Dream Yacht suspending Guaranteed Charter Income payments

[mvweebles]

Originally Posted by IAmGroot

Catamaran Company has put their position out there now: https://www.catamarans.com/We-Go-The...o+The+Distance

Critical bit of the post for this thread:


Looks look like they built-up a cash reserve just for these situation. The balance of their post explains this a bit. Good work CatCo.

We will continue to keep all funds for charter and sales in the same escrow accounts despite no legal or financial requirements to do so, just as we have done for over 20 years. We will continue to promise that we will never comingle your funds with our funds and we will provide the operating funds for our business. Just like all the other crisis’s in the past, no owner payments will be missed and all contracts will be honored.

What I like about this statement is, besides affirming their promise, this company provides visibility/transparency into how their promise can be validated - no comingling of funds and sequestration of accounts. I'm sure all similarly situated companies are tempted to re-shuffle their payment commitments but are concerned about reputational risk and goodwill, especially if their competitors do not follow. Will be interesting to see how the charter industry evolves and attracts capital investors (the boat owners) to refresh their fleets with shiny new vessels.

Peter (aka "Drama Llama" with my head well above the sand!)

[ol1970]

I will happily be a paying customer of DYC moving forward when things are back to normal. Would I enter their program as an owner, probably not, but I am too much of a control freak when it comes to financial matters. Kudos to their founder for chiming in here, I hope they weather this storm because I do love the service they offer.

[valhalla360]

While I appreciate a direct response from the company and that is 10 times better than silence...

This reminds me of college football coaches and the dreaded assurance from the school that they have no intention of firing the coach. They are boxed in a corner. If they admit, they are looking at the possibility of firing the coach...it guarantees recruits look elsewhere and makes it that much harder for the coach to turn things around.

In no way should this be taken that I am implying DYC is purposely lying or purposely misleading but take things they say with a grain of salt...if they say that they are days away from going belly up if things don't get better quick, expect panicked owners to take action and it becomes a self fulfilling prophesy.

[contrail]

I noticed in the news, today, that California Gov. Gavin Newsome has pursuaded a whole gaggle of major banks to accept suspension of various types of loan and mortgage payments for 90 days, with those obligations tied on to the end of the agreements. I suspect that some sort of arrangement like these, and government payments to compensate companies for their payrolls, provided they don't get rid of employees, is what will keep the whole system largely intact, and ready to roll, when the time comes. Yes, perhaps a different approach than what would be even thinkable in normal times, but these times are a bit different. Good luck to all who, through no fault of their own, suddenly find themselves in a predicament, and thanks to all with the flexibility and finances and ingenuity to find ways to ride this out. Let's hope it works out this way for charter companies and their boat owners, everywhere.

[Barra]

I looked into the DYC/sunsail/ moorings ownership programs last year and was immediately concerned about the credit risk under all their ownership models as others have noted.

the common marketing line we all saw was "if you are worried about credit risk then these programs are not for you"

fair enough.

They all have variations of the following -

1. you buy the boat through them at an inflated price but get "guaranteed" income. you then use that to income to finance the boat in your name. you hold the title and any mortgage debt

2. charter company buys the boat at wholesale price and you pay them 30% upfront of the retail price, they then mortgage the boat and effectively have a nearly free boat to charter. you get some weeks use of the boat and can buy it for 55% of the inflated retail price at the end.

3. You buy a boat yourself to their spec and save same purchase $s, have the mortgage in your name and get a split of rental income thats not guaranteed.

All have credit risk 2. has title risk as well. I had thought that 2 was the most risky of the 3 ways to go as you dont get title for 5 1/2 years but its quite possible only doing 30% of your new boat price will end up being the least damaging option if things go pearshaped.

I never considered an industry wide collapse that is now on the radar. There is the distinct possibility of a dominoes effect now IMHO and just how long the dominoes can stay up depends on how long the shutdowns go on.

Ill eat my hat if the other companies dont suspend payments this month as well and frankly I would be even more concerned about them having not being as proactive as DYC.

[fivecapes]

The "if you are worried about credit risk then these programs are not for you" would most def be unsettling.

But still not quite sure why 1 and 3 has credit risks if you outright own the boat?

I remember asking someone about to put in their cat under 2 what would happen if DYC went tits up, never got a reply.

