I must admit to a bit of plagiarism here as the title, in part, comes from the World Maritime University (WMU) Report1 into the hours of work and rest (HOWR) in the shipping industry – link at the bottom. When I saw the title, read, then reflected on its contents, it became clear there were parallels with the superyacht industry.
That being said, it is important to recognise that in the superyacht industry the issues surrounding misrepresentation of HOWR are generally limited to the peak periods; those times when guests are onboard when, due to a combination of high demands and insufficient crew. To successfully navigate the obligations and intent of the legislation it is important to fully understand the regulations. The alternative is creative application of HOWR – something I am sure that most yacht captains and crew will have experienced.
In my early days on yachts, working long hours to deliver the guest experience was the norm and just part of yachting. “Harden-up” was often the refrain when someone spoke out on fatigue. It was like the measure of a job well done and validation that yachting was for you. Hours of work and fatigue were given very little attention and remained undocumented; unless you were crew you had no idea of the extent of the problem. Over subsequent years, regulations such as ISM and MLC were introduced to improve vessel safety and pollution prevention and the health and welfare of crew – less about yachting and about preventing the abuse of crew that was prevalent in some sectors of the shipping industry.
Unfortunately, as the WHU report suggests, despite the regulations and a greater appreciation of fatigue and its consequences, there is still a culture where work hours are, either under reported or adjusted to facilitate compliance. There are many reasons given, many of which are analogous to the superyacht industry:
Legacy – it’s part of the ‘can do’ attitude that is prevalent within yachting; the desire to deliver the best experience for the owner or guests.
Manning – having an appropriate manning level to meet the diverse demands of the operation; not just ‘minimum safe manning’ which is often the metric.
Contemporary Yacht Operations – yachting has evolved and so have the demands on crew, not only from owners who expect greater levels of service and experience, but also from the administrative burden that is a consequence of both regulation and management company reporting systems. Manning has failed to keep pace with this and something OnlyCaptains alluded to in this piece – Manning A More Considered Approach Required
Cost – crew are one of the highest costs of yacht ownership and so it is understandable that advisors and yacht owners are driven to reduce manning.
Financial Incentive – charter tips or bonus.
Employment Security – whether it be the Captain responsible for the yacht compliance, or an individual crew member not ‘towing the line’ there are concerns about the effect accurate reporting may have on employment prospects.
Management Pressure – either directly or indirectly they send signals that encourage the misrepresentation of HOWR.
Stakeholder Distance – the physical and psychological distance between the various shore-based stakeholders and the operational crew, means there is often a limited understanding of the work that crew do and what it takes to deliver an exceptional yachting experience, day after day.
Lack of Effective Controls – as proven, it is relatively easy to under report or adjust HOWR, even on some electronic systems, to ensure compliance. The fact that these are not identified by internal audits, Flag or PSC suggests the current inspection and enforcement mechanisms are not fit for purpose.
Also, in yachting due to the cyclical nature of demands ‘guest on vs. guest off’ there is also an attitude of:
What’s the big deal, the crew get plenty of time to rest when we are not onboard.
The reality is often very different; there is still plenty of work to be done that is critical to maintain and protect the value of the asset, safety considerations, and to ensure the yacht and crew are ready for the next visit.
Rest and Fatigue
This leads onto ‘Compensatory Rest’ as allowed by MLC, to mitigate or justify non-compliance; often the rule rather than the exception. Unfortunately, this is not always practical due to a yachts program e.g. short turnaround for next guests (back-to-back guests/charters) repositioning in rough sea, etc. And, unless the compensatory rest is both, timely and adequate, it will not prevent fatigue and its consequences.
There are numerous studies on fatigue; searching ‘fatigue and its effect on performance and safety’ in Google (other browsers are available!) produced 1.5 million hits – I would hazard a guess that none of the results would praise its health and performance benefits!
It is recognised there are three types of fatigue:
Transient fatigue this is acute fatigue as a result of sleep restriction or extended hours awake within 1 or 2 days
Cumulative or chronic fatigue brought on by repeated mild sleep restriction or extended hours awake across a series of days.
Circadian fatigue refers to the reduced performance during night-time hours, particularly during an individual’s “window of circadian low” (WOCL) -typically between 2:00 a.m. and 05:59 a.m.
Research has also shown that the accumulation of sleep deficit e.g. having an hour less of sleep for several consecutive days, needs a series of days with more-than-usual sleep for a person to fully recover from cumulative fatigue.
This suggests that, very quickly into a busy guest period, crew may already be affected by fatigue; their cognitive ability impaired, decision making and judgement clouded, and performance impacted. Many studies compare fatigue to the effects of alcohol consumption, the last thing anyone would want would be crew behaving as drunks due only to sleep deprivation.
Adding to the problem is that many crew cabins are cramped, poorly designed, and suffer from light and noise pollution, these factors, along with the yachts motion, even at anchor, can all affect the quality of sleep – another area worth consideration?
The shipping industry is aware of fatigue and has contributed to the canon of research on the subject, these include The SEAFARER FATIGUE: THE CARDIFF RESEARCH PROGRAMME, MCA MGN 505(M) and IMO GUIDELINES ON FATIGUE (MSC.1Circ.1598) and are all well worth reading.
Interestingly, in 2006 when the Cardiff Research Study was published, one conclusion was:
This study shows the current method for recording and auditing working hours is not effective and should therefore be reviewed.
Seems not much has changed.
As I discovered, honest reporting of HOWR comes with a cost, unless you have a supportive management company and yacht owner, so I fully appreciate why some captains might be reluctant. However, unless we report HOWR accurately we will remain part of the problem and there will be no incentive to change.
If you always operate at max, like an engine constantly run in the red zone, something will break sooner rather than later!
Ultimately the reason why there may be a need to under report or adjust of HOWR is that, in many cases, there is insufficient crew for guest periods. And, this is after all when a yacht owner, their family and friends or charter guests get to experience the enjoyment of yachting.
A Contempoarary Problem
Far from this being restricted to older yachts, this remains a contemporary issue, with some recent prominent examples shown not to have enough crew to deliver consistently the full range and standard of services demanded by yacht owners and charterer guests – this does beg the question; who is advising the owners and how did they assess the manning levels?
In response, I like to reflect on a comment from a respected designer Carlo Nuvolari, of Nuvolari Lenard, when he stated in an interview in Boat International – Nuvolari Lenard discuss the problem with yacht design 18 November 2015 by Stewart Campbell:
A Lot – Not All, But A Lot – Of Our Colleagues Don’t Go On Boats. I Can’t Understand It.
Perhaps ‘a bittongue in cheek here’ a solution would be for every designer or advisor, to spend at least one season working on a busy yacht in all departments, before they are allowed anywhere near a prospective yacht owner and/or its operation…just a thought!
And, whilst we can address the problem with more careful consideration of manning on new-builds, clearly, we cannot re-build each yacht and the demands will not decrease…so what can be done?
