The Economics of RV Park Campgrounds: Revenue Streams and Financial Considerations
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Investors in commercial real estate (CRE), especially those interested in managing their investment, may want to consider an RV park or campground. In addition to providing lucrative income streams with lower overhead costs, investors can enhance their park or campground's attractiveness by adding their choice of amenities.
Those who prefer to be hands-on investment managers often choose RV parks or campgrounds over retail outlets and franchises. Traditionally, these investors were nearing retirement age, but as RV vacations became popular with Millennials and Generation Xers, their managers' average age decreased.
An investment purchase also provides the new owner with management opportunities that can be relaxing and lucrative.
On-site RV park managers can share details of the nearby attractions with visitors, assist with routine maintenance of RVs and trailers, and, best of all…find out first-hand what this year's RVers are planning.
This article will take a closer look at the earning potential of RV parks, together with the different revenue streams they offer.
First, we'll look at investment options.
Investment Strategies
RV parks are popular with a variety of investors. Pricing is a major factor, and so are opportunities for owners/managers. Since buying the land is its own investment, we'll look at the land purchase and RV park build costs separately.
If you've decided to build from the ground up, you'll need to determine how much land will be required. You can do this by deciding the maximum number of guests you can manage. Most RV experts equate one acre of land with around 10 RV sites.
For example, if you're planning to host a maximum of 40 RV owners, you'll need a minimum of five acres. Deciding on required acreage should be one of your first business plan entries, as this will affect construction costs, taxes, and overall management needs.
Determining the costs of building your park or campsite will vary. For example, if you're buying unimproved land, you'll need to factor in the costs of clearing the land, adding utilities and septic systems, and construction costs for everything from the parking spaces to your chosen amenities.
If you've located an existing RV park for sale, this may be a larger initial spend than the DIY method. Remember, you're not just buying the park itself; you'll also need to study its current profitability before negotiating a price.
Depending on your park's amenities, location, and other factors, you'll want to take a closer look at the current revenue streams provided, plus ways to increase them.
Identifying and Analyzing Revenue Streams
Rentals are the main source of income from RV parks. However, there are plenty of additional ways to increase your ROI while making your park more attractive.
Here are some traditional add-ons to bump up your RV park or campground's income:
- Storage, either of RV vehicles or items like kayaks and mountain bikes.
- Laundry services and vending machines.
- Maintenance and cleaning of RV vehicles and trailers.
- Sales of food, merchandise, and vacation-related items.
- Guided excursions, such as fishing and hiking.
- Fitness-related extras, such as a gym, pool, or sauna.
After you've put additional revenue streams into action, you'll need to analyze their profitability. Some revenue streams are seasonal. For example, if your RV park is popular with summer hikers, revenue from guided tours will be limited to warmer months.
When you or an accounting pro are reviewing your park or campground's overall profitability, tracking your operating expenses should be done at the same time.
This will help you identify expenses that need to be controlled or eliminated, together with methods to help track them on a daily basis.
Now, let's look at additional strategies for reducing your operating expenses.
Identify and Reduce Your Expenses
While some park or campground owners may be content to record customers' contact information and reservations in a spiral notebook or on a desk blotter, automating these could save time, encourage more bookings, and super-charge marketing efforts.
Implementing software tailor-made for managing RV parks and campgrounds is essential for owners who recognize the growing trend toward younger RVers. No matter what their age, most visitors will appreciate the convenience of booking their stays online in seconds.
Management software systems do much more, especially for the owner/manager. Since each transaction is managed in detail, users will be able to determine overall profitability, seasonal trends, and popularity of individual amenities and services.
Another major expense that requires careful management: maintenance and upkeep.
Clean Parks = Positive Reviews
Even if your guests are mud-spattered mountain bikers, arriving at an RV park with idyllic landscaping and a sparkling pool is the ideal way to welcome them. It's also effective for bringing in drive-bys with no advance reservations.
Here are basic tasks that belong on a park or campground's maintenance schedule.
- Landscaping: this can be as simple as mowing the grass and picking up trash or maintaining flower beds and bird feeders.
- Amenities: the costs of maintaining these depend on the amenity. For example, a picnic area will require considerably less maintenance than an in-ground pool.
- Utilities: while some are maintained by their source, others, like septic systems and wifi services, need regular checkups.
- Marketing: while not a traditional maintenance item, you'll want to print and distribute brochures, send direct marketing to past visitors to encourage a return visit, and post new items and special rates to your social media sites.
One method for reducing maintenance expenses is to compare the costs of different service providers. Could you take your marketing account to a pair of freelancers instead of using a local agency? What about pool maintenance and landscaping services?
When reviewing your monthly expenses, you may have redlined electricity as one of your most expensive bills. Switching to more efficient energy resources can lower your light bill while attracting visitors who are concerned about our environment.
Installing solar panels can also help you bring down energy bills. While costs vary by state, solar panel pricing has become extremely affordable, with the costs of installed solar dropping by 70% since 2010.
Other power-saving add-ons to consider include LED lights, programmable thermostats, and motion-triggered exterior lighting.
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