MIM Study on Superyacht industry

The Malta Institute of Management has commissioned a study on the Superyacht industry. This study was presented during the Annual Yacht and superyacht conference organised by the Institute.

The study analyses the current and future potential contribution of the superyacht industry to the Maltese economy in terms of the generation of value added and employment and its strategic fit with other policy initiatives. The study provides justification for further Government support to the sector based on the experience of the last five years, following a degree of privatization and economic mobilisation of operators across the island.

The superyacht industry is highly condensed in the Mediterranean. Yet, it is important to note that other centres are gaining in importance. Italy is considered as the major business player within the Mediterranean region being also the world’s largest builder accounting for 31% of all builds.

Malta’s role within the superyacht industry is in part defined by the fact that Europe is the leading region for superyacht building, with a market share of 79% in 2014. Malta’ is located in close proximity to this activity and has a strong economic maritime tradition and vocation which has been under-utilised in past decades. Malta is more on the refit and maintenance as there are currently no building factilities. Malta’s main operator in the sector that is Palumbo Superyacht facilities s very well connected in the sector. Indeed, Palumbo owns also Columbus which is a superyacht builder. Recently the Palumbo group also acquired another facility in Ancona. This may further increase the activity in Malta as the Palumbo network continues to grow.

Malta’s Integrated Maritime Policy launched in 2014 aims to provide renewed focus on maritime and marine activity within a European Blue Growth Framework. The Superyacht industry is already playing a major role in this regard, through activities centering around tourism, shipyard services and logistics.

The economic contribution generated from expenditure by superyachts is considered at three distinct levels, namely as it affects (i) business which is the direct recipient of such expenditure (e.g. shipyards, marinas, chandlers, providers of goods and services to yachts, etc.), (ii) business which is indirectly affected by servicing the needs of the firms included in (i), and (iii) business which benefit from the expenditure induced by the income generated within sectors directly related to superyachts.

On this basis, the superyacht industry is found to have directly generated around €67.1 million in direct value added, translating in approximately 1,600 jobs accounting for 0.78% of GDP and 0.81% of gainfully occupied respectively in 2015. Including the indirect effects, the value added generated is estimated at €96.4 million, involving around 2,300 jobs. The overall economic contribution including also the induced multiplier effects across the economy is estimated at €139 million (1.63% of GDP), generating 3,291 jobs.

The potential for future contribution of the superyacht industry to the Maltese economy is assessed through a SWOT analysis categorized into six aspects namely human capital, market demand, infrastructure, regulatory issues, logistical considerations and the general business environment.

From the human capital perspective, employees working in the yards are knowledgeable and well trained with the majority reaching retirement in a few years’ time. This is worrying within a context where there are no vocational course offerings to attract young workers to join the industry. In terms of market demand, Malta is located in close proximity to regions which are encountering political instability which could deter business. An infrastructural shortcoming is the limited capacity of yards and marinas to cater for business growth which will hinder local industry from benefitting from the expected global growth. The limited air connectivity to the South of France is identified as the main weakness for Malta to serve as a logistical base.

On the other hand, Malta’s competitive fiscal, legal and corporate support structures are attractive to business whilst co-operation between operators renders the possibility to offer a comprehensive service.

This study derives five-high level recommendations to optimise the potential contribution of the superyacht industry to the Maltese economy, as follows:

• Vocational education targeting specifically this sector to overcome the threat of an ageing population and skills gaps amongst the younger generation in the future;

• Improved air connectivity to the South of France through a direct flight to enhance Malta’s position as a logistical base thereby placing Malta at par with other competitor countries;

• Extension of marina developments through the construction of breakwaters to increase capacity through more berthing spaces;

• Safeguarding and potential strengthening of the actual and perceived security arrangements, especially within the context of the instability in North African countries;

• Exploitation of the potential synergies with high-end real estate developments in attracting global high net worth communities to reap additional spill-overs in other sectors of the Maltese economy. The consideration of such recommendations by policy makers, including as necessary private sector involvement, is of utmost importance to reap the opportunities that the industry has to offer, building on the strengths and the achievements achieved by Malta to-date.

In the light of these findings, the study makes a case for further Government support to the superyacht industry towards ensuring the implementation of the five policy recommendations listed above. This is considered as essential to sustain and build upon the success registered by the country over the last five years following privatisation of the yards and marinas, which led to significant improvements in terms of employment opportunities and value added. Of particular importance and urgency in this regard are new concessions for both yards and marinas to ensure that Malta overcomes existing binding capacity limitations that will be seriously hindering the local industry from benefitting from the global growth expected in the superyacht sector.