Searching for A pathway
Apart from accurate reporting, Captains will need to look at every aspect of their operation and work schedules to find efficiencies and/or time saving solutions e.g. use of a standing shore team that speeds up turnarounds. Yacht management working with their captains to improve SMS and operational reporting, using technology to make the systems more user friendly and efficient. And, where practicable, directing much of the administration back to shore management, freeing Captains and crew to be the operators, focused on ensuring the yacht owners, their guests and charterers are the priority.
Final thought. Would you fly on a long-haul flight if the captain (eyes darkened by fatigue) was trying to finish the plane’s budget, next maintenance schedule, organise his parking at the next airport and was on the phone interviewing a cabin attendant as you boarded? I think the answer is obvious, so why do we run our yachts this way?
Following our last post and feedback, we take a deeper look at rotation. We believe the benefits for crew are well understood, so in this piece we focus mainly on how rotation can improve yacht ownership and whether the benefits outweigh any additional costs involved?
With traditional leave arrangements, crew normally take their accrued leave at the end of a contract if a seasonal job or, when a yachts program allows e.g. at the end of the season, during a refit or crossing, or the off-season lay-up period. This approach means crew may work for prolonged periods before a break and, planning for their leave and/or training required for career progression, is very difficult.
Although a yacht can be admired for its aesthetic beauty and technical excellence, ultimately it is the professional crew who are responsible for ensuring the yacht delivers on the dreams and aspirations of an owner. Employing and retaining the very best crew is, without doubt, fundamental to success. And, as the fleet grows and yachts get bigger, the competition for quality crew will only increase; to meet this challenge terms of employment will need to evolve and rotation will become an ever more important consideration for many.
So What is Rotation?
I think the simplest explanation is job-sharing, where, most commonly, two crew share the same job and alternate their time onboard and on leave. This is normally the situation with the most senior crew with work/leave ratios such as 2:2 or 3:3 and other crew on ratios such as 5:1 or 3.1.
Although there may be different variations/ratios, not all crew have to be on the same terms, the general principle is that the yacht is fully manned at all times and leave is properly scheduled – within accepted variances due to a yachts program.
With any job share, especially in positions of leadership and responsibility, one of the challenges is ensuring the two people sharing the job have mutual respect, similar ethics, behaviour and work standards. This dynamic is important as consistency is fundamental to the health of the team. Any major differences can lead to uncertainty and confusion amongst the crew and a breakdown in the team and performance – success, relies on identifying and employing the right crew.
Yacht Availability – Asset Optimisation
Large yachts are a significant investment, and one of the joys of yacht ownership is the freedom to use it without restriction. Therefore, outside of crossings or refit, any time a yacht is unavailable to a yacht owner or, for charter, would seem to be a poor return on the investment.
Even on one season yachts I have seen where the lack of crew has prevented an owner from using their yacht in winter, and there are some stunning days in the winter in the Med! This was frustrating for the owner and something that did not make sense given the investment involved, including the capital costs and operational expenditure.
Rotation ensures that it is the yacht owner who determines when to use the yacht and is not restricted due to crew leave, or quality diminished by use of temporary crew. Lack of crew due to leave commitments would no longer be a reason to curtail use or compromise on safe manning in port.
Temporary crew is an option for replacing crew on leave and keeping the yacht available to the owner, though this is not normally the most successful strategy as recruitment is often at short notice and choice may be limited.
Further, there is no guarantee they will perform, have the same professional standards, gel with the crew and/or yacht owner and family. The training and supervision they will require and, repeated every time a temp is used, is a drain on crew resources creating inefficiencies in the team’s performance and the yachts operation. This can have a negative impact on the quality of service, levels of safety, standards of maintenance and the yacht owner’s experience.
Employing temporary crew has repeating costs such as agency fees, salary, uniform and travel and these can be used to offset the additional cost of permanent crew required for rotation.
It is widely accepted that long periods onboard without a suitable break can lead to fatigue and burnout, especially on busy yachts, and the uncertainty in leave planning and difficulty in having a normal life off the yacht can affect the welfare and well-being of crew. All these are contributing factors to the high turnover of crew that is so often complained about in our industry.
The senior crew are even more exposed to these stresses due to the pressures of their roles. These are the mature/older more experienced crew that others look to for leadership, training and motivation – they are the foundation on which the long-term success of the yacht is built. Many will have reached a point their career and/or life where they may have a family or, in a relationship, and are interested in building a fulfilling life away from the yacht.
Junior crew tend to have different priorities, as alluded to in Part I, so whilst extended leave is not so important, a reasonable amount of leave and having the ability to plan for their time off is still a key influence.
Rotation also provides opportunities for advancement and helps remove another oft cited reason for leaving. For example, it may allow a chief officer to step up to rotational captain, or a 2nd stewardess to become rotational chief stewardess. It adds to motivation and further helps retain the skills and knowledge built-up through mentoring and their time served onboard.
Although yacht owners may be frustrated by the constant churn of crew, they may not fully appreciate the hard and soft costs involved. The hard costs include such things as recruitment fees, employment setup costs, uniform, training, etc. and easiest to explain. The soft costs, although harder to put a monetary value on, are also important considerations. Arguably, the biggest cost to crew turnover is the loss of knowledge which could be technical, operational or, even personal to the yacht owner and family. There is also the disruption to the team and operation, and the time and effort required to train and supervise new crew on their journey to becoming an integral part of the team. And, all of these could affect a yacht owners enjoyment; something you cannot put a value on!
It’s also difficult to appreciate the importance a yacht owner places on seeing familiar faces amongst the crew; it helps them relax, and gives them comfort in the knowledge that the crew understand their needs and will make their stay flow seamlessly. I have heard familiarity being used as a reason against rotation due to the additional crew, but this should not be a major concern as it doesn’t take long for those crew to be a familiar sight – they just won’t all be onboard at the same time!
Rotation does not completely eliminate crew turnover as there will always be influences outside the control of the yacht but, by incentivising crew through better leave and improved employment prospects, a yacht owner can remove some of the key reasons for leaving.
Yes, But Rotation Is Expensive!
This is often, understandingly, the refrain from yacht owners and rightly so, as the payroll can be between 25% – 40% of the operating budget, and it is frequently the captain who must explain how increasing these costs can be of benefit a yacht owner.
Within any proposal, the crew must also buy-in to the idea and understand that a trade-off may be required on their part. It would seem obvious to anyone that if you work less then you should be paid less? Unfortunately, crew do not always see it this way and some expect to work significantly less days whilst still earning the same money – this stance is often where the idea never even gets off the ground. That being said, there are examples of very generous salaries combined with rotation – there is no standard in yachting!
Once an owner recognises the benefits it is clearly easier to implement prior to employment of the crew, such as during a new-build or before purchase. Changing an operational yacht to a rotational structure is a little more challenging due to the uplift in costs, and any salary negotiations that may be required.
The examples below show how changing annual leave allowances affects the number of days worked per year.
