Charter Management and Commercial Use

We bought our previous boat, Ocean Mist, specifically for use running commercial trips and as a charter boat. Here is a description of some of our experiences, which are why our current boat isn’t available for commercial work.

The Aim

We based Ocean Mist on the English east coast, which is a varied cruising ground, not as crowded as The Solent and with easy access to various European ports.

Ocean Mist went into charter management with a sailing school and charter company that I (Andy) regularly instructed for. They were already running occasional cruises to The Netherlands and we came up with a number of other itineraries from easy local trips to full on non-stop mile builders. All of this was advertised on the sailing school’s web site. The idea was to offer trips aimed at a range of different abilities that people could use to build experience and miles, something that can be difficult to do if you don’t have access to a boat or friends who sail.

We realized that we’d be unlikely to sell back to back trips so we also made the boat available for sailing school and bareboat charter work through the school.

Coding

In the UK any seagoing boat that is used commercially must comply with the Maritime and Coastguard Agency codes of practice for commercial use. These place requirements on the construction of the boat, equipment carried and in some cases crew. For small boats the MCA define a number of categories of use in terms of maximum distances from a safe haven, the category of use defines the actual requirements on the boat and its equipment. The boat is inspected by an approved surveyor who is able to either sign the boat off or advise on what modifications are required to achieve the desired category, this is commonly referred to as “coding”.

We had Ocean Mist coded for category 2 operation, which is for use up to 60miles from safe haven. The vast majority of charter boats in the UK are in this category. The higher categories (cat 1; 150 miles offshore, and cat 0; unlimited) require considerably more expensive equipment and place stricter requirements on stability and construction than many production cruisers can’t meet. The lower categories limit the usage rather too much so tend to only come into play (at least for cruising yachts) for smaller boats that don’t meet the category 2 stability requirements. In practice category 2 is sufficient for most charter work, for example a direct passage from Harwich to Oostend is approximately 80 miles during which the boat is never more than 40 miles from a port.

The coding also specifies the maximum number of people that can be carried. This is determined by available bunks, number of lifejackets and size of liferaft. We coded Ocean Mist for a maximum of 8 people. I think that it is possible to code a boat in two categories with different maximum people numbers, for example 8 people in category 2 operation or 10 people in category 3 operation, but we didn’t go down that route.

To achieve coding Ocean Mist required a few modifications, most of which were sensible improvements. The surveyor that we used was keen on ventilation to all cabins so we had to drill some holes in the boat for extra vents, rather nerve racking on our new purchase. Subsequently I came across another Moody s38 with the same coding that didn’t have additional ventilation so there appears to be some variation between surveyors. The list of equipment to be carried also makes a lot of sense, most of it was items that I’d want onboard for private cruising, but of course there needed to be sufficient safety gear for the maximum crew so we had to buy a lot of lifejackets and a larger liferaft that we’d need for private use.

Coding entails some ongoing costs. Some of the safety gear needs annual professional servicing, the gas system needs an annual inspection and periodically the boat must be re-surveyed.

The boat also needs to be insured for commercial use. When I was phoning around for quotes I could get a very good price for a boat privately owned by a Yachtmaster Instructor, but increasing the cover to skippered charter use added a fair chunk to the premium and adding bareboat charter cover more than tripled the price. Several insurers would not cover the boat for theft while in charter, so if a charterer decided to sail off with the boat, or just forgot to lock it when they went to the pub, we wouldn’t be able to claim (in the end we insured through Pantaenius who weren’t the cheapest but did seem to offer the most comprehensive cover).

Experiences

Running Trips

We managed to run a few trips but not as many as we’d hoped. I think that there were several reasons for this:

Location: Whilst the East Coast is a great place for sail training other destinations are probably more attractive for a holiday.

Marketing: Sailing trips weren’t the main business of the sailing school so they didn’t actively sell them, the trips were just another thing on the school’s web site. We weren’t running the trips as a full time business so we didn’t have the time or resources to market them ourselves.

