Wealthy rethink penchant for mega-yachts, jets

By Deepa Babington

GENEVA (Reuters) - The financial crisis is forcing the wealthy to rethink splurges like fancy cars and yachts, private bankers say, threatening to crimp the free-wheeling luxury goods spending bonanza of previous years.

Luxury brands had signaled they were weathering the global financial crisis better than others, with many saying they expected emerging markets in Asia and China to offset flat or declining sales elsewhere.

But investors have been looking for signs the credit crunch and dismal economic outlook are biting into purchases of luxury goods, and bankers to the wealthy say even the super-rich have begun to rein in spending as they fret over their shrinking portfolios.

"People are definitely cutting back," Javier Arus Castillo, general manager of Santander Private Banking International told the Reuters Wealth Management Summit.

"With the markets down, if you have lost $100 million and have $300 million left then that makes you think. Your life is not going to change but you start to feel a little concerned."

Many are also putting off big-ticket purchases for later as they try to wait out market turmoil, bankers say.

"We work with some very large business families on business strategy and their first thought at the moment is not to go out and buy a Maybach car or another 56-meter yacht," said Scorpio Partnership Managing Partner Sebastian Dovey.

"Their first question is: can I remain liquid?"

Spending on mega-yachts and private jets appear to be the early victims of the super-rich's hesitance to continue spending as before, bankers say, despite industry optimism that strong demand will continue.

"Clients who had shares of NetJets or their own planes, they're considering if it's worth flying in first or business class instead," said Santander's Castillo. "People think 'It doesn't make sense that to fly from Latin America to Europe cost me $100,000.'"

The wealthy have yet to start cancelling orders on yachts and jets, but are chartering fewer of them and are more reluctant to push ahead with new bookings, said Barclays Wealth Vice Chairman Gerard Aquilina.

"There is still a large backlog of orders for super-yachts and planes, but there is probably a smaller order book coming off than a year ago," he said. "Less people are chartering planes and yachts and less people are ordering them."

The wealthy began reining in luxury spending as early as the start of the year, said Enrique Marazuela, chief investment officer at Spain's BBVA Patrimonios, citing a dramatic fall.

"The amount of transactions or clients asking for money to spend on leisure goods has dropped dramatically," he said.

Though many luxury goods makers cite emerging markets in Asia and Middle East as a buffer which should propel demand despite the crisis, some bankers predict volatility in markets there too will translate into lower spending in the future.  Continued...