90 days leave per year, plus one day off per week when onboard, effectively works 236 days per year. On 1:1 rotation they work 183 days per year (no day off per week). This is a reduction of 22%.
60 days leave per year, plus one day off per week when onboard, effectively works 261 days per year. On 1:1 rotation they work 183 days per year (no day off per week). This is a reduction of 30%.
38 days leave per year, plus one day off per week when onboard, effectively works 280 days per year. On 5:1 rotation, plus one day off per week when onboard, they work 261 days per year. This is a reduction of 7%.
An interesting point is that a full-time employee in the UK with statutory holiday, public holidays and weekends, effectively works 228 days per year.
The effective workdays is also the number used to calculate the daily pay rate. Using that figure you can see that to keep the rate the same would result in a salary reduction by the same percentage – as mentioned, this is something that crew may find difficult to accept, but may also make the salary uncompetitive.
As an exercise I developed a detailed spreadsheet that compares a ‘normal’ yacht with a crew complement of 19 onboard with average salaries, leave and travel costs, against the same yacht with a ‘rotation’ – the table below summarises the leave differences.
3:3 Ratio = 183 days
Chief Officer, 2nd Officer,
Purser, Chief Stewardess,
Head Chef, Sous Chef
3:3 Ratio = 183 days
5:1 ratio = 60 Days
3:3 Ratio = 183 days
3:3 Ratio = 183 days
TOTAL PAYROLL NUMBER
The junior crew are on a 5:1 rotation which, in general, may suit them better given their different priorities to the senior crew. There is still a good amount of time off to rest and recuperate and, importantly, an ability to plan their leave.
What this detailed examination highligthed is that rotation does not result in a doubling crew costs which, is often the assumption. In this particular case the increase in crew costs is between 8% – 24% depending whether salaries are adjusted for effective workdays, left at the original rates, or negotiated somewhere in-between.
It is clear that there are costs and benefits associated with rotation; although it is important to perform a detailed analysis of all the cost inputs, outputs and variances – this is a fundamental part of any justification. The benefits, apart from the financial savings that can be made through the reduction in temporary crew and crew turnover, are dependent on the value and importance ‘weighting factor’ that an yacht owner places on these, and whether, on balance, these outweigh the costs and add value to the quality of the ownership experience.
Finally, and worth considering; although rotation is not yet the norm, it is growing trend, especially for the larger yachts – although I have heard of its use on <500gt yachts as well – and more crew will be looking for this in the future – I think most yacht crew would agree that this is a positive change and demonstrates the industries progressive growth and evolving maturity.
As we have mentioned previously, OnlyCaptains are not offering prescriptive solutions, we simply present ideas and suggestions that may offer captains some useful ideas that they can use in their own command and act as a catalyst to further industry discussion – we hope you enjoyed this post and welcome any feedback.
Although commercial shipping has rotated crew for many years, it is a recent phenomenon in the superyacht industry. It started to become a reality on yachts first with engineers, and then on the larger yachts where manning regulations required officers with STCW qualifications.
When rotation first started is a little unclear; it was certainly in use in the late 70’s when I was with BP Shipping – though it only applied to deck and engineering officers. However, what was clear, that it was not born out of regulation, but driven by market forces and a recognition that to attract and keep the right people they had to offer a better work/life balance. Today, these very same reasons are relevant to yachting.
So, in our latest post, we are going to take a dive into rotation and, due to its importance to many captains, their families and yacht owners, we will break it down into two parts and focus on the whys, how’s and the impact this fundamental employment change has had on the yachting community.
This week in Part I, Brendan is writing of his own employment journey to supply some context, then next week in Part II, Malcolm will take a deeper look at the pros and cons and how you might present the idea to a yacht owner using a worked example.
I entered yachting when contracts and structured leave were rare to the point of not known. Leave was when it suited the yacht’s programme, often with little notice. Crew would scramble to make last minute arrangements when a window opened. With limited leave, weekends in port was our time to get away, explore and socialise, leaving the yacht to the care of a couple of watchkeepers. Regardless of age or relationship status, life revolved around the yacht and no alternate lives ashore were maintained.
This began to change for me in 2007 when I joined my first 100m+ yacht and realised there was no stopping a yacht of this scale. It needed crew every day to keep the show running and there were no more ‘weekends with a couple of watchkeepers’. I remember naively saying to the Heads of Departments we would shut the yacht down one weekend for everyone’s rest; they humoured me, said yes, but ignored the instruction and kept the yacht working the way it demanded.
Since that time, I have modelled many and various employment structures for yacht owners and their representatives. When I do these, I do not speak of rotation from a crew’s perspective, it is with consideration of the yacht owners needs and their investment. My point being that the yacht, the owner and guest experience should not suffer because of crew taking leave. I support this position with a crude calculation; add the finance cost of the yacht to the operating expenses and divide by 365 to gain the cost per day of the yacht’s existence. The number can be staggering and to think that you would intentionally stop the operation so the team can take days off does not show good value.
Further to this crude calculation, the owner is reminded that the beauty of yacht ownership is freedom and spontaneity. Rotation can allow that when a gap opens in their diary, they can escape to their yacht and enjoy the pleasure of being on the water with family and friends; something that is even more relevant today.
In one of the presentations the yacht owner agreed for senior crew without hesitation, saying, “but yes, they have families, and we want them to be focussed on us when they are here and not worried about when they can get home.” For junior crew there was a different perspective with the principal asking, “why do these crew want so much time away when they were young?” Weren’t these the years to earn money, travel and gain experience needed to progress?
Malcolm’s comment – the latter point I also heard from an owner. One 80m+ example lost several junior crew because of generous leave/rotation! The basic reasoning was it was expensive to spend so much time at home, all their friends were working so no one to hang out with, and it took far longer to gain the necessary sea time and experience to progress. Sometimes you cannot win!
Be careful what you wish for.
Since 2007 (outside of shipyard construction) I have been on equal time rotation. This is a Nirvana for many but, having defended the position to the owner that the yacht requires 365-day attendance from its captain and senior team to get rotation over the threshold, you are accountable to work accordingly.
So now, during a 2-3-month roster onboard, I tend to focus completely on the yacht and my days exploring the wonderful areas I sail through are a distant memory. Crew come and go in and procession of rotational changes and although bonds are still made perhaps, they are a little weaker? That said, when they return refreshed, the faces are familiar and they quickly adapt back to life onboard without missing a beat; ensuring operational readiness, a consistent service quality, better maintenance and safety.
It could be said that with better leave and rotation means the yacht is now the place we work; it is no longer the centre of our universe and the place where we also lived our lives!
Clearly this is a much healthier balance but, occasionally, I do look back on those time long ago in sepia, when spending 11-months of the year with the same tight crew created my most memorable experiences and learning opportunities. I am open in saying my memory is grander than the reality, it was unsustainable if I wanted any sort of normal life outside of yachting. I could not have raised a family without rotation and so today I am content with a few laps around the yacht at anchor or a quick morning run on the rare times in port. My days exploring are not lost, I now have the time and freedom to return to destinations in my own time and with my family, and that is incomparable.
