Sail Ionian - Age of fleet.

[Mark-1]

When I used to charter every Summer from Sail Ionian the boats all did three seasons before being retired so you knew you were getting a boat three years or younger. (...and it always made sense to hire a boat in its first season AFAIC.)

I'm considering going back this summer and I just noticed that policy is gone and the boats are being kept way longer (over 10 years) with no obvious retirement policy.

So what's changed in the economics of chartering? Interest rates? The work load of commissioning new boats all the time? Did they run out of 'owners' willing to take the depreciation hit?

It's not a problem, I'm just curious why the change.

 

[marlint]

I think they have a mix of ages now so you can choose a newer one or pay less for something a bit older. When we chartered an older one last year was in great condition for its age.

 

[Tranona]

Most of their boats are privately owned or managed on a shared ownership scheme. The typical management contract is 6 seasons after which the owner takes over the boat. This type of contract is common to most charter operators and has been for well over 30 years. I bought my first Bavaria in this way 25 years ago. However the changes in the market and the economy mean that there are periods when this basic structure needs flexing. Most of the private owners for SI are British as are the charters and I would guess that both the charter market is flat and crucially the number of Bits wanting to buy a boat this way now almost non existent. Does not help that new boats have almost doubled in price in the last 10 year, partly general prices and partly a move up in size. The big expansion periods when lots of new boats came onto the fleets were early 2000s and mid teens. My boat was £76k fully equipped and delivered to Corfu. In 2015 a Bav 37 was probably around £110k. Noe it would be well over £200k.

One way of coping with these conditions is to extend the life of the boats and even use new contracts with existing owners rather than selling the boats off after 6 seasons. Similar thing happened to me. I took a 1 year contract after my 6 years were up as there was still strong demand for that model. However with hard used boats they do get more expensive to run as more bits start to fail. SI have an advantage here in that their general level of maintenance is higher than most operators and no reason why a 10 year old boat of the right type should not still be a money earner.

You are right - general economic factors are the reason for a change in approach.

 

[oldbloke]

We have used Sail Ionian a couple of times. My impression was that the boats we had were a bit older , but much better maintained than the other companies'.

 

[Mark-1]

We have used Sail Ionian a couple of times. My impression was that the boats we had were a bit older , but much better maintained than the other companies'.

All the time I chartered with them there were no boats over 3 seasons old and if you were savvy you'd book a brand new one which didn't seem to cost any extra. I remember talking to them at the London Boatshow before their first season and I'm sure their first fleet wasn't all new. (I got the sense they were going to run a Charter Firm as a restful retirement hobby job. Naive, I thought. How wrong I was, instead they knew exactly what they were doing and going out to rapidly build a succesful empire.)

I've just counted on my fingers and it was actually only five holidays over 4 seasons. At this distance I recalled a lifetime of summer adventures.

 

[Mark-1]

Bits wanting to buy a boat this way now almost non existent.

Thanks, I was hoping you'd comment.

...and yeah, it never made sense, even in the glory days. Every year they'd wave a spreadsheet under my nose to try and tempt us. Every time I'd squint and try to make it make sense. It simply didn't. It seemed to be just a way to farm the depreciation off. They clearly had no shortage of takers, though. I think people from London were willing to take an 8% loss per year in exchange for being able to tell their friends they had a Yacht in the Med.

 

[Tranona]

Thanks, I was hoping you'd comment.

...and yeah, it never made sense, even in the glory days. Every year they'd wave a spreadsheet under my nose to try and tempt us. Every time I'd squint and try to make it make sense. It simply didn't. It seemed to be just a way to farm the depreciation off. They clearly had no shortage of takers, though. I think people from London were willing to take an 8% loss per year in exchange for being able to tell their friends they had a Yacht in the Med.

No you misunderstand how it works. If you pay for the whole boat typically you would receive between 100 and 112% of its value each year plus your "free" holidays. The boats ;ose about half yheir value over 6 years. So a good return on investment. You could then sell it and buy another or take it over paying VAT on the written down value and use it. Alternatively you could buy half, get no financial return during the 6 years but free holidays. At the end of the contract you get the boat. In our case we paid the VAT and the boat was part of our retirement plan. We paid £36K upfront and £11k VAT (bit complicated as we bought in DM but settled in Euros 7 years later), Sailed it back to UK and after 5 years use sold it for £44k We borrowed at 4% interest only and that bought uss a boat 7 year's free holidays and a boat that had not effectively depreciated.

Numbers are bigger now and fewer people are interested in that sort of deal particularly since Brexit because retirement wandering around the Med is no longer sttractive.

 

[Mark-1]

Well, it's possible we misunderstood, this would have been in tbe office in the sunshine after industrial quantities of Mythos but I reckon I'd have spotted a 6x ROI over 6 years so there must be some significant costs/tax to offset against that 100%-112% or surely everyone would be doing it?

 

[Tranona]

Your comment about boat owners standing the 8% depreciation just does not make sense. The operator has to finance the boats somehow and few can do it out of their own resources or get finance to pay for the boats. Hence the absent owner model which started with a French scheme to help builders sell boats for tourist use in the early 1990s. It was very generous as private owners could offset the cost of the boat against income tax. The 6 season contract was part of the scheme. As I suggested it became the default way of financing charter boats. The 50% scheme that I used was a "cheaper" way of getting in. The other 50% was raised from a mortgage against the boat which was paid off over the duration of the contract so the boat came to me with full title.

I knew Neil quite well at that time and one of my options at the end of the contract with my operator was to have him manage it while I bought a new boat through him. His contracts were just as I described, but from memory the annual return was a bit lower on the full purchase option. So not sure what you saw, but going that route only makes sense if there is an adequate financial return either by way of a guaranteed income or free usage or both.