[Barra]

^^^

credit risk on 1 is happening now - income payments are being suspended
credit risk on 3 is building quickly - 1/3 share of no income but no doubt bills for holding costs are coming.

so far no credit risk per se on 2 which like i said to me seemed to be the most risky. You can still take your 6 weeks charter if you can get to a boat. for now.

how you financed the boat is irrelevant to the credit risk of the contract

[ScottWest]

Lease purchase for truckers sounds similar to this deal for boaters. You take all the risk, allow them to borrow your money from you twice, and in the end stand a good chance of not even getting the equipment in the end.

[mvweebles]

In defense of the model, an older post in a thread requesting feedback on buying via a charter company. One "owner" related a scenario that made sense to me ( I use "owner" in quotes because he had no intention of actually purchasing the boat).

Scenario #2 was his pick. Pay 30% upfront with option to purchase at end, which he had zero intention of exercising. He stated that doing so allowed option of either 6-weeks usage in prime seasons, or 12-weeks off-season. He and his wife are retired and use the 12-week off season option at multiple locations, not just the home port of "their" boat. His view was he was saving a bundle by effectively prepaying for charter vacations. Essentially a timeshare arrangement. If I remember correctly, I believe he chose DYC due to the large number of charter bases, and his original "purchase" was the smallest in their fleet which was fine for he and his wife. If a larger boat was needed for guests, he felt upgrade cost was modest at $500/week which the guests would pay. He had a designated contact at the charter company who would help him coordinate dates, location, logistics, and such, and the boat was always ready ready to go when they arrived. Knowing the amount of prep it takes me for a 12-hour trip let alone a 12-week cruise, I immediately understood the value proposition.

While I wholeheartedly agree these arrangements are lousy ways to purchase a boat, the reasoning for strictly holiday use made sense if used correctly and thoroughly, though does carry risk of the company going out of business.

Not for me, especially for purchase, but I can see a limited use case where it makes sense

Peter.

[Barra]

Originally Posted by mvweebles

In defense of the model, an older post in a thread requesting feedback on buying via a charter company. One "owner" related a scenario that made sense to me ( I use "owner" in quotes because he had no intention of actually purchasing the boat).

Scenario #2 was his pick. Pay 30% upfront with option to purchase at end, which he had zero intention of exercising. He stated that doing so allowed option of either 6-weeks usage in prime seasons, or 12-weeks off-season. He and his wife are retired and use the 12-week off season option at multiple locations, not just the home port of "their" boat. His view was he was saving a bundle by effectively prepaying for charter vacations. Essentially a timeshare arrangement. If I remember correctly, I believe he chose DYC due to the large number of charter bases, and his original "purchase" was the smallest in their fleet which was fine for he and his wife. If a larger boat was needed for guests, he felt upgrade cost was modest at $500/week which the guests would pay. He had a designated contact at the charter company who would help him coordinate dates, location, logistics, and such, and the boat was always ready ready to go when they arrived. Knowing the amount of prep it takes me for a 12-hour trip let alone a 12-week cruise, I immediately understood the value proposition.

While I wholeheartedly agree these arrangements are lousy ways to purchase a boat, the reasoning for strictly holiday use made sense if used correctly and thoroughly, though does carry risk of the company going out of business.

Not for me, especially for purchase, but I can see a limited use case where it makes sense

Peter.

Yes scenario 2 comes with a theoretical "timeshare" value of about 120% of your 30% deposit. But that uses the full rack rate for the boats. If you look at most of the charter companies online you can usually get 20% off the rack rate by booking a bit in advance or last minute.

So even if you have the time to take all of the timeshare (which we all know hardly ever happens) you are no better off than just looking for a deal each time you charter. And of course as is now the case you are looking at maybe losing the rest of your timeshare if things get bad.

Scenario 2 only made sense if you were going to buy that particular boat at the end and then just only barely made sense mainly for a cat as they were exhibiting less than normal depreciation.

Your poster just wanted an excuse to go sailing every year and there's nothing wrong with that.

[serpa4]

1st, I don't own a boat. 2nd I have only chartered once.
However, as a typical person with a small income, this has got to be more than 6 months.
Many/most people have lost a great deal in the market and investments. These are likely people who charter...not enough to buy/own, not retired and sail off ready, just enough income to have fun...till now.
Even when the travel ban is over for say BVI, it has to be over for everyone else leaving their country and coming back in. Then airlines have to begin flying also.

Then, assuming I have made any money back in the investment market, I certain will not have recovered enough to even think about an expensive charter.
We have not reached max sickness.
We have not reached max unemployment.
We have not seen a possible housing market crash from the 20% unemployed, lost hours, lost income, no vacation rental income, etc.

In my unqualified opinion, this is going to be a long time before charter picks back up.
However, I am eagerly awaiting the travel ban lift so I can go purchase a good used owner's suite boat. Sucks I cannot get to Turkey or New Zealand to see either.

