RV Park Investing in 2022 and Beyond
What’s all the fuss about RV park and campground investing?
I’m in my third decade as a professional real estate investor. And I’ve rarely been more excited about a commercial real estate asset class. Our firm, Wellings Capital, has been intrigued with RV parks for years, but we didn’t locate a suitable operating partner until earlier this year.
In July 2022, our Wellings Real Estate Income Fund invested in a portfolio of RV parks with a seasoned operator. But that’s not the point of this article. Let’s start by reviewing the high level reasons why we believe in this space…
Why Wellings Capital is Excited About RV Park Investing
The asset class is highly fragmented. Operators with less than five properties own 90%+ of America’s 8,000+ RV parks. These mom-and-pop operators typically don’t have the desire, knowledge, or resources to upgrade their parks, increase income, and maximize value for their investors. They don’t “need to” since the recent spike in demand has significantly increased the occupancy at most RV parks. And those selling their parks can demand a premium because new investor interest has increased their value.
Park demand far exceeds supply. This trend didn’t start with Covid. But it has significantly increased since then. The proportion of first-time campers grew at a rate of 5x in 2020 compared to 2019. And the sharing model for RV rentals has made renting park spaces more challenging than ever.
RV sales are at an all-time high. 2021 sales topped 600,000, compared to under 250,000 in 2010. RV dealers could apparently sell far more if they had inventory. However, manufacturers are severely constrained by demand, labor, and material shortages.
The power of the sharing model. The Airbnb/Uber model is now available for RVs. I’ll talk more about this later in this article.
Ten Compelling Facts About RV Ownership and RV Parks
RV ownership has risen 62% since 2001 (see source)
As of 2021, a record 11.2 million US households own an RV (see source)
9.6 million households say they plan to buy an RV by 2026 (see source)
26% of campers were new to camping in 2020 – during the pandemic
The rate of new 2020 campers grew by 5 times the record pre-pandemic rate
In 2020, over 10 million households camped for the first time
This year’s KOA advance deposits are up ~ 63% over 2019 pre-pandemic levels
A study from PKF Consulting USA showed RV camping is more cost-effective than traditional vacations at 47% less than a comparable car/hotel vacation and 62% less than a comparable air/hotel vacation
Online searches for “RV parks” doubled over the past decade (see source)
RV parks experienced continued revenue growth during the Great Financial Crisis of 2008 to 2011 (see graph below)
RV parks were the only asset class maintaining positive growth (at about +2.5% in the worst year of 2011) through the Great Recession and enjoyed the highest overall growth of the five asset classes compared here. Note that mobile home parks and self-storage are not compared in the graph but performed well compared to the rest of the market from 2007-2011. We like those asset classes, too.
Did you catch the numbers in bullets #2 and #3 in the list above? If this increase in demand comes to pass, it could result in an 85% increase in U.S. RV owners.
But this doesn’t seem possible under the current production constraints. 2021 RV sales were in the record-level 600,000+ unit range. 2022 RV sales are expected to be similar. Dealers say they have far more demand than supply, particularly for certain models, which makes sense given these statistics.
Though this 85% increase doesn’t seem likely to materialize in the next five years, in a moment, I’ll tell you about a compelling reason RV park demand is apparently outpacing RV sales and will continue to do so even if RV sales stop. (Hint: think about Airbnb for RVs.)
Remote Work: A First in World History
I mentioned 6 million new campers and a record number of total campers since Covid. During the pandemic, many travelers felt unsafe in a hotel room or a commercial airline. But pandemics are temporary phenomena. So why is this trend still gathering steam?
The pandemic reminded us of the value of time. Life is short. We’re not promised anything. Many Americans re-evaluated their priorities and realized they wanted more time with family, more time pursuing postponed dreams, and more time outdoors.
But something much more significant happened during the pandemic, and this factor will likely drive RV sales for decades to come. This is a first in world history, an epic and unexpected workplace shift, much like the industrial revolution almost two centuries ago.
I’m talking about the remote working revolution. Though the pandemic has settled down this past year, the amount of remote work is still at around 30%. On average, 75 annual workdays occur somewhere other than the office! And this is much higher for many white-collar jobs. And many of these folks have the disposable income to enjoy RV camping.
