Will Big Companies Keep Buying RV Parks?
Anyone who's spent time in the campground and RV park industry has seen the trend of more and more companies showing active — and growing — interest in the industry. Whether it's hotel-industry veterans starting a new RV park franchise network (most recently Cruise Inn), hotel-software companies coming into the industry with reservation and management software (most recently Frontdesk Anywhere) or major companies shifting even more into RV parks from the manufactured-housing-community space, the landscape is changing.
There's at least some "clustering" growing in RV parks and campgrounds, be it ownership (Carefree RV Resorts has 59 in the U.S. and Canada and RVC Outdoor Destinations is involved in 10) or well-established franchises Kampgrounds of America (KOA), which owns some parks in addition to the franchised ones, and Leisure Systems inc., which handles the Yogi Bear's Jellystone Park Camp-Resort franchise.
If you take a look at the most recent annual reports from two of those major real-estate/manufactured-housing players — Michigan-based Sun Communities Inc. and Equity LifeStyle Properties Inc. (ELS) of Chicago — you'll see that they aren't slowing the pace of acquiring RV parks.
Sun Communities acquired six RV parks between November 2013 and February of this year. By comparison, they added only one manufactured-housing community. They spent $146.8 million on those seven properties, with the RV parks in New York, California, Maryland and New Jersey, according to the company's year-end announcement. Looking at all of 2013, Sun acquired only one manufactured-housing community to 14 RV parks.
"Our focus on acquisitions in the RV marketplace is based in part on increases in the annual
shipments of RV's, which are expected to increase by 6% in 2014 marking the fifth consecutive annual increase in shipments," said Gary Shiffman, Sun's chairman and CEO. "In addition, over 40% of demand for RV parks is from adults over 55 years of age which is a growing segment of our population," Shiffman added.
The company has focused on areas like Florida, California and east-coast vacation sites, but plans to expand its geographic reach to help insulate Sun from regional economic issues, according to the annual report. "We continue to expand our properties utilizing our inventory of owned and entitled land (approximately 6,300 developed sites) and expect to construct approximately 800 additional sites in 2014, located primarily in Texas and Colorado, which have current occupancies in excess of 90%."
"According to various industry reports, there are approximately 50,000 manufactured home properties and approximately 8,750 RV properties (excluding government-owned properties) in North America. Most of these properties are not operated by large owner/operators, and of the RV properties approximately 1,300 contain 200 Sites or more. We believe that this relatively high degree of fragmentation provides us, as a national organization with experienced management and substantial financial resources, the opportunity to purchase additional properties as evidenced by the acquisitions during the year ended December 31, 2013," according to the report.
ELS management personnel went on to say, "According to the Recreation Vehicle Industry Association (“RVIA”), nearly one in nine U.S. vehicle-owning households owns an RV and there are currently 8.9 million RV owners. The 77 million people born from 1946 to 1964 or “baby boomers” make up the fastest-growing segment of this market.
"According to 2010 U.S. Census figures, every day 12,500 Americans turn 50. We believe that this population segment, seeking an active lifestyle, will provide opportunities for our future cash-flow growth. As RV owners age and move beyond the more active RV lifestyle, they will often seek more permanent retirement or vacation establishments," ELS said in the report.
"According to 2010 U.S. Census figures, the baby-boom generation will constitute almost 19% of the U.S. population within the next 20 years. Among those individuals who are nearing retirement (age 46 to 64), approximately 59% plan on moving upon retirement."
RV sales figures also play into the ELS strategy, according to the company. "We believe that consumers remain concerned about the current economy, and by prospects that the economy might remain sluggish in the years ahead. However, the enduring appeal of the RV lifestyle has translated into continued strength in RV sales despite the economic turmoil. According to RVIA, RV ownership has reached record levels: 8.9 million American households now own an RV, the highest level ever recorded, which constitutes an increase of 12.7% since 2005. RV sales could continue to benefit as aging baby-boomers continue to enter the age range in which RV ownership is highest."
ELS is trying to reach RVers, according to the report. "In the spring of 2010, we introduced low-cost membership products that focus on the installed base of approximately nine million RV owners. Such products include right-to-use contracts that entitle the customer to use certain properties. We are offering a Zone Park Pass (“ZPP”), which can be purchased for one to five zones of the United States and requires annual payments." There's no additional cost to stay at ELS properties in the zone, and "modest" payments can get users into additional zones. In 2013, ELS sold 15,500 of those passes, in part by teaming up with RV dealers, according to the company.