Hi Reader,

As we navigate the doldrums of summer, two major events are making waves in the world of chartering. First, we'll share some updates about the aftermath of Hurricane Ernesto and its impact on the Virgin Islands. Then, we'll move to some major industry consolidation that could be underway.

Ernesto's Aftermath

As many of you are aware, last week Hurricane Ernesto swept through the Virgin Islands, bringing strong winds, heavy rainfall, flooding and temporary disruptions to the region. While not as devastating as previous storms like Hurricane Irma in 2017, Ernesto still posed a significant threat. The storm caused temporary closures of ports, airports, and ferry services and resulted in some widespread power outages. Some boats were grounded or suffered major damage. But on the whole, the impact was manageable.

If you have a charter planned in the coming weeks, I don't foresee any significant impact from this event.

Wind Speed Comparison: Ernesto vs. Irma

Hurricane Ernesto brought sustained winds of up to 70 mph. In comparison, Hurricane Irma, which devastated the Virgin Islands in 2017, had peak sustained winds of around 185 mph. This stark difference highlights why Ernesto, while disruptive, did not cause the same level of widespread destruction as Irma.

Impact on Charter Businesses

We spoke with several charter companies that still had boats in the water (many go on the hard for hurricane season). They reported only minor damage, thanks to the excellent preparation by base crews. Most fleets have already resumed near-normal operators, but it's always best to confirm the status as recovery and inspections continue.

One of our readers rode out the storm on Tortola and reported only minor fiberglass damage to his boat at Hodges Creek. He offered to share this video with the newsletter. Those winds are no joke!

Soggy Dollar Bar, Hendo’s Hideout, and Nova at Oil Nut Bay have all reported on social media that they are safe post-storm, open, and operating on their regular schedules.

For more information on businesses closing during the 2024 hurricane season, click here.

Charter Company Consolidation?

I read in a forum this past week that the owner of Dream Yacht Charter, PPF, has now bought a controlling interest in Navigare. PPF, a big European-based private equity company, has owned a partial-share in Navigare since acquiring it in 2021.

There isn't anything public about the move, and there might not be since this was a private transaction, but it seems like there is some truth to the matter. This increase to their Navigare stake would put ownership of the first and fourth largest charter companies under the same umbrella.

So, what does this mean for you, the customer?

This added control could lead to more unified operations across Dream Yacht Charter and Navigare Yachting. However, there’s a significant concern: Dream Yacht Charter has a reputation for not maintaining their fleets as well as competitors. This is my biggest worry since I am sometimes a Navigare customer.

In the British Virgin Islands, Dream Yacht Charter operates out of Hodges Creek, a marina that lacks the development and amenities many customers expect. Meanwhile, Navigare Yachting is based out of Nanny Cay, a much more appealing location with a hotel, bars, restaurants, beach, and provisioning services.

If operations were to be consolidated, will Dream Yacht's historically lax maintenance standards drag down Navigare’s reputation for quality?

A Look at KKR’s Strategy with Moorings and Sunsail

KKR, another major private equity firm, offers a useful comparison through its 2010 acquisition of Moorings and Sunsail as part of its purchase of TUI Marine. Under KKR’s ownership, both brands benefited from fleet expansions, modernized offerings, and streamlined operations, which helped them maintain their leading positions in the market. Additionally, KKR’s substantial financial backing was pivotal in enabling these brands to swiftly recover from the devastation of Hurricane Irma, highlighting the critical role of strong financial support in overcoming industry challenges.

KKR strategically maintained separate brands to preserve customer loyalty, with Moorings dominating the North American market and Sunsail leading in Europe. Despite this brand separation, many aspects of the business, such as sales, marketing, and operations, share resources to maximize efficiency. In destinations where both brands operate, they often share marinas, staff, and other resources, creating efficiencies across the board.

The decision to keep the brands distinct allowed KKR to effectively target different market segments. However, if Dream Yacht Charter and Navigare Yachting follow a similar path—remaining separate brands but sharing resources, particularly in operations—there’s a risk that Dream Yacht’s known weaknesses could negatively impact Navigare’s customer experience.

Looking Ahead: What Does This Mean for the Industry?

As PPF tightens its grip on the yacht charter market, we could be standing at the precipice of a new era marked by increased consolidation. This might result in fewer, but larger, players dominating the scene, leading to more standardized experiences across the board. While this can provide stability and predictability, there’s a looming risk that such consolidation might sacrifice the personalized service many seasoned sailors enjoy from boutique charter companies.

Adding to this, there are rumblings of market saturation, with too many yachts entering charter programs and not enough demand to fill them. We’ve seen steep discounts becoming more common—a boon for customers, but a troubling sign for charter companies and yacht owners. I know an owner that just sold his boat out of a boutique BVI program to stop the bleeding.`

These discounts, while enticing for the short term, could signal deeper issues within the market. If the balance between supply and demand isn’t carefully managed, it could lead to long-term financial strain on the industry, affecting everything from fleet maintenance to the overall quality of service.

I will, of course, keep a watchful eye on these developments. Whether it leads to smoother sailing or stormier seas, only time will tell--but it seems probable that the currents of change are already in motion.

That's it for today!

Have a great week! - Matt Weidert