RV parks are highly secure businesses from an economic standpoint. Foremost, these businesses do not require large capital expenditures outside the startup capital needed to acquire land. Beyond land, the second largest expense is usually the development or acquisition of a small house where a full time manager can reside. Outside of property taxes and utility costs, the ongoing direct expenditures to maintain an RV park or campsite property are generally minimal. Usually, a full time manager is provided with a modest salary provided that they are able to live rent-free within the onsite facilities.
Strengths
As it relates to strengths, RV parks can generate revenues in a number of different ways. First, the businesses are able to take reservations among people traveling through the target market area while providing stop-in service to unexpected vacationers. Given that most RV parks acquire substantial acreage; these businesses are often designed to accommodate influxes of businesses from time-to-time. The gross margins generated by RV parks are substantial (usually in excess of 90% depending on what the owner counts as part of their cost of goods sold).
Another important revenue center for a RV park are monthly rental and storage fees among local residents that do not keep their recreational vehicle at home. In many areas (especially in neighborhoods that have a home owner’s association), many RV owners are not able to directly store their vehicles at home. These fees produce substantial streams of recurring revenue that can satisfy the underlying mortgage obligations of the RV park while providing a significant return on investment.
Finally, RV parks are able to generate ancillary streams of revenue from onsite general stores and usage of washers/driers.
Moving forward, the demand for socially distanced vacationing is expected to grow substantially. There is already a growing demand among people that would rather travel by recreational vehicle to and from vacation destinations rather than flying. It is expected that this demand will increase at least 10% per annum over the next five years.
Weaknesses
For weaknesses, RV parks and campsites do face a substantial amount of competition. Given the low startup costs associated with these businesses, it is very easy for someone who already owns a large parcel of land to simply set up a RV park (with electric and tank hook ups). As such, these businesses need to be flexible as it relates to pricing in order to compete in these markets.
Opportunities
For existing RV parks, the best way to increase revenues is to monetize every aspect of operations. This includes having a general store on site (that sells in demand travel items) as well as providing access to washers and dryers. Many RV parks also provide refills of propane.
Another opportunity for growth stems from the acquisition of additional parcels of land in order to accommodate a greater number of customers. Many RV parks focus heavily on providing storage services (during off-peak months) in order to have their revenues remain stable throughout the year.
RV park and campsite businesses generally have substantial access to capital (either via a loan or private investment) given the large amount of property that is used to secure the investment. Banks and financial institutions love to provide mortgages and working capital to RV parks given that nearly 100% of their capital is almost always secured by the land and real estate as collateral. An entrepreneur seeking to obtain capital via these methods should have no problem sourcing capital.
A major opportunity, as it relates to marketing, is to develop an expansive online presence so that reservations can be made months in advance via a proprietary website. This ensures that fees are collected upfront. Additionally, many RV parks now use third party services in order to generate bookings so that the facilities operate at 100% occupancy at all times. Generally, a third party site charges a fee equal to 10% of the transaction. Although this is expensive, it does allow for a much higher occupancy rate with minimal marketing effort on behalf of the RV park or campsite.
Threats
Outside of competitive threats, there is really nothing that impacts the way at a RV park conducts business. Although the economy is heading for substantial economic uncertainty over the next twelve to twenty-four months, the demand for safe vacations will increase substantially. More Americans are reconsidering how they intend to enjoy a vacation as a result of the pandemic, and traveling via recreational vehicle is one of these methods. Interest rates are expected to remain near historical lows for a substantial period of time.