Godfrey Zwygart

The pandemic has wreaked havoc on the transportation infrastructure since the beginning of the pandemic, with extreme disturbance on land (resulting in the disruption of supply chains) and sea shipments.

In the yachting industry, in 2021 new shipyard orders went through the roof in all segments of yachting, particularly in the mid-size and superyacht sectors.

For a good part of 2020 and 2021 many ships were stuck in harbor or on anchor, and couldn’t sail internationally. Goods were piling up in ports and warehouses. When ships started sailing again in small numbers container shipments were up five to seven-fold.

Between 2020 and 2021 domestic shipping rates for moving goods by road and rail in the U.S. were up about 23% and warehousing prices up 14%. Sea shipping went up 75% YOY. (Note: the sea carries more than 80 percent of the world’s traded goods).

Domestic prices in Asia, and especially China barely saw any changes due to a number of specificities. (Very efficient domestic logistics; very advanced network and infrastructures). International shipments prices were dampened by the belt & road rail system that reopened as soon as lockdowns were over.

With the pandemic over, the demand was still far outweighing the capacity of the freight sector, and transportation and logistics providers were still seeking big boosts in prices for contracts in 2022. (Contracts are annual and generally negotiated at the beginning of each year).

Shippers have been trying various ways to keep the transportation inflation at bay, such as consolidating more loads to minimize truck trips and renting truck trailers for storage rather than paying rising warehousing rents. But experts say companies have little choice other than absorbing the cost or passing it along to their customers.

Now it’s 2023 and the costs have kept decreasing since mid-2022 and dropped at the end of the year. They are now back to pre-pandemic level since March 2023.

However the inflation, as well as the rise in oil prices will have lingering effects for quite a while. According to the IMF data from 143 countries over the past 30 years, it appears that shipping costs are an important driver of inflation around the world: when freight rates double, inflation picks up by about 0.7 percentage point. Most importantly, the effects are quite persistent, peaking after a year and lasting up to 18 months.

Luckily shipyards that had full order books have been able to keep production, and are now able to ship yachts worldwide at reasonable rate since the second quarter of this year.

Pandemics and other catastrophic events are not new; what is indeed is the fact that they are now scientifically documented and quantified thanks to information technology. Should we ponder on the impacts and envision emergency plans for the future? Certainly some transportation alternatives exist when it comes to general goods shipped in containers, but when considering yachts, viable solutions are hard to come by.

Godfrey Zwygart, GMBA China & Asia
Tel: +86 188 0899 8617
Email: godfrey.zwygart@gmba.blue

Disclaimer: Global Marine Business Advisors is a registered legal entity and is a network of independent marine industry advisors. In all articles the opinions expressed are those of the author and does not necessarily reflect those of GMBA.

(And why most foreign enterprises have failed on the Chinese market)

It is a fact: In the last ten-plus years, since the start of the yacht market growth in China, many western companies with great expertise in the marina field have failed miserably to secure any consistent and long term contracts. In this article I try to examine the Chinese market specificities and the obstacles companies face when trying to enter this market.

First a few numbers to get a perspective: China has roughly 25-30 marinas in operation (9 of them are located in Hainan province) with probably a hundred more under planning or construction. The total number of yachts is estimated to be around 20,000. Most marinas are small in size and few offer more than 300 berths. With these figures why do foreign companies have a hard time getting a share of this market?

MANAGEMENT

Major hospitality chains have done extremely well in China, with thousands of hotels managed by foreign brands, under very well established and recognized structures and management systems. So why are these systems not effective for marinas? The problems are multiple.

• Size factor: most marinas are small and often built as a satellite to real estate projects and therefore operations are hardly financially viable. Smaller promoters do not have the habit of hiring or contracting foreign companies to handle their business, and usually prefer to remain local. On the other hand larger marinas are often state owned, and for various reasons governmental bodies will prefer to deal with local corporations.
• Financial control: Chinese companies have very strict administration and control systems and usually want to keep 100% control over finances. At present western management contracts mainly offer a package, whereas the management company has full control over the expenditures and operations. In addition they are often expensive. This cannot work with penny conscious medium size Chinese companies, unless it has been proven effective in terms of financial return. So far most marinas in China at present (except for a select few) have the reputation of not being profitable.
• Fear factor: Mid-size Chinese entrepreneurs like to work with people they know well whereas trust comes from years of experience. So a Chinese boss will rather put his trust in people he knows for years (often relatives) even if these individuals are clueless or inexperienced about the marine business. In addition investors with little or no international practice will be fearful of communication problems that may arise in dealing with foreigners.

DESIGN & EQUIPMENT & SERVICES

Designers still have a good card to play on this market, providing they have been on the Chinese market for years and have a good, proven track record. Hopefully in the future, larger corporations will be investing in marinas and the market may well offer increasing opportunities.

Equipment suppliers (pontoons, ancillaries, etc.) are facing several serious obstacles.