Done right, better leave and rotation offer crew and yacht owners many benefits and, although there are added costs, carefully planned, they are not as high as might be imagined, and there are many advantages that cannot be measured purely in monetary terms that can add value to the yacht owning experience.
In Part II Malcolm’s deep dive is where you need to go to look to the tools that you might need when structuring your own rotational plans to a yacht owner, their representative or yacht manager. The strength of your case will depend not only of the financial model, but also the quality of your reasoning and supporting facts. Without a compelling case, the yacht owner or their representatives might be thinking “living the dream, sailing the seas, working half a year and still complaining?”
It could be suggested there is too much information available on COVID-19 and the pandemic; including, an almost infinite number of articles and commentary on the internet, numerous Circulars and Guidance from the IMO and, publications from the International Chamber of Shipping (ICS) such as Coronavirus (COVID-19) Guidance for Ship Operators for the Protection of the Health of Seafarers (version 3.0 29th September 2020).
This excess of information can be confusing and, also as suggested in Tom Nichols book “The Death of Expertise” result in a tendency to trust in the internet to make us ‘experts’ in all manner of subjects and, resist or even ignore, advice from those with a deep understanding and experience of the subject matter, including COVID-19 – this can lead to poor outcomes.
With the absence of a collective response from the industry, it has been left to individual yacht management companies and/or captains and crew to wade through the mass of information, try to assess its quality and efficacy, and then develop and implement their own protocols and procedures in response to the virus. And, whilst some of these are well thought out and effective, others on deeper analysis, are perhaps like the ‘Swiss Cheese’ risk assessment analogy, have holes for the virus to pass through.
So, it was a great relief to come across the “Recommendations from the Healthy Sail Panel.” This is the first document I have seen from a related industry with a well-researched and holistic approach to the prevention, protection and mitigation of COVID-19, in an easy to follow format.
The Healthy Sail Panel is a collaboration between Royal Caribbean Group and Norwegian Cruise Line Holdings Ltd who put together a panel of World leading experts to help inform and find a new pathway back to the “new normal” of sailing. The resulting research and recommendations are broken down into 5 key focus areas, with over 70 recommendations, many of which are applicable to yachting.
The key focus areas are: –
Testing, Screening and Exposure Reduction
Sanitation and Ventilation
Response, Contingency Planning and Execution
Destination and Excursion Planning
Mitigating Risks for Crew Members
It is well worth downloading and reading. I suggest you also follow up on some of the footnote references.
COVID testing is one of the subjects with references in the footnotes. Further reading clearly highlights the value of testing for screening and diagnosis but, like the use of electronic aids to navigation, you have to be aware of the limitations, errors and accuracy.
I was certainly confused by the various tests; Rapid Antigen, PCR, Antibody, etc., their effectiveness for screening, diagnosing present and past COVID infection. The US CDC footnote reference in the Healthy Sail Panel certainly helped my understanding, along with the infographic below – found on the Nature website in their article “Fast coronavirus tests: what they can and can’t do.”
It became clear that, amongst other factors, the timeline of infection has a big effect on the various tests and why caution is required – especially with the Rapid Antigen tests that may be used by yacht crew.
Indian Ocean and Caribbean Passage
As many yachts and crew are readying themselves for passages to the Caribbean, Indian Ocean or further afield, I thought it was also worth considering this in the context of COVID-19 and posing the following question: –
“Should you self-isolate the yacht and crew and test before departing?”
Clearly, the time taken in transit is likely a suitable quarantine period for destination arrival purposes. However, the reason I pose the question is that given that most yachts will be departing from countries/areas with high rates of infection, and crew will have been enjoying shore leave and their time in port, what happens if a crewmember is infected, but tests negative (if tested) and is asymptomatic prior to departure?
Once underway and symptoms present, not only would there be concerns of further infections amongst the crew, and medical treatment if severely affected, there would also be concerns about at the port of destination; would the port allow the yacht to berth and what are the reception and medical facilities for any infected crew?
The same goes for ‘crossing crew’ do you bring them in early and quarantine (onboard in single cabin) and test prior to departure?
Clearly, no captain wants to restrict well-earned shore leave but, then again, it is important to avoid any crewmember being infected and becoming a medical emergency and/or a vector for further transmission, especially on a long sea voyage, so it makes sense to try and prevent this outcome.
I’d be interested to know how yachts and management companies are dealing with this. Some considerations:
What methods are in use for mitigating the risk of infection prior to departure
Has the port authority of your arrival destination been contacted and what is their policy in the event of an infected crewmember on an arriving yacht
Do the hospitals have the facilities and capacity to handle a COVID-19 patient
Are there any additional medical supplies and PPE above ‘Medical Scales’ that may be recommended to carry
The above, departs slightly from the main reason for this post but, for those about to embark on a lengthy passage, it’s something worth thinking about?
As always at OnlyCaptains, or goal is to share knowledge and help inform. Hopefully, the Healthy Sail Panel offers some useful information on COVID-19 that may help with your own procedures. And, perhaps it might be used as a reference by industry associations such as MYBA, LYBRA, IYBA, in a collaborative effort to create our own yachting recommendations. These would not only be of value to captains, crew and yacht management, they would also help to instil confidence in owners and charterers through the knowledge that industry accredited measures were in place to protect them whilst onboard.
Last week, I attended the Yacht Cub de Monaco: Capital of Yachting Experience. It was a very well organised and attended event, with some very interesting presentations and discussions.
It was also the launch of the Yacht Club de Monaco Superyacht Eco Association (SEA) INDEX. Supported by Nobiskrug and Credit Suisse, this is an important initiative with a goal to benchmark yachts in terms of their CO2 environmental performance. And, whilst there are other emissions, CO2 is by far the largest greenhouse gas (GHG) of importance and the one most visible in the public eye.
The principle is that it uses the IMO’s Energy Efficiency Design Index (EEDI) formula with a few changes to make it more specific to yachts.
The SEA INDEX is the first tool designed to assess and compare the efficiency of a yachts design and its environmental impact in terms of CO2, with a transparent and easy to understand rating system. Stars are awarded from 1 (lowest rating) to 5 (highest rating) depending on where a yacht sits above or below the rating bands relative to the baseline of sampled yachts.
Image: Courtesy of the SEA INDEX
The data from approx. 130 yachts of various length and displacement was sampled and their data entered in order to develop the initial baseline – there are now over 200 yachts.
It uses max power and speed, which may seem excessive, but a metric was required and, if you consider this as the ‘maximum emissions potential’ of a yacht, by using the same set of data points for all yachts, it provides a ‘standard’ for comparing their designs. For example, on comparable sized yachts, a more efficient hull will require less power for the same speed, and more efficient HVAC and hotel systems power management, will require smaller generators, both of which will result in reduced emissions and a higher INDEX rating.
