Drawing superyachts to Asia: the battle to entice charters

By Zara Tremlett

The Douce France, a long-time charter yacht of Southeast Asia

For years, Southeast Asia, a vast and diverse geographic region with a dizzying array of cultures, has been touted by local operators and a few entrepreneurial marine businesspeople as “the next destination to charter”. The dream has always been to encourage more superyachts to depart the Mediterranean in search of new adventures in the Asia Pacific, far from crowded and well-worn destinations. 

For the many insiders who have been aware of the tremendous potential of the region, there is enormous positive energy. But how has it all worked and where do we stand in 2020? Could the shutdowns on mass tourism caused by Covid-19 prove a turning point?

There are many hurdles, from the development of infrastructure to so many different local regulations. Ownership of superyachts by Southeast Asian ultra-high-net-worth clients is relatively uncommon – superyachts are conspicuous and that may not be acceptable to some for political reasons. Also, taxes can be prohibitive. Yet, superyacht charter has proven time and time again to be financially beneficial at so many levels and through the creation of yards and marinas, the services develop and thus so many job opportunities are provided.

“We are not competing with local markets, in fact we compliment them, but the local operators must be encouraged onboard, so we can work together and show them that their areas of operation will not be ruined by, or be competitive to, the niche market of superyacht charter,” said Vincent Tabuteau, a decades-long veteran of Phuket yacht charter and now managing director of Fraser Yachts Thailand. 

The superyacht experience, common in the Med, is still rare in Southeast Asia (photo courtesy of Burgess)

“The crew of these yachts are professional people and meet tough training standards, and they bring so much business to an area. Then the end user of the superyacht charter is a highly desirable person for any country to wish to attract, so why is this not happening? There is so much to gain by moving forward, updating old regulations to today’s market needs.”

In 2003, Thailand led the region by dropping import taxes on yachts to zero, a bold move that immediately saw  yacht charter companies such as Sunsail, which has yacht charter bases around the world, set up in Phuket. Locally based businesses in bare boat and private charter followed, which further opened up charter in Thailand. Today, Phuket is known as the capital for yacht charter and superyachts in Southeast Asia. 

The end user of the superyacht charter is a highly desirable person for any country to wish to attract, so why is this not happening?

The yacht charter business needs the support of good infrastructure. In 2003, Thailand had three marinas – one in Pattaya and two in Phuket. As soon as the import tax was dropped, all three marinas started further development. Shortly after, more marina facilities were opened, along with a range of associated businesses, along with massive job creation. 

A boom time for the marine industry began in Thailand, but only Thai-flagged vessels could legally charter within the country. This leaves the superyacht charter industry hamstrung to this day.

The main reason that the vast majority of superyachts will not visit Thailand – and therefore don’t come to Asia at all – is that they cannot do charter business in the country’s waters, says Andy Treadwell, founder of the Singapore Yacht Show and the Thailand Yacht Show. He adds that chartering offsets as much as half the cost to the owner of moving a superyacht from the Mediterranean, home to most of the world’s 5,000 plus superyachts, to Asia. 

To do charter business in Thailand, a visiting superyacht needs to be temporarily imported by a registered Thai company, paying 7% VAT on the value of the yacht. When the owner decides to leave, the yacht must then be “re-exported” again – a long and unwieldy process – in order to get compensation for the import tax.

In Thailand, the yacht charter business is supported by the Thailand Yachting Business Association (TYBA), amongst others, which has been lobbying various government departments for years, and the government has been supportive. In June 2015, a charter licence was approved that allows foreign flagged vessels of 30 metres and over to charter in Thai waters. However, this cannot actually be acted upon, as tax must be paid on the charter revenue and in order to do this there must be a Thai company through which the revenue is paid.  

At present, TYBA and Treadwell are working to resolve tax and other issues with the Department of Finance and the Ministry of Tourism.

Superyachts visiting Thailand have often expressed a keen interest in being able to operate legally in Thai waters. 

In late June, Thailand’s tourism authorities indicated that they wanted to use the shutdowns caused by Covid-19 to turn the country’s tourism industry away from the mass market and towards a high-net-worth market. 

Treadwell greeted the news with optimism that such a focus would mean a loosening of restrictions towards superyacht charter. 

He estimates that as many as 300 superyachts a season would start visits in Asia through Thailand if they could do charter. 

Meanwhile, Indonesia is the current hotspot for visiting superyachts, whose guests are just itching to see the stunning, remote areas of Raja Ampat and Komodo or dive with whale sharks in the pristine Cenderawasih Bay. 

“Not only do we see an increase in annual numbers of private superyacht visits, but through incentives from central government, the country is seeing increased visitation from commercial cruise ships, to popular tourism locations like Bali and Komodo National Park,” said Andy Shorten of The Lighthouse Consultancy, a superyacht support agency. 

Shorten said that his agency had also provided support for boutique cruise ships looking for more remote itineraries in exotic destinations. As the vessels are classed commercially, they can legally operate commercial trips within Indonesian waters. 

