Sailing into choppy waters

The yacht industry enters a more tempestuous time as the economy slows down

Wealthy people in China are developing a passion for sailing, but the weakening macroeconomy combined with the effects of the frugality and anti-corruption drive are creating a headwind that is preventing the industry from progressing fast.

A total of 800 million yuan ($129 million) of order contracts were signed during last week's China Rendezvous, an exhibition focused on a high-end yacht promotion held in Sanya, in southern China's island province of Hainan.

"The number was a little down from the 1 billion yuan order book in 2013. Actually, the order value has not changed dramatically in the past five years that we have held China Rendezvous," said Lily Chen, an information officer at the exhibition.

Sanya Visun Royal Yacht Club, one of the nation's biggest yacht clubs, told China Daily that it has more than 700 members. About 95 percent are individuals, while 5 percent are company members.

"Membership recruitment expanded most quickly in 2010, when Hainan was picked by the national authority as an 'international tourist island', and plateaued in the past two years because of the sluggish economic outlook," the company said in a statement.

Although the yacht business in China has not grown as rapidly as some industry insiders expected, it still looks to be in good shape, in Sanya at least.

Official statistics show Sanya as a destination now attracts the highest number of people in China from the international yachting community. In early 2013, there were 219 berthing yachts of which 142 were registered offshore. The city now has more than 800 berths at three mature marinas.

"More people are buying yachts for personal amusement, while the percentage of those purchasing vessels to conduct business and improve relationships with governments is falling, mainly because of the drive by the central government to eliminate corruption and emphasize austerity," said a salesperson of a well-known international yacht brand.

A Shanghai financier surnamed Qin ordered a 25 million yuan Sundiro yacht during the Sanya exhibition.

"I like yachting. It frees me from work pressure. I go yachting occasionally every year, off Australia, the Maldives or Mauritius. It is more convenient if I own my yacht in China," Qin said.

Massimo Perotti, president of Italian yacht brand Sanlorenzo, said: "I have confidence in the China market. In terms of its maturity and infrastructure, Sanya maybe scores 50 (out of 100) but, in terms of potential, it is 100."

Sanlorenzo was rated the second-largest yacht builder in 2014 based on its global order book, according to US magazine Showboat International. The company made a major step forward in exploring the Chinese market last year by setting up a joint venture with China's motorcycle manufacturer Sundiro Holding Co Ltd. It aims to build yachts from 36 feet to 66 feet (about 10 to 20 meters) in Hainan.

"I have developed many new markets in the past, including Mexico, Brazil and Japan. All the new markets start because having a boat is a status symbol. People are buying the big yacht to show their power and wealth," Perotti said.

There is also another possible drive, found for example in Italy, where yachting is regarded as a sports and lifestyle pastime enjoyed by not only the rich but also the mass public, he added.

So far in China, the high cost means only the wealthy can enjoy it.

Visun Royal Yacht Club charges 168,000 yuan to 25.8 million yuan in membership fees, which provide members with a yacht berth, chartering, training and a buying service.

Perotti said he is still optimistic about the outlook for sales. His company aims to sell 500 million euros ($600 million) worth of boats in China in the next 10 years.

"Maybe it will still take a little time for the market to boom, but not long. And you have to be here before it seriously takes off," he said.

GDP grew in Sanya by 10 percent to 37.3 billion yuan year-on-year in 2013, faster than the national average. Investment in the real estate sector surged by 27 percent, hitting 30 billion yuan. Local officials said housing vacancy rates would exceed 70 percent during the off-peak season for tourism, so the city needs another growth engine.

Xia Shenge, director of a local economic development zone, said it will take time to see how much yachting will benefit Sanya's economy.

"Currently, growth is mainly driven by the construction of yacht marinas. But we need a whole industrial chain, including yacht manufacturing, maintenance, insurance and training to support the economy sustainably," he said.

As for the future of the boating industry, most local people could not care less.

"You have all sorts of means to profit from the sea if you live by it. Also, Sanya is the most famous beach holiday destination in China. Any small business is enough to feed the family," said 47-year-old Su Mingdong, owner of a small car-leasing company.

"The only problem is housing prices. They have risen too much. I support the government developing the yacht business," he added.