How to Start a Charter Business!
First let me tell you that running a charter boat is tons of hard work and you will not get rich doing it. On the other hand, if you are a people person and do not mind working every minute of a charter then there are lots of rewards.
For example, you may work several times for six weeks without a break during the season, but you then get three months off in the off season to go travel. Chartering also provides you with a chance to quit your office job and get outside doing something you love.
WHAT TYPE OF CHARTERS?
The first thing you need to do before anything else is to figure out what type of charters you want to run and where you want to run them.
There are different types of charters? You bet!!! You have:
- Day charters – as the name implies these charters only go out for one day
- Term charters – guest stay on the boat from one night to two weeks or more
- Sailing charters – any charter on a sailboat would fall in the category
- Fishing charters – a charter where the focus is on fishing
- Diving charters – charters where SCUBA diving is done
- Instructional charters – first to mind are sailing schools, but any charter that is primarily teaching
- All inclusive – typically a two-person (or more) crew where all meals are prepared by crew
- Captain only – the only thing the price includes is the boat and a captain
The above categories represent the majority of charters out there, but do not let that stop your imagination. Remember that you can have multiple categories from above in a single charter. For example, you can run term sailing charters, which is what I do, or you can have day charters on a sailboat. Fishing charters tend to be day charters, but they do not have to be. The point is to simply figure out what type of charter you think you want to run, because it will affect decisions later on.
Of course, you can always change your focus once you get into chartering, as I did. I thought I was going to run a sailing school with some term charters. Turns out I run a captain only, sailing, term charter with some sailing school on a 41-foot catamaran. On top of the captain only price I have chosen to include a few services found on the all-inclusive charters like picking up provisions before guests arrive, baking homemade bread, and cooking three dinners, but I will talk more about this later in this series.
GET YOUR LICENSE
No matter what you do, if you are going to make money on a boat, you have to have a Merchant Mariners Credential (MMC).
Now what type of MMC depends on the size of the boat, number of guests, and location of the charter.
The size of the boat relates to the tonnage determined by the USCG, not the actual weight and length. The USCG Captain’s Licenses are broken down as OUPV, 25 ton, 50 ton, 100 ton, 200 ton, etc. The license you receive will be issued based on the tonnage of the vessels you have experience on. The license will also be for inland waters, great lakes, or near coastal waters again depending on where you obtained your experience operating boats.
When it comes to the number of guests, six is the magic number.
Will you take no more than six guests? If so, then you may only need an Operator of Uninspected Passenger Vessel (OUPV), which is more commonly called a 6-pack. Otherwise, you will need to upgrade to a Masters license. One caveat to this is that the OUPV is a USA only license and if you plan on going to another country with your charter you will have to have a Masters license regardless if you have 6 or less passengers. Having a Master’s license will also allow you to operate inspected vessels which have Certificates of Inspection (COI) issued by the USCG.
This leads us to the last consideration of your license, where will you run charters?
This comes into play because the USCG offers Inland, Great Lakes, and Near Coastal license, If you will simply be doing sailing or fishing trips within US bays and rivers then the Inland is fine, but if you plan on crossing the demarcation line at the mouths of rivers and bays then you need a Near Coastal license. The USCG has made up the Inland license because we have so many navigable rivers and bays, but it is not recognized in foreign countries. So, if you want to run foreign charters, from say Florida to the Bahamas or the US Virgin Islands to the British Virgin Islands, you must have your Masters Near Coastal License. In addition, when traveling outside the U.S. you have to have your Standards of Training, Certification, and Watchkeeping (STCW) endorsement. This is an international convention to ensure all mariners sailing internationally, meet the minimum standard of training regardless of their country of citizenship. Besides STCW Basic Training, there are many specialized certificates needed for different types of vessels and roles on a vessel, so check the requirements to determine what all you need.
Robert Alport of the St Thomas based Captain School USVI is quite helpful when he states “there is a lot of information on the USCG website (www.uscg.mil/nmc). You may also find a lot of information by contacting one of the many schools licensed by the USCG. By consulting with one of the schools in the area you plan on working in, you may get a lot of insight as to what is truly needed in a given area to be compliant with not just USCG or international rules, but also local municipal or state/territory laws”.
FIND THE RIGHT BOAT
In order to run your new charter business, you will have to have an appropriate boat based on the type of charters you want to run.
I know it seems like a no brainer and you would not use a sailing catamaran to run a fishing charter or a dive boat to teach sailing from, but there are other considerations. For example, will you take more than six guests? What about 12? These size boats require the boat to be inspected and have a few modifications not on a smaller boat. Also, will guests spend the night on the boat? If that is the case, then you will need to consider how many cabins the boat will have and where you or your crew will stay.
I cannot speak for fishing and dive charters, but if you are running a term charter consider getting a catamaran.
This is not to say you can not run a successful business with a monohull, because I know many people that have, but charterers tend to appreciate the space and accommodations of a catamaran when on the boat for a week and catamarans get booked more often. Air conditioning also helps with bookings, even if it hardly ever actually gets used, and non A/C boats will have to give a pricing discount to compete. Over the last seven years I have also seen an increase in the size of the boats chartered and now over 50 foot is quite common. In fact, some of them are now around 60 feet long. Again this is not to say a smaller boat will not get charters, because the majority of the market is in the 40-50 foot range.
