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On a steady course
© St. Petersburg Times, TAMPA -- The phones in Lazzara Yacht Corp.'s offices pretty much stopped ringing around March of last year. It was the first hint Rich Lazzara had that the economy has cooled even for his super-rich clientele. Then, at the Fort Lauderdale boat show in October, the Tampa company sold only one of its luxury yachts, compared with two or three in years past. Now, the most compelling proof of a slowdown sits at the dock behind Lazzara's shipyard at Rattlesnake Point. It's a gleaming new 80-foot Lazzara yacht, fresh off the production line. Unlike the seven other vessels in various stages of construction, the sleek $3.5-million yacht has not been sold. "It's the first time that's happened since we opened," Lazzara said of the family business that has turned out 53 boats since his dad and uncle started it in 1993. "Obviously we don't want to build boats for ourselves." In fact, Lazzara has built a steady business and strong reputation by supplying multimillionaires with multimillion-dollar boats. The company's average customer has a net worth of more than $300-million. And for the past several years, every customer has paid cash for Lazzara's yachts, which cost $3.5- to $7-million. But if Lazzara's customers are feeling a pinch lately, they're not letting it get them down too much. A contract is pending on the unsold 80-footer. And Lazzara has booked orders in 2001 for six 80-footers with a newer design and two 106-footers, the biggest yachts yet to be built by the yard. Appealing to the jaded tastes of wealthy clients, then building their boats on time as well as within budget, is a treacherous business. Plenty of boat manufacturers have gone under trying, bulking up during boom times, then going bankrupt or merging when things get lean. But in an industry full of flash and speed, the Lazzaras' business strategy is downright conservative. Part of that can be attributed to the family's history. In 1970, Vince, Rich's grandfather, founded Gulfstar Yachts in St. Petersburg, building sail and powerboats of up to 65 feet. In 1989, Gulfstar merged with Viking Yachts. By 1991, the shipyard was closed, a victim of overbuilding in the boat business and, to a lesser extent, the short-lived federal luxury tax. "You have to understand that my father saw Gulfstar go from 800 employees to two," said the younger Lazzara, who at 28 is vice president of marketing for the family-owned company. His father, Dick, is president of Lazzara Yacht Corp.; his uncle, Brad Lazzara, is president of Lazzara International Yacht Sales, a sister company. "Now the company goal, in good times and bad, is to have a constant production cycle of eight boats a year," Rich Lazzara said. "In good times, that might mean back orders or that we lose some orders. But in bad years, we're able to make it on six to eight boats." The company expects $35-million in sales this year and has been profitable since its first year, he said.
Lazzara Yachts, which start at 76 feet, are semicustom: The hull, deck and mechanical and electrical systems are standard on all models while the interior design and decor can be customized. The hull and deck are built in Lazzara's open-air hangars south of the Gandy Bridge. All other components, from the engine to the air-conditioning system to bird's-eye-maple cabinetry, are bought from more than 1,000 vendors. "We concentrate on putting the parts together in the most quick and efficient way," Lazzara said. "And by doing so, we're able to guarantee price and delivery date, which are two big issues with buyers. I can tell you right now what boats we'll be delivering five years from now." Lazzara's focus on a consistent production cycle has advantages. It means steady work for the boat yard's 250 employees; other yards routinely lay off workers during downturns. Lazzara was honored in May as one of the Tampa Bay area's most family-friendly employers, offering its workers interest-free loans, an on-site gym and a party after each boat is completed. The steady pace of work also means a predictable order stream for vendors in return for meeting the builder's deadlines and quality standards. But Lazzara's refusal to rev up production during hot markets puts a limit on its potential growth. The company, which sells its boats directly rather than through a distributor, is exploring other ways to increase revenues. It has opened an office in Fort Lauderdale that specializes in used Lazzaras, though that market is softer now than the new yacht business. It also is considering partnering with another manufacturer to construct even bigger boats. "We could manufacture the hulls and decks here for a 122-foot boat and contract out the rest," Lazzara said. "The market dictates that we build bigger boats because our customers demand it." One such customer is Bob Guy, owner of a 76-foot Lazzara who will take possession of a new 94-foot model in August. Last week, Guy, his captain and his first mate were in a classroom overlooking Lazzara's factory floor, learning the intricacies of the new $6.45-million boat's power, water and air-conditioning systems. After class, Guy, 67, said he chartered a competitor's model before buying his first Lazzara. "The Lazzara had the layout and design I wanted," he said. "You can get yachts in the same size range for less, but you get what you pay for."
Guy said that in the 18 months he has owned his Lazzara, it has traveled about 9,000 miles, stopping at ports from the Bahamas to Bar Harbor, Maine. Asked why he is getting a larger model, Guy replied, "Have you ever heard of anyone going smaller? I have five kids and 11 grandkids and I know I really like it now." Guy is a former vice president and general tax counsel for Coca-Cola. With the exception of a certain widely known race car driver, who has a 106-footer on order, Lazzara's buyers generally are working professionals or entrepreneurs in industries that are lucrative, though not necessarily glamorous. One customer had a business that repaired the cable boxes that sit on top of TV sets. Another was a regional distributor of refrigerators, ovens and microwaves. A third started the Baby Superstores chain. All three had their companies acquired, giving them a substantial pile of money and free time for boating. For most customers, a Lazzara is their entry into luxury yachting, a big change from 10 years ago when an 80-foot boat was considered the top of the line. Jim Gilbert, editor-in-chief of ShowBoats International, a Fort Lauderdale magazine catering to the mega-yacht trade, said Lazzaras are considered small in a world where 200-foot vessels are increasingly common. "Lazzara is at the bottom of the upper end of the luxury yacht market," he said. "And we define luxury yachts as when you get to that point where you need a full-time, professional crew." Competing with Lazzara in the starter-yacht market, Gilbert said, are Italian boats by manufacturers such as Azimut and Ferretti, as well as U.S. manufacturers such as Hatteras and Burger. "But Lazzara has two things going for them," he said. "Their products have done well on resale. And they attract newcomers to luxury yachting who find their high level of support and customer service very comforting. The typical Lazzara owner could afford a much bigger boat, but they use the experience to ground themselves in the whole experience." Rich Lazzara said the buyer's profile changed considerably during the 1990s. Initially, buyers tended to be in their late 50s, with a net worth of about $100-million. Now they are in their late 40s, with three times the net worth. With price tags as high as $7-million for the 106 model, all Lazzara yachts come fully equipped down to the china, linens and artwork. But purchase price is just the beginning. Annual cost to run a Lazzara -- for crew, fuel, docking and maintenance -- can run $200,000 to $400,000 a year. The average Lazzara owner runs his boat about 400 hours a year. That's less than three weeks. "That's twice the average use for an 80-footer industrywide," Lazzara said. "But still, in the scheme of things, it's not very much use." Even Lazzara admits no one really needs his company's product. "You have to realize, these people already have two or three homes, plenty of cars and probably a plane," he said. "The last thing they purchase is a yacht." - Kris Hundley can be reached at hundley@sptimes.com or (727) 892-2996.
 © 2006 • All Rights Reserved • St. Petersburg Times
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From the Times Business report
From the AP
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