Thursday, Mar 24, 2011 at 09:27
The reality in Australia is that the caravan parks that we all knew from our child-hood days, the ones where mum, dad, and the kids pulled up in their Viscount, stayed for weeks over Christmas are long gone and with them the rates we used to pay. Yes, there might be some out there that represent better value than others, but for the most part Caravan Parks in popular tourist spots, especially on the coast, are multi-million dollar business’s, that need to make huge investments to attract the ‘paying’ crowd.
The price of coastal properties in Australia has sky-rocketed over the past 25 years, and so have the rates the local council collects from the land holders, including caravan parks. So whilst many of us have benefited from rising house prices increasing our wealth, it comes at a cost in other ways, and this is just one of them. The value of the land that the more popular caravan parks sit on have sky-rocketed also.
Now I’m not defending Caravan Parks or what they charge that is entirely there business, and besides they have their own Association that can do that, but why single out CPs at this time of year.
How can it be that the cost of an airline
seat for the guy down the front of the plane, was half the price of what you paid for yours down the back, or why are turkey’s more expensive at Christmas, how come the price of umbrella’s go up on rainy days.
Well I guess the answer lies somewhere between opportunism, and the reality that business owners need to consider what they need to ‘yield’ on average over the course of a year to remain viable, whether they sell airlines seats, umbrella’s or turkeys.
Off-peak will see rates for many things tumble, and this will be subsidised by those who want to use the service at the peak time.
Consider, overtime, many Australian’s enjoy an extra payment if they work beyond a set number of hours in a week, why? Opportunism, and the fact that labour was in short supply so you have offered yours out at a higher rate because of this demand.....we all do it in some form, don’t we?
Rabbiting on now...but vote with your feet and money if you don’t want to pay the price, but equally if we all do this, caravan parks will disappear, slowly, but surely.
Cheers, The Landy
AnswerID:
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Follow Up By: The Landy - Thursday, Mar 24, 2011 at 11:29
Thursday, Mar 24, 2011 at 11:29
Just further to the previous post. Following is a link to Aspen Parks Property Fund. This fund invests directly in caravan/resort parks and manages them and has a portfolio of these spreading across Australia.
This is the way the ‘humble’ caravan park is heading, but it is interesting to note that it has 25 properties that it values in excess of $260M, and whilst some might be worth more than others, that it equates to around $10M a piece if looked at simplistically.
What I find interesting is that this fund yields around 8.6% pa and has yielded around 12% since 2004. Now I don’t know if that is an adequate return for an investment of this type, and I’m certainly not spruiking Aspen Funds, but what it does tell you is a business operator with a spread of investments in caravan/resort parks is currently returning of 8.6% pa to its investors/owners – I ask the question is this excessive? Money in the bank for 12 months will earn you 6.0% pa, and that comes with a guarantee you’ll get your money back (in most cases) without having to worry about whether the
toilets are flushing, or the ‘dump’ point is full; okay, I accept you have to talk to a banker, but I’m sure you get my point.
It doesn’t look like the returns generated from caravan/resort park investments are extra-ordinary, despite many suggesting they are rip-offs....
Aspen Parks - Tourist Stays
Cheers, The Landy
FollowupID:
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Follow Up By: Member - Wim (Qld) - Thursday, Mar 24, 2011 at 12:36
Thursday, Mar 24, 2011 at 12:36
Hi Landy.
Many thanks for adding a few facts to the discussion.
regards
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Follow Up By: Member - Bruce C (NSW) - Thursday, Mar 24, 2011 at 14:14
Thursday, Mar 24, 2011 at 14:14
Hi Landy,
I think you could forget the 8.6% as it states the return has been 12% since 2004, and will probably rise as more baby boomers hit the road more often.
This 12% would probably not include the on going capital gain. Which can only increase as land values increase, going forward, as they say.
They are not all that bad otherwise these larger corporations would not give them a second look. As we know many parks are being bought up by larger corporations probably with an eye to the future potential uses such as high rise development or resort style setups.
And they are not only buying on the coastal strips.
Cheers, Bruce.
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Follow Up By: The Landy - Thursday, Mar 24, 2011 at 15:18
Thursday, Mar 24, 2011 at 15:18
Hi Bruce
I won’t speculate on what future returns might be, but can only highlight what it currently is. But I believe you are correct to point out that one of the attractions for investors is the prospect of an increase in the share/unit values due to increasing asset/property values.
And therein lies the problem, it is getting to a point that the returns that can be generated from your ‘average’ caravan park, when taking into account the total economics of running one versus what people are willing to pay, will not stack up against turning it into an alternative such as apartments/housing if the land use permits. After all this is one way to monetise your capital gains. There have been many examples of this in recent times, but will be hard pressed to find an example (if any) of new caravan parks being established.
What prompted me to post on this topic is we frequently see criticism of caravan parks based on a notion that they are ‘ripping us off’ which often has very little fact associated with it. There are many reasons why caravan parks are costed the way they are, and reality says that over time something will need to change, either the land tax relating to caravan parks and how it is applied or users become more willing to pay more, perhaps a combination of both, otherwise caravan parks as we have known them will become extinct.
As for concerning ourselves with ‘price’ increases at
Easter time, the list is long and distinguished, and whilst caravan parks may feature on it, there are many other examples of business’s that are reliant on certain times of the year to generate a large portion of their annual revenue..
Cheers, The Landy
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Follow Up By: Member - John G- Thursday, Mar 24, 2011 at 16:03
Thursday, Mar 24, 2011 at 16:03
G'day The Landy
You make cogent points as always, nevertheless I still reckon a 25% increase from last FY, and $100 per night for a family is over the top.
It could be argued that
young families with school age children are generally constrained to school holidays and long breaks such as
Easter, and that they therefore bear the brunt of peak prices in caravan parks. As a result, folks such as me who steer clear of peak periods, are being subsidised by the younger travellers.
You are right that something may need to change, or will change. Sales of caravans don't seem to be declining, so the plot of grass with a power pole and running water will inevitably increase in cost, particularly in coastal areas.
Cheers
John
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Follow Up By: Rob! - Thursday, Mar 24, 2011 at 17:16
Thursday, Mar 24, 2011 at 17:16
Landy,
I suspect that the 8.6% return is AFTER the investors have paid the employees tolook after the caravan park. It is the employees who have to worry about blocked loos, not the investors.
R.
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Follow Up By: The Landy - Thursday, Mar 24, 2011 at 18:50
Thursday, Mar 24, 2011 at 18:50
G'day Rob....yeah I guess I can accept that probably happens ;)
Cheers, The Landy
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Follow Up By: geoffqld - Thursday, Mar 24, 2011 at 19:33
Thursday, Mar 24, 2011 at 19:33
It should be pointed out that the return quoted is on the valuation not the cost of purchase, One of the great cons of all time is if the return goes up then the valuation goes up which lowers the return and causes the price of the service to go up. Vicious circle where the consumer loses and all the powers that be say "that's competition".
Geoff
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721477