Sept. 26 (Bloomberg) -- Yachtmakers are slashing prices by as much as 20 percent as the recession crimps demand for luxury goods and clients curb spending on oversized vessels.

Boatmakers including London-based Burgess Yachts and Italy’s Wally said visitors at the annual Monaco Yacht Show, which ends today, are seeking bargains while some customers have been forced to cancel orders as credit dries up.

“We’ve all had to adjust to the new economic environment,” Alev Karagulle, Burgess’s marketing director, said in an interview at the show in Monte Carlo. “Before, prices were artificially high. Now everyone is being more realistic.”

At least four European yachtmakers have sought bankruptcy protection this year after credit dried up in the global economic crisis. The hardest-hit categories are megayachts longer than 70 meters (230 feet) and smaller boats of 30 meters or less, Karagulle said. While wealthy clients may still have cash, they’re reluctant to make conspicuous purchases while companies lay off workers and the economic mood remains somber, she said.

Sales of smaller boats are dwindling because their traditional buyers such as bankers, hedge fund executives and entrepreneurs have lost access to credit.

‘Disaster’

“It’s been a complete disaster,” Michael Payne, a broker for Camper & Nicholsons International, said of the 25- meter category. “There simply isn’t any financing available.”

Camper & Nicholsons, a unit of Cannes, France-based Rodriguez Group, halved the price of some models by moving production to Turkey from northern Europe, Payne said.

“We definitely see more interest in cheaper boats,” he said, pointing to a 30-meter long yacht costing 16.5 million euros ($24 million). “We created a shipyard in Turkey where we’re producing value for money.”

One of the industry’s biggest woes is the withdrawal of Russian clients, who had been among the most enthusiastic buyers of luxury yachts prior to the collapse of Lehman Brothers Holdings Inc. last year. The economic downturn in the country ate into fortunes and forced many Russian buyers to cancel orders, boatmakers said.

“We had a Russian client who ordered a yacht and then withdrew even though he had to give up the 40 percent deposit,” Wally spokeswoman Monica Paolazzi said.

Still, most industry professionals said sales have picked up since summer and predicted business would improve next year.

“I think we’ll never go back to the situation of two years ago when everyone was making money so easily and was spending it right and left,” Paolazzi said. “But that doesn’t mean the industry doesn’t have a future.”

To contact the reporter on this story: Ladka Bauerova in Paris at lbauerova@bloomberg.net.

Last Updated: September 26, 2009 04:19 EDT