RV Park/Campground Operator s Manual Chapter 2 Buying Or Building Making The Right Decision Types of RV Parks/Campgrounds / enroute/transient, destination To Buy or Build Other Options / management, franchise, condominium & bare land strata, specialty Professional Services / how do they charge, what to consider Overview In the first chapter, you assessed whether you had the knowledge and attributes to own and operate your own RV park/campground. The next step is to research the merits of either purchasing an existing RV park/campground or developing a new one. Following are some questions to ask: 1. What type of RV park/campground do you want to operate enroute, destination, wilderness, resort etc.? 2. What is the competition factor in the area you are considering? 3. What management structure do you want, and should you operate as part of a franchise or remain independent? 4. How will you finance the operation? 5. What is your expected return on investment? 6. What expert help will you need? 7. What are your plans for the future of the business seasonal sites, permanent rentals, winter campers, cabins, etc.? Once you have answered these questions you should be able to assess the financial viability of an RV park/campground operation. RV Park/Campground Operator s Manual 2-1
Useful tip Determining the economic feasibility of your RV park/ campground is a key step before making any commitments. Economic feasibility means whether or not you will make a profit on your investment over time. Consider hiring a consultant to perform a feasibility study before making a purchase. Chapters 3 to 6 discuss the elements of a feasibility study. Types of RV Parks/Campgrounds Generally speaking there are two types of RV parks/campgrounds enroute/transient and destination. The type of RV park/campground can most often be determined by the location and the facilities in the area as well as those you plan to offer. The enroute RV park/campground primarily serves the overnight visitor and the destination RV park/campground attracts visitors who may stay for several days, weeks, or for the full season. RV Park/Campground Operator s Manual 2-2
Enroute/Transient RV park/campground This type of RV park/campground caters to campers who are looking for a place to stop overnight while touring the area, or just passing through. An enroute RV park/campground should be located on, or near a main highway with easy off and on access but not so close that traffic noise will be disturbing. Attributes of an enroute RV park/campground Individual campsites are often smaller in area than those provided at a destination site however, not so small that they deny the camper privacy. Local government guidelines may also dictate the minimum size of a campsite. Sites should be easy to get in and out of. They should be designed to allow RV owners to level up the vehicle and connect it to the utilities easily. Chapter 5 discusses campsite design. A limited number of facilities and services are usually provided on-site. Destination RV Park/Campground A destination RV park/campground is generally located in a resort or urban area. It is a place where campers go to enjoy the amenities and facilities provided in a holiday atmosphere both within the park and close by. Attributes of a destination park The campsites in the destination RV park/campground are generally larger than those in the enroute RV park/campground, providing campers with sufficient space to not only set up their RV but also be able to relax and live in the outdoors without crowding their neighbour. Many destination parks are known as RV resorts. The park provides some or all of the activities and services on-site. These could include both passive and active activities such as: swimming pool arts and crafts trails fishing convenience store shuffleboard games room snack bar docks/boating canoeing organized activities Some RV parks/campgrounds combine the best aspects of both types of RV park/campgrounds, catering to the overnight camper and offering amenities for those staying longer. RV Park/Campground Operator s Manual 2-3
Be flexible The prospective RV park/campground operator should be flexible in encouraging guests to stay longer than one or two nights. There are many tastes in camping and holiday choices, and although an RV park/campground could be on a major tourist route and classified as enroute, the region around it could be highly attractive, encouraging longer-term stays and a base from which to explore the area. To Buy or Build The first step in deciding whether to build your own RV park/campground or purchase an existing one is research. It is important to determine the type of RV park/campgrounds that already operate in the desired area and what their occupancy rates are. Can the area justify more campsites and what existing long-term development plans are in place. Research will provide information into the community, attractions and overall business opportunities in the chosen location. Things to consider Look into the occupancy and turn-away rates of existing RV park/campgrounds. If they are unable to meet the demands of campers each season, there may be opportunities for new development. Check out the condition of existing RV park/campgrounds. Are their occupancy rates low? Is it because of poor maintenance? Can this be improved with up-to-date services and amenities? Assess the potential for diversification opportunities. Is there a market for other businesses? This market may include sightseeing tours, outdoor activities or renting RVs on-site. All of these can increase your occupancy rate and RV park/campground appeal. RV Park/Campground Operator s Manual 2-4
Conduct research What attractions are available to your campers provincial parks, historical sites, and other recreational activities? Have RV parks and RV park/campgrounds in the area been successful? Are RV park/campground operators and tourism services working together? Will there be any resistance to new development? What regulatory groups will you have to deal with? What will they require of you? Are there existing bylaws relating to RV park/campground development or expansion? Are there environmental concerns that need to be looked into? Will you require an environmental assessment? Other Options a. management structure If you have insufficient capital, you must find others interested in investing in the business. This process may take time, as investors need to be sure of their investment and return. Those interested will want to see your financial projections. In return for their financial investment, investors are likely to want a say in how the business is run. You will have to decide whether to form a proprietorship, a limited partnership or a corporation. The type of organization you select will depend on the personal position of those who are investing and on tax and legal considerations. Talk to your lawyer or accountant about the arrangement that will suit you best. b. franchise Franchises are the largest growing form of small business in Canada. A franchise is basically a chain with the same name brand and quality of facilities, often similar in style and design. There are different rules and guidelines for each franchise chain including the amount of independence allowed and starting capital required. RV Park/Campground Operator s Manual 2-5