• Firstly, they rarely have a Chinese entity which means they can’t issue local invoices, and payments need to be made abroad and in foreign currency which for local companies is very troublesome.
• Secondly, they seldom have a local production unit, which in turn means higher costs due to taxes and shipping.
• Thirdly, equipment is not rocket science and local companies are learning fast. Some of them even expanded and have become very tough competitors on foreign markets.

In terms of yacht services, the market is extremely tough. Price competition is very fierce and there is no organization or professional federation to enforce consistent pricing. The small guy next door can always offer a better deal even if he barely makes any profit and if the service quality is not on par with what I would call professional yacht services.

CONCLUSION

The Chinese marine and yacht market is undoubtedly gigantic and can offer enormous opportunities. However the access card can be excruciating and pricey. One should be prepared to be cost-effective, have personnel that can communicate perfectly and is familiar with Chinese business habits and customs, and overall be extremely patient, resilient and adaptable. An easier path to market access is establishing a long term partnership with a Chinese company, bringing branding and technical knowledge while benefiting from local experience and production capability.

Godfrey Zwygart, GMBA China & Asia
Tel: +86 188 0899 8617
Email: godfrey.zwygart@gmba.blue

Disclaimer: Global Marine Business Advisors is a registered legal entity and is a network of independent marine industry advisors. In all articles the opinions expressed are those of the author and does not necessarily reflect those of GMBA.

Fires are one of the most dreadful hazards for yachts and marinas, and here is why:

• Fire is scary and might create panic in passengers and crew
• Most yachts today are in FRP and when burning produce toxic fumes and spread rapidly
• In harbor, fire can easily spread to nearby boats
• Fire damages can be extremely costly

In recent years we have witnessed an escalating number of yacht fires occurring worldwide. Why do suddenly fires seem to become so common? I believe there are several factors. Firstly of course is the development of communication. Whilst in the past fires might have remained a local issue unknown to the rest of the world, today with the advent of social media these hazards quickly make the buzz on the internet. Secondly is the tremendous growth of the boating market; it has probably doubled in the last thirty years and there are increasing numbers of marinas, packed tightly with boats side by side. Thirdly, in the past most crews came from the sea-trade and had professional training. But nowadays, while super yacht crews usually have serious education, the high demand means that many small boat owners are amateur boaters; and new crews are stepping straight into the industry without real professional background, and may lack training and systematic safety reflexes.

Fires are a terrible threat for marinas and even those with excellent facilities are at risk. So marinas need to be prepared and be fitted with proper safety equipment in accordance with laws and guidelines. In addition to standard fire stations, professional marinas should also consider owning an aluminum work boat fitted with a foam fire pump and stainless grapnel and chain (to tow boats if needed) as well as a dedicated fire golf cart which is the only way to access any point in the marina very quickly. That allows attending shortly from both shore and water to contain a fire until the fire brigade arrives. Fires ought to be contained within minutes, especially with FRP boats. Once FRP catches fire it is extremely difficult to handle and it spreads very fast! It is equally important to carry out frequent fire drills, and to organize training sessions with the local fire department. Large marinas should have 24H watch, and patrols through the premises even at night. This will also avoid other accidents such as boats sinking during the night.

Despite all precautions the risks remain very high, even with proper equipment and training. The problem is that fires nearly always occur on boats, not on the docks, and usually due to lack of knowledge or negligence from the crew, as well as lack of maintenance. Many in-harbor fires occur when nobody is on board. In such case it is frequently due to power lines, shore power supply or batteries failure. Personally, I only saw one case of small shore fire, in a garbage bin. All other incidences were always onboard a yacht.

So what can marinas do about it? Education and prevention are the keys. And these should not be limited to marina staff, but instead involve yachts crews.

For example there are a lot of procedures for preparing a trip, starting engines etc., but actually very little for safety checks or procedures for leaving a boat after a day’s work. While on leave-aboard yachts fires are usually accidental and happen in the galley or are caused by gas leaks, on day-boats the day crew should be given a step-off checklist. Additionally all boats should be equipped with sensors and detectors for temperature, gas, etc… Usually on medium size boats these are autonomous devices and crews/owners often forget to change the batteries as required or check regularly to make sure these are working properly.

Training can be done by organizing quarterly meetings and events for crews; for example a morning meeting with some reminders about the marina services and regulations, followed by some safety advice and training and an afternoon of fun events. Crews will love it if you close the day with a buffet or a crew party. Moreover this builds up team spirit and enhances communication between the yacht club and the members.

Share your knowledge with boat owners (and they might as well be happy to share some of the crew training costs). Keep in mind that if a boat is damaged or lost, the legal responsibility is on the captain but the financial burden is on the owner. Insurance companies cover only part of the losses.

Keep safe!

Godfrey Zwygart
Email: godfrey.zwygart@gmba.blue or info@gmba.blue
Mobile:+86 188 0899 8617
Website: www.gmba.blue

Disclaimer: Global Marine Business Advisors and its associated website www.gmba.blue are not registered legal entities. GMBA is a network of independent marine industry advisors. In all articles the opinions expressed are those of the author and does not necessarily reflect those of GMBA