The Growing Need for RV Parks and their Investment Potential
There is a growing need for RV Parks due to the rapidly growing number of RVs in America. In 2021 alone, the number of RV sales increased by 39%. But this is not purely a rapid rise in popularity caused by COVID. RV Sales have been rising significantly every year for over a decade, and this is simply an acceleration of that trend. More and more people are attracted by the freedom that RVs give them, and are taking to the open road and hitting the highways in their RVs. These people need places to stay, and the supply of RV Parks has not risen to meet the growth in demand. With the rising popularity of RVs, more people are looking for places to stay. During the last few years, they have often had to make reservations many months in advance to secure a spot to stay. This boom in demand is driving the need for more RV Parks.
First, there are two big demographic trends that are culminating to make RV Parks an excellent investment. The current wave of Baby Boomers retiring is one of them. There are 10,000 Baby Boomers retiring every day, and buying an RV and traveling the country is at the top of the list of retirement goals for many of them. Baby Boomers buy RVs at high rates, and many of them plan on selling their house and traveling full-time. In fact, over a million Americans already live full-time in their RV. Many of these Baby Boomers have planned on buying an RV and traveling the country for decades, and their retirement finally allows them to capitalize on this dream. One of the reasons for the enormous spike in RVers over the last few years was Baby Boomers pulling the trigger early on this dream. But the lack of supply of RVs caused a large spike in their pricing, which is only being slowly resolved because of persistent demand. As manufacturers ramp up their workforces and supply lines, this issue is slowly being resolved. This trend it shows the pent-up of demand for RVs. There is a large desire for the simpler lifestyle that RV living provides, especially among Baby Boomers.
The second demographic change driving RV demand is the growing influence of Millennials. There are now more Millennials than Baby Boomers, and they value location-freedom, Tiny-Living, working remotely, and connecting with nature. The fastest-growing segment of new campers is Gen Zers and Millennials. The rise of remote working is not disappearing with the ending of the pandemic. It is clear that many Millennials are committed to remote work, and companies that offer remote work are growing rapidly.
Millennial campers are driving the trend in RVing as a work/travel lifestyle. In 2021, 57% of millennials worked while camping. As long as RV Parks have high-speed internet, they are ideal places for these Millennials to stay, as they can connect with nature and get their work done. The demographic shifts detailed above have at least another decade to play out, ensuring that RV Parks will remain in high demand for years to come.
Lack of Supply of RV Parks:
As stated above, there has been a rapid rise in the number of people buying RVs in the last few years, with the number of RV sales increasing by 39% in 2021. But it is far easier to build an RV, than it is to build an RV Park. There are many required steps to build a new RV Park. The challenges range from finding the right location with enough traffic, to finding the right zoning, the availability of utilities, and financing the construction of park, which can require many million dollars of dollars to build. In addition, it can take up to four and a half years to build a park, from the closing on the property, to the opening of the park. In the last few years, many developers took the easier path of simply building apartments, which were in high demand at the time, and offered a shorter timeline to completion. But this easier path was taken by so many developers, that we are facing an oversupply of multifamily at this point. The oversupply of these multifamily developments, combined with the rise in interest rates, has led to a serious issue for many multifamily developers. Building apartment buildings is no longer the slam dunk investment that it once was.
The challenges faced in developing RV parks are large. These include a lack of suitable land, zoning and permitting issues, competition from other types of land use, a lack of available capital, and local regulations. But these challenges are a huge advantage to RV Park developers, as this ensures that the supply of RV Parks will remain low, and RV spots will stay in high demand. As Warren Buffett puts it, “The most important thing in evaluating businesses is figuring out how big the moat is around the business”. These challenges are the “Moat” that ensures that RV Parks will remain scarce for years to come. Very few developers are focused on building RV Parks, making it an ideal niche to focus on. The main source new RV Parks is people who own suitable land, and many of them don’t have the patience, expertise, and capital to see it though. It just takes too much capital and time for the average landowner to complete a development of this size.
In conclusion, there is a growing demand for RV Parks, especially since they offer a far cheaper cost of living than traditionally built homes. This price advantage is stable, and will likely never reverse. It is simply far more expensive to build a traditionally constructed house. Just try to build a new house for $100K, which is what a high quality Tiny Home can cost. The trend of rising costs for traditional development will continue, and these structures will likely become more and more expensive as building standards continue to increase in complexity and price. As a result, RV Parks will continue to grow in popularity, and their advantages will increase. But only those with the patience, capital, and expertise to see them through will realize these gains, as building an RV Park is not a simple undertaking.
If you are interested in learning more about the benefits of RV Parks, as well as the RV Parks that the Upslope Group is making offers on, shoot us an email at Keith@UpslopeGroup.com