Charter revenue, does it cover costs?

[obmij]

Hello all.

As per title. We are considering purchasing an boat to keep in the med (eastern) & were wondering if it is realistic to expect charter income to cover costs. This would just be running costs / maintenance and would not include a return on capital.

Standard charter sailing boat. Probably around 36ft but could go up or down.

I assume a few of you have done this. Would you mind sharing experience and perhaps sums?

Cheers

: - )

 

[Minerva]

Do Sunsail (et al) still do the scheme whereby you 'buy' the boat, they run the charter side to cover the a % off the loan costs then after X years you get 100% ownership the boat?

On the surface it would feel a more satisfactory method than handling all the customers yourself

 

[bedouin]

A yacht in full time charter will cover its costs and give a return on capital - otherwise no one would do it. The caveat there is getting the right yacht with the right charter outfit. My BIL has done this a couple of times at the larger end of the charter market - based in Croatia - and is happy with the returns (i.e. gets a reasonable return on capital when all costs are considered over the lifetime).

 

[Tranona]

As an individual owner, no. In most countries it is difficult, if not impossible for an individual to operate a charter boat - combination of legislation and pressure from existing operators in a market where there is over capacity.

The only way is to buy through a charter management scheme as I did. However it is a risky business and you do not "own" the boat in the sense of having control over its use while it is on contract to the operator. Your "reward" is "free" holidays and either a cut price boat at the end of the contract - typically 5-6 years or an annual return on your capital then the boat at the end. Schemes vary in detail but those are the principles. Even with a busy season it is difficult to make real money. I chartered my boat after the end of the contract, paying a commission to the manager and my surplus was around 3000 euros!

36' is too small for a Med charter boat now, very few new boats under 40'

 

[Bobc]

To make the sums work, you need to be able to use your allocated number of weeks and calculate that as money you have saved by not having to charter yourself.

I'd you can't use the boat for at least 6 weeks per year yourself, it's probably not worth doing.

 

[Tranona]

Yes, the deals are nowhere near as good as they used to be, partly because of the increase in size and cost of the typical charter boat. When I bought mine I paid just under 50% which I financed through an interest only mortgage against my house. 2 weeks charter cost equalled annual interest charges! The big gamble is what you do at the end of the contract as the boat ill likely be worth less than you paid and difficult to sell if you want out. Worked for us as we kept it another 6 years and got back more or less what we paid.

There are other ways of getting a good boat economically, particularly in a syndicate, but these are probably less common now with the post Brexit restrictions. However there are some small operators who offer more flexible contracts with more "you" time while retaining the advantage of offering a management service.

 

[obmij]

Thanks all.

Just to clarify - the intention is to use a smaller charter broker / management company. They do exist as we are chartering through one and many years ago I used to work for one (as a skipper & general vessel prep & repair bod)

The boat would not be new, but < 10 years old. We would use the boat ourselves (but not as much as 6 weeks / year).

I suppose the question really boils down to management fees and commissions & how much they eat into charter revenue. I will obviously ask the question of management companies but it is helpful to have information from those who have actually been there. I'm assuming a management company will be pretty optimistic regarding revenue and you don't get much of an idea of costs as a charter client or indeed the paid skip driving the boat / brandishing a spanner.

Tranona - you mentioned a surplus of 3000 Euros. That was a busy year and after all costs deducted? Did you use your boat for many weeks in the year?

 

[Tranona]

16 weeks in the Ionian. A bit less than when she was newer at typically 20 weeks a year. In my costing that included everything for the year - berthing insurance, annual permit, inspection, liferaft service and so on. The booking commission was 20% and turnaround costs about 250 euros a booking plus the inevitable minor running repairs. The weekly marginal revenue now based on the same size boat (37') and high season rate of 2400 euros and allowing for some repairs might be in the region of 1200-1500 per week. So 6 weeks gives 7-9000 euros and your marginal increase in costs would be insurance and annual compliance costs and this might make a contribution to your berthing costs.

However, TBH the market for a 10 year old charter boat in the med, particularly 36' probably does not exist. There is vast over capacity and chances of a single boat, unless it is really something unusual getting clients pretty slim. Even in the UK the number of private boats like that getting worthwhile business is small. In most countries like Greece and Croatia where the big demand is the cost of compliance with rules is high.

 

[obmij]

Thanks for the detailed and clear eyed POV

 

[dslittle]

This is our, very good and quite unusual, experience…

To cut a very long story short, we bought our first yacht, a Jeanneau SunDream in Greece about twenty years ago after a very pleasant weeks charter there. The ‘seller’ had helped us and I took him and his wife out for a meal to say thank you. The conversation (alcohol fuelled) got around to us thinking about buying a share in a yacht - another option in the OPs case…

I should have guessed the outcome when the next question was “why buy a share in a yacht when you could buy one outright and charter it”? Obviously he had a yacht to sell. He had a small (three yacht) charter company and wanted to realise some cash but keep the boat in charter. The next day we looked at the yacht that we would come to own for seven very happy years. He told me the price and we went home to do a bit of research and think about it.

Two days later, I rang him and said that we had a deal. He had told me that I, as the owner, would make €5-6k pa profit. It was at this time that we realised that I was talking € and he was talking £ - the exchange rate then was 1.5€ to the £!!! I couldn’t afford it.

A couple of days later I rang him again with another offer - if he thought that there was €10-12k profit over the next two years, he could keep the profit and deduct that amount from the asking price - a win/win I thought. That afternoon he rang back and said YES…

For seven years we sailed Oneiro for five/six weeks a year. She never cost us a penny in that time (we didn’t make €5k pa profit though) and we sold her for €5k more than we paid for her…

All in all a VERY good introduction to yacht ownership, but I really don’t think that it is typical or achievable in most cases. It can be done.

As a P.S. we became good friends with the ‘sellers/charter Company’ who are still in existence today.

 

[dunedin]

Re post #10 above, I suspect a lot has changed in terms of rules and regulations on charter in the past 20 years in Greece

 

[dslittle]

Re post #10 above, I suspect a lot has changed in terms of rules and regulations on charter in the past 20 years in Greece

Yes and no. The yacht was registered correctly as a Greek Charter Yacht in British ownership. As per my P.S. the Company are still in existence and chartering.

I did allude to the fact that we were very lucky to come to our arrangement as they were a small Company and not a large conglomerate. I have absolutely no idea if such an arrangement would still be possible but I will contact the Company, just out of interest…

 

[dslittle]

This link will show that the option is still available…

Pinnacle Yacht Sales - Buying a yacht as an investment

 

[bedouin]

I think too many people's opinions are coloured by one particular company and their sponsorship scheme. That scheme is not a total rip off as it in effect allows you to get free sailing and you shouldn't lose money but there are better ways of doing it - they just require a bit more research

 

[Poecheng]

This link will show that the option is still available…

Pinnacle Yacht Sales - Buying a yacht as an investment

As I was reading down the thread, I wondered if it would be Pinnacle. Met them very briefly in 2018 when visiting Corfu and I gained the impression (FWIW) of a nice, small, focussed outfit

 

[obmij]

Sorry for the late reply on this thread - just seen the new replies!

DS - that's a great story, and encouraging. That's pretty much the kind of arrangement we're looking for.

5 weeks a year would cost at least 8K so that's a pretty good return!