RV Parks and Campgrounds: A Comprehensive Guide for Real Estate Investors

Introduction

The recreational vehicle (RV) industry has experienced significant growth in recent years, and investing in RV parks and campgrounds has become an attractive opportunity for real estate investors. With the increasing popularity of domestic travel, outdoor recreation, and the desire for a more flexible and cost-effective lifestyle, RV parks and campgrounds offer a unique investment opportunity that caters to these emerging trends.

RV parks and campgrounds serve as accommodation facilities for travelers with recreational vehicles or those seeking a more rustic and nature-oriented lodging experience. These properties can range from basic sites with limited amenities to luxury resorts offering a wide array of services and recreational activities. As a real estate investment, RV parks and campgrounds can provide stable and recurring cash flow, lower operating costs compared to other property types, and opportunities for value-add improvements that increase both occupancy rates and revenue.

Growth Trends in RV Park and Campground Industry

RV sales have been on the rise in recent years, with 2021 seeing an all-time high of 483,672 units sold. This is a 33.8% increase from 2020 and shows that more people are turning to RVs as their preferred mode of travel for both leisure and business purposes. According to the RV Industry Association (RVIA), RV shipments increased by 6% in 2020 compared to 2019, with a total of 430,412 units shipped. This upward trend is expected to continue as more people discover the appeal of RV travel and lifestyle.

“For decades, the RV industry has been growing with more and more people turning to RVs as the perfect way to experience the great outdoors. While the demand for RVs has been amplified over the past two years, the pandemic also created several obstacles and challenges for our industry,”

RV Industry Association President & CEO Craig Kirby.

Financial Performance of RV Parks and Campgrounds

Occupancy rates: A key indicator of the financial performance of RV parks and campgrounds is their occupancy rate. The National Association of RV Parks and Campgrounds (ARVC) has reported increased occupancy rates in recent years, reflecting the growing popularity of RV travel and camping.

Other statistics from the ARVC 2022 Trends and Insights report include: more than half (58%) of park owners reported an increase in main season occupancy in 2021 when compared to 2020. Up from the 40% that reported an increase over 2019.

Along with reporting an increase in occupancy, nearly two-thirds (64%) anticipated their profits were going to move up in 2021, with only 4% expecting a decrease in revenue.

On the rate side, 55% of parks reported an increase in nightly/weekly rates, while a third reported no change and 3% reported a decrease in rates.

Factors Affecting Potential Profitability

Location and Demographics: the location of an RV park or campground is crucial to its success. Proximity to popular tourist attractions, natural landmarks, or major transportation routes can significantly impact demand and profitability. In addition, understanding the demographics of the target market, such as age, income, and travel preferences, can help guide investment decisions and operational strategies.

Amenities and Services Offered: the quality and variety of amenities and services offered by an RV park or campground can directly affect its competitiveness and profitability. Modern travelers seek unique experiences and appreciate amenities like swimming pools, playgrounds, Wi-Fi, and pet-friendly accommodations. Offering a wide range of services can help attract a broader customer base and drive repeat business.

Marketing and Customer Engagement Strategies: Effective marketing and customer engagement strategies are essential for maximizing profitability in the RV park and campground industry. Utilizing digital marketing, social media, and targeted advertising can help raise awareness and attract new customers. Additionally, engaging with guests through loyalty programs, personalized communications, and exceptional customer service can help foster long-term relationships and drive repeat business. By developing and implementing comprehensive marketing and customer engagement strategies, RV park and campground owners can enhance their overall profitability and establish a strong presence in the market.

The RV park and campground industry has experienced significant growth in recent years, driven by factors such as increased RV sales and rentals, and a shift towards domestic travel and outdoor recreation. (It is worth noting that the impacts of COVID have led to some of the uptick in RV demand, with new RVers either turning to this mode of tourism due to limited other entertainment offerings, to get out of downtowns that no longer had active nightlife, or to work remotely – it is yet to be seen how demand will hold up in the years to come.) With strong financial performance indicators, such as high occupancy rates, diverse revenue sources, and favorable operating margins, investing in RV parks and campgrounds has become an attractive opportunity for real estate investors. However, to maximize potential profitability, investors should carefully consider factors such as location, demographics, amenities, and marketing strategies when evaluating and operating RV parks and campgrounds.