The Boat: A larger boat with more, and more flexible, accommodation may have been better suited to running trips as holidays. Our Moody s38 was a comfortable boat for sail training work but boats running more holiday oriented operations tend to be larger.

School and Bareboat Charter Work

From an owner’s point of view there’s little difference between sailing school use and bareboat charter use. In each case the boat is sent out with a crew that came through the sailing school/charter operator.

On a school trip there will be a qualified instructor onboard, but the crew will probably not have much experience (otherwise they wouldn’t be on a course) and the course should involve plenty of time on the water and lots of sailing exercises that can stress the boat.

On bareboat charter the experience and abilities of the skipper and crew can vary enormously. The charter agent should check the qualifications and experience of the charterer, but they are running a business so they’re likely to give someone the benefit of the doubt rather than turn them away.

We encountered a range of issues when we had Ocean Mist in management for sailing school and bareboat charter work:

Personal Use

When not working the boat was available for our personal use, and we had the option of booking it out for our own use. This is one of the main selling points of charter management, you have your own boat but when you’re not using it goes out on charter work to cover its costs.

We found the reality to be a little different. When we collected the boat it was in whatever state the previous charters had left it in (the sailing school would normally clean boats just before they went on charter and as we weren’t an official charterer often the boat wasn’t cleaned for us). When we returned the boat we always had to ensure that it was clean, that the fuel and water tanks were full and that we replaced any empty gas cylinders (on several occasions we found that the spare cylinder had been used and not replaced with a full one). If the boat was booked out for a charter after our use we would have no flexibility in return dates, it had to be back in time for the next charter. We couldn’t leave any personal gear onboard so we’d have to carry all of our gear (bedding etc.) to and from the boat every time that we used here.

Our experience of using our own boat for personal use was no different to bareboat chartering, except that because she was our boat we’d end up doing more maintenance and repair work on her than we would be expected to do on a charter.

Loss of Equipment

Various pieces of equipment went missing or were broken. This ranged from minor annoyances (one year all but 2 of the desert spoons disappeared from the galley) to items of gear that the boat needed and that were required for coding (like the hand bearing compass disappearing or the gas alarm having it’s cables cut).

Sometimes items of gear would move between boats. People tend to view charter and sailing school boats as belonging to the school so if one boat is short of some gear they don’t see a problem in making it up from one of the other school boats. Sailing instructors are particularly liable to this when they’re under pressure to get a course started and the boat is, for example, short of fenders (I know because I’ve been a sailing instructor in that position). The problem is that a week later people forget that they borrowed the gear, and the problem for the owner is that they outfitted their boat at their own expense, they didn’t outfit the whole school.

Damage

Renting a boat out to complete strangers you need to accept that there will be some damage, particularly to the gel coat. The charter agent should arrange to have this sort of damage repaired, either at their own expense if it’s minor or from the charter’s deposit if it is more substantial.

Our experience is that the sailing school were keen to maintain the cosmetic appearance of the boats so minor gel coat damage was normally repaired promptly. When equipment was damaged and needed to be replaced we had to be careful to ensure that the school replaced it like for like, for example I happened to be onboard when another boat that was on charter from the school hit our boat and wrote off a lifebuoy and light. I’d fitted good quality safety gear but the school’s owner would have gone off to the chandler’s and bought the cheapest items in stock as replacements if I hadn’t pointed this out to him.

The school also had a tendency to do repairs as cheaply and quickly as possible, preferring to do work themselves rather than use the marina’s boatyard. One example of this was a repair to the end fitting of a genoa car track which they re-fitted by drilling completely through the deck to fit bolts in place of the original screws, resulting in persistent problems with water leaking through the repair.

Ocean Mist suffered some more serious damage while under charter management, including loss of the propeller while on a course and hull damage due to a heavy grounding which I’ll discuss later on in relation to security deposits.