If the vessel you intend to use was built outside the United States, then you must have a Jones Act exemption to run charters anywhere in US territorial waters except the US Virgin Islands.
This waiver is fairly simple to get and will cost $500. You can find the form at www.marad.dot.gov. On the website use the ships & shipping drop down menu, click on domestic shipping, and find the application under small-vessel-waiver-program. Another way around the Jones Act is to register your boat in another country, but I must warn you this has a whole different set of problems. All I can say is to do your research and do what is best for you, your boat, and your business. I personally chose to register in the US and get the waiver.
CLEARING HOUSE & BROKERS
Now that you know what type of charters you wish to specialize in, you are properly licensed, and you have your preferred boat for chartering it is time to get some charters booked.
The first thing you need to do is to join a clearing house, which is essentially your representative to all of the charter brokers. A clearing house will get your boat listed on Central Yacht Agent (CYA), which is an internet based, centralized listing of all charter boats in the world. Brokers use this database to select the boats AND crews that are available for the desired dates and are the best matches for their client’s needs. The clearing houses also holds all charter fees in escrow until the charter is started to protect you and the guest. All clearing houses will get you listed in the CYA database and escrow your money, but the good ones will offer you advice and recommendations from the beginning on how to present your boat in the best possible light to the brokers and help you with with pricing and marketing strategies to get your business off the ground and positioned properly within the charter community.
Once you are represented by your preferred clearing house, it is time to showcase your boat to the brokers.
The best way to do this is through one of the charter broker boat shows held at the beginning of the charter season (November in the Virgin Islands, December in Antigua). These are different than the boat shows where you are looking at boats, supplies, parts, etc. These shows are set up for as many as 60-80 brokers from the US and around the world that attend to tour the various boats to take note of condition and amenities and to meet and interview the crews. I cannot stress how important it is to have a good presentation of your charter boat and business to the brokers from the beginning. This will help you stand out from the other charter yachts and help you get a personalized relationship with many of the brokers.
As stated by Micheale Zazo of Island Life Charters, “it is critical to make sure the yacht and crew put their best effort forward at the annual boat shows, as this may be the only opportunity they have to personally make an impact on the brokers and make their charter yacht stand out above the competition”.
Another important aspect to consider with the brokers is how much emphasis is put on the culinary aspect of a charter, especially if you are running an all-inclusive term charter business.
If you are not a culinary trained professional, no need to worry. Many of the chefs on the charter boats are in the same boat (pun intended). The best recommendation I can give is to work on the presentation and cook simple yet elegant meals. Having a sample menu to show the brokers and share with prospective charter guests will help promote your style of cooking and any specialties you plan to prepare. It would also be a great idea to take a cooking class or two to hone in on your skills.
YACHT MANAGEMENT & CREWS
So far I have been assuming someone would want to be the owner and operator of a charter boat, but that is not always the case.
Maybe you want to own a boat you can use several weeks a year and makes money the rest of the time or you are a few years from cruising but have the boat already or you simple know you do not have the right character to run charters yourself. There are multiple reasons that you may not want to or be able to run the charter business yourself.
With that in mind let’s discuss having your charter boat managed by a yacht management company.
There are many companies out there who will manage your charter boat with varying degrees of service. Some companies will put your boat in their fleet and take care of everything from advertising, bookings, crew, charter turn around, maintenance, and storage while others will only help with charter turn around. It is important to find the right company that will take care of your boat and business as you would yourself because they are the eyes and ears for your business.
Hiring crew can be difficult.
You need to find people you are comfortable being on your boat and will take care of it. They also need to represent your charter business to brokers and guest in the best light possible. You also want crew that will stick around, since the average crews only last in the industry for three years or so and you are trying to build a brand with your charters. Another thing to consider is that charters coming from brokers specify who the crew will be. If you switch crew after the contract is signed you may lose the charter and still have to pay the brokerage fee. With all that said Michael “Hank” Hampton of Paradise Yacht Management, based in St Thomas, approaches hiring crew by “having some preselected questions we ask crew. We compare their answers with how the most successful crews in the industry answered the questions, so we can make sure we make the best decision in the hiring process that surrounds us with great crews that are hospitality minded and will create a great environment to work with very low turnover.”
Now that you have a charter business up and running don’t forget to grow those relationships you have established with your clearing house and brokers.
I know many people feel they can not turn any charters away, but as you get established you will become more selective. For example, my first year I took an overnight charter and now I have a five-night minimum because it takes just as much effort to get ready for one night as five nights.
My biggest advice is to just be yourself.
If you try and be something you are not the guest will see that. Also, by being yourself and letting your charters take on your personality, you will attract like minded people and enjoy your charters more. Every personality traits and hobby (religious, pet aboard, heavy drinker, kite surfer, etc) you have will attract people to join you for charters, but it will also drive others away. In the end you will find your own niche.
I, for example, am not a big drinker, like to cook, and am very active. This has led me to offer captain only charters, because I personally would not want to pay for all inclusive. Instead I prefer to pay for just what I use. At the same time, I enjoy cooking, so I offer to cook three dinners and bake homemade bread during a charter. Now I am known as the “bread” captain. I also love to snorkel, hike, climb rocks, and other fun activities which has brought me more active charters, so we are always on the go.
Does anyone know of a location where I can get information about what States and counties are best to base a day charter out of? I am looking for the lowest overall costs, taxes insurance, and registration. The more I look into this the more confused I get. I am retired and looking to start the business some time this year.