“Economic Drivers of the Marine Industry “
Paper to the Conference on Yachting
May 2012
Martinique
History will show that the yachting industry was one of the great opportunities for a development sector that was presented to the mini economies of the Eastern Caribbean and that this opportunity was not much utilized.
The opportunity is close to ideal. This industry activity can be achieved with infrastructure requirement and most of that infrastructure in any event enhances the typical stay over tourism product. It offers high paying employment. The activity is consistentand not much subjected to recession. The regional geography offers a geographical attributes that are not available elsewhere and give the sector a natural advantage.
In short, the sector is one of the greatest opportunities for diversification from the conventional stay over tourism produAt least at first glance .
The challenges are unfortunately less obvious than the apparent advantages.
The yachting industry is a unique industry in the Caribbean and in its development it is not possible to copy many existing models. It is an industry in rapid growth and highly complex because different parts of it behave in dramatically different ways. Conventional financing institutions do not understand it and cannot benchmark risks of financing. Existing industry is largely dominated by expatriates and in most jurisdictions the popular culture has not connected to itspotential.
Let us examine some of the challenges of the industry ….
Complexity of the industry
There are a wide range of customers and the consumer behavior of these customers varies enormously. The “cruisers” function totally differently to the “super yachts” or the “bareboaters.” Amongst the “cruisers” there are also a wide range of customer types . The manner in which each of them utilizesservices, their expectations and the basis for attracting them varies widely.
Every effort to reduce the complexity is unproductive as it will lead to inappropriate policies
Rapid change in the industry
Because yachts are the play toys of the wealthy, they are also the recipients of the greatest attention in respect of new technology, usually for the purpose of the self aggrandizement of the owners; the newest technology is often present. The result the industry has found itself having to adapt very quickly as materials changed and technology was introduced
Expatriate Dominance
This industry seems strange to most Caribbean people and they don’t see themselves participating in it easily. Conventional stay over tourism is reasonably easy to understand and the employment scenarios in that industry are understood and recognized and precedents in place .Employment on yachts for a variety of reasons, simply does not match interest. Even when a school leaver might be interested in persuading a career in this industry there is no tertiary education focused on the industry whilst hotel schools are plentiful. Whilst the penetration of employment in this industry by Caribbean nationals is improving, it can hardly be said that it is going easily or smoothly.
Data for decision making
If the Caribbean nations are going to get the most out of this industry then it is essential that there is to be a greater understanding of the industry. This understanding is not likely to move forward quickly if it is done by conventional tourism analysts who attempt to utilize the same tools for the yachting industry as they do for stay over tourism or cruise ship tourism. This approach has been the basis of much wasteful work and I fear that we have not come to the end of this wastage.
Governments correctly identify that they require supportive documentation before making decisions and consequently investments in the sector. The only obvious suppliers of such information appear to them to be tourism consultants or financial advice consultants. Whilst each of these areas have value in understanding the marine industry , the special nature of the marine industry means that in order to make any progress they first need to do a huge amount of familiarization before they can make any headway . Inevitably the funds for the specific consultancy run out pretty much at the same time as they have obtained some familiarity with this complex and small scale industry.
In their quest to make headway they tend to want to use the same tools as are commonly used in the tourism industry which is typically based on occupancy percentages, arrival numbers and room rates. These tools will obviously not work when the revenue streams from the marine industry are (in most cases) not from the supply of accommodations but rather from services to keep a very wide variety of vessels operating and floating and provisioned.
The analysis has to start on the fundamentals of the service to be offered and not on the basis of the convenience of using the existing tools of analysis in tourism.
Our experience in Sint Maarten
In Sint Maarten government policy making statutorily requires technical advices to support policy. I assume this is increasingly the case in all modern governments. It certainly is the case in International organizations and NGO’s.
In order to get the best answers you have to ask the right questions. In order to get the best advices you need to provide consultants with the correct mandate.
In spite of the fact that analysis by the independent Statistical Office of the (former) Netherlands Antilles identified that the sector is responsible for 16% of the Gross Domestic Product, there is still not one person in the entire government apparatus who has any depth of knowledge nor a mandate to obtain this knowledge about the marine sector of the island. It becomes very difficult then for government to write a mandate and expect well directed answers to questions relating to how they might manage this industry to provide the greatest returns to the territory they govern.
In Sint Maarten we have had numerous consultancy reports that haveenthusiastically defined the potential of the industry. Typically there is consensus that the industry has potential but the next step seems not to be realizable.
It is my view that all public authorities in the Caribbean need to ensure that they have available within their civil service persons who have an intimate knowledge of the industry and the manner in which the industry operates.