“When the COVID-19 pandemic shuttered workplaces nationwide, society was plunged into an unplanned experiment in work from home. Nearly two-and-a-half years on, organizations worldwide have created new working norms that acknowledge that flexible work is no longer a temporary pandemic response but an enduring feature of the modern working world.”
That quote is an excerpt from this article. Many workers are 100% remote. Others are hybrid, working partially from the office and partially remote. Employers are finding that remote workers are more productive than before. Savings on commute time and office space are measurable.
January 2020 data showed remote employment had already grown 400 percent in the prior decade before the pandemic. In 2010, the US Census Bureau found that only 9.5 percent of employees worked remotely at least once a week. Now 35 percent of respondents say they can work from home full-time. Another 23 percent can work from home from one to four days a week. A mere 13 percent of employed respondents said they could work remotely at least some of the time but opt not to.
Of course, remote work doesn’t always go as well in seriously out-of-the-way locations. While I love getting away from cell coverage and internet on vacation, it is more challenging when I’m on Zoom calls and researching blog posts.
Many RV parks (like the ones we’re investing in) have solved that issue through location selection and the installation of Wi-Fi.
The Sharing Economy and Its Impact on RV Parks
Think about this. When Airbnb exploded, it allowed millions of homeowners to use their personal or rental homes as rental units. Airbnb launched in 2008. But Airbnb has over four times the units/rooms of Marriott, the world’s largest hotel chain, which launched almost a century ago.
And what about taxis? Uber allowed anyone with a car to start a side hustle. Or, in many cases, launch a full-time business. Like Google for online searches, Uber has become a verb when looking for a ride.
We’re all aware of Uber and Lyft’s impact on the taxi world. Before Uber, in 2011, a coveted New York City taxi license cost about $1,000,000. The medallions are now available for $80,000.
The sharing model has devastated the hotel and taxi business while providing massive opportunities for millions of regular people. Now the sharing model has blossomed into private rental cars (Turo), boats (Carefree), and tools (Sparetoolz). You can even share clothing with strangers now (Tulerie)!
The sharing model has entered the RV world. And it’s created a meaningful spike in demand at RV parks nationwide.
This model allows RV owners to lease out their RVs on a sharing marketplace. Sites like RVezy, RVShare, Good Sam, and Outdoorsy now host thousands of RVs for rent in all different classes, sizes, and locations. RV selection includes vintage Airstreams, toy haulers, fifth wheelers, Class A, B, & C RVs, and a garden variety of trailers, motorhomes, and more. Now any RV owner can cover their costs or even turn their idle RV into a profit-making machine.
These platforms connect RV owners to RV renters, and some even host a management firm (Wheelbase) to take care of all the details like cleaning, maintenance, delivery/pickup, emergency repairs, and more.
We believe this model has given a boost to RV sales since those trying to justify the cost of ownership now have a previously unimagined resource. I heard of one guy who bought five RVs just to rent them out online. This model also allows non-RV owners, like my family, to rent a variety of RV types as a test drive for potential ownership. Or just for a fun, affordable getaway.
Of course, these RV sharing programs could also decrease RV sales over time as more RVs are shared.
I mentioned the leveling effect the sharing model has had on hotels, taxis, and others established business models. But unlike hotels and taxis, RV parks directly benefit from the RV-sharing model. I’d argue they are perhaps the primary beneficiary!
Outdoorsy claims that multiple millions of RVs sit idle for about 350 days per year. But RVs added to a sharing platform may now be put into action for many weeks or even months annually. And all these users need a place to camp.
So, who potentially benefits from increased demand that could result from an RV-sharing economy?
RV parks. And their investors!
Conclusion
We believe the trends we’re seeing in the RV park space will create tailwinds for years to come, especially with so many institutions, individual investors, and private equity groups looking for yield. If you have any further questions about RV parks, please email us at invest@wellingscapital.com or use this link to set up a call.
This article is for educational purposes only and is not to be relied upon as the basis for entering into any transaction or advisory relationship or making any investment decision. All investments involve the risk of loss, including the loss of principal. Past performance, and any performance results reflected in this article, is not an indication of future results.