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Megayacht business booms in nautical tourism industry

But Puerto Rico still unable to capitalize on it; legislation filed locally to boost yachting tourism sector


July 11, 2002
Copyright © 2002 CARIBBEAN BUSINESS. All Rights Reserved.

The Caribbean Tourism Organization (CTO) reported that yachting tourism in the region produces the equivalent of 1.5 million overnights (stays) every year.

A study of boating in the Caribbean by Auliana Poon revealed that the British Virgin Islands has the largest charter-boat fleet (32%) in the Caribbean, followed by St. Thomas and St. Martin (20% each). St. Lucia has captured 8% of the market, while Guadeloupe and Antigua have 5% and 2%, respectively.

The research also showed that some Caribbean islands that boasted of a yachting tourism sector do not differentiate between visitors who arrive on cruise ships and those who arrive by yacht, lumping the two groups together.

"The nautical industry has thrived in the eastern Caribbean, particularly in the British Virgin Islands, where it is the leading tourism sector," said House Tourism Committee Chairwoman Rep. Sylvia Corujo. "I believe Vieques and Culebra, known by many as the Spanish Virgin Islands, would benefit greatly from this industry because of their geographic location, their natural attractions, and their existing infrastructure.

Several weeks ago, Corujo filed House Bill 4567 to study the island's nautical tourism sector, which includes excursions by sailboats, yachts, and motorboats to neighboring islands.

The study may lead to legislation to offer tax incentives to local and offshore companies that operate or lease boats for group outings, as well as to the promotion of Puerto Rico as a destination for boating enthusiasts by travel wholesalers and in specialized publications.

"We need to develop legislative incentives and a marketing plan to promote the nautical industry in Puerto Rico," Corujo said.

Puerto Rico does have government incentives for marina development, but there are none for the bareboat charter fleet, which Dan Shelley, president of Puerto del Rey Inc. in Fajardo, likens to the condo-hotel concept in the hospitality industry.

"Right now, hotels get a 10% tax credit for 10 years under the condo-hotel program. The boating industry should get a tax credit for five years, because a boat gets more of a beating than a hotel room," Shelley said. "This type of incentive has proven itself in other Caribbean islands and would encourage charter companies to sell boats and to put them into a program. The Bahamas and the U.S. Virgin Islands have a fleet of charter boats that are used under the renting concept. Puerto Rico had a small fleet of up to 20 boats, but they left because there was no program available."

The Jones Act seen as a barrier

According to Shelley, there have been several barriers to the establishment of a nautical industry in Puerto Rico, which is why it is imperative that the local government takes a role.

Most crewed yachts now sailing the Caribbean are foreign-flagged and therefore are not permitted by the Jones Act to transport passengers between two U.S. ports. That rules out nautical tourism between Puerto del Rey to Culebra or to Vieques, for example.

"Vieques and Culebra are the only two islands so discriminated against," Shelley said. "What's the point of chartering yachts in Puerto Rico if the vessels would have to bypass two beautiful islands and sail to St. Thomas."

No explanation was offered as to why there are no U.S.-flagged charter vessels here, as there are in so many tourism destinations stateside.

Corujo indicated she has spoken to Resident Commissioner Anibal Acevedo Vila about seeking an amendment to the Jones Act to develop nautical tourism in the east coast of Puerto Rico. According to Corujo, Acevedo Vila has expressed his desire to explore the possibility. The next step is to coordinate efforts with the Puerto Rico Tourism Co. and with the mayors of Vieques and Culebra to hold public hearings on the matter.

Years ago Puerto Rico obtained a limited Jones Act exemption to allow foreign-flagged cruise ships to transport passengers between Florida ports, San Juan, and the U.S. Virgin Islands.

Corujo plans to hold hearings this month to explore alternatives for boosting nautical tourism in Puerto Rico.

Nautical tourism in the Caribbean

A CTO study estimated that in 1998, there were 3,000 bareboat charters in the region, with an average annual occupancy rate of 20% at a cost of $2,380 per week, for a global turnover of boat-rental activity of $142.8 million.

The study established boat-rental-company expenditures as follows: 47% on wages and social charges; 17% on maintenance, repairs, and spare parts; 16% on the rental of slips and docks; 8% on insurance; 3% on communication, and 9% on other (water, electricity, transport, gasoline, travel agent commission, et al.).

This expenditure distribution, according to the study, varies from one company to another and from one island to another. Wages and social charges depend on the type of product proposed.

The CTO study also found that day charters are booming in the region. Although the number of day-charter vessels in the Caribbean is undetermined, the study did reveal that these vessels cost $60 to $200 a day to charter and can generate up to $2,000 per day.

At least 200,000 people vacationed on a rented boat in the Caribbean in 1996 and stayed 10.5 to 13 days, according to the study. Following is an estimate of the expenses of a charter client for two weeks:

  • Boat rental (high season): $7,324
  • Transport and car rental: $87
  • Provisions: $553
  • Bars and restaurants: $128
  • Fuel: $37
  • Shopping: $43

Some experts say these expenses are not substantial for a destination compared with hotel room rates, but they do agree nautical tourism broadens the island's tourist offerings because these yachters may otherwise have never visited a particular destination.

