|Special Report: Megayachts could mean big benefits, challenges|
|Written by By JASON SMITH|
|Friday, 27 May 2011 13:37|
“If you can get that little economy to tie up at the end of your town, that money is going to come straight in,” he said.
The Icon may represent the future of tourism in the Virgin Islands: bringing in the highest of the high-end yacht visitors, who business and government leaders say they’d like to attract. Ambitious plans laid years ago for facilities catering to megayachts — a distinction typically given to luxury vessels longer than 150 feet — are slowly being realised. With those plans come economic opportunities but also concerns that the boats and accompanying development will negatively affect the territory.
The owners of megayachts include billionaires, Russian oligarchs, Hollywood movie stars, Middle Eastern monarchs and the chief executive officers of multinational corporations.
“These boats are pretty much $50 to $120 million a pop. That’s to buy it. To run it, you’re looking at a budget of $150,000 per month,” Mr. Haycraft said. “They’re not small toys.”
By comparison, Sir Richard Branson purchased Mosquito Island in 2007 for $20 million.
According to Cameron McColl, the developer of Nanny Cay Marina, the typical megayacht owner spends two to three weeks each year on the boat and might charter it out for 10 to 15 additional weeks. Megayachts typically visit the Caribbean during a six-month winter season — roughly from November to May — but that traditional operating period is lengthening, Mr. McColl said. Some vessels spend a 12-week summer in the Mediterranean Sea or along the east coast of the United States; then when the weather gets rough, they relocate to the Caribbean for the winter. But the region’s weather justifies a longer operating season, Mr. McColl said.
“A lot of megayachts have said, ‘When we total up the cost of fuel, the wear and tear on the boat and so on, it’s not worth going back to the Med for a 12-week season for which we’ll have six weeks of charter. Economically it doesn’t stack up,’” he said.
During the traditional six-month season, Frances David, owner of Shore Side Yacht Services Ltd., assists as many as 100 to 120 megayachts in the VI. Ms. David readily acknowledged, though, that the industry experiences “peaks and troughs.”
“Last year we were busier than this year. This year I think people turned left out of St. Maarten and turned down-island instead of coming to the BVI,” she said.
Each yacht’s destination is determined by the whims of the owner or charterer, who may want to be seen at swanky yacht clubs in the Mediterranean or the French territory St. Barts. Other times he or she may want to be out at anchor in seclusion, enjoying the natural beauty of the Caribbean, Ms. Davis said.
Large luxury yachts have been coming to VI waters for years. They are drawn here by the islands’ beauty and “unrivaled cruising,” according to Tony Harris, CEO of Boat International Media, a firm that organises events for megayachts.
“You don’t get cruising like this anywhere in the Caribbean. You’ve got the channel. You’ve got all the flat water. You’ve got all the chain of islands,” he said. “You can go and visit a different beach every day, and you can’t do that if you’re cruising from Grenada to Bequia [in St. Vincent and the Grenadines]; it’s a day sail.”
Until recently, most megayachts in the VI have stayed at anchor, with their passengers spending little time or money on land, according to Mr. Harris and other industry insiders. Or they’ve passed through the VI on their way to stop and resupply at marinas in St. Thomas, Antigua or St. Maarten. Now, with facilities in the works or planned in North Sound, Nanny Cay and West End, among other locations, the infrastructure to handle the boats here is slowly coming on line.
The most visible example of this trend is the 2,300 feet of dockage space specifically designed for megayachts completed in January at the Yacht Club Costa Smerelda – Virgin Gorda. The dock facility — made of a series of 2.2-tonne floating concrete platforms — originally was built to complement developer Victor International’s plan to build a community of luxury villas at Oil Nut Bay in North Sound. Plans later evolved for the facility to host the inaugural Caribbean Superyacht Regatta and Rendezvous, which was held in March. Victor International Chairman David Johnson said YCCS decided to establish a permanent presence in the VI after looking for a suitable base in the Caribbean for more than 15 years. Mr. Johnson described the Sardinia, Italy-based yacht club as one of an elite few. It was founded by the Aga Khan, an Islamic leader who claims to be a direct descendant of the Prophet Muhammad.