Indonesia has long been home to liveaboard dive charter boats and a growing number of Phinisi charter boats. These wood-built Phinisis are made by hand in Indonesia on the beach, and can be fitted out as luxury charter vessels with amenities that can rival a superyacht. 

Shorten said local operators are “protective” of their cruising areas, a common theme within Southeast Asia. “This sentiment, combined with the lack of infrastructure, geographic distance and political challenges, is keeping future plans for foreign flag charter of superyachts firmly on hold,” Shorten said.

Without the infrastructure required for superyachts, it’s harder to entice superyachts to visit, thus spurring more infrastructure. “It is a bit of a chicken and egg scenario”, said Shorten. 

Indonesia is the current hotspot for visiting superyachts, whose guests are just itching to see the stunning, remote areas of Raja Ampat and Komodo or dive with whale sharks in the pristine Cenderawasih Bay. 

Malaysia, on the other hand, has an abundance of infrastructure along its western coastline, with the island of Langkawi acting as a hub. From Langkawi, numerous day charter operators offer a range of cruising options. Additionally, many visiting superyachts cruise between Langkawi and Phuket in order to circumvent the “no foreign flag charter” rules in Thailand and Malaysia. Legally, they can pick up guests in Phuket and drop them off in Langakawi, which are just over 140 nautical miles from each other. The cruise offers stunning scenery and shoreside activities. 

While Malaysia currently has no actual yachting association, Sazli Kamal Basha, organiser of the Sail Malaysia Rallies, said that “in Malaysia, there is a discussion to create a Leisure Craft or Boating Act in the near future.” He added that the Cruise Marine Tourism Association of Malaysia has started discussions with the Ministry of Transport and The Ministry of Tourism this year with the aim of allowing foreign-flagged vessels to charter in Malaysian waters.  

New Zealand, Tahiti and Fiji have recently leapt ahead in the superyacht charter scene and seen massive returns almost immediately. New charter regulations allow for the temporary importation of vessels that meet set criteria in vessel value, length, maximum number of passengers or MCA registration, and are similar for each of these countries.  

The key point is that the authorities trust the representatives of these vessels to pay the relevant taxes.  When a yacht is booked for charter, fees usually enter an escrow or other offshore account. The central agent manages the funds and makes payments to the yacht owner, including relevant taxes for the country of charter. The taxes owed are marked on the charter agreement and it is the responsibility of the yacht owner to pay taxes to the relevant authority.

“In the case of a foreign charter licence, charter funds may or may not physically pass through a country, and tax agents have to rely on the information on the charter agreement, stating the total charter fee (including broker commissions) and tax. Charter agreements and related tax invoices have to be accepted by tax agents at face value. So there is a certain matter of trust involved,” said Lies Sol of Northrop and Johnson. 

New Zealand has also created a special visa for superyacht crew, which is attached to the yacht applying to enter its waters

At the end of 2019, Australia finally joined the list of countries open to visiting superyachts for charter and they expect massive returns from a rising number of superyacht visits, which may positively impact businesses ranging from local florists to superyacht refit facilities. 

New Zealand has also created a special visa for superyacht crew, which is attached to the yacht applying to enter its waters, commercially or otherwise. In most countries, ongoing immigration and visa issues for superyacht crew hamper the growth of superyacht charter options, as a chartering superyacht’s crew may need access to shore facilities that regular commercial visas for crew may not. 

New Zealand’s actions come in time for the America’s Cup competition, slated for March 2021 in the Hauriki Gulf, near Auckland. The event will surely draw superyacht visitors to the region, who will want to embark on tours of the region if possible. 

Alongside the desire to show how much Southeast Asia has to offer in comparison to the Mediterranean, there has been a huge effort to join the dots by promoting the services available along the way, from Tahiti, Fiji, New Zealand, Australia, Palau, Papua New Guinea, through Southeast Asia to the Maldives and the Middle East. 

Thailand’s example of simply dropping the import tax on yachts has definitively driven the marine industry and growth of facilities, which in turn has attracted some of the world’s largest superyachts to Southeast Asia. 

The action and drive of long-time operators haven’t ceased and, like Thailand, Southeast Asian nations may look anew at their tourism industries in the wake of the coronavirus shutdown.

 

About the author

Born in Sydney and raised in the UK, sailing became part of Zara’s life after hitching a ride on a cruising yacht from Australia to Thailand, where she met her partner Nick Wyatt. Since then they have worked in the Med & Caribbean on various yachts, setting up Harbour Village Marina in Bonaire. From 2002 until 2016, Zara and Nick managed Phuket Yacht Haven Marina, Thailand. In 2016, Zara became the first female in Southeast Asia to attain International Certified Marina Manager, and following Nick’s retirement, managed Phuket Yacht Haven alone. She is involved in the Thai Marina Business Association and is a contributor to the Superyacht Services Guide.