By Andy Zipser
Author, Renting Dirt
Last week, I briefly outlined how soaring demand for RV campground sites is stressing out commercial campground operators, even as it has sparked growing interest in the investment class.
People with money see campgrounds as relatively unexploited investment opportunities, while campground owners are increasingly receptive to being bought out. But what does all that mean for the RVing public? The answer, I’m afraid, is less personal service, higher prices and more dissatisfaction overall.
Let’s start with RV site rates.
I’ve mentioned “dynamic” or “demand” pricing in the past, under which the cost of a site will vary according to demand. This algorithmic approach is already familiar to anyone booking an airline flight or hotel room, and the “hospitality industry” gurus sweeping into the campground sector don’t see any reason it shouldn’t be applied to RV sites as well. For these experts, campgrounds are simply a “back of the woods” sector of the lodging industry – that’s exactly how a former CEO of Kampgrounds of America (KOA) described it almost a decade ago – that needs to be dragged into the modern age. And the RVers who are rolling into campgrounds with their oversized fifth-wheels and motorcoaches are making the case for them.
“These aren’t campers,” one campground owner told me at the Virginia Campground Association (VCA) meeting two weeks ago. “They’re hotel rooms on wheels,” and they’ll be priced accordingly.
Occupancy rate at RV campgrounds
But there’s an additional dynamic that most RVers don’t understand that’s also goosing prices, and that’s the occupancy rate. Most RVers assume that campground owners desire a 100% occupancy rate, because that means there’s no wasted inventory – all the sites are being used. But for the industry’s number crunchers, 100% occupancy (except on rare occasions, like holiday weekends) means you’re not charging enough. “When occupancy rates start hitting 75% or 80%, it’s time to raise prices – you don’t want to be at 100%,” Donna Bordeaux, a CPA who specializes in campground accounting, told VCA members last week.
Raising rates will drive down occupancy, which means less stress on the facilities and on staff, and if balanced correctly will bring in just as much (if not more) income. Over time, as the occupancy rate starts inching back up because of continued high demand and waning price resistance, the rates will be raised again. Meanwhile, Bordeaux added, campgrounds also need to do away with weekly and monthly rates in season, when the potential to fill those sites at overnight rates means “you’re just giving it away” with a discount. Indeed, Bordeaux would do away with all discounts – from Good Sam to military and first responders to AAA – which in her view cheapen the product.
Most family owners of campgrounds resist these prescriptions because they don’t see themselves as being in the lodging industry. They tend to view their campgrounds as recreational facilities, with repeat customers who come back year after year for the unique combination of staff and amenities that they’ve enjoyed in the past. “I couldn’t do that to them,” an owner for more than 30 years of one of Virginia’s largest campgrounds told me about the increasing pressure to raise rates.
“They’re almost like family.”
But “family,” alas, does not factor into the algorithms driving the new acquisition wave, which treats campgrounds and RV sites as fungible commodities. Indeed, the McDonaldization that has overcome virtually every consumer segment of the economy, with its emphasis on efficiency and predictability, is starting to wash over the campground industry as well.
So, for example, while online reservations initially were embraced as a premium add-on, that script is starting to flip: pretty soon, it will be campers making telephone reservations who get hit with a surcharge, in an effort to drive more business to online systems – and allow campgrounds to operate with fewer desk staff and shorter business hours. Besides, as Bordeaux pointed out, campers who prefer to use the phone rather than go online trend older and are more inclined to complain about prices. “They’re generally paying less if they’re calling you,” she observed, the implication being that there are other, more desirable customers.
Bordeaux is hardly an outlier.
The pricing gospel she delivered has been an increasingly dominant refrain for several years at campground conventions, often underlain by a bemused (and faintly condescending) impatience toward those who don’t understand the new fundamentals. The new class of investors, often coming with either a money management or lodging industry background, doesn’t have those blind-spots. And the rest of the industry is being swept along, even if kicking and screaming, and will console itself with fatter bank accounts and rising property values.
As for the RVers? They, too, will adapt, as they already have to self-service gas pumps, self-scanning checkouts at supermarkets and drive-up windows at fast-food restaurants – all the little ways capitalist society finds to move us along more efficiently, to someone else’s benefit.
In the four months since he sold the Walnut Hills RV Park and Campground, Andy Zipser has written a book about his family’s experiences that goes on sale this Monday, Oct. 11, priced at $4.99 for the ebook version and $14.95 for the paperback. Look for Renting Dirt at your favorite bookseller (including Amazon); or you can order a discounted paperback at his new website and blog, renting-dirt.com, where you can also keep up with his other writing on the campground world.