Full Speed Ahead

By Thomas K. Grose/London

British yachtmaker Sunseeker launched its biggest boat yet at last year's London Boat Show: an $18 million, 121-ft. (37 m) superyacht. So far, it has built three of them; two are under construction at its boatyard in Poole, England; and eight more are on order. That kind of demand surprised Robert Braithwaite, managing director. "If we had sold five or six by now, I would be very happy." At this year's show, the company unveiled two more big boats, a $4.8 million 89-footer (27 m) and a $14 million 112-footer (34 m)--smaller than last year's model but still within the important superyacht category.

Worldwide credit crunch? Faltering stock markets? Oil at $110 a barrel? Mere trivialities for the $25 billion yacht industry. Annual sales over the past five years have grown 10% to 15% and show no signs of tanking, thanks to increasing numbers of wealthy buyers from developing countries. In the fiscal year ending September 2007, Sunseeker's sales jumped 18.5%, to $473 million. And other yachtmakers are enjoying similar returns. Italy's Ferretti, for example, saw its production value jump 21% last year, to $1.37 billion.

The rising-sales tide isn't lifting all boats. Sales of smaller yachts are somewhat adrift. For instance, demand for Sunseeker's $550,000, 44-ft. (13 m) Superhawk 43 is languishing. "The top end is pulling the industry along," says Ed Slack, editor of International Boat Industry.

Sunseeker built 318 boats last year, but Braithwaite doesn't expect to better that pace five years from now. Why bother? He can keep revenues climbing by building bigger instead. Rapid growth in Asia, the Middle East and Eastern Europe, particularly Russia, is taking up the slack in the U.S. and Western Europe, where sales are softer. "An explosion in the client base" of high-net-worth individuals is generating sales, says Vincenzo Cannatelli, Ferretti's CEO. These aren't people who flinch at high fuel costs. "Many of our customers are making money from the price of oil," Cannatelli says, chuckling.

There are about 85,000 people worldwide with liquid assets of $25 million or more, and their numbers are increasing. Sunseeker's dealers in Dubai "will take anything we can give them," Braithwaite says. Four years ago, Ferretti's Russian market was practically nonexistent. Last year sales there hit $147 million. Rich Russians are following the lead of homegrown multibillionaire Roman Abramovich. He owns three yachts, including the 377-ft. (115 m) Pelorus, and reportedly has a fourth under construction in Germany--the aptly named Eclipse, which at 509 ft. (155 m) would be the world's biggest privately owned ship.

There are more superrich than there are superyachts to go around. Damn. "Production capabilities are running behind demand," says Joel Plasco, CEO of Collins Stewart, the private banking group that sponsors the London Boat Show. But scarcity doesn't hurt this industry. The small number of yachts it builds makes it less vulnerable to economic upheaval: manufacturers need only rely on a handful of customers. "It's more difficult for luxury-goods makers who have to sell hundreds of thousands of items," Cannatelli says.

Boatbuilding is highly labor-intensive, yet the industry's biggest players remain based in Western Europe and the U.S., where workers are well paid. Braithwaite compares it to luxury automobiles. "If you built Rolls-Royces in China, you'd never get another sale. The product has to be fantastic." Yachts are still mostly handcrafted, although manufacturers now rely more on new technologies to improve quality and speed production. Sunseeker has a tech center outside Poole where robots help churn out components, ranging from dashboards to furniture.

Customization rules in yacht-building. Onboard gyms and saunas are common, and some of the bigger yachts even have swimming pools. There are also megayacht toys such as small helicopters, minisubmarines, diving bells, and tenders that can accommodate sailboats and speedboats. Annual running costs--including maintenance, crews and berthing fees--tend to be 10% to 20% of the boat's price.

To meet the enriched demand, Sunseeker is spending nearly $30 million this year expanding its boatyards in Poole and nearby Portland. Ferretti spent some $74 million last year upgrading its operations to handle increased production, while Azimut-Benetti, another Italian manufacturer, is spending $323 million over the next two years on its facilities. So go ahead, pick your metaphor--clear sailing, running with the tide, full speed ahead--the yachtmakers have it going for them.