The yacht club building is still under construction, but once it is completed in December, Mr. Johnson plans to hold a series of major regattas, potentially one every month. He is also considering establishing a sailing academy. The “superyacht” races — for professionally crewed sailboats that are at least 78 feet long — offer an additional boost to the territory’s economy as the events involve hundreds of visitors and dozens of vessels, Mr. Johnson said. Currently, the North Sound area doesn’t have the capacity to accommodate all of the 20- to 30-member race crews each “superyacht” requires, he said. In the long term, he estimates, an additional 50 villas may be needed, which he said he would like to see built by Virgin Islanders.
“It’s an entrepreneurial opportunity for all kinds of BVI investment. We would like to see Gun Creek developed by locals into another Sopers Hole with little artisan shops,” Mr. Johnson said.
The developer has an application before the Department of Natural Resources and Labour for additional land to place 11 villas near YCCS. The villas, which Mr. Johnson called the “economic engine” behind the project, will be privately owned and rented.
Additionally, a short boat ride from the club, the Oil Nut Bay plans call for 88 villas, which will cost an estimated $400 to $500 million to complete, he said.
While he seized the opportunity of the regatta business, the original aim behind the rendezvous business — social gatherings for yacht owners — is to sell real estate at ONB, Mr. Johnson said.
Existing resorts such as Peter Island Resort and Scrub Island already host megayachts and their guests. But the size of Mr. Johnson’s North Sound operation could make the VI better known as a destination for these boats, according to Keith Thomas, acting general manager at the Virgin Gorda Yacht Harbour.
“There’s a fear that it may take away, but I’m hoping not. With more traffic over there and more traffic coming into the area, I’m hoping we’ll actually gain from it,” he said.
Servicing the boats
At Nanny Cay, Mr. McColl sees the potential in providing hospitality for owners and their guests. But he also wants to encourage the captains to base the yachts at Nanny Cay when they aren’t on charter. Nanny Cay is in the midst of a $30 million plan to add 230 slips to its marina. Approved plans call for a helipad, a customs and immigration facility, a swimming pool and a relocated tennis court. The proposal will also add 16 slips, allowing the facility to accommodate vessels up to 350 feet in length. The marina already has three slips for 100-plus-foot “mini-megayachts,” which Mr. McColl said are usually filled.
“We get phone calls every week from those size boats and larger saying, ‘Can we come and dock with you?’ And we have to say ‘No, we’re full,’” he said.
Nanny Cay, with 40 businesses that provide services ranging from provisioning to specialty engine repair, already is a centre for the yachting community.
Mr. McColl said he would like for Nanny Cay to become a semi-permanent home for megayacht crews.
“They want to live in a place where there’s community, where they can go out to restaurants and go out to bars and live their lives. Some of them have families onshore with maybe the kids in school. So they want to be based in a place where they can interact together,” he said.
Mr. McColl also said that servicing the megayachts is a natural extension of the marina’s business model. As a rule of thumb, he added, it costs about 10 percent of a boat’s total value to operate it each year. For a $10 million megayacht, that could mean $1 million on crew salaries, dockage fees, general upkeep and other costs.
“There’s a lot of maintenance that has to get done all of the time. That gets contracted out to local businesses here. You have engine servicing, oil changes, air-conditioning equipment, the seacocks, the pumps, the generators and on and on and on and on. There’s a continuous flow of parcels arriving from FedEx and DHL and continuous work to be done,” he said.
Often when servicing megayachts, time is of the essence, Mr. McColl said.
“If mom and dad are sailing on their boat and they need to take a week out of their itinerary because the propeller’s bent, it’s not that big of a deal. They’ll check into a hotel for a few days. If I have a $200,000 charter that starts in four days’ time, I need it fixed right now,” he said.