And, as new designs and engineering innovations are introduced into yachting, the SEA INDEX will help highlight the improvements being made.
Of course, actual emissions depend on many variables that are affected by an owner and the operational profile of a yacht – these are hard to assess in any consistent or meaningful way. If we had recorded all yacht activity and consumption over the last 10 or 20 years, we would be able to draw a curve of standard deviation and have an idea of what might be described as ‘average use’ on which to make comparisons. Unfortunately, we don’t have this information, and this is perhaps the flaw in all such tools, so the only true account of a yachts CO2 emissions has to be calculated from their fuel consumed.
The factor the IMO use for CO2 emissions from MGO is 3.206, this means for every 1,000t of MGO used, 3,206t of CO2 is generated so it is easy to calculate your CO2 from fuel.
Any design efficiency gains, and improvements that can be made in the operation of the yacht, such as running at lower speed, managing power, switching off unused lighting and equipment, etc., will reduce the power required, fuel consumed and emissions.
In combination with efficiency gains, Carbon offsetting is one way to mitigate a yachts emission. Though, as I have written in a previous piece Superyacht Carbon Offsetting great care is required to select one that is fit for purpose.
But, it’s not just the amount of CO2 that is an important consideration. Looking to the future, it is very likely that shipping, like other industries, will be impacted by Market Based Mechanism’s (MBM) to drive forward the transition to a greener future, and these will have cost implications.
The IMO by 2023 will introduce their new framework for the reduction of GHG emissions from shipping and it could include a carbon tax. The EU in a recent plenary session of parliament, agreed that shipping should be included in the EU Emissions Trading Scheme (ETS) possibly in 2021and include vessels less than 5000gt. Trafigura, one of the World’s largest ship charterers, published on 25th September “A proposal for an IMO-led global shipping industry decarbonisation programme” calling for a $100 – $200 tax per ton of CO2 on shipping as the only way of driving the necessary industry change.
As further evidence of the direction of travel for CO2 emissions for business, Swiss Re made this announcement on the 15th September 2020:
“Swiss Re steps up its internal carbon levy to USD 100 per tonne as of 2021 and will gradually increase it to USD 200 per tonne by 2030”
Any such taxes or levies imposed on CO2 emissions will increase the cost of yacht ownership.
On top of that we have Environmental Governance and Sustainability (EGS) targets that are becoming ever more prevalent, especially in investment and finance. The Poseidon Principles is just one initiative, launched the 18th June 2019, “major shipping banks will for the first time integrate climate considerations into lending decisions to incentivize maritime shipping’s decarbonization” their goal is to work towards the IMO 2030 and 2050 reductions in GHG by ensuring that their loan books are aligned with those targets – finance will become harder for vessels that fail to meet efficiency improvements and GHG reductions.
Could similar lending rules apply to yachts in the future, how would that affect the value of older less efficient yachts?
Whilst it is not yet clear how taxes and regulations will be imposed in the future, what is clear, is that yachting is unlikely to escape their embrace. And our intimate connection to the sea and the environment places additional responsibility on the industry to protect the health of our oceans and planet. The SEA INDEX is the first of many important tools, including those from the Water Revolution Foundation, that will help us to understand our environmental footprint and drive the necessary change that puts us on a pathway to a sustainable superyacht industry.
Like any instrument that is reliant on data; the more yachts that participate, the more refined and accurate the SEA INDEX will become – I would call upon all Captains to get involved.
With the superyacht fleet >3000gt still growing, I thought it worthwhile to look at the difference between Yacht and Commercial qualifications, the various pathways to an Unlimited CoC and,some considerations to factor into your choice of pathway.
A Little Background
We know that education, training and experience are vital to ensuring safety on yachts and ships, and although there is the Standards of Training Certification and Watchkeeping (STCW) Convention that regulates minimum standards, it was introduced for commercial ships and those destined for a merchant navy career.
Inrecognition of the requirements of the yachting industry, in2002 the MCA and, their contributing partners, introduced MGN 195(M) the first yacht specific standards of training and certification as allowed under Article IX of STCW.
Prior to this,commercial STCW qualificationsor RYA qualifications for recreational boaters were the only qualifications available to professional yacht crew. Given yachting’s trajectory, it made absolute sense to combine elements of both to develop a qualification that was relevant and attainable. There is no doubt that the Large Yacht Code has significantly improved the standards of safety and professionalism within our industry.
Though there have been amendments, and we are now at MSN1858 (M+F),there are perhaps questions whether it hasadapted sufficiently to the changes and challenges we have seen within our industry and, of course,why there is still abarrier that prevents Yacht captains serving on Yachts >3000gt?To answer this and other questions we need to explore the options available.
For unlimitedtonnage qualifications under MSN1856 (M+F) there are several different pathways. If we look at the MCA Higher National Certificate/Diploma (HNC/HND)route for experienced mariners–the one experienced yacht crew would be more inclined to choose – there are significant differencesin the educational and sea service requirements. For example,the classroom time requires an extra 53 weeks compared to Yacht qualifications.
Another difference is bridge watchkeeping. No verifiable bridge watchkeeping duties or, experience, is required for a Yacht OOW/Chief Mate <3000gt,only 4 months for Master 500gtand, 8 months for a Master Yacht <3000gt and Marshall Islands (MI) Master (Yachts) Unlimited – this is in stark contrast to the minimum of 30 months required for a STCW Master Unlimited under MSN1856 (M+F).
Perhaps these are the reasons why it has proved so difficult for the MCA to provide a suitable transition – how do they reconcile thedifferences and still comply with STCW?Perhaps an Endorsement, like there are for special vessels like tankers, could be a way forward; though, it should be pointed out these Endorsements are on top of STCW qualifications.
The Marshall Islands recognised an opportunity to provide a pathway to unlimited tonnageyachts for experienced captains and introduced their own qualification. This allows experienced captains, through additional modules and an assessment by MI examiners, to obtain an Unlimited CoC restricted to Yachts.
Below is a summary of the main differences.
MCA Master Yachts <3000gt
21 weeks education and short courses
Minimum 60 months sea service – including 8 months of bridge wathckeeping
Cost approx. €25,000
MI Master (Yachts) Unlimited – including MCA Master Yachts <3000gt
31 weeks of education and short courses,
Minimum 72 months sea-service – including, 8 months of bridge watchkeeping, and 12 months served as a Master on a yacht >500GT
Cost approx. €40,000
MCA Master Unlimited – following the HNC/HND experienced seafarer route
61 (college) + 13 (home study) a total of 74 weeks of education and short courses
Minimum 60 months sea-service, including 24 – 36 months of bridge watchkeeping, and 6 months watch keeping duties prior to OOW
Cost approx. €25,000
Of course, there will be additional expense for a MCA Master Unlimited due the course duration, loss of earnings and subsistence costs.
