Pleasure Boating & Tourism industry

Author: Shashikant Pushpakar | Marketing Head - Commercial & Leisure Boats M: +91 9676 56 3344 | Tel: +91 40 4445 0000 | Email: [email protected] | www.esmario.com

PLEASURE BOATING INDUSTRY A note on the needs of industry

&

It’s role in developing the tourism sector of India

An initiative of Esmario Marine - Marketing Division

The images and/or content used are with proper citation. Apart from outside references whose rights are reserved to its respective owners all rights reserved ©Esmario Export Enterprises Pvt Ltd

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CONTENT

1. WHAT IS PLEASURE BOATING?

2. WHY FOCUS ON PLEASURE BOATING INDUSTRY IS REQUIRED IN INDIA? a. Multi-fold development opportunities b. Reports on various countries for their economic growth through

pleasure boating industry c. Exemplary examples of promoting boating industry d. Problems plaguing the pleasure boating market in India & a few

suggestions

3. WHERE IS THE MARKET IN INDIA?

4. HOW TO CREATE & ACHIEVE A HOLISTIC BOATING MARKET?

5. So, WHEN IS THE RIGHT TIME?

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PLEASURE BOATING

Pleasure boating industry has the potential to put India on world map of cruising and yachting destination. With over 7500 km of coast line and almost 15,000 km of another navigable inland waterways, pleasure boating has enough leeway for it to thrive.

World across including our neighbouring countries such as Singapore, China, Indonesia, Sri Lanka and Maldives have benefited from the opportunities pleasure boating has created. Growth in national and international tourism, revenue generation through custom duties, sales and service taxes on import of capital goods for the infrastructure, numerous employment opportunities, growth of hospitality sector, boat manufacturing opportunities by western and local boat builders, infrastructure which supports and enhances the coastal security are only a few macro-economic view on the growth possibilities through pleasure boating.

Currently, pleasure boating is a much neglected industry in India with no proper legislation/ guidelines on owning/ operating the pleasure boats, lack of cruising policies for international tourists, inadequate boating infrastructure and lack of nodal agency are among a few which are bottlenecks in the growth of pleasure boating industry.

Even with so many obstacles, the importation of yachts and speed boats has generated sizeable revenue for central and state agencies also creating numerous employment opportunities. There is only one small marina in India in Kerala state but that too is not a marina in true business sense. With high berthing charges and no regulatory support for International tourism, the berths are always lying idle. However, with support of government and recognising pleasure boating as industry will bring incredible growth.

Contradictory to the popular belief that pleasure boating is only for rich and famous, anyone with love for sea, rivers and inland water-bodies can enjoy the range of boating activities. As per industry estimates, pleasure boating market is growing year on year with the rising disposable incomes and increased sensitivity towards our water resources. People are exploring the outdoor activities at their leisure time. Various water based activities are on offer involving all age group, gender and different demographics of clients.

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WHY FOCUS ON PLEASURE BOATING INDUSTRY IS REQUIRED IN INDIA?

MULTI-FOLD DEVELOPMENT OPPORTUNITIES

Pleasure boating industry stores tremendous growth opportunities:

• Boater spending at marinas • Growth of international tourism for using boating facilities • Growth of domestic tourism opportunities • Revenue generation through boat registration, permits and other statuary requirements • Revenue generation through custom duties on import of boats, yachts and other capital

goods • Revenue generation through taxes on sales and services from boat sales by domestic boat

manufacturers • Numerous employment opportunities in marine industry, hospitality, boat manufacturing,

boat supporting services, retail at marinas • Growth of hospitality sector • Shipbuilding bases - like automobile industry’s growth in India, boat manufacturing

industries in Europe & USA are willing to set up their manufacturing hubs in India after getting required regulatory support

• Sustainable infrastructure which provides servicing of boats, fuelling services etc. Can support the marine police and other security agencies for enhanced coastal security

• Growth of real estate properties along the waterfront • Increased awareness and sensitivity towards water resources

REPORTS ON VARIOUS COUNTRIES ATTACHED FOR THEIR ECONOMIC GROWTH THROUGH PLEASURE BOATING INDUSTRY

“..Robust Growth for the Global Boating Industry…” - LUCINTEL 1 “The global recreational boat market is expected to witness high growth during 2012…. The market is expected to witness a CAGR of 8.5% over the next five years and grow to $30.63 billion in 2017” - Lucintel, a global management consulting and market research firm, has analysed the global boating industry and presents its findings in “Global Recreational Boating Industry Analysis and Forecast 2012-2017”.