These deals only make sense if you can either fully use the "free" weeks or are using it to buy a boat for the long term and use it as a way of reducing your capital cost as I did

 

[LittleSister]

It surely all depends on how well the boats are maintained and looked after?

I 'rented' in the Ionian 3 times (variously 32' to 38' IIRC), and had no idea, and no interest in, how old the boats were. They didn't seem quite brand new (so one had no worries about the risk of putting on their first minor scrape), but they were clean, smart, tidy and (with one or two minor slip-ups across those three rentals) fully functioning and very pleasant to sail and to stay on.

I recall that Sailing Holidays used to have a number of decidedly 'mature' 27 footers among their fleet (possibly dating from when they first started up?), and these were very popular with punters as practical and cheaper options, to the extent that there was some wailing and gnashing of teeth when they finally decided to sell them off and focus all their fleet on larger and more recent models. I believe they had no problem selling them off, including some to people who'd been renting them year after year. I saw a few of them in use in Sailing Holidays' flotillas, and they looked fine (if not that shiny) and all those aboard them seemed to be having a very jolly time (perhaps even more so than those on the same fleet's bigger and glossier offerings?).

I have no problem with people seeking new boat charters if that's what they want, but can't see the point myself.

(My own boat is a not far off 50 years old MAB, and any recent-ish AWB boat seems a bit glam (though also rather soulless) to me, so do feel free to dismiss my comment out of hand. )

 

[Mark-1]

Your comment about boat owners standing the 8% depreciation just does not make sense. The operator has to finance the boats somehow and few can do it out of their own resources or get finance to pay for the boats. Hence the absent owner model which started with a French scheme to help builders sell boats for tourist use in the early 1990s. It was very generous as private owners could offset the cost of the boat against income tax. The 6 season contract was part of the scheme. As I suggested it became the default way of financing charter boats. The 50% scheme that I used was a "cheaper" way of getting in. The other 50% was raised from a mortgage against the boat which was paid off over the duration of the contract so the boat came to me with full title.

I knew Neil quite well at that time and one of my options at the end of the contract with my operator was to have him manage it while I bought a new boat through him. His contracts were just as I described, but from memory the annual return was a bit lower on the full purchase option. So not sure what you saw, but going that route only makes sense if there is an adequate financial return either by way of a guaranteed income or free usage or both.

These deals only make sense if you can either fully use the "free" weeks or are using it to buy a boat for the long term and use it as a way of reducing your capital cost as I did

No quarrel with any of that but it's not what I asked!

 

[Mark-1]

It surely all depends on how well the boats are maintained and looked after?

I 'rented' in the Ionian 3 times (variously 32' to 38' IIRC), and had no idea, and no interest in, how old the boats were. They didn't seem quite brand new (so one had no worries about the risk of putting on their first minor scrape), but they were clean, smart, tidy and (with one or two minor slip-ups across those three rentals) fully functioning and very pleasant to sail and to stay on.

I recall that Sailing Holidays used to have a number of decidedly 'mature' 27 footers among their fleet (possibly dating from when they first started up?), and these were very popular with punters as practical and cheaper options, to the extent that there was some wailing and gnashing of teeth when they finally decided to sell them off and focus all their fleet on larger and more recent models. I believe they had no problem selling them off, including some to people who'd been renting them year after year. I saw a few of them in use in Sailing Holidays' flotillas, and they looked fine (if not that shiny) and all those aboard them seemed to be having a very jolly time (perhaps even more so than those on the same fleet's bigger and glossier offerings?).

I have no problem with people seeking new boat charters if that's what they want, but can't see the point myself.

(My own boat is a not far off 50 years old MAB, and any recent-ish AWB boat seems a bit glam (though also rather soulless) to me, so do feel free to dismiss my comment out of hand. )

I'm sure I remember seeing the battered Sailing Holidays 27 footers and a mate chartered one.

As for new boat charters, I don't think many people care. At the time I just assumed it was cheaper to move the boats on after 3 seasons than to maintain them. I suspected that was the sweet spot in the depreciation/maintainance cost curve at that time. in much the same way that hire cars are typically newish cars. Certainly I wouldn't be willing to pay extra for a newer boat.

My original question was about what had changed rather than expressing dissatisfaction with the change. In much the same way as I'd be curious if Enterprise Car hire started renting out 12yo cars. I wouldn't care, I'd just be curious about why.

 

[benjenbav]

These deals only make sense if you can either fully use the "free" weeks or are using it to buy a boat for the long term and use it as a way of reducing your capital cost as I did.

I suspect the answer to ‘what’s changed’ lies partly in general economic conditions and partly in that there may be fewer folks who want to commit to doing the same thing for their main holiday every year for the next five/six years in order to justify Tranona’s comment as quoted.

 

[Bouba]

After 2008 the banks and nations couldn’t guarantee your deposit over a certain amount…so investing in companies (especially with a boaty theme) was another way to safeguard your money. Also in Europe there are (were) tax incentives to the buy and leaseback business model with the bonus of limited use

 

[tat27]

We've chartered with Sail Ionian 5 times and are back for another week in October. The boats are always extremely well looked after and spotless when we have collected them.
In addition they are a company (like Nisos & Vliho YC, who I have also used) who keep their promise of if something breaks, we will be with you in a fast rib asap, to minimise the impact on the holiday.
Some years ago, we used a charter company from Gouvia in Corfu and that was very different - 40 foot Beneteau with only 2 cups, no working mozzie screens and the anchor winch packed up after 3 days (& no mechanic available to fix it).
Hence we came back to Sail Ionian & I think they have had 3 new launches, this spring to add to the fleet.