In many cases, the capacity to do the high-end specialty work the megayacht operators seek already exists in the territory. Mike Masters, the owner of Nautool Machine Ltd., opened his Tortola shop in 1980 to meet the demand of the yacht industry for metal work. The company used to do a lot more “yacht jewellery” — stainless steel fittings for boats, he said. Now construction projects such as fabricating railing or staircases make up a larger part of Nautool’s orders.
Mr. Masters said megayachts have never been a major component of the territory’s yacht servicing industry. Over the years, regulation and competition from other islands has driven away some yacht-related business, he added.
“The VI was known as the place to go to get serviced, and that has slowly been taken away from us,” he said. “It might turn it around, but it will take five or 10 years and for the government to change their attitude.”
But some government officials are already on board: They see the high-skill jobs that megayachts require as career opportunities for VIslanders.
“To run these things you cannot just pick someone off the street and say, ‘Come and work here for me.’ It takes special qualifications and so forth,” said Captain Baboucar Sallah, director of the VI Shipping Registry.
The VISR, which regulates the territory’s marine vessels, is among the government agencies that view megayachts as a potential boon. Mr. Sallah said it will be a challenge for the community to attract and retain these “high-level” assets, but one that is worth the effort.
“Everything we provide has to be to a particular class and standard for them to stay here. Otherwise they will go to somebody else who can give it to them,” he said.
The BVI Ports Authority has planned since the 1990s to extend its port facilities for megayacht use, according to BVIPA Director Vincent O’Neal.
The $25 million plans to build a new ferry terminal at West End may include five or six megayacht slips, he said, though that phase of the project depends on the availability of funds.
Additionally, the cruise ship tender pier completed last October in Road Town was designed to be multi-purpose, and has seen at least six large yachts this season. Mr. O’Neal said five years from now he would like to see that number increase to 100 over a season.
The authority’s dockage fees — $1.50 each day for each foot of boat — are cheap compared to YCCS-North Sound Marina, which charges $3.95. But, Mr. O’Neal said, the Harbour Charges Act is being revised.
Mr. Sallah, of the VISR, has been promoting another way for the government to profit from megayachts — one in which the boats’ physical presence isn’t necessarily required in the territory. By registering vessels here, the territory receives income from registration fees and surveying costs, similar to company registration in the financial services industry, Mr. Sallah said. Megayachts registered here can receive tax and other benefits, he said. So far, Mr. Sallah said that megayacht registrations have not yet reached a significant level, but he has high hopes.
“The expectation is that once we have reached a certain level then it will begin to grow. We will grow,” he said.
In order to bring in the infrastructure viewed as necessary, government has doled out incentives to developers who have megayachts in mind. For example, Mr. Johnson’s North Sound Yacht Club Ltd. was deemed to be a “pioneer investor” last year, allowing it to import construction items duty-free.
Both the current Virgin Islands Party government and the former National Democratic Party government have made efforts to court megayachts. A 2003 feasibility study conducted for the Town and Country Planning Department recommended that megayacht developments be brought to Sopers Hole and Robin Bay, VG, possibly under government ownership. Both sites scored highest in a ranking of 11 potential sites, though neither has been developed.
Some government officials say they are supporting the industry not just because of the new revenues but because of the revenues’ distribution.
“It’s a pretty good business, and it’s a business where a lot of the money is spread all over,” Mr. O’Neal, of the BVIPA, said. “It’s not like the cruise ships, where most of it is limited to taxis and shops.”
The exact amount of money brought into the economy by each yacht varies, but Victor International’s Mr. Johnson estimates the figure is as high as $250,000 per large megayacht per week. Others estimate typical spending is closer to $100,000 or $150,000.
But critics are sceptical of such estimates. Stephan Carney, a freelance charter captain in the VI, said that because much of the money is spent on buying fuel, food, wine and other supplies in bulk, much of the buying is done in other locations where prices and selection are better. With large storage capacities on board, many of the yachts can go for months without restocking, he said.