From Yacht to Unlimited
There is the MI Master (Yachts) Unlimited and, although a practical option for those with Yacht qualifications to upgrade, there are some considerations. So far, the Cayman Islands are the only Administration to have recognised this CoC, the fleet of Yachts >3000gt is small, and the ‘Yacht’restriction,further reduces its value compared to an Unlimited commercial CoC.
Unfortunately, the MCA don’t make it easy. A Yacht captain, irrespective of experience, still must start at the beginning with an Unlimited OOW,followed by Chief Mate Unlimited before MasterUnlimited. Due to time/cost considerations, thisonlymakes sense for those who make the decision to follow the commercial pathway early in their career or, already have an STCW OOW or Chief Mate Unlimited, and wish to upgrade.
There are other Administrations, such as AMSA in my example below, who also have their own pathways. But these are generally based on STCW.
Interestingly, there is a growing number of deck crew, especially those working on the larger yachts, who are choosing the commercial route, it certainly provides them with better career opportunities, including commercial shipping, harbour Pilotage, ferries, as well as shore-basedemploymentwith a Class Society, FlagAdministration or insurance company.
Whatever pathway you choose to Master Unlimited, there will be a cost and no guarantee of the returns. You might have to accept work as a 2nd officer or chief officer to gain the relevant large yacht experience. And, the reality is that, as mentioned, the Yacht >3000gt fleet is small so opportunities are limited, and you will be competing against commercial officers and captains who have now made yachting their home.
My Own Journey
Late in my career I embarked on my own journey to Master Unlimited. I had earned my OOW Unlimited working for BP Shipping before yachting and with that andmy sea service on yachts (all Private) I was accepted into the Chief Mate Unlimited/Master Unlimited pathway with AMSA,the Australian Maritime Safety Agency.
The process involved attendingcollege full-time for almost 10 months in Fremantle, Australia, for my Chief Mate Unlimited. This was an experience, as I was, let me say, a more mature student,and my classmates were all about 20 years younger, with relevant commercial experience; I was that ‘white boat captain’ a bit of a novelty! I was certainly self-conscious of that from the outset.However, what became clear was that, as seafarers, ultimately, we face the samemaritime challenges, and whether a ‘white boat’,box boat, tanker, or anchor handler, there was much similarity and we all benefited from the different experiences we brought to the classroom.
On obtaining my Chief Mate Unlimited I then returned to sea to earn another 12 months of sea service necessary to sit my Master Unlimited orals exam. This was not easy as AMSA required sea service on vessels over 3000gt for Master Unlimited (they were supposed to reduce this to 500gt but Australian politics intervened).Fortunately, my industry connections came to the rescue and I found myself as Chief Officeron Katara thenEclipse where I obtained the bulk of the sea service required. I then returned to Fremantle for a months prep before successfully passing the oral exam and becoming Master Unlimited.
So, starting with an OOW Unlimited to becoming a Master Unlimited, took nearly 3 years and I had already worked for nearly 20 years as a yacht captain. And, thethe cost of taking a significant amount of time off, leaving a good jobwith loss of earnings, living expenses, college fees, etc., all mounted up.
So how was my own return on investment?
If I’m brutally honest, the financial rewards have not been great.However, for me, the sense of achievement, professional pride,my greater knowledge and understanding, and the experiences gained from my time served on Yachts >3000gt, have beena farmore importantmeasure of success than the monetary cost.
For those starting their career, it is worth considering the MCA or, equivalent, Commercialqualificationpathway. This will provide you with the greatest flexibility and broader range of opportunities in the future.And not just at sea, there are many related industries who value a Master Unlimited qualification.
Unfortunately, until the MCA change their qualification standards and pathways, the choice is limited for experienced yacht officers/captains who want to serve on Yachts >3000g. Theoptions are, the MIMaster Yachts (Unlimited) or, the MCA Unlimitedor, other Administrations, Commercial pathways.
Finally,it’s worth remembering that there are some amazing yacht Owners and yachts below 3000gt and that bigger, is not always better – they come with challenges and differences that may not suit. Think carefully about the time and cost involved and your career goals. And, find time to speak to those who have already trodden the path…
When I was asked to write a piece on Minimum Safe Manning (MSM) and how it affects yacht operations for the Superyacht Report, I knew that, although an important factor, it was only one of a number of considerations used to determine the crew complement. However, what was also clear, is that many yachts do not have sufficient crew to meet the expectations and demands of their owners and guests. A point that was recently expressed in article from the International Superyacht Society (ISS) Captains Committee, where they raised concerns about fatigue and its dangers, and asked:
Why is it that manning levels that were appropriate years ago are still accepted as the norm today?
From my own experience I can empathise with this.
Some time ago I took command of a yacht owned by a lovely family with a large family residence serviced by what seemed like an inexhaustible number of staff. For them, they were used to having the most attentive service 24 hours a day and had the same expectation for the yacht. They built a beautiful yacht that could carry up to 22 passengers which, she often did, but unfortunately was manned with the same number of crew as an equivalent 12 passenger yacht. As might be expected, it created significant challenges!
Following that experience, I also had the opportunity to review three new build PYC yachts and their manning. My observation on all of them, was that there was insufficient crew, partly because PYC compared to LY3 required additional MSM numbers, which impacted on the hotel side, but also due to the number of guests carried and services expected. After delivery, two ended up building more crew cabins – imagine the expense – and one downgraded to LY3 because they could not meet the MSM requirements without negatively impacting on the interior service. Clearly, if it was so obvious to an experienced mariner, why was it not obvious to the broker, designers and the shipyard?
The suitable manning of yachts is not restricted to large yachts either; there has been numerous discussions and articles written about crew on various sizes of yacht having to be ‘creative’ with their hours of work and rest in order meet owner/guest demands and remain compliant.
I suspect that many readers who have worked on busy yachts will have all had the same experience, where the team spirit, professionalism and commitment of the officers and crew to deliver the very best experience, overrides concerns about fatigue and the effect on performance, welfare, mental health, safety and crew retention.
So how are manning levels determined and, how can they be better understood?
Along with the MSM (more of which below) there are other factors that normally determines the size and makeup of crew:
Finance is an important consideration as crew expenses are amongst the highest operational costs so obviously it makes sense to optimise manning
Manning levels on similar sized yachts are used as a comparable standard, especially applicable to production yachts
Given the high value of the yachts ‘real-estate’ owners, understandably, will want to maximise owner/guest accommodation – the luxury spaces
Technical, service, access and operational spaces also require a large volume
Additionally, some in the industry may be keen to gloss over crew numbers to help with a sale, they may fail to manage the owners expectations or, just do not possess the operational experience to understand the numbers needed for a particular owner and yachts operation.
Once the above factors are considered and the various spaces assigned, the crew accommodation is designed following the Maritime Labor Convention (MLC) guidelines and the number of cabins/berths can be defined. Interestingly, MLC may actually be having some unintended consequences; as one respondent – maybe controversially? – in the ISS article suggested:
What we need is more berths not more space!
Minimum Safe Manning
A commercial yacht will require a Flag state approved MSM – many private yachts, as with other regulations, may also choose to comply on a voluntary basis.
