America's Cup: Queensland grabs superyacht spend

by Richard Gladwell, Sail-World.com/nz 25 May 2018 12:59 NZST 25 May 2018

New Zealand is poised to be gazumped again by Australia, this time by the announcement of an aggressive new strategy to attract substantially more superyacht business to Queensland co-incident with the staging of the 36th and subsequent America's Cups in Auckland.

On Wednesday the Queensland Minister for State Development, Manufacturing, Infrastructure and Planning Cameron Dick launched the five-year Queensland Superyacht Strategy at the Australian Superyacht, Marine Export and Commercial Marine Conference at the ASMEX 2018 conference at Sanctuary Cove International Boat Show.

A superyacht servicing facility plan has been in gestation in Auckland for three years. Progress has been slow and despite the Emirates Team New Zealand's America's Cup win almost a year ago and the superyacht device facility project has not been fast-tracked, as has been done with the America's Cup base project.

The Auckland scheme involves the creation of a significant superyacht maintenance facility on the western side of Wynyard Point. The area already has several marina berths for superyachts but needs to be expanded extensively if Auckland and New Zealand are to capitalise on the 90-100 superyachts to visit during the 36th America's Cup.

That figure is conservative according to the Queensland State Government: “during the 2016-17 season, around 200 superyachts were operating in Australian waters," says a media release from the Queensland's Minister's office.

“Going by the rule of thumb that superyacht charters spend about 10 percent of the value of the vessel on running costs, plus the cost of maintenance, provisioning and follow-on tourism, we can readily see the benefits this work will bring to Queensland," says the Minister.

If the Queenslander's play their cards right, much of the America's Cup superyachts could bypass having their servicing work done in Auckland, and instead have the vessel serviced in Queensland en route or returning from Auckland after the Cup finished in March 2021.

The bold Auckland plan involving Orams Marine and Southern Spars would see the creation of a superyacht maintenance base complete with 600tonne travel-lifts capable of handling superyachts up to 70 metres in length.

The Auckland superyacht facility plan would join the properties occupied by Southern Spars and Orams Marine, allowing a substantially higher number of vessels to be serviced, taking advantage of the significant amount of world-leading marine companies in Auckland, the expert experience available and the very competitive New Zealand exchange rate.

Auckland Council and its development arm Panuku Developments appear to have been caught flat-footed by the Australian move which is aimed at swiping a significant amount of America's Cup and downstream superyacht business, reminiscent of the snatching of the 2003 Rugby World Cup hosting rights by the Australian Rugby Union.

The business case put forward by the Queensland State Government says that superyacht activity bought AUD$630million (NZD$690m) of business into the state economy in 2016 which supported 4,500 jobs in SE Queensland alone. The new initiative would see that business expand to AUD$1.1billion (NZD$1.2b) and 8000 jobs in 2021 says a written media statement issued by the Minister's office.

The statement also reported other initiatives further north in Cairns, and the Whitsundays bought a further AUD$320million (NZD$350m) and 2660 jobs in 2016. This was expected to increase to AUD$580million (NZD$633m) and 4,500 jobs by 2021.

Hindering the development of a superyacht facility has been the attitude of many of the key players in local and national government who are sceptical about the size and benefits of the superyacht industry to Auckland and New Zealand.

During an open meeting of the Planning Committee of the Auckland Council in early September 2017, the initial options for the hosting of the 36th America's Cup were discussed along with the legacy use of the team bases.

Councillors grasped for information but could only quote a previous 2014 Council report saying that the superyacht servicing industry generated only NZD$30 million per year, that was described as "peanuts for Auckland".

"And when you look at that business case, some 35% of that $30million is actually on lube and oil changes. No value added there. Refits account for only 20 %. Repairs and maintenance account for only 12%. There is no great business benefit to Auckland in parking up mega floating mansions on the waterfront that are owned by occasionally visiting oligarchs and sheikhs etc. There is no real value. You don't obliterate your water space by prioritising it for the privileged," opined Planning Committee Chairman Chris Darby.

At subsequent Council meetings, the potential value of the superyacht servicing industry was increased substantially over that figure and closer to the assessment by the Queensland State Government.