“Yacht and Pleasure Boating Industries: China and Hong Kong” - MAINE International Trade Center 2 China's recreational marine market is forecast to expand sharply in the coming years. In 2010, China imported over 80 million USD worth of yachts and pleasure vessels, which was an increase of 138% compared with 2009.

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Based on the confidence that pleasure boats will become one aspect of East Asia’s expanding upper- and middle-class life style, provincial governments, property developers and boat builders are sectors that are investing heavily in this industry. Statistics show that the total revenue of China's yacht market reached $3.4 billion in 20102… the government is encouraging growth and the industry is expected to grow an average of 30 percent in the next few years. Eventually, this will lead to an annual value of more than 200 billion Yuan (US$320 million) by 2015. On the demand side, interest in yachting continues to grow, and the estimated number of high net worth individuals (HNWIs5) in China grew 31% from 2008 to 2009, and the number of billionaires (115) grew by 80% over 2009-2010 Marinas in China are usually more extensive than just docking facilities. These 5-star facilities often provide business offices, vacation rentals, and shopping malls. Twenty-two marinas are currently operating in China, and 26 are under construction while 45 others are in the design phase. Many luxury residences in major cities incorporate waterways and boating facilities in their developments.

“The Chinese Shipbuilding Industry: Information and Resources” 3 The marine and ship-related commerce in China is truly expansive; it also brings added business in port building, marina development, and pleasure boat manufacture. The aggregate of its shipbuilding industries represented 4% of the country’s gross domestic product in 2005, and it continues to flourish. While shipbuilding is one means of measuring a country’s maritime industry, it’s certainly not the only one. China is also focusing on the manufacture of pleasure boats, port and waterway construction, development of new marinas, and expanding shipbuilding bases Marinas: As the pleasure boating market expands, the market for marinas grows as well. As Chinese citizens experience economic growth and become more middle class, they are targets for luxury residences equipped with waterways and marinas. In its efforts to modernize and remake its image, Shanghai has built marinas along its downtown river

“Rapid Growth Fuels Boating Boom in Southeast Asia” 4

The growth in pleasure boating industry in Southeast Asia has been recorded and reported as back as in 1995 by The New York Times. Leaving India many of our neighbouring countries had capitalized in the requirements which is still growing providing India the opportunity to position its strengths in this industry. “Pleasure boating is on the rise in Southeast Asia, and nowhere is that more in evidence than the Riau Archipelago… The Riau’s are the only place feeling the expansion of leisure boating. New marinas are also opening in Singapore, Malaysia, and Thailand. This expansion, combined with a gradual easing of sea boundary restrictions by the governments of these countries, is accelerating the growth of a marine leisure industry….”

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“Drive to make UAE pleasure boating hub” - The National 5

“…with some 200 natural islands and sandbanks, and plans for 45 marinas, experts believe there is great potential for the capital to become a boating destination…., the Chairman of Abu Dhabi Tourism Authority, says the yachting industry is “an emerging sector - and we know demand exists” …

“55,000 new berths to boost leisure boat market - There are an estimated 46,000 yachts in GCC worth $4 billion” - Gulfnews.com 6 “…the focus is turning towards Dubai and the UAE where the infrastructure is ready to accommodate the needs of the market…Demand in the Middle East and North Africa for marina berths is expected to more than double by 2015 to about 82,000 berths, according to a Booz & Company report.”

“The Economic Impact of Recreational Boating in Canada:2006” 7 Recreational boating’s $15.6 Billion splash…nearly six million Canadians took to the water in a boat. The money they spent buying, servicing and operating Canada’s 2.9 million pleasure boats pumped $15.6 billion directly into the national economy

…and, its $26.8 billion ripple effect... creating 111,747 jobs directly and another 42,726 jobs indirectly… When the ripple effect of successive waves of spending and hiring are accounted for, it added up to a total impact of $26.8 billion and 373,606 jobs.