Pros and Cons of Investing in RV Parks and Campgrounds

Pros of Investing in RV Parks and Campgrounds

Diversification of Investment Portfolio: investing in RV parks and campgrounds provides an opportunity to diversify an investment portfolio by adding a unique real estate asset class. This diversification can help spread risk, as the performance of RV parks and campgrounds may not be closely correlated with other real estate investments, such as residential or commercial properties.

Stable and Recurring Cash Flow: RV parks and campgrounds can generate stable and recurring cash flow through a variety of revenue sources, including site rentals, cabin rentals, and ancillary services. These diverse revenue streams contribute to the financial stability of the investment, making it an attractive option for investors seeking consistent income.

Lower Maintenance and Operating Costs Compared to Other Real Estate Investments: compared to other real estate investments like hotels or apartment buildings, RV parks and campgrounds typically have lower maintenance and operating costs. This is due to factors such as less complex infrastructure, lower utility costs, and fewer employees. As a result, RV parks and campgrounds often enjoy higher operating margins and better cash flow.

Opportunities for Value-Add Improvements: RV parks and campgrounds often present opportunities for value-add improvements, such as upgrading amenities, adding new services, or expanding the property. These improvements can increase the overall value of the investment and contribute to higher occupancy rates and revenue.

Cons of Investing in RV Parks and Campgrounds

Seasonality and Economic Sensitivity: The RV Park and campground industry can be subject to seasonality, with demand often peaking during warmer months and holidays. Additionally, the industry can be sensitive to economic conditions, as changes in consumer spending and travel preferences may impact occupancy rates and revenue. These factors can create fluctuations in cash flow and pose challenges for investors.

Competition from Alternative Accommodations: RV parks and campgrounds face competition from various alternative accommodations, such as hotels, vacation rentals, and other unique lodging options. This competition can impact occupancy rates and pricing, making it essential for investors to differentiate their properties through exceptional guest experiences, amenities, and marketing strategies.

Environmental and Zoning Restrictions: RV parks and campgrounds are subject to various environmental and zoning restrictions, which can limit development or expansion opportunities. Navigating these regulations can be complex and time-consuming, potentially impacting the feasibility or profitability of an investment.

Potential for Natural Disasters and Liability Issues: RV parks and campgrounds can be vulnerable to natural disasters, such as floods, wildfires, or severe storms, which may cause property damage or disrupt operations. Additionally, these properties may face liability issues related to guest safety, accidents, or environmental concerns. It is crucial for investors to obtain adequate insurance coverage and implement risk mitigation strategies to protect their investment.

Legal Complexities of Investing in RV Parks and Campgrounds

Importance of Understanding the Legal Complexities and Potential Profitability

As with any real estate investment, it is crucial for investors to have a comprehensive understanding of the legal complexities and potential profitability associated with RV parks and campgrounds. Legal issues can range from zoning and land use regulations to licensing, environmental compliance, and liability concerns. Navigating these complexities is essential to minimize risk and ensure a successful investment. In addition, understanding the factors that drive profitability, such as location, amenities, and customer engagement, will help investors make well-informed decisions and maximize the potential return on their investment. In this section, we will provide an in-depth exploration of these topics, offering valuable insights for investors considering RV parks and campgrounds as a real estate investment opportunity.

Zoning and Land Use Regulations

Permissible Uses and Restrictions: Zoning and land use regulations determine the allowable uses and restrictions for a particular property. Investors must ensure that the intended use of an RV park or campground aligns with the applicable zoning laws, which may dictate factors such as minimum lot size, setbacks, and density requirements.

Variances and Special Permits: In some cases, investors may need to obtain variances or special permits to develop or operate an RV park or campground. This process may involve public hearings, negotiations with local officials, and adherence to specific conditions or requirements set forth by the governing authority.

Licensing and Permits

Health and Safety Regulations: RV parks and campgrounds are subject to various health and safety regulations, which may include food service licensing, swimming pool permits, and compliance with local health department requirements. Investors must ensure they obtain the necessary licenses and permits and maintain compliance with all applicable regulations.

Building and Fire Codes: Investors must ensure that RV park and campground structures, such as cabins, restrooms, and recreational facilities, comply with local building and fire codes. This may involve obtaining building permits, undergoing inspections, and implementing fire safety measures such as smoke detectors, fire extinguishers, and emergency exit signage.

Environmental Regulations

Water and Wastewater Management: RV parks and campgrounds must adhere to federal, state, and local regulations regarding water and wastewater management. This may include obtaining permits for water supply and sewage disposal systems, regular water testing, and compliance with water conservation requirements.