Handovers

There should be a handover including a check for damage and an inventory check at the start and end of each charter. In practice a full inventory check almost never happens. It could easily take an hour to go through the full inventory, including time spent searching out items that the previous charterer stowed in a different place to the location on the inventory list. Similarly checks of the hull are often just a cursory examination of the side that’s next to the pontoon, especially if there’s another boat on the other side. On a busy handover day the school or agent won’t have enough staff to spend an hour or so with each boat that’s going out (all of whom will want to be off as soon as possible) and many charterers aren’t going to want to spend that much time on a handover. When the boat is returned the crew are normally keen to set off home so once again the pressure is on to skip or reduce the handover, especially if the boat has been returned late and needs turning around for its next outing later that day.

At the end of the season various items will have gone missing from the boat’s inventory and items of damage will have accumulated. Because there are incomplete records of checks no one knows who took or lost gear or caused damage and the owner ends up covering the costs.

Conflicts of Interest

The charter agent is in business to make money and understandably wants to make as much as possible from the boats in their charge. An owner also wants to maximize the income from their boat so on the face of it their interests should align with the agent’s. However the agent is maximizing profit for the charter business and in some cases this can work against individual owners.

Repeat business is an important source of income so there is a temptation to let minor damage and equipment losses go when the boat is returned, especially if those expenses will fall on the owner rather that the charter operator.

Boats need to be turned around quickly to be available for work, so repairs may be done quickly rather than properly and maintenance schedules can slip.

In our case the sailing school owned one of its boats. Whilst we were told that work was shared out equally the school would clearly be making a bigger profit when it didn’t need to pay an owner for boat use.

Security Deposits and Major Damage

It is normal for a charterer to pay a security deposit against damage or equipment loss while the boat is in their charge. As far as I am aware the security deposit was always refunded in full for our boat despite various losses and accidents on charter work (we were certainly never paid anything towards repairs from a retained security deposit).

There are a few problems with the notion of a security deposit:

When we came to sell Ocean Mist some hull damage was found at the aft end of the keel. As none was reported in the survey when we bought the boat I can only assume that at some time since we bought her she’d had a heavy grounding. We didn’t do that so it must have happened either on charter or school work. The hull repair was expensive but the school did not offer anything towards it because although we believe that the damage occurred during their use we couldn’t prove it.

I know of a case in Scotland where significant damage was found to the keel of a charter boat when it was hauled out at the end of the season. The boat had clearly been driven quite hard into something solid (probably a rock) but no groundings had been reported by any of that year’s charterers.

A recent (2010) story in the UK yachting press described how a Cornish charter boat was unexpectedly knocked down while out on a skippered charter. On returning to base it was discovered that the bolt on keel was completely missing. The keel had been lost a couple of charters previously (which says something for the form stability of modern production yachts) when the boat hit a rock in Scilly. The charterers on that trip didn’t report anything when they returned the boat but once the loss of the keel was discovered they did admit that they had had a minor grounding (which was memorable enough for them to give a location accurate enough for divers to recover the keel).

In all of these cases no grounding was reported at the time, probably because the charterer didn’t want to risk losing their deposit.

Conclusions

The income from charter work didn’t cover our costs, even before the expense of major hull repairs, and the heavy use that the boat saw in charter work reduced its resale value. We made a loss on the enterprise, while the charter agent (the sailing school) got the use of a £100,000 asset at no real expense to themselves.

We wouldn’t put a boat we own into bareboat charter management again. For the costs involved it would be possible to go on several charter holidays a year, in different locations around the world, with someone else worrying about maintenance and the running costs of the boat. In fact if you’re only sailing for a few weeks a year then chartering someone else’s boat when you want to sail is almost certainly a lower cost and more flexible option than owning your own boat.

We do still own a boat, but Speedwell or Rhu is our personal boat and we use her to go on extended cruises, several months at a time, that would not be possible if we chartered.

Articles Index