Purchasing a franchise offers several benefits. If the franchiser is reputable, not only will it provide national advertising and a cooperative reservation system, but it will also include management and master planning assistance. Before entering into a franchise agreement, visit several RV park/campgrounds in the franchise organization to ascertain: the current owner s opinion on the value of the franchise if they are receiving full value for the franchise fees whether they would sign a franchise agreement again. Useful tip The franchise company should be investigated to ensure that it has a satisfactory credit rating, a good reputation, and is in a sound financial position. Ask for information on how many of its franchises have been unsuccessful and why. Specific information to ask the franchise company What does the franchise charge and what would you get for your money? Have your lawyer review the contract. What is included in the franchise fee? What does the down payment cover, and what does it not? Is the cost of buildings and equipment you would have to buy from the franchiser reasonable, and are they well designed and soundly constructed? What percentage of yearly sales is to be paid to the franchiser and what services are provided in return? What is the size of your franchise territory that is guaranteed free from competition? RV Park/Campground Operator s Manual 2-6
Advantages and disadvantages of owning a franchised RV park. Advantages of a franchise Management, financial advice and assistance. National and international recognition. Financing may be easier to obtain and at better terms. Tested and standardized designs help to reduce costs. Disadvantages of a franchise It costs money to belong to a franchise. Possible uniform pricing policies. Strict guidelines for start up and operation remove some freedom of decision-making. Loss of individuality and creativity. Recognition of name by travelers will improve occupancies. Uniform operating systems. Advertising support. Centralized purchasing and service facilities offer quality at reduced cost to operator. Established referral system to maximize occupancy. Although the advantages seem to outweigh the disadvantages, it is a matter of personal preference. Your decision to purchase a franchise should reflect your goals and reasons for entering the RV park/ RV park/campground industry. Franchises available in Canada KOA (Kampgrounds of America, Inc.) http://ownakoa.com/ownakoa/build.htm Yogi Bear s Jellystone Park Camp-Resorts System www.leisuresystemsinc.com Franchise options Joining a franchise can be done three different ways. 1. You can purchase an existing franchise. Contact the licensing department of the particular franchise. RV Park/Campground Operator s Manual 2-7
2. Choose a franchise and build an RV park from the ground up. This option involves locating in an area that does not have an existing park within the franchise brand. 3. Convert an existing park into a franchise. Make sure the park is not located in the same area as another similar franchise RV park/campground. Consider your options Franchises don t want you to fail. Generally a franchise will provide its operators with training, coaching, manuals, standardized forms, signage, national marketing plans and successful operating strategies. However, the money saved by not joining a franchise could be used to hire a professional to assist in developing these business components. This allows the park to be designed to fit in with the region s attributes and owner s desires. c. condominium, strata, bare land strata The condominium or strata RV park/campground operates in a similar way to a condominium apartment. An individual may purchase a campsite for a specified sum and place his/her recreation vehicle on the site for occupancy during vacation, over weekends, or as specified on the agreement of sale. The campsite owner may wish to authorize the RV park/campground owner to rent the site and RV equipment for those periods when he or she will not be occupying it, paying a part of the rental proceeds to the management for this service. The campsite owner may chose to rent the site only and not the RV. In this case, the camper may authorize management to remove the RV to storage until he or she returns. The rental fee is often split with the RV park/campground owner for this service. The advantage to RVers is the protection and availability of their own vacation spot to use at any time. If the RV park/campground is well managed and desirable, the RV park/campground owner can derive revenue from the sale and resale of such property. RV Park/Campground Operator s Manual 2-8
Advantages of a condominium RV park/campground Allows for rapid expansion or establishment of a property at a relatively low capital investment. The developer can build to optimum market size and style rather than being limited by available capital. Lowers risk factor by spreading it among several investors. Disadvantages of a condominium RV park/campground Lower level of profit because it must be shared with site owners. Lesser degree of control over future expansion or renovations because of involvement of site owners. Loss of marketability of property if owners choose to use their RV sites during peak season. Capital investment recouped relatively quickly from profit on sale of sites. Future expansion not limited by having to re-finance a large mortgage. d. specialty RV park/campgrounds Some RV parks are designed to cater to specific markets. Two examples are: 1. Barrier free parks which are designed for people with disabilities where they and their families can enjoy camping in an accessible facility. 2. Religious RV park/campgrounds are targeted towards people of the same faith. Now what? You have decided on the type of RV park or RV park/campground you want, so now it s time to develop your business plan. Investigate your financing options and potential return on investment. It may be in your best interest to hire the services of professionals to help you achieve your goals. RV Park/Campground Operator s Manual 2-9