An owner/operator will make an MSM application based on Flag guidance and the IMO Principles of Safe Manning Resolution A.1047(27). Once approved, an Administration will issue an MSM certificate, however, this is only the minimum number of crew (those requiring STCW or equivalent qualifications). This is the captain, deck/engineering officers and ratings and, cook, depending on crew numbers and Flag requirements, necessary to safely operate a yacht when it proceeds to sea:
The ship named in this document is considered to be safely manned if, when it proceeds to sea, it carries no less than the numbers grades/capacities of personnel specified in the table
This does not include the hotel team; service, housekeeping, laundry and galley, or the additional deckhands necessary to launch tenders, run the water sports, etc., or other specialists required these days – these are all additional to the MSM.
Of note is that the A.1047(27) changed from previous resolutions as follows:
A.890(21) and amendment A.955(23)
1.1.1 maintain safe navigational, engineering and radio watches in accordance with regulation VIII/2 of the 1978 STCW Convention, as amended, and also maintain general surveillance of the ship;
1.1 maintain safe navigational, port, engineering and radio watches in accordance with regulation VIII/2 of the 1978 STCW Convention, as amended, and also maintain general surveillance of the ship;
As you can see, safe manning in port was added but, so far, I have not seen any yacht specific guidelines on ‘port’ safe manning – commercial ships are normally involved in cargo operations so they tend to be more fully manned in port. In-port-manning can be a difficult issue for captains; it is often left to them to determine and they have to strike a fine balance between safely manning the yacht and providing crew valuable shore leave but, given number of incidents and fires in port, perhaps it should be better regulated? Running drills with reduced crew will help identify what is a safe number.
Often the Manning Scales provided by an Administration will be used as the standard. However, they allow some latitude on numbers based on the strength of the application and, operators can also take advantage of manning reductions allowed due to ‘distance from safe haven’ – which, for yachts, seems contrary to their operational demands?
Once the MSM has been agreed the rest of the crew can be determined – if the total number of berths is 15 and the MSM is 8, that leaves 7 berths for the rest of the team.
Three Hundred and Sixty Degree Approach
As can be expected expect this approach produces mixed results – a bit like the ‘off-the-shelf’ budget that so often disappoints.
What is necessary a three hundred and sixty degree approach; an in-depth assessment of all the factors and how each unique owner wants to use their yacht. Only once armed with that information can you estimate the right manning levels and/or manage expectations by modelling the expected demands, peaks and crew work schedules.
The point of managing an owners expectations is key, especially in the case of production and semi-production yachts where crew accommodation/berths tend to be fixed. In these circumstances it is still important to make the assessment. This helps avoids frustration and disappointment by communicating any limitations that may surface, along with possible solutions, such as use of external laundry services, shore-based crew, or shadow boat, at the earliest stage to an owner.
Yes, the yacht can operate with these crew numbers but, the service onboard will be limited in these areas…is that what you want?
Making a proper assessment requires effort and collaboration; asking questions, getting to know an owner, how they expect to use the yacht and the style and depth of services that are important to them.
• Likes quiet time with wife and one or two guests
• Meal times, silver service and large and varied selection
• Rises late goes to bed early
• Has boat full of family and friends
• Likes to be in port as often as possible
• Likes to party and stay out late
• Eats very light diet and at strict times
• Loves to be at anchor
• Guests have to follow his rules
• Some guests rise early late, others rise late and bed late – no rules set for guests
• Wants very light touch and informal service
• Love water sports, all the toys setup and available
• Happy to help themselves
• Tender rides for sightseeing, shopping trips, etc.
• Doesn’t want fuss
• Wants a masseuse available
• Just love being on the yacht
• Expects crew to look after children
• Wants formal service at all times – loves the attention and show
• Will not help themselves and expects stewardess on call 24/7
• Often invites friends over for drinks/meals at short notice
On both (A) and (B) the normal crew complement was 19. The manning on (A) worked well, but on (B) we were unable to deliver and maintain the standards of service expected and without being non-compliant. Fortunately, the owner was understanding and pragmatic and, after detailing the issues and possible solutions, it was agreed that we would use two guest cabins for 4additional crew that allowed us to provide the level of service that was important to him. Later, the the yacht was modified and 2 additional crew cabins (4 berths) were added at considerable expense.
Understanding use and gathering information similar to the above example will help to determine the appropriate manning levels, especially during those important peak times in guest operation, and allow you to develop work schedules for all crew and each department. It may need several iterations and some finessing to get right but this is a crucial exercise as it provides the information necessary to have a meaningful discussion about manning with an owner.
Operational vs. Standby
Unlike a commercial ships where workload and manning is more easily determined and manage accordingly, yachts are a much more difficult and, not just because of different owners demands and expectations but also the seasonality and operational profile.
Many yachts, apart from shipyard periods, operate all year round, on standby for visits at the drop of a hat. These tend to be larger yachts and so full manning required can more easily be justified.
Smaller, or one season yachts, are a more complex situation. Whilst it might be essential to have 19 crew during the season, it may be difficult to justify that number sitting in port for the winter with no guest movements where a more appropriate number might be 12 i.e. sufficient to safely man and maintain the yacht in good order. And, if that choice was made, at least you have the berths necessary to increase crew for the season; though it should be noted it is easy to downsize a crew but, much more difficult to upscale again and expect the same quality of crew, personalisation, level of service, operation and safety standards.
Importantly, manning levels should be determined by the peak periods of operation; after all, that is when an owner or charter guest gets to experience the depth and quality of service.
In my time I have seen the whole industry evolve and so many positive changes have taken place.
Today, yachts are better built, more reliable, safer, officers and crew better qualified and trained, employment conditions improved, and there is now much better support available from yacht management and other shore-based service providers. At the same time, there has also been an incremental increase in owners expectations – some examples below: –
Yachts and guests now rely heavily on electrical/electronic and AV/IT systems
Beach clubs’ add another deck to be servced
SPA therapists, hairdressers, gym instructors, nurses, nannies, are now routinely carried – are they single or dual role? Whatever the case, it generally means service and housekeeping are stretched as they lose a member to other activities
Every night is ‘theme night’ with new table decorations and service expectations
Photograph/video guest experience and provide a personal record for guests to go home with
Flight crew, security and owners staff can add to numbers carried and place their own demands on crew
Tenders are bigger, requiring more crew to launch and operate
More toys carried like inflatable slides -heavy and labour intensive to setup/breakdown, especially when wet! – an ever-expanding list of toys, diving equipment, motorcycles, etc. – all require crew and maintenance
Diving, Pilates, jetski, sailing, windsurf, kite surf…an almost endless list of activities
Accommodation for river or ice pilots for yachts traveling further afield
These are further compounded by an increase in paperwork that is a fact of modern yachting e.g. budgets, purchase and approvals, crew HR functions, maintenance and refit planning, safety management systems, and management reporting – this generally falls on the shoulders of the captain and senior crew. One study on a 100m+ showed that the captain was spending 33% his time on their management companies demands which, along with their normal duties and responsibilities, was clearly unsustainable.
