Written Jeff Crider – Originally Appearing in Woodall’s Campground Magazine – Vol. 55 No. 3 March 2024
Growth Occurring Despite Higher Interest Rates
The private park business is continuing to expand its footprint across the U.S., with 90 new campgrounds and more than 18.000 campsites in new and existing parks coming online between 2023 and 2027, according to park operators, developers and local news reports.
At least 13,284 of the new campsites are coming online through the construction of 90 new campgrounds, RV parks and resorts across the country, with another 4,831 campsites being added to 66 existing parks. This makes for a grand total of at least 18,115 new campsites.
Park operators and developers are also complimenting their RV sites with at least 1.613 new rental cabins, mostly park models, as well as yurts and covered wagons. Al least seven glamping and cottage resorts are also being developed or expanded. Some even have floating bungalows.
As of late December, Billings, Montana – based Kampgrounds of America Inc. (KOA) had 27 new campgrounds with at least 4,000 campsites in various stages of development including 18 new construction contracts prior to 2023 that are still in process, according to Chris Fairlee, KOA’s chief acquisitions officer. KOA signed franchise agreements for nine new KOAs in 2023 alone.
“We had expected six, so we exceeded our annual target,” Fable e told Woodall’s Campground Magazine, adding Martine new KOAs are to be built in Arkansas, Florida, Kentucky. Ohio, Louisiana, North Carolina and New York.
“Two of the nine should be completed and ready to open in 2024 or 2025. The remainder are two to four years out.” Fairlee said.
Thirty-two different KUA campgrounds in 15 states and one Canadian province also expanded their number of campsites in 2023, Fairlee said.
“As it relates to sites designed, our development team designed between 1,500 and 1,600 new RV sites for existing KOA owners in 2023. This would include campgrounds looking to expand the footprint on their existing campground.” he said,
Other major campground and RV resort operators – including Ocean City, Md.-based Blue Water Development Corp.; Phoenix. Ariz.-based CRR Hospitality; Chicago-based Equity LifeStyle Properties; Memphis, Tenn.-based RVC Outdoor Destinations; Grand Rapids, Mich.-based Northgate Resorts; Scottsdale, Ariz.-based Roberts Resorts; Great Escapes RV Resorts, based in Houston, Texas; Castle Rock, Colo-based Horizon Outdoor Hospitality: as well as parks affiliated with the Jellystone Park franchise network and Southfield, Mich.-based Sun Outdoors – also added new RV sites and rental accommodations, and smaller RV resort networks, such as Orlando, Fla.-based Athena Real Estate.
Other campground and RV park projects are in the pipeline, but developers told WCM they were not prepared to announce these projects just yet. Other projects are being delayed not by permitting issues, but by the high-interest rates and inflation, which have escalated building and expansion costs to the point where it isn’t financially feasible to move forward with some campground and RV projects at this time, a topic that will be explored in an upcoming WCM report.
To see a large list of the new developments and expansions that are occurring throughout North America, go to woodallscm.com/more-than-18000-sites-coming-online-by-end-of-27/.
Interest Rates Still Having an Impact
There is a tremendous amount of construction taking place involving new and expanding campgrounds, RV parks and resorts across the U.S. But not as much as there could be if it weren’t for high-interest rates and inflation, which have driven up the cost of construction, according to park operators, developers and industry consultants.
“As a result of rising interest rates, cap rates, have increased and values have declined. Capital, both debt and equity, is much more discerning and has a higher cost with more stringent terms. This makes future development fact and circumstance-driven and less economically feasible,” said Richard O’Brien, CEO of Athena Real Estate in Orlando, Fla., which owns and operates 14 parks through the Applebrook RV Parks network.
Amir Harpaz, of Harp Development, is moving forward with expansions of Torrey Trails RV & Golf Resort in Bowling Green, Fla. and Cherokee Outdoor Resort and Marina near Vonore, Tenn. However, he said some new developments are being held back due to higher interests where the original proformas do not pencil out anymore.
“In some cases, they want the park to refinance their existing operation before they give them a loan for an expansion project,” Harpaz said, adding, “They don’t went to be in the number two position behind another lender.”
As a result, Harpaz said, some park owners may simply opt to wait for a while to see if interest rates fall. After all, he said, many do not have to expand right now.
“While it maybe desirable to expand, they don’t have to,” he noted.
Jayne Cohen, president of Campground Consulting Group, said inflation and high interest rates have killed some projects and delayed others, but she said there is still considerable growth and development taking place in the private park industry across the country.
“Economic realities, primarily interest rates, the inaccessibility of funds and high construction costs are extremely challenging,” she said, adding, “Funding is extremely tough to get and expensive when you find it.“
“We have a few expansions under study and conducted approximately a dozen more recent feasibility studies and have almost an equal number in the works,” Cohen noted. “Some of these will lead to new RV park development and/or expansion. The interest rates are making it tough and what would have stabilized in three years is now taking five or longer.“
Despite these obstacles, many park operators and developers are still moving forward with their plans to build new parks and expand existing ones.
“We are still busier than ever with new development, expansions and operational audits,” Cohen said. “A lot of people (are) still looking for properties. (It’s) tougher to find a property to build on and to find acquisitions, but they are finding them and continuing. Overall, (there are) just more obstacles and challenges, but those with the appetite are moving forward. (We’re) finding a lot of clients doing their diligence right now and looking for opportunities. (They are) running studies now, which may not turn into development in a year or two when rates are possibly lower and money freer and costs (go down).” –Jeff Crider WCM