Professional Services In planning for and operating your RV park/campground you are likely to require the services of one or more professionals to ensure that the plans are developed in accordance with city or regional by-laws and provincial regulations. Your first step is acquiring legal and financial help. You may also require the advice of professionals skilled in design, RV park/campground layout and service requirements. Many of the services overlap for instance the lawyer, accountant, and feasibility consultant all provide business advice; the architect, landscape architect and engineer all provide planning and design services. They often work in teams, so that each aspect is adequately covered. It pays to investigate a number of firms before hiring one. Not all are equally skilled in the RV park business. a. solicitor A solicitor (or lawyer) provides a range of comprehensive legal services. Services include title searches, advice on by-laws, easements and access, completing property purchase arrangements, advising on mortgages and providing legal protection, insurance counsel and advising on investment and types of management or business operations. Most lawyers also have excellent knowledge of real estate and contracting procedures. b. accountant An accountant provides financial and investment advice. The accountant helps establish budgets and capital projections, sets up and reviews financial statements, evaluates your financial status, establishes a fiscal year end, and helps in the preparation of income tax returns. In addition, an accountant can advise on which expenses can be charged to your operation, how to realize tax savings, and run your business efficiently. RV Park/Campground Operator s Manual 2-10
c. economic feasibility consultant Certain consultants, generally trained in economics and planning, can do feasibility studies for recreation ventures. They will assess the many roles involved in an RV park/campground operation and provide a reasonable indication of the probable success of the business. d. architect An architect can often provide master planning and facility design services, as well as coordinate other design consultants. Architects give advice on zoning, contracting procedures and prepare contract documents, including working drawings, specifications and instructions to bidders. The architect can aid in the selection of a contractor and will assume the responsibility of site supervision, ensuring that the job is designed and built according to specification. e. landscape architect Landscape architects (not to be confused with landscape gardeners) can usually provide master planning services and are skilled in landscape design, soil conditions, suitability of natural areas and use of vegetation for screening, windbreaks and other functions. A landscape architect that has a thorough knowledge of the natural resources in the area, and is experienced in campsite layout is preferable. f. engineer There is a range of engineering services available. Civil and structural engineers are usually called upon to give advice on structural design and ensure that sound construction procedure is followed. Abutments, retaining walls and permanent dockage require engineering advice, as do roadways. Your architect may consult with an engineer regarding framing and acceptable loads in a building. Sanitary engineers specialize in water supply and waste disposal systems, and particular problems encountered with sanitation. Many engineering firms have planning services available and can provide master plan layouts. RV Park/Campground Operator s Manual 2-11
g. graphic designer Graphic designers prepare recommendations for signage, brochures, stationery, etc. and can assist you with your web site. If financially viable, a team of consultants is the preferred option, but if this is too expensive you will have to do the legwork yourself and call in a specialist at critical stages. Try approaching government, banks and other financial organizations, supply companies, local industry and trade associations for assistance. They should be able to provide the information you need and direct you to those consultants who have worked in the RV park/campground industry. Other things to consider before hiring a consulting company Who will be assigned to the job? How available will they be to you? What exactly will you get for the money paid? Can the firm offer follow-up help, if needed? a. how do professionals charge for their services? Business consultants charge by the hour, or a fixed fee negotiated in advance. Design fees are based either on a standard percentage of construction, or an hourly charge for time. It is wise to establish a maximum price for the work before it begins. b. what should you consider when hiring a professional? First and foremost, you should prepare a document outlining the scope and purpose of the assignment. Once you have established your purpose, find an expert in the field for professional help. You can find a professional by word-of-mouth, through friends, by contacting the Institute of Management Consultants, local Bar Association, Chartered Accountants Society, Architectural Institute of British Columbia, and others, for a referral. You should obtain at least three proposals before making an informed decision on whom to contract with. RV Park/Campground Operator s Manual 2-12
Useful tip Most business schools have summer or year round business consulting programs. While students generally lack experience, they do work under the guidance of faculty and their use has several advantages. a. They save time for the entrepreneur and they have recent academic experience. b. They are objective and can bring a fresh point of view to a problem, and are much cheaper than the conventional consultant. To summarize It is important to review and make decisions on what your future plans are for the RV park/campground. All businesses continually evolve but RV parks/campgrounds today are changing rapidly with the significant increase in the value of prime land in resort areas and the propensity for the growing baby-boomer population to own a piece of resort property for their retirement pleasure. Do your homework first! Review Question 1: Question 2: Question 3: What are the significant differences between a transient and destination RV park/campground? What should you consider when deciding whether to buy or build? What are the advantages and disadvantages of a condominium RV park/campground? RV Park/Campground Operator s Manual 2-13