For most, owning a yacht is a dream come true, but of course, there are plenty of annual expenses and ongoing costs.
Many yacht owners turn to charters to offset these costs. But do they actually turn a profit?
In the majority of cases, the owner’s end goal isn’t profitability. Instead, they own the yacht for pleasure and to entertain friends and family. Charters, thusly are a great way to bring in income when the yacht isn’t in use, for tax advantages, and to crew your yacht for ongoing upkeep.
But let’s say your goal was profitability. Can you turn a profit from owning a charter yacht?
In short, profitability is dependent on a number of factors, from how much time you plan to spend onboard, to your location and the type of yacht you own. So yes, it is possible to profit from owning a charter yacht. But profitability does require careful planning, the right crew, a charter broker that can help you plan for success, and a bit of luck.
Owning a Charter Yacht: Operating Costs
In the industry, a successful yacht typically books 12 weeks of charter per year. Weekly charter rates can range widely, based on the type of yacht, how new the yacht is, the size, etc. Ultimately, if you plan to be profitable, what you earn in those 12 weeks (and remember, you may book fewer than 12 weeks), would need to bring in more than operating costs.
That’s what complicates profitability. Operating a superyacht is very expensive. Based on industry estimates, a 160-foot yacht typically requires about $4.5 million in operating and maintenance costs per year. They include:
- Crew: Salaries and recruiting costs for captain and crew are some of the most significant annual costs for yacht owners. In 2020, an industry survey found that captains of superyachts averaged about $200,000+ per year. Ultimately, a crew of 8 on a superyacht can cost from $600,000-$900,000 per year.
- Fuel: Fuel costs, especially for motor yachts, eat into profitability. Larger yachts typically use about 150 gallons per hour, when cruising at 12 knots. Therefore, if you plan to operate at 600+ hours per year, fuel (which includes tenders and generators) can easily cost $400,000 per year.
- Insurance: Insurance for a superyacht can climb to nearly a quarter of a million dollars. And chartering the yacht may require a more costly insurance policy.
- Dockage: Dockage is typically sold per foot, and therefore, larger boats have higher dockage costs. During peak season, a 180-foot yacht can expect to pay about $1,000 to $5,000 per night. Plan to spend up to $300,000 in dockage costs per year.
- Maintenance: Repairs, upkeep and maintenance is another cost center. A large yacht typically requires more than $1 million in maintenance per year.
Bottom line: Because the operating costs are so significant, many owners use charters to offset these costs and also to lower the cost of their own use of the boat.
Financial Advantages to Chartering Your Yacht
Generating income through yacht charters is, of course, very important for profitability. But there are many of financial aspects of charter yachts that add to profitability – from upkeep and maintenance, to tax deductions.
Here are some of the reasons chartering a yacht makes financial sense for owners:
By chartering your yacht, you’re essentially turning the boat into a business. Therefore, maintenance and fuel costs can be deducted. In some cases, repairs and new equipment up to $1 million can be deducted. This will also help to offset costs of ownership.
When you hire a crew to manage your yacht, it’s well looked after. Maintenance is performed on time by experts. When maintenance is skipped, it can quickly add up. Regular maintenance can help keep your charter yacht profitable.
Your Boat Doesn’t Sit Idle
An idle yacht can quickly rack up dockage feels and storage costs. By chartering your yacht, it’ll spend less time in the marina; plus, you’ll be generating income when it’s not in use.
Another advantage: Your yacht is ready for use year-round. That benefits you – you can fly in and set sail, whenever you please – but it’s also advantageous for potential guests. You’ll be able to accommodate last-minute charters and events.
Factors That Affect Earnings
The cost to charter a yacht is based on a number of factors. Larger boats cost more to hire, as do newer or recently retrofitted boats. Therefore, profitability can be tied to:
- Size: Larger yachts and yachts with more cabins generate more in revenue.
- Season: The time of year you plan to make your yacht available will affect profitability. Yacht charters are more expensive during the high season (summer in the Mediterranean or winter in the Caribbean).
- Location: Some countries and charter regions are more costly than others.
- Reputation: Charter yachts can build reputations for service and experience. More reputable yachts command more from charter guests.
Reasons to Consider Owning a Charter Vessel
Ultimately, profitability isn’t guaranteed, and it can significantly offset the costs of owning a yacht. And for many, that makes it more than worth it. But beyond profitability, there are many other reasons why owners charter their yachts. They include:
- Industry Is Growing
The luxury yacht charter industry is growing, and charter yachts are more in-demand than ever. For owners, this means that potential income and profitability may grow year-over-year in the near future.
- Selling Your Yacht at a Profit
A significant advantage: Yacht owners can build interest in their yachts. This is helpful when it comes to selling. A successful charter yacht will help make your yacht more marketable. Many owners have sold their yachts at a profit because they’ve built a reputation and interest in their vessels.
- Protecting Your Yacht’s Value
Because your yacht undergoes regular maintenance by a professional crew, its resale value is protected and the life of the vessel is extended. This can help you charter the yacht for longer, as well as protect value.
Bottom Line: Owning a Yacht for Charter Can Be Profitable
As you can see, there are many different factors that contribute to the profitability of a charter yacht. Ultimately, many of the most successful charter yachts are built for yacht charters. They’re customized to accommodate more guests and provide the most comfortable accommodations. In other words, if you’re shopping for yachts and are hoping to profit, look for yachts that are designed to accommodate charter guests.
Plus, it’s all about your team. The right crew will help protect your vessel’s value while working with the right charter broker will help keep your boat in demand. Find a yacht charter brokerage that has a track record of helping clients profit.
Have questions about chartering your yacht for profit? Contact Worldwide Boat today to learn more.