Whilst there has been some positive changes in the industry that should be celebrated, the evidence suggests that manning levels maybe one element that has not profited from the evolutionary process.
Perhaps yacht crew are partly to blame for this due to yachting culture, as already posited, where they will work all hours necessary to deliver the very best experience for owners and guests, and often do so without complaint or communicating the problem outside of the yachts team. And, apart from this cultural norm, there are also undeniable concerns about job security where captains and crew may be reluctant to speak-up and/or report their hours of work and rest accurately for fear of losing their job. However, it is important as proper reporting helps to educate owners and the wider industry. Furthermore, if there was an incident and an inquiry, if falsification of hours of work were discovered and fatigue the root cause or contributing factor, it could have serious consequences for the crew, especially the captain.
The quality of captain, officers and crew and, the onboard experience is, without doubt, key to the success of a superyacht and this can only be achieved with the right manning levels which, unfortunately, have not kept pace with the advances made in the rest of the industry.
As the ISS piece stated ‘for the love of yachting’ we need to have an honest conversation about manning that includes owners and all industry stakeholders, especially those with operational experience. Getting this right improves the health and well-being of the crew, their performance, retention, yacht safety and, ultimately, leads to a better ownership experience.
Whenever I talk to owners and their teams, the subject of running costs and budget always comes up. I always advise, it is a fundamental tool for measuring the financial performance of the yacht but, like fine art, requires careful crafting and curation to be of value, and this always comes with a caveat – there is no ‘one size fits all’ model. That “10% of the value of the yacht” as often cited, can turn out to be a significant underestimation that can lead to financial shock and a negative ownership experience; with some owners withdrawing from the industry because of it.
There is no ‘one size fits all’ model
The cost of running a Superyacht is significant, with annual costs ranging from €2M for a 50 metre yacht, and up to €20M+ for some of todays Gigayachts. And, with such significant expenditure it is essential to have financial controls in place, and a well formulated, approved and monitored budget is one of the most valuable tools available.
A budget must; forecast the amount and timing of funds, measure performance and instill accountability and transparency into the fiscal management of the yacht.
A realistic budget takes time and effort to develop. The schedule of accounts must reflect the expenditure accurately and, as mentioned, this is unlikely to be achieved from ‘an off the shelf budget’ for an identical or similar sized yacht without adapting it to the owner and use.
The process of developing a budget requires proactive collaboration and consultation between the captain, the yachts team, and the owner, his family office, and/or management company. It will be important to understand how the yacht is to be used as this knowledge will help with the accuracy of the budget.
The process of developing a budget requires proactive collaboration
Knowing the cruising plans and use of the yacht e.g. one or two seasons, stand-by or scheduled use, crew employment terms and conditions, standard of maintenance, along with preferences for economy or speed, marina or anchorage, food and drink, etc., will help in creating a workable budget. There is also the question of private or charter, which although adds income to the yacht – not guaranteed and often over estimated – also has cost implications; extra hours on engines and systems, general wear and tear and crew issues.
The Head’s of Departments (HOD’s) – engineering, deck, interior and catering – should be involved in the development process and should have responsibility for managing their departmental budgets. This helps improve the accuracy of the budget, and serves as a motivational tool by giving senior crew ownership and accountability of their area of expertise.
As yachting is perhaps, the ultimate discretionary expense, and a big part of its appeal is the freedom and spontaneity it affords, one should understand that the budget is subject to many variances, some which can be significant depending on how plans change. In addition a yacht is made up of complex systems and equipment and operates in a hostile environment. This will inevitably result in breakdowns or incidents that cannot be readily modeled into the budget, other than trying to mitigate a potential shortfall by maintaining a contingency for unexpected events.
During the life of the yacht, the reality is that repair and maintenance costs will increase. A new yacht in its first year is covered by shipyard warranty, so associated repair costs tend to be low – although beware of the travel and subsistence costs that may be levied as these can be high if there is a large amount of work carried out remote from the shipyard – in later years, these costs will progressively increase as the operating hours take their toll on equipment, systems and machinery.
Future expenses that I would categorise as Periodic Maintenance, such as dry docking and shipyard periods should also be considered. A Private or Commercial Yacht 12 PAX or less, will require two dry-docks in a five year cycle for works such as – Class survey, antifouling paint, checking and maintenance of shafts, stabilisers, rudders, bowthruster, anchors and cables, hull and ships side valves. It is also likely that the hull and/or superstructure may need a repaint within that period, again a cost that should be budgeted for. The cost of servicing engines and generators – excluding the normal checks and oil/filter changes – is often something that is overlooked and is dependent on use and hours. As an example a service contract by one engine manufacturer for maintaining 2 x 300kW engines over 16,000 hours was around €450k, and 2 x 3600kW engines over 12,000 hours was in excess of €550k.
Periodic Maintenance costs are cyclical and spread over a number of years and there are a number of ways of accounting for these. An owner should decide if he wants he to spread these over a 5 or 10 year cycle, or whether he would prefer each year to be independent, with Periodic Maintenance added separately.
An owner should decide if he wants he to spread these over a 5 or 10 year cycle
Capital expenditure for new equipment and/or upgrades should also be accounted for as a separate category as it falls outside the normal operational expenses of the yacht.
Following good accounting practices there should be sufficient cost centres, sub-catagories and account codes – the metrics – to enable a thorough analysis of expenditure. For example with suitably defined crew costs, the budget could be used to highlight and identify the real cost of high crew turnover by spikes in recruitment fees, uniform, repatriation/travel costs, etc., and provide the financial imperative to resolve the situation. Lumping costs together limits transparency and value of the budget and should be avoided.
Inevitably the budget will go through a number of versions as it is developed, reviewed and finessed, before finally approved by an owner. And, once implemented, the budget will need to be effectively monitored to ensure the defined financial targets are being met and any variances are brought to the owner’s attention without delay.
The budget is an important aid but, is only part of the picture, it must also be backed up with other controls and procedures in order to effectively manage the yachts finances. These include such things as format and frequency of reporting and auditing, purchase order request and approval process, and setting expenditure limits and authority.
As many of the suppliers and service providers we rely on in the industry tend to be small businesses, the effect of delays in the payment cycle can be profound. And, for the yacht, it can create reputational damage – you end up being at the back of the queue or, ignored completely, for services and supplies which, in high season, can impact on the owner and guest experience. Having a budget that effectively forecasts cash flow can ensure funds are available to make prompt payments – although sometimes, unfortunately, slow payment is the policy of an owner or his financial team.
Finally, it should be understood that the budget is a dynamic document and will need to be continuously reviewed and improved upon over time, and changed as circumstances dictate. If crafted and curated well, the budget provides an owner with a valuable tool in understanding and controlling costs, minimising financial shock and, improving the ownership experience.