New Zealand is one of the world leaders in holiday parks, and they are often found in the country’s most stunning locations, with sublime scenery and the ambience of magical landscapes worthy of the Lord of the Rings movies.
The parks provide New Zealand's best leisure accommodation, whether guests are travelling as couples, on family holidays, or as solo backpackers.
They offer a wide variety of accommodation options, from camping sites through to self-contained apartments and cabins, with powered and non-powered sites for tents, caravans, campervans and motorhomes. Many also have backpackers' lodges, rustic cabins, and self-contained motel units.
Guests usually get multimillion-dollar views at a budget price.
But while New Zealand holiday parks are easy to get into for holidaymakers, they are much tougher to get into for investors.
And for anyone taking over a lease on a holiday park there are many factors to consider, especially the intricacies of the leases which are often unique for each property.
One of New Zealand’s leading tourism accommodation brokers, Kelvyn Coffey from Coffeys Tourism Property Brokers, says many holiday parks in his country have been owned by the same families for decades.
Mr Coffey says the soaring cost of New Zealand real estate makes freehold ownership of holiday parks in most instances prohibitive for anyone except major companies.
The fast-growing Tasman Holiday Parks, which raised $300 million from private equity late last year, owns 21 holiday parks in Australia and five in New Zealand, all bought since its foundation in 2019.
Earlier this year chief executive Nikki Milne told the Australian Financial Review that there was a further $28 million in the pipeline for New Zealand properties.
Mr Coffey, who has specialised in the sale of motels, motor inns and tourist hotels since 1984, says there are many more models for operating New Zealand holiday parks than there are for motels. Potential buyers have to be aware of all of them.
“With motels you have freehold going concerns or a lease – and the majority of New Zealand motels are run under lease,” Mr Coffey said.
“There is a lot more freehold ownership of holiday parks than there are with motels, where as many as 80 per cent of motels are leased, and there is generally a lot more money involved in owning a holiday park.
“They don’t change hands very often and often are multi-generational properties.
“There is a lot of expensive real estate involved.”
Mr Coffey said while the workings of a standard lease for a motel were “reasonably consistent throughout the industry” the holiday park business could be “very different”.
“Sometimes people might own all the hard assets including the buildings, but they’ll have a lease from the council over the land so the operator is not leasing the whole property but only the buildings,” he said.
“The long-term council leases almost invariably get rolled over because the council doesn’t want to run holiday parks.
“Some of the holiday parks are very profitable but buyers have to be aware of the complexities of each lease in each situation.”
Alan Robertson, a director of Auckland-based Strata Funding, has spent almost 40 years in the accommodation industry, and said the same criteria applied in buying a holiday park lease as it did for buying into a motel.
“There are the obvious things to consider such as the location, the condition of the buildings and things such as deferred maintenance, the nature and the term of the lease agreement, and how long it’s got to run,” Mr Robertson said.
“Looking at finance for the business you have to take into consideration whether it is achieving market rental or above market rental, or is there the potential for the property to increase turnover if it's achieving below market rental.
“Another important factor for anyone buying into a holiday park is the rating on TripAdvisor. That’s becoming more and more a factor in their success these days.”
John Pryor, a valuer from Colliers, said many of the prime holiday parks in New Zealand had been sold to Australian investors. Given the expense of the real estate they revealed “pretty tight yields.”
“The big ones such as those operated by companies including Tasman are fully managed so that they become passive investments with full onsite management,” he said.
Holiday Parks generally have much lower maintenance costs than motels, according to Christchurch-based lawyer Seaton Read, who became a partner at the firm Harmans in 1976 and specialises is advising clients in the hospitality industry.
“Normally holiday park buildings are much more basic than in a motel, so the upkeep costs are not as high,” he said.
A national board member of Hospitality NZ, Mr Read said the same basic rules applied for buying into a holiday park business as it did for motels – the factors to be considered include location, occupancy rates, and visitor numbers.
Wayne Keene, the National Director Hotels, Tourism & Leisure for Bayleys Real Estate, said leases would return a much better rate for investors than trying to buy a freehold holiday park “because it's the business that makes the money over a short period rather than the asset.”
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