina. I wrote a financial on it and the Editor kindly published it. I reproduce it here. For those interested, I think it gives a clear insight into what's happening. However you work the model, someone is making a killing!


"Marina costs – Poole (June edition).

Your editorial was well timed. What the harbourmaster told YM about a break even taking 10 years to achieve is patently not so. Whatever the works cost, say £1.0m, the carrying cost (interest) is £65,000 pa at today’s commercial rate (one over LIBOR) which equates to 2160 letting nights at £30 per pop (£35 less VAT). Put another way, the first six average value daily lettings over the year cover this cost. The project must expect a minimum 50% occupancy over the year, so the next 44 lets contribute nearly half a million pounds a year- easily enough to break even on all current costs, management and maintenance, and contribute to capital repayment. What do we bet occupancy will exceed 50%? It doesn’t add up, does it?

The nasty suspicion arises that whoever participated in this welcome development wants a large and early capital return. Well that’s the capital market for you, and we, playing the same rules will troop off in increasing numbers to the continent where a more long term and enlightened approach to capital paydown continues, mercifully, to be the rule. Could you really see the Calais Chamber of Commerce permitting a E50 charge (equivalent) per night in its marina? Nom d’un chien!"

I think this situation will only worsen until government steps in to regulate a clear abuse. Market forces are totally unable to correct this exploitation on their own.
Time to write to our MP's !

PWG

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[BrendanS]

Re: Yes, and here\'s a worked example

Do you really think your MP is going to have this high on his list, compared to other letter writers with more pressing complaints about tax credits not being paid, hospital waiting lists, no housing etc.

You may receive a polite letter in response, but if you show me an MP who makes marina fees a high priority in his next election campaign, I'll show you an MP about to lose his seat.



<hr width=100% size=1>Any sufficiently advanced technology is indistinguishable from a rigged demo

 

[jwatson]

Please tell me where, exactly, you saw a share price listed for MDL?

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[MainlySteam]

Re: Yes, and here\'s a worked example

<<<I think it gives a clear insight into what's happening>>>

Not to me it doesn't. I do not understand it and would appreciate an explanation of your case.

Although I am not resident in the UK, you may see from my bio that I have a particular interest in corporate performance and behaviour - hence my genuine interest (apart from being a keen yachtsman, of course).

John

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[neutronstar]

FT.com/Markets & Idecies I think it was

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[jwatson]

Can't be Tom . It is a privately held company. No share listing.

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[neutronstar]

Note to Old Git:

in the cold and distant North of England the cheap berths are NOT available no matter how hard you look. The marinas are nearly all full, and clubs are the only cheap option. They usually moor on the rivers and crime is so bad that you must pack all equipment up and take it away when the boat is unattended. There are not really any halfway houses with a pontoon, security but no services, such a mooring would suit me fine.

p.s. I'm an 'old git' too.

The contributor who listed the cost of a new marina (in Scotland I think) mentioned only the berthing. There is a tendency in these discussion groups to focus tacitly on the initial question posed and this is another good example. However the issue is often wider and I would be hoping to obtain 20-40% of profit (apart from property and land appreciation) from a marina's peripheral activities. By these I mean boatyard fees, hoisting, gas, electric, rent from the bods who have a lock-up on site, agents selling boats on site, fuel, AND don't forget the "casual user" who can pay 500% of the annual fee.

Also the long term planning of our rivers has not been co-ordinated over the decades. Our rivers have been raped of their rich wetlands (especially in the North) and the whole length of the river is often built up to ship level and parallel to the flow. So the cost of converting these docks into marinas with their high sides and concrete piles is not cheap. Much of the valuable tributary areas with good shelter have been built over or concreted out. Suitable docks have often been filled in (which is sad when one considers they were dug out by hand originally). Conversely if marinas are no longer needed in future they are not too difficult to change back to another purpose.

Which brings me back to my only two gripes on this issue:

I can't afford the current prices, and

If we could only plan ahead on an agreed course of action regarding waterways we would probably be able to do things smarter and cheaper but we would have to work together as a Nation or a powerful group of interested consumers.

It is easy to claim market forces justify all, but there really can be a better and more efficient way of doing things if folk are positive enough.

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[DavidM]

Nobody likes the thought of being exploited and yacht owners and users certainly make their feelings known on this point. I would question, though, the basis of the question posed "Are we being screwed by marina operators?" and the research carried out before asking the question. Have YM requested from Companies House copies of all the marina operators accounts and analysed them to establish their profitability? I would suspect that the answer is a clear NO. For those who are seriously concerned about this issue, I would suggest that you write to YM and ask what research they have done, which marina operators have they spoken to about the issue and ask them to present a balanced appraisal of their findings. I wonder also if all the contributors to the posts on this subject realise the costs involved in running a marina. Just a few for you to consider; Crown rent, staffing, insurance, rates, repairs and maintenance, utility costs, waste disposal, marketing costs, depreciation of assets, capital servicing and repayment costs and many more. As far as capital costs go, there are many factors to take into account; planning, environmental approvals and consents, dredging, piling, breakwaters, pontoons, utility services, safety equipment and so on...... You will gather now that it is not so easy to substantiate the claims of outrageous profiteering at the yachtsman's expense.

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[neutronstar]

The claims of being 'ripped off' are probably only an indication of contributors' anger at being a captive customer with few alternatives.

Some of us have been in business, and have a reasonable idea of the cost of running a marina. Also the cost to a club or council can be different as work can be done by members or by staff during quiet spells. Not all pontoons will require services and members can maintain their own finger jetty once the marina is in use.

The themes I see emerging in this strand however, are ones which question:

the lack of global planning or considerations of priority/scale at outset,
the difficulties posed when clubs, councils or small operators try to get involved, and
the way the current profit making bodies have a take it or leave it attitude once their lease is set and they must meet their shareholders' needs.

The suggestion that we should examine closely the books of the current operators to get a better idea of the problem is valid but their way is not the only way.

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[neutronstar]

Must have been another MDL. CN had three one minute indicies and only one of them was visible, (a blank graph came up for the other two listings).

Its not that good really, transparency would be desireable to the punter.

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[ParaHandy]

Re: Transparency ... ?

with the greatest of respect, information is available. Marina cpys are transparent. You just have to go and get it ...

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[neutronstar]

Re: Transparency ... ?

We were refering to the FT.com Business and Tools one minute listings for share prices from a posting higher up. (some are not quoted and some are blank).

I think you were under the impression that someone thought business and corporate returns were not available.

Transparency of corporate financial returns is another issue however: but lets not get into that one please (topical as it my be due to recent US court cases).

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[[2574]]

Re: Yes, and here\'s a worked example

John,

A 40% EBIT is not unusual in marina businesses. A lot depends on the blend of landside to waterside income on any one particular site. The main issue is capital remuneration for two reasons:

1) The capex requried to build a marina is HUGE - civil engineering is very expensive
2) The "cost of capital" is also huge because investors don't see the historic cost of the investment but quite correctly look at the Oportunity cost of Capital. And because marinas have the income characteristics of a property investment the EBIT's are capitalised at Reversionary rates similar to property investments. (PE equivalent of somewhere between 15-30)

So, imagine a marina turning over £2m, that might produce EBIT of £900k. Given a reversionary capitalisation rate of say 9% that gives a capital value of £10m. The shareholder will want a property income return of at least 7%, so £700k leaving £200k for tax. That's the economics in a nutshell. I'm sure it won't have escaped your notice that this is an entirely circular argument - but then that's the way of the world - shareholders want remuneration for current value, the opportunity cost, not the value x years ago.

Rob

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