For Hire :  Shared Boat Ownership

More Fun with Fewer Dollars 

by Elaine Lembo

 

Fractional boat ownership is a great way to get out on the water and into cruising, but sorting through the options can be as complicated as finding a cross-town address in Bangkok, one of the most sprawling metropolises on Earth.

This branch of the marine industry, which takes its cue from time-share vacation resorts and executive jets, is nonethless basic in concept.   It goes like this:  Paying up front for a sliver of a condo, a car, an RV, a jet, or — yes — a yacht to ensure that it is at your beck and call when you can actually use it is far less expensive than owning all of it while it sits idle.   Which, lets face it, is most of the time.

A little education goes a long way toward demystifying the fractional phenomenon.  Let’s start with the basics.

Types of Ownership

There are essentially three forms of involvement in a fractional boat:  You possess deeded ownership, you lease time aboard a specific boat as a “member”, or you have access to any of several boats in a fleet.

Contract lengths for deeded, or equity, shares usually run three to five years, at which point the boat can be put up for sale.   Lessee arrangements average a year.  “Club” membership is parallel to joining a health-club in that you avail yourself of any boat in a fleet at specific times; the obligation is usually for the term of use.

But, in all these cases, terms can vary.       “There’s absolutely no standard, and lots of people are offering things that are fundamentally different,” says Will Blozan, a consultant and president of Breeze Easy Inc., a yacht-management and fractional-ownership advisory agency in San Diego, California.   “There are no straightforward comparisons.”

Yes, but why is fractional boat involvement gaining attention these days?

“For starters, it’s timely because of what is happening in the economy and in U.S. demographics,”  says consultant William F. Mirguet III, of Drake Yachtshares in Palm Beach Gardens, Florida.  “The fact that it’s becoming more and more expensive to get out on the water is perhaps the impetus the industry needs to drive activity into fractional arrangements.  Economic pressures will make people more interested.”

The Check, Please

If economic pressures and fuel prices haven’t yet won you over, consider the words of Ronnie Chappell of Florida Yacht Charters and Sales, which has launched a program called FlexTime Yachts with a 43-foot Mustang.  “We’ve learned that most owners use their yachts about 20 days a year,” says Ronnie.  “If they realized how rarely they’re on the water, they wouldn’t put so much money into it in the first place.”

Wayne Diviney of Sailtime, a firm that’s currently launching an internationl fractional powerboat program patterned after the successful shared-sailboat plan it hatched in 2001, echoes this sentiment but in a slightly different manner:  “The overall cost of boat acquisition and today’s fuel prices make [full ownership] extremely expensive,” Diviney says.  “Here’s a way to get on the water without the full-blown costs.”

As an example, Chappell cites a 10 percent share in the aforementioned Mustang.  New, this boat costs $675,270.  A tenth-share membership allowing 32 days of use costs $82,810, with a monthly maintenance charge of $585.  That sum, besides incidental costs like fuel and provisions, places the fractional user far ahead of the sole owner in terms of dollars (and headaches).  “This is the wave of the future,” Chappell says.

Sailtime Power’s pilot program, which kicked off the international expansion, has operated in Toronto, Canada, since 2007, offering seven no-equity membership shares in a Cruisers 360.  The boat is worth about half a million dollars, says Sailtime director Kevin Kennedy.

An annual membership, which includes a one-time initiation charge, a monthly fee, and a minimum of nine days of use per month, runs about $15,540 a year.  “It’s not inexpensive,” Kennedy says.  “But when you consider that the vessel is a Cruisers 360, it’s a pretty affordable way to secure access to a full-featured boat.  The intent of the program is to provide a reasonable way for people to enjoy the yachting lifestyle.”

Points to Consider

Aside from these two specific examples, bear in mind that, in general, the cost of fractional use — whether equity, member lease, or club-level — can range from several thousands of dollars to a quarter of a million and upward, depending on the vessel and usage program offered.

You can choose anything from year-round monthly use of a bareboat in the 30-foot range in a tropical setting, to a fully crewed and managed megayacht of 100 feet or longer in a destination with a four-month season.  In some programs, such as the one offered by Florida Yacht Charters and Sales, as well as by several megayacht-management firms, the company will charter the boat when owners and members aren’t using it, to help defray costs.

Several boat manufacturers and builders are also now directly involved in fractional arrangements.  Most fractional managers are willing to tailor arrangements to owners’ purchase preference.

According to Mirguet, the following cost guidelines are typical:

Equity:   In this program, expect some markup of the acquisition cost to compensate the company that’s putting the deal together; monthly/quarterly/annual-maintenance payments to cover dockage, insurance, and yacht management;  and incidental/consumable costs such as fuel, provisioning, gear, catering and beverages.

Lease/member:  In this program, expect an arrangement that’s tied to the use of a specific boat as opposed to any vessel in a fleet; costs can include an initiation/training fee, a monthly fee, and a consumables fee.

Club:  In this program, expect access to a fleet of boats and usage fees by the year, month, multiple day, day, or hour; other costs can include consumables.

Taking the time to read the find print in any fractional offer is a worthwhile pursuit, stresses Mirguet.

“Consumers don’t always come to the table with a good approach, and perhaps they walk away disappointed because they haven’t done their homework about the true cost,” he says.  “If they fully prepared themselves, they’d find the process easer and more palatable.

“Most people who haven’t been boaters don’t understand the real cost of boating.   They talk to the fractional companies with unrealistic, uninformed expectations.  They need to understand there’s a tradeoff to everything.

“Prospective customers who think that bearing one fifth of the cost of boat entitles them to everything precisely when they want it aren’t looking at the give and take involved [in fractional ownership].”

Mirguet stresses a cautious approach to sweeping offers.  “Never use the works ‘make money’ and boating in the same sentence.  One expectation of fractional ownership is either making money or getting a boat for free:  That’s just the wrong way to look at it.  The realistic goal is to reduce costs and/or offset costs so this leisure actitivity isn’t taking too much out of your budget.”

The Human Factor

So, is fractional ownership for you?

“By and large, our  clients tell us that for them, it’s convenience and service that are bringing them to us,” says Nuno Alves, president of One 4 Yacht Fractions in Vancouver, British Columbia, which sells quarter shares and manages various boat models for its clients.  “We look after the maintenance and operation of the vessel, as well as the scheduling.   We are the glue that puts it all together.”

According to Diviney of Sailtime, fractional ownership is the ideal platform for inexperienced cruisers.  “The majority of our members are relatively new to boating,” he says.  “This way, we’re creating an easy on-ramp for folks.  From an industry perspective, we’re expanding the market and creating more of a yacht-club environment.”

Perhaps the words of a satisfied Sailtime member will suffice.  Klaus Buechner, a member of Toronto’s Sailtime Power, summarized his reasons for signing on in a five-point e-mail: 1.  It’s a great way to experience boating without a significant up-front investment.  2. The training and orientation are geared to make the member really comfortable in handling the Cruisers 360 alone.  3. The overall scheduling process is equitable, transparent, and easy to use.   4. The fees are reasonable for occasional use of a new yacht, even over several years.  5.  The service is very good, and the staff are well qualified, responsive and friendly.

Blozan of Breeze Easy suggests, “If you’re just trying to give the family some fun on the water, and ego isn’t part of it, then chartering or renting is the most cost-effective alternative.

“How frequently do you want to take your boat out?  If it’s not more than once a month, then a club is the most effective.  If you’re really a boat person and want to spend the weekend on the dock, then some form of ownership is going to be more cost-effective for you.”

Power Cruising Magazine
September/October 2008