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Who's driving Asian yacht demand? Not China

Blueiprod | Singapore Yacht Show

Southeast Asia is fast emerging as the yachting hub of Asia, with industry watchers highlighting the potential in markets like Thailand and Indonesia as the 5th annual Singapore Yacht Show kicks off this week.

Singapore is already the region's established base for luxury boating, but limited cruising opportunities have seen interest spread to neighboring countries, said Andy Treadwell, managing director of the Singapore Yacht Show.

To be sure, there isn't a widespread yachting culture in Asia despite the region's growing billionaire population. Only 4.3 percent of the world's super yachts are based in Asia despite the region boasting twice as many ultra-high net worth (UNHW) individuals as the Middle East, Latin America and Africa combined, according to Wealth-X. A super yacht is typically at least 25-30 meters in length.

But there's plenty to be optimistic about.

"The [countries] I see the most potential in yacht growth [in are] Thailand, Indonesia, Philippines and Malaysia. That's often because of the pretty islands, yacht clubs, a strong tourism industry as well as a strong expat community who might have a history of yachting," said Tara Loader Wilkinson, Wealth-X editor in chief.

Wally 47, an Italian-made sports cruiser, will make its debut at the Singapore Yacht Show this year, drawn by the region's prospects.

"People are moving away from buying cheap production yachts and as the understanding of yachting develops and becomes more popular in Asia, people are moving onto quality boats," noted Wally brand ambassador Henry Goulding.

Cruising destinations

Southeast Asian islands, renowned for their beauty, have been a steady source of tourism for the region, and the yacht industry plans to capitalize on that. The World Travel and Tourism Council expect Southeast Asia to be the fastest growing sub-region globally over the next decade.

"With so many islands, and its proximity to Chinese customer base, the Philippines has tremendous potential. The Andaman Sea around Phuket in Thailand also offers great cruising, and when the Burmese islands become more accessible, the Phuket-Krabi area can be a real launching point," said Simon Arrol, managing director of marina development firm Arrol.

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For Malaysia-based dealership Pen Marine, Indonesia remains Asia's most interesting market. The country's 17,000 islands make for perfect yachting destinations and are a prime mover for sales, explained managing director Oh Kean Shen.

But without a solid infrastructure base, very little yachting can happen, warned Arrol. "The ruler of Dubai famously once said 'build it and they will come.' He was right, and I think the same will happen albeit on a smaller scale here if we build marinas."

He points to Sri Lanka, where a number of marina projects are currently in the pipeline, including one in Colombo Port City. Thailand's capital city Bangkok is in desperate need for a super yacht marina, he warned, as it could become a key base for cruising around the Cambodian and Vietnamese coastline.

Government regulations

Growth in the region's most prosperous markets, Thailand and Indonesia, is currently impeded by government policies. Captains and crew can only remain in Thailand for a maximum of 30-days, and only Thai-flagged vessels are allowed in the charter industry. Meanwhile, Indonesia has Asia's highest import tax for yachts at 45 percent.

As both countries open up, not only will demand increase, but the domestic economy should also see a boost, noted Treadwell. For example, the cost of fresh flowers on a yacht in Thailand comes to a whopping $100,000 a week, which will certainly benefit the local industry, he said.

Yachting is a sector driven by governments, echoed marina expert Arrol.

"Asian governments must recognize the desirability of super yacht operations because of the high-end tourism it attracts and the direct employment it sustains. Moreover, it attracts investment and expedites development by offering marina developers a one-stop shop for planning application."

ASEAN vs China

ASEAN's potential may come as a surprise to those expecting China to top regional demand given the country's booming pace of wealth creation.

"There are double the number of UNHW individuals in China than Southeast Asia nations combined and there's certainly enough room in China to build marinas and berth yachts, but there isn't yet a culture and understanding of yachting to drive the sector," said Wilkinson of Wealth-X.

Other inhibitors to yacht demand in China include President Xi Jinping's anti-graft campaign, a consumption tax on luxury goods and the lack of local experience when it comes to crew staff.

"Yachting hubs will form in areas that have a stronger relationship with boating and luxury tourism like Thailand and the Philippines. Or in regional hubs like Singapore that stand at the crossroads of these destinations," Wilkinson added.