Thursday 25 August, 2022
Many superyachts are offered for charter, providing yacht charter guests the opportunity to use the yacht for a set period. There are certain advantages in placing your yacht into yacht charter management with a yacht central agent.
The major advantage is that chartering your yacht will help offset a large portion of the ongoing cost of running and maintaining your yacht. There are two types of yacht charter programmes and different yacht charter management firms will offer either one or the other or both. There are advantages and disadvantages to them both however.
Guaranteed Income Programme
This form of programme is offered mainly by the large yacht clearing houses and yacht charter management companies as they have the significant capital to back the scheme. It suits larger yachts in particular for its operations. It’s a programme that’s more hands off for the owner, with the charter company paying for all the expenses including, insurance, berthing, maintenance and general operating. The owner doesn’t usually pay anything and receives a guaranteed payment, which is paid monthly. This can be as high as 9% annually of the yachts initial value. The programme can vary between yacht charter company’s but it usually lasts between 54 to 66 months. The longer the term, the more guaranteed income you will receive as a whole.
The advantages of this programme are that there is no maintenance or accounting on the owner’s side, and a guaranteed income is secured whether the yacht charters or not. The flip side to this is that the income is fixed, so the owner receives no benefit if it charters a lot. Other disadvantages are a loss of control for the owner, as the owner loses the freedom to use their yacht whenever they like as it may be chartering at the time and loses control over maintenance for the duration of the scheme. The income is also deemed passive and provides no tax advantage.
Performance Programme
The performance programme retains owner control, with most of the net-charter income also returning to them. The yacht charter company then bills the owner for their services. There is typically a split of the charter income that usually ranges from 65% to 80% for the owner to 35% to 20% for the charter company. It’s important to consider all fees particularly booking commissions, as a more even split doesn’t necessarily mean a smaller yield for an owner. With maintenance and operations, the owner will be much more hands on however.
The advantage is that maintenance is not discretionary and has the owner is involved throughout the process. It also yields a higher return for the owner but does leave them susceptible to the demand for chartering the yacht, whilst still being responsible for the costs of the yacht. When placed into a charter management performance programme, the yacht automatically shifts from a personal asset to a business one, and can therefore claim tax relief in many instances. The yacht still belongs to the owner; the yacht charter management firm is simply assisting in running it.
If you’d like to learn more about yacht charter management, yacht central agency or for a consultation about putting your yacht for charter under our management, get in touch with the SWM Yachts yacht management team via email at info@swmyachts.com.
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