I was so close to putting a new boat in charter as well as my friend at work. Guess not was a lucky call.

[Barra]

As advertised by DYC

In Australia as a result of our rush to stimulus you can now write off the first $150k of a charter boat purchase and 50% of anything after that so if you have a large enough taxable income this year you can buy a new boat for nearly half price.

Pretty sure thats not what our government had in mind with its stimulus and you might want a specific tax ruling to be sure but pretty surreal huh?

Of course you do run the risk your new boat might be worth 50% less if we have a global depression.

[Cool Hand Luke]

[QUOTE=letsgetsailing3;3103157]'ll admit, I don't quite understand it. Explain it like I'm a 5 year old./QUOTE]

Reminds me of one of the best quotes from one of the best movies...

"Maybe you could tell me what is going on. And please, speak as you might to a young child. Or a golden retriever. It wasn't brains that brought me here; I assure you that."

[Shanachie]

A message from Dream Yacht Charter to its business partners, copied from the company's web site. Note that it says it has the financial resources to succeed through September. Any bets on how the charter business will be doing then?



For the first time in our history, we have an almost total suspension of our activity due to the Coronavirus pandemic. Our bases can no longer accommodate customers and, as you will no doubt be experiencing too, sales teams have virtually no more sales requests to process.

My first priority is of course the health of my staff, you, as our partners, and that of our customers. Site closures and remote working allow us to quickly meet this requirement.

The second priority is to ensure the sustainability of our businesses. We have, as I am sure you have, been working tirelessly to guarantee the functioning of our businesses for the coming months so that we can recover quickly after the pandemic restrictions are lifted. We have drastically reduced our costs, secured a government loan and you can be confident that we will successfully see this through until September.

We know you are all suffering too and our strength with partners has always rested on the ability to mobilize in solidarity, to act quickly and anticipate. This is the vision that I invite you to share, to find these joint solutions to help each other.

While we have cut back our operations and costs to ensure our survival, we remain committed to delivering those charters which guests still intend to take and provide excellent customer service. This means, in return, we need to know who is committed to travelling and that they maintain their financial commitment to the booking.

What we can all do together is to help customers feel confident in their bookings, knowing they can reschedule should they be unable to travel due to Coronavirus disruption, and maintain the bookings already in place.

Customers have the following options:

If they are not confident they will be able to travel for the booked date due to Coronavirus disruption, we offer flexible rescheduling. We urge them to reschedule.
If clients still intend to travel on the booked date, subject to the lifting of Coronavirus restrictions, it is important that they maintain their booking in good standing and adhere to the payment terms of their booking. They can be confident that if this situation changes, their money is safe and they can reschedule.

In these times of great uncertainty, we need more than ever to have the most accurate understanding of our clients’ intentions.

A reminder of our policies

Clients sailing this summer can change their dates and/or location in 2020 with no penalty.
Clients booked to sail this season can change to 2021 with a small change fee. Alternatively, this change fee can be avoided if the original payment schedule for pre-change dates is kept to.

The unprecedented event of COVID-19 has become a huge threat to the tourism industry and governments have been quick to react to protect businesses, such as yours and ours. Governments have fast-tracked law changes and we are applying it as soon as it is ratified.

These law changes in some countries mean customers cannot claim a refund during the Coronavirus pandemic period, instead they are allowed the opportunity to reschedule. This has been voted for recently by governments in France and Italy, and Germany isn’t far behind. Tour operators can issue a credit note valid for:

Italy – 12 months
France – 18 months (all major tourism firms including Air France apply that policy)

We kindly ask you to be firm with your clients and stick to this policy and it is also in your interest too.

We are adjusting our operation daily and we’ll be ready to serve charters as soon as guests are ready to travel to us. Those unable to get to us will be able to reschedule at another time that suits. In return, those clients that have booked with us must maintain their commitment to travel and financial payments according to their booking’s terms so that we can anticipate and plan the resuming of our operations accordingly.

It’s going to be a very difficult time and we thank our partners for their patience and understanding. I hope you and your teams stay safe.

Best regards

Loïc Bonnet

President and Founder, Dream Yacht Charter

[letsgetsailing3]

I don't know how to break this to you folks, but boat ownership isn't a great financial investment no matter how you do it.

But other than travel, women and booze, what else would you do with your money? Leave it to your kids? HA! In the end, someone else was going to get Scrooge's money.

You can't take it with you, so you may as well spend it on something you like to do, even if you have to force yourself.