Keen to adopt a stance that will resonate well with their electorate, many of the Council remain increasingly sceptical of the benefits of the superyacht surviving market, and the America's Cup generally - despite the increasing volume of analysis to the contrary.

A recent international assessment by a global investment and real estate consultancy CBRE put the value of the superyacht business to Auckland at $400 to $900million - just from the 36th America's Cup period alone.

The same report notes that the world superyacht fleet is expected to expand to 6000 vessels by 2021 - approximately double the number when Auckland last hosted the America's Cup.

More importantly, superyacht insurers now require a full refit every five years, typically involving a spend of 10% of the vessel's value, a figure confirmed in the Queensland Minister's announcement.

In Bermuda, a venue which had no superyacht servicing facilities attracted 70 superyachts for the America's Cup scattered around five locations on the Atlantic archipelago. Auckland hosted 90 for the 2003 America's Cup.

Most America's Cup visiting superyachts would undergo a substantial service in Auckland, particularly with the ability to have a full rig service from Southern Spars, which often involves a the rig being lifted from the vessel and serviced on Site 18. Southern Spars has the majority share of the superyacht spar market enjoying the benefits of a large custom designed and equipped manufacturing facility in Avondale.

Site 18, an open-air facility currently used by Southern Spars for rig servicing came close to being swallowed by early America's Cup base plans until planners appreciated its significance for the superyacht servicing industry.

During the planning machinations over the options for America's Cup bases, first Panuku Developments and then the Minister of Business, Innovation and Employment, David Parker put forward separate proposals that used the area known as "Site 18" for America's Cup bases.

The Panuku Developments use of Site 18 just came up as one of five options in a lateral thinking exercise and was discounted in the first round of assessment by Panuku for several reasons.

However, when Minister Parker revived the Site 18 base option, causing jitters amongst an already alarmed Auckland marine industry concerned at the serious lack of understanding of the superyacht and marine industry being shown by the political decision makers.

The current facilities are on borrowed time. To date, Orams Marine has been unable to expand beyond its existing footprint. Southern Spars are only on a month to month lease of Site 18 - vital for the servicing of superyacht rigs, which are booked months and years in advance.

The plan for the combined Site 18 and Orams' yard would create a 33000sqmetre area able to haul 65-70metre long vessels, in addition to existing wharves and marinas for larger craft.

The slipways currently used for superyacht haulage, instead of a travel-lift, date back to 1915 and is one of several century-old facilities in the area which pre-dates the creation of Westhaven Marina and certainly the office/apartment/hotel constructions that have now taken over the traditional home of the Auckland marine industry.

The Westhaven site is the only suitable location for the new superyacht facility, as many of the superyachts are fitted with masts that will not fit under the Harbourbridge.

During a brief visit to Auckland at the end of November 2017, when a takeover of Site 18 for Cup bases was very much on the table, North Technology's President Tom Whidden was adamant that New Zealand is going to have to make the right calls if it is to maximise the benefits of the next America's Cup.

North Technology is the predominant player in the marine industry owning several international marine businesses including North Sails, Southern Spars and Hall Spars. The US-headquartered empire has substantial plants around the world and pushes business to those locations, rather than just servicing local demand.

New Zealand owned international sailmaking outfit, Doyle Sails is also heavily involved in the superyacht industry. Based in Avondale, Doyle Sails has an interest in a string of sail lofts around the world, and also stands to pick up business from a new superyacht facility as well as from America's Cup visiting superyachts.

"I hope that whatever happens here with the America's Cup, winds up helping the [marine] industry because the industry in New Zealand needs a shot in the arm," Whidden told Sail-World.

"I hope they don't take away the space for stepping masts and fixing boats," he added, in a direct reference to the America's Cup planners possible intentions for the area known as Site 18.

"They will grow jobs here, as long as the industry grows as a result of the America's Cup. If you lose the chance to work on the boats here and do refits, it would be a shame."

"If you think about the Auckland economy, I imagine and hope that the America's Cup is going to be great for re-launching the New Zealand boatbuilding enterprises. Too many of them have gone away. There is so much talent down here, and worldwide there is so much need for good, well-built boats. But there aren't enough boatbuilders around."

