Interesting post. About 20 years ago, I looked in to purchasing a closed park and bringing it back to life. The numbers posted were proportionally very close to my estimates of what it would take to be in operation. I finally backed away when the numbers said I needed 90% occupancy to make myself about a dollar an hour or to charge rates that I didn't believe the area could support. I have since worked in other rv parks and don't regret my decision a bit. Knowing what is involved in a park, I have great respect for those folks that own/manage a nice place and will support them every chance I get.
How about a little Devil's Advocate here as costs and numbers can show anything you want them to show if you label them a certain way. I'm assuming you're showing us these figures to justify what you charge for the sites, and also justifying this site fee by stating it's in a 'resort area' which means some day it will probably sell for a pretty tidy sum in the future.
And, that's $5.86 per site, not per day ... so, if 150 sites at 75% occupancy for six months, that's nice wages. That's $158,000 profit for six months AFTER costs and debt service. SO we assume you either work another job or 'have fun" the other six months, deducting some time for off-season maintenance.
$5.86 + $16.60 = $22.46 = Site at $51.65 = 39% of your net to "profit and pay debt". don't know how many sites you have, but if you have 150 and run at 75% full during each six month season, that means $158,000 Profit in six months, plus the sale free and clear in 20/30 years.
Nothing I'd like better than to recieve 39% on my investment. Operating costs are one thing, but whether you pay cash for the park, and then 'pocket' the 39% now, or sell the park when it's paid off with this debt service paid by the site fees (customers) in 20/30 years, it's still 39% profit per year paid out of the "site charges" ... PLUS sales price in the future.
Without knowledge of actual purchase price ... say $1,000.000 in 2001 and selling for $4,000,000 in 2031 (not a bit unrealistic), then we include a 300% investment return. Not Bad ... while the owner also lives onsite (maybe?) and has no individual rent and no individual utilities, and all life costs (phone, vehicle, insurance, etc) over the thirty years is paid too.
Debt service is a cost of investment, not a cost of 'doing business' in the true sense. SO, 39% of that daily fee counts toward the profit margin.
* This post was
edited 01/01/12 10:04am by monkey44 *
Yep, numbers can be very interesting and motives for posting them even more so! I will take the approach that the business venture is what he wants to do, hopefully enjoys it, and gets enought customers at that price to stay in business. Me, I will stay at parks that cost just a little less unless that is the only available room in the area and, if so, limit my stay to one night and move on. Good luck to the OP in 2012.
Thanks for the enlightening breakdown. Looking through all the listed items, the one that made the biggest impression on me was the Credit Card costs. Almost $1.00 per site, per day. And if you don't take them so many will pass you by. Makes me want to consider hitting the ATM on the way in and paying in cash.
Rae & Mark
1999 Fleetwood American Tradition 40
Just got it and learning about it as we go!
“It doesn't. Just lowers the site fee. None of the discount programs pay a dime to the park. That is why if you really research a lot of the PPA parks, you will find their published rates to be really out of line with what would seem to be the rate they should be charging. While $20.00 a night at the PPA park might seem reasonable, no one would actually feel paying $40.00 for that same site would be reasonable. Physcology comes into play. People feel that getting 50% off of a site listed at $40.00 is a whole lot better than paying a listed rate of $20.00”
This is not a fair characterization of how the discounts work…
I have yet to find a park that gives their services away, or offers discounts unless it benefits their operation in some way… parks dictate when the discount is given and the half price is off their real regular price in almost all cases… they may not add much to profit for the 1 or 2 days they are given but don’t take much away from it either… they are discounting sites that would otherwise be empty that still carry their fixed cost when not used… it also introduces people to the park that might have otherwise never traveled that road, to stay other days or times that are not discounted…
While I know nothing about your parks and therefore don’t know how accurate the numbers you supplied are… it seems to be information on one of several parks if I read it correctly and from the one with the highest debt service and cost of operation, and wouldn’t be a aggregate or average cost of even all of your camping sites let alone a average for camping sites in your market… that at least fades the colors of the picture you are trying to paint, a little…
Anyway it’s a good, interesting and thought provoking thread…
Love my mass produced, entry level, built by Lazy American Workers, Hornet
Speculating on the numbers presented is somewhat dicey at best but interesting anyway. We have no way of knowing the total number of spots available but from my experience 100 would be a good sized park and 200 would be a large park.
If we assume the average space rental to be $51.65 and assume a blended occupancy for the 180 day season of 80%, a 100 spot park would have 14,400 rental events. At $51.65 per rental, that is $746,784 in gross sales per season. The park is taking 11.34% to the bottom line before taxes. Therefore, profit would look like the following:
100 spots = $84,685
150 spots = $127,072
200 spots = $169,370
250 spots = $211,712
It would be pure conjecture what the other sources of income would be worth such as the laundry and the profits in the campground store.
The OP states he has a multi-million dollar mortgage and the numbers shown for debt service would support that kind of mortgage corresponding to the number of spots in the park. It would also indicate a sizable initial cash investment supported by his statement that his return on initial cash invested is a little more than 10%.
At the end of the day, I think his point is that even at his price point, the campground owner is hardly making an exorbitant amount of money and has in fact bought himself a decent paying job with his initial investment. The backside 10-15 years from now at payoff or sale time is nothing but a guess and highly dependent on whether there even is a RV business.
He paid his money and is taking his chances as the entrepreneur he obviously is. Good luck as not many have the fortitude to take that gamble!