Caravans hit the road to riches

by Grantlee Kieza 2nd of September, 2021

Caravans hit the road to riches
© Jackson Photography / Adobe Stock

When ASX-listed Ingenia Communities Group paid $50 million for the Cairns Coconut Holiday Resort it gave 50 million reasons why caravan parks are big business.

While the end of petrol rationing and better highways saw the Australian caravan industry boom in the early 1950s, caravan parks have evolved into something far more sophisticated and lucrative than those days when many were a paddock with a toilet block.

The sale of the 11ha Cairns Coconut in 2017 represented Australia’s largest single holiday park transaction and Ingenia now has 29 holiday parks and six additional parks under management.

Natalie Kwok, the company’s Chief Investment Officer and General Counsel, said their holiday parks had performed strongly over the last financial year.

“We are seeing a lot of first-time guests so we are expecting the parks to do even better once COVID restrictions and lockdowns ease,” Ms Kwok said.

“There will be a lot of pent-up demand so we think the caravan parks will do good business in the short, medium and long term.”

The Coolangatta-based NRMA Parks & Resorts oversees almost 50 parks, and Luke Porter, the National Business Development Manager, said all but three freehold properties were leased from government bodies or private organisations. He said the NRMA had acquired “probably a dozen” parks since 2017.

How do caravan parks stack up as an investment?

“They are great businesses and people make a terrific living from them,” said Michelle Weston, the Chief Executive Officer of the Caravan Parks Association of Queensland.

“There are small caravan parks operated by mums and dads all the way up to these really large parks that have quite a significant staff.”

Are caravan parks a good business?

Yes, they can be very successful.

Michelle Weston said groups such as Ingenia, Discovery Parks and the NRMA would not be investing heavily in the industry unless they were making a good return on investment.

Tim Symes, from Tower Business and Real Estate in Benalla, Victoria, said the demand for caravans was so great that it can take up to 12 months to have one made.

“The industry has been growing for many years and the parks have been getting better and better,” Mr Symes said. “They’re now offering things such as splash parks, jumping pillows and a lot of creature comforts. A lot of them have a resort feel.”

How much can caravan parks make?

Amanda and John Tetley bought the Bucasia Beachfront Caravan Resort near Mackay in 2013 and the Sarina Palms Caravan Village in February this year. They say if owners are running the parks themselves, they should be looking at an 11 per cent return; if paying a manager, then 7 per cent.

“It’s hard to get more than that,” Mr Tetley told us, “and you would need a park with at least 50-60 sites to offset the cost of management. But that rate of return is still a lot better than bank interest.”

Ryan Doughty, from Queensland Tourism and Hospitality Brokers, said the more remote the location the better rate of return, as the business factors in an incentive to entice buyers.

“Some of the areas in western Queensland can pay up to 15 per cent on the investment,” Mr Doughty said, “but somewhere on the coast is likely to pay around the 10 per cent mark because it’s such a desirous location to live in.”

Michelle Weston said some caravan park operators in seasonal holiday areas choose to keep their operations small as a lifestyle choice.

“If you get a park that is seasonal it then gives you the chance to travel around during the off-peak times,” she said.

“The park might give you the income that you want by doing only a certain amount of work. I know some owners who have chosen caravan parks without cabins because it means less labour for them and that allows them to have the lifestyle that they choose.”

Ingenia’s Natalie Kwok said depending on size, location, and configuration, returns could range from 8-13 per cent depending on the freehold or leasehold interests of a park.

“Regardless of the variables, people are doing well from them,” Ms Kwok said, “and our outlook on caravan parks is very positive.”

How much do caravan parks cost?

There are still some parks selling for under $1 million but not many, and the rate of return is usually just a wage.

Tim Symes has a 1.8ha park at Everton in north eastern Victoria on sale at $845,000 but said some parks in Victoria have sold for “around $30 million”.

Ryan Doughty said owner/operators can still make a great living from small investments.

He is marketing the Hydeaway Bay Caravan Park north of Airlie Beach, with an asking price of $1.895 million. It features 48 powered sites, 15 unpowered camping sites and an amenities and laundry block.

Tips for buying a caravan park

Amanda Tetley said it was important for owners to still have a hands-on overview even with management because “there is a lot of revenue that goes through a park and a lot of it is based on trust.”

Michelle Weston said it’s vital for new owners to have someone who knows the caravan industry help with due diligence.

“So often we see a new owner coming into a caravan park and discover they have residents with no paperwork saying they are entitled to stay there,” Ms Weston said.

“That is a big issue within the industry. Doing proper due diligence should pick that up before sales go through.”

What makes a good caravan park?

Luke Porter said it’s not rocket science – good location and facilities.

“We look for destinations that our NRMA members want to visit, anywhere that has access to beaches, waterways and reefs are highly popular,” Mr Porter said.

Amanda Tetley said location was the key and there had to be something memorable so people kept coming back.

“At Bucasia Beach there is 4.5 kilometres of a magnificent beach that looks over the southern Whitsundays,” she said. “That’s the added extra.

“We chose Sarina Palms because it's located near the end of that terrible four-hour drive between Rockhampton and Mackay. By the time caravaners reach Sarina they want somewhere clean and safe to stay, somewhere welcoming. They see it's a lovely little place so they end up wanting to stay four or five nights.

“At Sarina the previous owner bought all these fibreglass animals, so we have 60 life-sized animal statues of all different kinds and people certainly really remember that – it’s like a safari park only quieter. As a marketing tool it's helpful.”

Ryan Doughty said prospective caravan park owners should also look for scope to improve, either through additional land or the potential to add cabins or more sites.

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