“The most money you get out of the megayacht is probably from the crew when they’re out at the bar,” he said. “The megayachts are great. They’re very pretty; everybody likes to see them. But they don’t bring any money in”
Mr. Carney said that in many cases, because yacht passengers are “quite happy” being at anchor, they don’t dock here and don’t have the opportunity to buy anything.
Sam Welch, president of the Marine Association of the VI, said that while the megayachts can coexist with cruise ships and charter yachts, he also doubts that they will have much economic impact here.
“I’m concerned that some people will see them as a huge moneymaker, but I don’t think they will be,” he said.
Others worry that the environment will be adversely affected by the megayachts and the facilities built to accommodate them.
Though developers behind the Nanny Cay and North Sound projects have promised to proceed sustainably, in both cases environmentalists have expressed fears about the potential destruction of mangroves and negative impacts on marine life, especially during construction.
Similar concerns persist with the proposed West End ferry terminal, which would require the loss of some young mangroves. According to the environmental impact assessment for the project, there is a nearby population of healthy fish that may be harmed by runoff if construction isn’t managed properly.
Mr. Sallah, the VISR director, said that megayachts themselves are designed to be environmentally friendly in many respects. For example, they produce their own water and contain their own sewage until it can be safely disposed of out at sea, he said.
“If you have a $25 million ship, you are not going to cut corners by saving on garbage disposal,” he said.
If megayacht captains are irresponsible about where they drop anchor, though, they can do “irreparable damage” to coral reefs and sea grass beds, according to Trish Baily, a charter captain and VI coordinator for the non-profit organisation Reef Check.
“Wherever the megayacht puts its anchor down, it’s potentially cutting a huge swath through the coral, and that coral is not coming back,” she said.
Ms. Baily said that the problem is compounded because currently there aren’t restrictions on where the boats can drop anchor and because existing mooring balls can only handle yachts up to 60 feet in length. Even with the new dock facilities, she still anticipates coral damage.
“The megayachts are still going to want to go out and tour around, and they don’t have anywhere to go. I think the BVI needs to decide if they want to pursue the megayacht business, and if they do, to put in the necessary infrastructure,” she said.
Dr. Lianna Jarecki, a biologist at H. Lavity Stoutt Community College, said that in 2007, the Holo-Kai a 162-foot megayacht, dropped anchor three times on a coral reef near Guana Island. The captain said that he checked his instruments and believed that there was only rock below, according to Dr. Jarecki.
“We suggested to him that that rock in these waters usually means coral. Our rock is alive,” she said. “He did a huge amount of damage, and it hasn’t recovered yet. “
The biologist added that the matter was reported to government authorities, but no action was taken.
But according to Mr. Johnson, the ONB developer, most captains are conservation-minded. He added that one of the reasons his new marina is popular with megayacht owners is because the floating dock was built without dredging.
“Especially sailors have a high integrity for environmental preservation and environmental standards of excellence, which they incorporate into their boat designs and everything else they do,” he said.
Both Mr. Johnson and Mr. McColl said that they recognise that if measures aren’t taken to safeguard the reefs and shorelines, the tourism economy and their developments could be threatened.
If the VI is to become a more popular megayacht destination, it also will need to ensure that it keeps crime under control.
Currently, violent attacks against crewmembers and high murder rates in St. Maarten, Antigua and the USVI are driving megayachts away — and towards the VI, Mr. Harris, of Boat International Media, said.
He added that the website of Dockwalk, one of the company’s trade publications for captains and crew, saw its busiest day of traffic ever after it reported on the death of Ludovic Gullevin. Mr. Gullevin, a 37-year-old chef from the 125-foot motor yacht Cheetah Moon, was found brutally beaten and stabbed after he went for a walk on Feb. 26 while the vessel was docked in St. Maarten, according to the St. Maarten Daily Herald.
Antigua, also a hub of megayacht tourism, experienced six murders in 2010. Those included the killing of a tourist that caused one cruise line to stop making calls to the island. The USVI’s notoriously high crime rate — with a record 62 homicides last year — also causes some captains to reconsider their itineraries, some industry insiders said.