“Great Lakes recreational boating’s economic punch” - Great Lakes Commission, Michigan8 “The study showed that the Great Lakes states are a recreational boating powerhouse; with nearly one third of all registered boats in the United States. Spending on boats and boating activities in the Great Lakes states totalled nearly $16 billion in 2003, directly supporting 107,000 jobs. With secondary effects figured in, that number grew to 244,000 jobs, with economic impacts of $19 billion in sales, $6.4 billion in personal income and, $9.2 billion in value added. Beneficiaries of this activity included manufacturers, retailers, marinas, restaurants, lodging accommodations, charter operators and other businesses largely concentrated near docking facilities. Recreational harbours also support other functions such as hosting Coast Guard stations and serving as harbours of refuge for vessels in distress. In addition, recreational harbours are a key element in restoring former waterfront industrial areas, providing a key anchor for new, upscale developments along the Great Lakes.”

“US recreational boating contributes $121bn to national economy” - IBI Plus International Boat Industry9 The NMMA’s 2012 Recreational Boating Statistical Abstract, released today, shows that recreational boating in the US has an annual economic value of US$121bn. The industry supports 964,000 jobs and 34,833 businesses, generating US$40bn in annual labour income and US$83bn in annual spending.

“Malacca can be the next Gold Coast, says CM Datuk Idris Haron” - Malaysia Edition 10

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EXEMPLARY EXAMPLES OF PROMOTING BOATING INDUSTRY

Reports like “The Saint Lucia Ministry of Tourism announces major strides in growth for the country's yachting sector” are exemplary examples of initiatives taken by St. Lucia Ministry of Tourism with announcements of revised policies. These sanctions and changes in regulations will greatly improve and support yachting for private and charter yachts. Read the complete report as attached in the annexure11.

PROBLEMS PLAGUING THE PLEASURE BOATING MARKET IN INDIA WITH A FEW SUGGESTIONS

There is an urgent need to make the infrastructure and regulatory environment more user friendly to consumers, operators, and service providers by reviewing the existing laws and requirements. The relevant statutes include port of entry requirements, customs and taxes, berthing permit requirements, treatment of pleasure boats, and real estate construction guidelines.

1. REGULATIONS - Currently there are no rules for yachts / boats / sports boats and sailing yachts. There are rules for big ocean going vessels and inland vessels but they are being arbitrarily being applied to yachts with no aesthetic sense. A simple example – a barge filling sand / carrying coal can ply the coast of India whereas power yachts / sailing yachts with better fit outs and navigational equipment cannot be operated. SOLUTION – Adopt the small boats act from the MCA which has definition for power yachts above 24m and below and for sail yachts as well. There is also a provision for yachts on charter. This will take away the issue of chartering of yachts. Charter yachts can be endorsed commercially.

2. FLAGGING - If we put the above suggested regulations in place and set up a yacht specific registration authority under the state maritime board and specific yacht clauses like the MCA, it will help resolve many issues. It could be worked in a system where today a lot of work is subverted to the IRS in this case the Maritime board can sublet this to a central agency and they could do this. This will develop the industry and yachting as a whole.

3. CRUISING POLICY – India has the potential to become the next cruising ground of the world. With our developing economy all the big corporates want to come to India and what better way to see the country than with your yacht. However, we have a problem. Today when an International visiting yacht comes to India they have to do an inward and outward from each port with custom and immigration in both ports. This is a time consuming and cumbersome process. A simple question, if a foreigner arrives in Mumbai by air he is then free to travel all over the country on one visa. Whereas if the yacht comes in by sea he has to do multiple custom and immigration checks which is not common in other countries. The same issue pertains to any domestic boater too. Say, if a person wants to sail his yacht from waterbody of one state to another state, there are cumbersome policies and regulations with hefty fees on entering the waters, thus hampering the industry. An individual will like to use his/her boat as any automobile on road. The road transportation allows the movement of a personal vehicle by charging nominal permits/ entry taxes depending upon days of travelling within the state. The same process should be followed for yachts plying in waterways too.

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SOLUTION - Set up a cruising permit. This can be issued by a central/state agency which in turn can inform the police/ immigration of yachts visiting the country or coming from another state and their whereabouts. This will open up a great tourism opportunity.

4. INFRASTRUCTURE – The bane of all development. One has seen the effect of privatization of airports – if we can privatize ports why not waterfront development / and waterfront living – the potential is huge, with week European economy we can create world class infrastructural amenities in India which shall cater to the global yachts tourists and develop tourism. Look at GCC where there is a need for 55,000 new berths to accommodate an estimated 46,000 yachts in GCC worth $4 billion. In, 1994 Dubai they had one marina with a 200 berth capacity today they have 22 marinas and they are all sold out for yacht berthing.