Waste Disposal and Recycling: Investors must comply with waste disposal and recycling regulations, which may involve securing permits for solid waste disposal, implementing recycling programs, and adhering to restrictions on the disposal of hazardous materials.

Natural Resource Protection: RV parks and campgrounds may be subject to regulations aimed at protecting natural resources, such as wetlands, endangered species habitats, or cultural resources. Investors should be aware of any applicable restrictions and implement measures to minimize environmental impacts and preserve natural resources.

Liability and Risk Management

Insurance Requirements and Coverage: Investors must obtain adequate insurance coverage to protect their investment and mitigate potential liability risks. This may include general liability, property, and casualty insurance, as well as specialized coverage for unique risks associated with RV parks and campgrounds.

Premises Liability and Risk Mitigation Strategies: To minimize exposure to premises liability claims, investors should implement risk mitigation strategies, such as regular property inspections, prompt maintenance and repairs, and clear communication of safety rules and guidelines to guests.

Employment and Labor Laws

Compliance with Federal, State, and Local Labor Laws: Investors must ensure that their RV park or campground operations comply with all applicable federal, state, and local labor laws, including wage and hour regulations, overtime rules, and anti-discrimination policies.

Employee Training and Safety Programs: To minimize liability and promote a safe work environment, investors should implement employee training and safety programs, ensuring that staff members are knowledgeable about their responsibilities and the proper procedures for maintaining a safe and compliant workplace.

Tax Implications

Federal, State, and Local Taxes: Investors should be aware of the various tax implications associated with owning and operating an RV park or campground, including federal, state, and local income taxes, property taxes, and sales taxes.

Tax Incentives and Credits: In some cases, investors may be eligible for tax incentives or credits related to the development or operation of an RV park or campground. These incentives may include credits for energy efficiency, historical preservation, or environmental protection measures. Investors should consult with a tax professional to identify and maximize potential.

Best Practices for Investing in RV Parks and Campgrounds

Due Diligence and Property Evaluation

Market Analysis and Feasibility Studies: Before investing in an RV park or campground, it is essential to conduct a thorough market analysis and feasibility study to evaluate the potential profitability and long-term viability of the investment. This may involve researching local market conditions, analyzing competitive properties, and assessing demographic trends and consumer preferences.

Physical Inspections and Environmental Assessments: Investors should perform detailed physical inspections of the property to identify any existing or potential issues, such as structural concerns, maintenance needs, or environmental hazards. Environmental assessments can help uncover potential environmental liabilities, such as contamination or resource protection issues, that may impact the investment’s feasibility or cost.

Structuring the Investment

Financing Options and Sources: Investors should explore various financing options and sources for their RV park or campground investment, such as bank loans, private lenders, seller financing, or joint venture partnerships. Thorough research and comparison of financing options can help investors secure the best terms and minimize borrowing costs.

Legal Structures and Ownership Arrangements: Investors should carefully consider the appropriate legal structure and ownership arrangement for their investment, taking into account factors such as liability protection, tax implications, investor structure, and management responsibilities. Common structures include sole proprietorships, partnerships, limited liability companies (LLCs), and corporations. Consulting with legal and financial professionals can help investors determine the most suitable structure for their specific situation.

Developing a Successful Operation

Effective Management and Staffing: The success of an RV park or campground depends heavily on effective management and staffing. Investors should focus on hiring experienced and qualified personnel, implementing comprehensive employee training programs, and establishing clear lines of communication and accountability within the organization.

Marketing and Customer Engagement Strategies: To maximize profitability, investors should develop and execute targeted marketing and customer engagement strategies that leverage digital channels, social media, and traditional advertising methods. Focusing on customer satisfaction, creating memorable experiences, and fostering customer loyalty can help drive repeat business and positive word-of-mouth referrals.

Continuous Improvement and Adaptation to Industry Trends: Investors should continually monitor industry trends and adapt their operations to remain competitive and relevant in the marketplace. This may involve upgrading amenities, expanding services, or adjusting pricing and promotional strategies. By staying attuned to market shifts and customer preferences, investors can ensure the long-term success and profitability of their RV park or campground investment.

Conclusion

Investing in RV parks and campgrounds offers attractive potential for profitability, driven by factors such as growth trends in the RV industry, diverse revenue sources, and favorable operating margins. However, the investment comes with legal complexities, including zoning and land use regulations, licensing and permits, environmental regulations, liability and risk management, employment and labor laws, and tax implications. Navigating these complexities is crucial for the long-term success and profitability of the investment.