Where there were once six superyacht builders in New Zealand, now there are just two - a combination of the fluctuating Kiwi foreign exchange rate and government turbo-charging of the industry just announced in Queensland.

Unable to put together an America's Cup team, the Queensland plan is set to snaffle a significant percentage of the benefits of the America's Cup hosting in Auckland and then leveraging that business to fast-track the expansion of the fledgeling industry.

“Our strategy encourages companies to build superyacht berths 80 metres or longer to capture this strategic opportunity, lift existing maintenance facilities to European standards, and further develop access to facilities, services and social activities for guests and crew," says the Minister.

“The Queensland Government is committed to realising the significant economic and employment potential of this growth sector, especially in regional Queensland, the Minister's statement continued.

“We are seeking to reduce Federal Government red tape to expand the industry and create more jobs in our major maritime precincts of the Gold Coast, Brisbane, Cairns and the Whitsundays."

The Queensland strategy links the attraction of more superyachts to cruise the Australian coast including the Great Barrier Reef and then having the vessels receive their five-year and other servicing in Queensland before travelling to their next destination.

Auckland has a similar plan geared around the America's Cup, but without having expanded servicing facilities available in New Zealand, it would seem likely that Wednesday's announcement could pull a significant percentage of those visiting superyachts to Queensland.

Alternatively, the more prominent New Zealand firms could take an "if you can't beat 'em then join them attitude" attitude and look at setting up facilities in Queensland, to protect their share of the superyacht servicing market.

After eight different plans for the America's Cup bases were developed, mostly as concept sketches only by Minister Parker's office, before being released to the media. Emirates Team New Zealand devised a compromise plan, a deal was reached on March 26, and a second Resource Consent Application was submitted in late April.

The critical factor in the America's Cup Champions decision to make a final proposal and not send the 36tth America's Cup to Italy was the team's loyalty to their substantial Auckland and New Zealand supplier base. Under current circumstances, it would seem that much of those benefits will be lost to Queensland.

The long-term prognosis for the New Zealand superyacht industry to benefit from infrastructure created for the 36th America's Cup is that an successful industry will not be able to benefit in the medium to long term without the development of a specialist superyacht servicing facility.

Part of the second America's Cup Resource Consent application was the dropping of a parallel application allowing the permanent relocation of new facilities for the seaplane base, for the Waiheke and Great Barrier vehicle ferries, and fishing boat facilities to the western side of Wynyard Point. Instead, under the current plans, those operators will be housed elsewhere as an interim measure and will then move back into the America's Cup berthage space in April 2021.

Also relevant to Economic Benefit analysis of an America's Cup, CBRE calculated that the 2003 Auckland America's Cup generated a net spend of $523 million, of which the racing teams accounted for 55 percent. In 2021 there will be fewer teams, but spending by the superyachts and from general tourism is expected to more than make up any shortfall, CBRE said.

While each of the previous Cups in Auckland were held over a five-month period, the upcoming event is expected to be conducted over a three-month span. While this means that superyachts will be berthed in Auckland for a shorter period, their numbers are expected to be higher, CBRE said.

The 2021 event is expected in total to capture up to $250 million in core retail expenditure including food and beverages. Retail spending during the 2003 event was $136 million, 27 percent of the total at that event. Accommodation made up 9 percent of total expenditure during the 2003 event, around $47 million, according to CBRE.

An extra 214,569 hotel room nights were sold during the 2003 Americas Cup period. Even with an additional 2,580 rooms estimated to be completed in Auckland in time for the regatta, there will be a shortage of hotel rooms, which will need to be filled through Airbnb and serviced apartments, CBRE said.

Contrary to other benefit analysis produced on AC36, the CBRE report is genuinely independent and was intended an overview for current and potential investors in Auckland projects, and not to support the position of one of the key players in the 36th America's Cup to be held in Auckland.

The current America's Cup bases Resource Consent application has a minimal AC36 legacy use for superyachts. As matters now stand Auckland stands to lose much of the medium to long-term benefit of the 36th America's Cup, while the Queenslanders maximise their opportunities to establish a long-term superyacht service jump-started by the opportunity afforded by inaction on the other side of the Tasman.