Megayachts mean megabucks

The most economically significant trend in the yachting industry is the growth of the megayacht sector, according to the Marine Industries Association of South Florida (MIASF).

There are only 5,000 megayachts (vessels at least 80 feet long) in the world, but their scale makes each its own microeconomy. It is estimated that 250 new megayachts enter the industry annually and that 20% of the total fleet travels through South Florida every year.

A 200-foot floating mansion can easily cost $40 million, with yearly operating expenses amounting to about 10% of the purchase price. A 200-foot yacht typically has a pair of 4,000-horsepower engines and fuel tanks that hold 60,000 gallons of diesel fuel and cost $96,000 to fill. A megayacht owner can easily pay $500,000 for an exterior paint job. Then there is the cost of dock space, which can run from $400 a day for a 100-footer to $1,500 a day for a 400-footer. And of course yacht owners must stock the boat with such amenities as artwork, fresh flowers, and fine wines.

"Megayacht owners are wealthy individuals or corporations that use their vessels a few weeks a year. The yachts have a permanent crew, so they don't just sit there; instead, they are chartered to others," said Puerto del Rey's Shelley. "Even though megayachts are recreational vessels, there is an economic impact for the island because those who stay onboard the vessel must fly into Luis Muñoz Marin International Airport and stay at a hotel for a couple of days before the boat arrives. They also rent cars and eat out at local restaurants."?

It’s no wonder, then, that Puerto del Rey Marina, the largest marina in the Caribbean, has begun to service this lucrative market.

"We are providing a 165-ton Travelift to haul vessels up to 130 feet," said Shelley, noting that the Fajardo marina is the first in Puerto Rico capable of servicing megayachts and the only one between the Bahamas and Trinidad. "A megayacht is a special breed because they’re expensive to buy and operate and the owners spend a lot of money on all types of amenities."

In the past few years, Tortola, Virgin Gorda, St. Martin, and St. Thomas have designed hotels to cater to nautical tourism. Puerto Rico will respond to that market with the 414-room Inter-Continental Cayo Largo Resort, which is scheduled to open in Fajardo by December.

"Now, with the opening of Cayo Largo Resort, Puerto del Rey will be an attractive place for megayacht owners to visit," Shelley said.

Economic impact of megayachts in South Florida

A 1998 study commissioned by MIASF, in conjunction with the Broward Alliance and the University of Florida, found that each of the 900 yachts that passed through South Florida that year spent an average $236,000 at local boatyards alone. The study also reported that megayachts had a direct impact on South Florida of nearly $300 million a year, counting only the boatyard, brokerage, and charter businesses.

The lack of dock space and service facilities, particularly for megayachts, has been a concern for Broward County. The problem is the limited number of locations on navigable waterways suitable for new or expanded dockage and repair facilities.

Other east coast cities in the U.S., such as Savannah, Ga., and Portsmouth, Va., have made moves to steal some of the megayacht business from Fort Lauderdale, Fla. As a result, the MIASF designed a master plan for South Florida that would create more space for the big boats and has lobbied for more dock space at Port Everglades.

If the Puerto Rico government is serious about putting the island on the yachting industry map, it must have ample waterfront property available.

According to the MIASF master plan, waterfront land is a relatively limited commodity, which makes for intense competition for waterfront property and, as a result, for high real estate values.

Waterfront land is not the only necessity, so is training for skilled workers. Any expansion in the number or size of marine facilities requires an increase in the work force. Nearly 80% of marine-industry jobs are in technical fields. Accordingly, there is an immediate need to increase training programs to meet the industry’s future demand for technically skilled workers.

Also, a public education campaign should provide information about environmental protection, boating safety and education, economic growth and contribution to the community, and work force development.

To advance its goals, the MIASF planned to rely on such government programs and incentives as:

  • The Urban Infill and Redevelopment Program, which provides financial assistance to local governments for the purpose of economic development, job creation, housing, transportation, crime prevention, and neighborhood revitalization.
  • The Community Redevelopment Act, which designates redevelopment areas where tools such as tax-incremental financing allow additional property taxes from new developments to pay for certain development expenses.
  • Florida Inland Navigation District Waterway Assistance Program, which provides grants to local government agencies for improvements supporting boating, such as channel dredging, markers, boat ramps, and docking facilities.
  • Florida Communities Trust/Florida Forever Program, which undertakes, coordinates, or funds activities and projects to promote public recreational opportunities that are consistent with Local Comprehensive Plans.
  • Florida’s Coastal Management Program, which provides support to communities to revitalize and renew declining waterfront districts.
  • Brownfield Redevelopment, which encourages the cleanup and redevelopment of contaminated and abandoned or underused sites using state financial, regulatory, and technical incentives.

If a destination does not have a unified approach to the development of the nautical tourism industry, instead sporadically planning only in the short-term, it will be unable to capitalize on the yachting boom. The absence of a clear and formal yachting development policy leads to the failure to designate the resources needed, whether monetary or in the form of adequately trained manpower, for the growth of the nautical tourism industry; to the inability to enforce marine legislation, where it exists; and to the failure to gather market data, which destination authorities require to make informed and timely decisions.

This Caribbean Business article appears courtesy of Casiano Communications.
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