While no tourists or crewmembers have been murdered here in recent years, the territory has experienced an increase in the number of late night robberies on Tortola, many of which have targeted visitors and have involved violence. That trend concerns Mr. McColl, of Nanny Cay, who called prevention measures “crucial.”
“If crime in the BVI gets out of hand or isn’t even brought under tighter control than it is today, then this entire industry is threatened,” he said.
Mr. McColl said he doesn’t want Nanny Cay to become a gated community, but he plans to beef up security with the expansion. Future plans call for a second security office, the deployment of officers on marine and foot patrol, and requiring the identification of visitors to the facility after 6 p.m., according to the project’s EIA.
Compared to other jurisdictions, though, the VI’s relatively low crime rate is currently an asset.
“I’ve been coming here for 17 years and never had an issue anywhere,” Mr. Harris said. “Neither do I know anyone who’s had an issue in any of these islands.”
Still, an increase in visitors could mean more opportunities for criminals, police Superintendent Roy Stoutt said at a recent public meeting on Virgin Gorda.
“I know with Oil Nut Bay and the megayachts we definitely have to increase the police presence in North Sound,” Mr. Stoutt said.
He added that he would impress upon the police commissioner the need for more patrols in the area. Mostly, though, North Sound residents at the meeting raised concerns about the increase in traffic caused by construction and other vehicles going to the resorts.
Safety on the water is another challenge facing officials. Increased boat traffic, especially at Road Harbour at peak season, is a growing problem for the Ports Authority, Mr. O’Neal said.
“One of our major concerns is the actual safety of entering or leaving the harbour. That is very important, because you could be open to lawsuits and litigation, that type of thing, should an accident happen,” he said.
Yachts of all sizes anchor throughout much of the harbour, and with the ferries, cruise ships, megayachts and other crafts, the area is becoming quite busy, Mr. O’Neal said.
He added that Premier Ralph O’Neal has ordered a hydrographic survey to study the depth of the harbour, a needed step towards ensuring safety. The BVIPA also intends to move to a harbourmaster system, which would function similar to an air traffic control system at an airport, he said.
Mr. Welch, of the Marine Association, said that most megayacht captains are professionals, who operate safely and steer clear of smaller boats.
“When you’re driving something like that, you’re not going to be a cowboy. You’re going to be a proper well-qualified mariner,” he said.
In addition to worries about the impact of particular projects on specific communities, some critics of megayacht tourism focus on the larger question of whether the VI needs additional tourism development at all.
For each major project — the Nanny Cay expansion, the North Sound developments, the Cruise Ship Tender Pier and the proposed West End ferry terminal — some residents have questioned the size and scale of the undertaking.
For example, while conducting a social impact assessment for the Nanny Cay expansion, Dr. Birney Harrigan, of Reality Global, found that some Sea Cows Bay residents at a public meeting voiced “strong objections” to the marina and boatyard. Several wanted a moratorium on all maritime development.
“They asked ‘development for whom and for what purpose?’ They believe that government should develop a cut-off point for all development in the territory,” Dr. Harrigan wrote in the report.
Mr. McColl said that he’s aware of the community’s concerns and wants to preserve the “certain vibe and feel” of Nanny Cay.
He believes that the challenges posed by additional marine tourism are “manageable” and megayachts can be a big part of the “mix” of the territory’s economy. Unlike financial services, an industry susceptible to the whims of the global financial system, the developer sees marine-based tourism as less “fragile.”
“For a regular nice beach with a palm tree, we’re competing with many, many destinations in the world. When we emphasise and focus upon the natural resources for sailing, the condition of the islands, we’re competing with virtually nobody,” he said. “It’s our unique selling point. It’s an area where we can compete globally as an absolute winner, and nobody can take it away from us.”
This special report first appeared in the May 5, 2011 edition. It is now appearing in full text on the Beacon website for the first time.
|Last Updated on Friday, 27 May 2011 13:57|