5. LACK OF NODAL AGENCY – It is time to have a consolidated single window agency to do this.

6. LACK OF NAUTICAL CULTURE - The nurturing of nautical culture is an important prerequisite in stimulating demand growth. This includes setting up nautical training schools to develop local qualified manpower, encouraging the growth of the local and international yacht manufacturing industry, and developing financial products to finance and insure yachts.

7. PROMOTIONAL CAMPAIGNS BY TOURISM DEPARTMENT- The promotion of the marina industry would raise awareness of its possibilities and help grow demand. Promotions may include advertising and organization of events such as regattas, festivals, and carnivals. These efforts will attract key players such as boat manufacturers, service providers, infrastructure developers and maintenance providers

8. ENVIRONMENTAL SUSTAINABILITY - The long term of pleasure boating industry can’t be compromised for short term profits. Best-in-class eco-friendly methods of design, construction, and operations are necessary to win licences and attract tourists who want to feel good about leaving natural resources in their pristine state.

9. NETWORK OF MARINAS - It is imperative to create a strong network of marinas in the region to create a nautical cruising circuit for yachting, sailing and promoting water tourism among larger Indian population.

Problems in boating industry have been raised by various states and business associations. In recent times, the Confederation of India Industries’ International Boating Conference had highlighted various concerns, the details of which are attached for further reading12. WHERE IS THE MARKET IN INDIA?

There are enough geographical and economic advantages India has which have created market for pleasure boating. A few reasons are listed:

• A coastline of 7500 km and numerous navigational water bodies gives India advantage of attracting boat tourism from different parts of globe

• Increased disposable income in India will help in giving regular domestic usage • Exposure to world class boating amenities and lifestyle of Indian travellers • Increased foreign national’s presence in India due to tremendous growth in service and

manufacturing sector • Incredible tourism opportunities by different states of India, all attracting global tourists

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A few prominent locations ideal for pleasure boating in India considering domestic and international tourism are: Surat, Gujarat Mumbai, Maharashtra Navi Mumbai, Maharashtra Goa Karwar, Karnataka Mangalore, Karnataka Kozhikode, Kerala Kochi, Kerala Chennai, Tamil Nadu Puducherry Vishakhapatnam, Andhra Pradesh Puri, Odisha Kolkata, West Bengal Port Blair, Andaman & Nicobar islands

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HOW TO CREATE & ACHIEVE A HOLISTIC BOATING MARKET?

As India’s economy is growing, tourism- especially nautical tourism- presents a major opportunity. With a large coastline, inland waterbodies, heritage tourism attractions, pristine and famous beaches of Goa, Karnataka, Kerala, Lakshadweep, and Andaman & Nicobar islands there exists a large untapped tourism opportunities. Enterprising governments, private investors, and marina developers in the region would reap significant benefits if they were able to capitalize on this demand. Nautical Tourism boosts regional economies by encouraging foreign spending on domestically produced goods and services, increasing governmental revenues through taxes, and creating employment. Indian government, supported by private-sector players, will need to create an environment conducive to the sector’s development in order to make the most of their marine needs. Governments should use public-private partnerships to grant long-term concessions for the development, financing, and operations of marine infrastructure and services to private consortia, consisting of reputable marina master developers and operators. Governments can attract such partners by negotiating public guarantees and other subsidies on a case-to-case basis. Primarily, government should create the conditions that are favourable to sectors development. A few other support structures could be adopted by Government to support the nascent yet strong industry:

• Allocation of suitable land on PPP or BOT model at various prominent locations • Lease opportunity at concessional rates • Custom duty exemptions on capital goods required in developing marina and other

necessary infrastructure • Bank loans at lower rates • Special incentives to local boat manufacturers • Subsidies on infrastructure • Relaxation on CRZ for marina and repair yards • Exemptions on income tax for initial ten years • Single window clearance agency

So, WHEN IS THE RIGHT TIME?

The answer is now. India is already late in valuing our strength and the opportunities the pleasure boating industry brings. Many of our neighbouring countries-like Singapore, China, Indonesia, Dubai, Abu Dhabi and Maldives-have understood and have experienced the strong growth of economy which pleasure boating industry brings along. Indian government has a fundamental role to play in creating the right conditions and guidelines to steer the development of the marina industry-and reap its substantial rewards. The public sector should urgently focus on setting up a comprehensive master plan to combine all the elements of the marina sector development and involve the private sector in executing the government vision.

Pleasure Boating & Tourism industry

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