The Economic Drivers
Each sub sector of this industry has a different driver
Bareboat Industry: This industry is likely to be driven by
- The proximity of suitable cruising grounds and anchorages
- The availability of reasonably priced dockage infrastructure
- The availability of reasonably priced and moderately skilled staffing.
This industry is also highly influenced by the availability of investment for the boats themselves and tax structures that incentivize investments in the boats.
Cruising and Transient Industry
All destinations in the Caribbean have benefitted from this over the years in spite of there not having been much investment. For some parts of this sub sector the investment is not required, for other parts it is. Some parts are highly price sensitive, others much less
In general destinations will always benefit from this part of the sector as long as they can limit crime and avoid trying to place charges that will drive the business to locations that don’t charge. Facilities,services, hospitality quality and supplies strategically placed will enhance traffic.
Superyacht Industry
This sub sector needs to be separated into the destination component and the service component.
In order to attract these yachts as a destination, the key word is “Prestige”. The most successful destination for super yachts as a destination is St Berths. Their huge audience is created by the owners of these yachts wanting to be part of the high wealth social network that is common in St Barth.
The other component is the service destination. In this respect Sint Maarten is the partner of St Berths where the business in super yachts is based on service provision in close proximity (14 miles) from the real destination which is St Berths
EnglishHarbour in Antigua is a destination for super yachts that is partly a prestige destination and partly a service destination.
Capturing the Spend
In general the greater spend takes place when the yacht is not in its recreational mode but in the refitting and reprovisioning mode and therefore in destinations that are focused on this the greatest spend is captured.
When a yacht visits a destination in order to anchor in a desolated bay and enjoy the pristine waters (the ultimate ideal of Caribbean cruises) the spend is relatively little in most cases although this will be different when there are high end restaurants and bars, and other recreational activities that are strategically positioned.
Few Caribbean territories are well positioned to capture both. Trinidad is clearly a service destination although it has had its destination day. Grenada is well balanced. St Vincent is a great destination but underscores on the services. Martinique has more balance. Antigua is strong on Balance. St Barths is clearly a resort destination of the greatest magnitude. St Maarten is a service destination. Tortola has a good balance. St Thomas is stronger on service.
Destinations are a shopping mall
The service component of the yacht industry involves a wide range of services. Some of these services are reasonably easy to define like the provision of consumables whilst others are more complex like marine electronic service and service of high performance engines or rigging as well as hauling facilities
The nature of yachts and the increased technical compliance to standards means that the yachts destination is defined by where these services are available. If your destination has most of the services but one of them is out of the question then you are garunteed to lose the business of that vessel.
The successful destinations of the future in the service component of yachting will be those destinations that are able to offer at a competitive price, the full range of services, probably including haul out facilities.
Direct Charges and Tariffs
It is not surprising that public authorities consider placing charges and tariffs at the points where it is most manageable and where the parties being collected from are the most able to pay .
It already works well in numerous areas in the Caribbean, or at least not that badly that the industry is severely impacted.
The key factor in determining the impact is whether or not the party being charged is in any manner already “captured “by the public authority.
When an air passenger leaves the territory he is already “captured” in the sense that he has no alternative means of leaving the territory.
When a tax paying resident needs an item he will pay import duties up to the point where he or she decides to move to another country.
When a metropolitan vacation homeowner chooses to own a house in a Caribbean island he has already committed and accepts that he will have to pay import tax over the building materials. He is already captured.
The owner of a boat however is never captured! That is the nature of boats!
So whilst the public authorities can levy some charges on thebehavior of consumers on boats there is a finite limit after which consumer behaviorchanges.
This has been demonstrated in the Caribbean on many occasions as well as in the Mediterranean. The types of charges may have varied but they all led to dramatic changes in business levels after a certain period.
For any territory to ensure that it’s yachting sector be not affected by the direct charges made to it’s customers, it must ensure that they stay within parameters that are not clearly benchmarked.
Robbie Ferron CV
Robbie Ferron was born in South Africa where he lived till the age of 26. He studied Social Sciences at the University of Cape Town (Honours degree) and at the Institute of Social Sciences in The Hague, Netherlands, where he took a Masters Degree in Development Studies.
He started Budget Marine in Sint Maarten in 1982 which grew to be the largest yacht chandlery chain in the Caribbean with 12 locations.
He is the founder of the Sint Maarten Heineken Regatta and the Sint Maarten Yacht Club.
Robbie was the consultant for the Sint Maarten part of the ECLAC project on the yachting sector in 2004
He is a director of the Central Bank of Sint Maarten and Curacao.
Robbie is a Knight of the Order of Oranje Nassau