How To Make Boating Low Maintenance
In 2005, Tim Barton and Douglas Gray, Boston residents and longtime friends who spent much of their time together sailing and fishing, had an idea. In a pre-Great Recession world, the luxury market was booming and the collaborative sharing economy was emerging; it already counted successes such as NetJets at the high end and the more populist ZipCar. Late in the year, Barton, who was an implementation manager at Newmarket International, suggested to Gray, who had recently founded a branding agency called Tide Rise Creative, that they apply the NetJets model of traditional ownership to the luxury boating industry. Gray liked the idea, and that was the start of their eponymous company. “It was taking a model that had been proven and applying it to an industry that we loved,” Barton says.
The two men had met several years before when Gray dated Barton’s sister-in-law. “We stayed friends after they moved in different directions,” Barton says. One reason was a shared passion for boating. Gray, whose family has ties to the Navy,grew up spending summers fishing and sailing on Cape Cod. Barton did the same on Long Island Sound. Still, both had some trepidation about entering the boating business.
“Like the restaurant industry and a lot of other industries, the boating industry has probably lost more money than it’s ever made,” Gray says. “We didn’t want to move into the traditional boating space.”
But the idea of a fractional ownership program for luxury day boats stuck. In May 2006, Barton & Gray launched its first boat, a 36-foot Hinckley Picnic Boat that was based in Nantucket for the summer and Palm Beach for the winter. Barton & Gray’s original business model allowed members to invest in fractional ownership of a boat in exchange for the opportunity to use it. Nearly 10 years later, the company maintains a fleet of 14 Hinckley yachts that are housed in 17 different markets throughout the year, including two international outposts in the Bahamas, which launched this year. The boats are available in 10 markets throughout New England and New York during the summer months, and then they’re moved south for the winter and spread among seven markets in Florida and the Bahamas.
The company’s business model has changed from the original plan. Now members pay an initiation fee of $10,000 and annual dues ranging from $25,000 to $50,000. Membership provides access to captained boats in every market the company is in, and the only incidental costs are fuel, food and drinks. Depending on their dues level, members can have from two to ten reservations on the calendar simultaneously. Though membership plateaued during the recession, Barton and Gray say that their company has enjoyed otherwise steady growth, with retention rates in the high-90s for first and second year members, decreasing slightly after that.
What were the keys to making this model work? Barton and Gray explain.
01. DOING THE WORK THEMSELVES
Barton has a background in software management and some experience in the luxury market—Ritz-Carlton was an account. Gray worked in advertising and branding, and had started his own interactive branding agency shortly before co-founding Barton & Gray. “With Tim’s administrative and operational background and my marketing background, we were able to avoid a lot of the upfront costs of starting a business,” Gray says. “We were able to go to market quickly, without having to outsource or bring in a lot of team members.”
02. TWEAKING THE BUSINESS PLAN
Although Barton & Gray’s current membership model is reminiscent of a jet card that grants buyers a certain number of flying hours, that wasn’t always the case. The company started by selling fractional ownership of the boats, and purchasing came with a multi-year commitment and a ticket price that was about three times higher than the current buy-in rate. While that model worked in Nantucket, it proved less popular in Palm Beach, where people spent less time year round. “We quickly moved to a different model that was a lower entry [cost],” Barton says. “You get less time, but you can customize the time to your lifestyle. That put us on the fast track to growing at a faster pace.”
03. STAYING LEAN DURING THE RECESSION
Luxury brands, particularly start-ups, were hit hard during the recession. But Barton & Gray had acquired enough members before the downturn to survive. “When they went to cut their budgets and they didn’t cut us, that was a testament to what we had,” Gray says. “It also taught us to be lean, operationally.” Adds Barton, “You learn what you were spending money on that you didn’t need to.”
04. ALIGNING THEMSELVES WITH AN ALREADY ESTABLISHED AND POWERFUL BRAND
The company’s signature product is the Hinckley Picnic Boat, an icon from a classic American brand that has been in business since 1928. “Their heritage and their brand value is so strong, it was an underpinning of our brand,” Gray says.
Barton & Gray’s fleet now includes the larger Hinckley Talaria yacht, but the Picnic Boat is still vital. “For what we do—day boating with small groups of people where you want to be able to entertain, take a swim and go on the beach—it’s really unrivaled,” Gray says.
05. KNOWING THEIR CUSTOMERS
Perhaps the most unexpected aspect of Barton & Gray’s business plan is that the company doesn’t market to avid boaters. “Ninety percent of our members have never owned a boat, have never operated a boat, will never own a boat and will never operate a boat,” Gray says. “We provide a product that, for these people, is entirely new.”