Editor’s Note: Woodall’s Campground Magazine did some deep research into the number of new developments and expansions taking place across the industry. You can read that story by clicking here. What follows is a look at how interest rates are impacting the growth of the industry.
There is a tremendous amount of construction taking place involving new and expanding campgrounds, RV parks and resorts across the U.S.
But not as much as there could be if it weren’t for high interest rates and inflation, which have driven up the cost of construction, according to park operators, developers and industry consultants.
“As a result of rising interest rates, cap rates have increased and values have declined. Capital, both debt and equity, is much more discerning and has a higher cost with more stringent terms. This makes future development fact and circumstance-driven and less economically feasible,” said Richard O’Brien, CEO of Athena Real Estate in Orlando, Fla., which owns and operates 14 parks through the Applebrook RV Parks network.
Amir Harpaz, of Harp Development, is moving forward with expansions of Torrey Trails RV & Golf Resort in Bowling Green, Fla. and Cherokee Outdoor Resort and Marina near Vonore, Tenn. However, he said some new developments are being held back due to higher interests where the original proformas do not pencil out anymore.
“In some cases, they want the park to refinance their existing operation before they give them a loan for an expansion project,” Harpaz said, adding, “They don’t want to be in the number two position behind another lender.”
As a result, Harpaz said, some park owners may simply opt to wait for a while to see if interest rates fall. After all, he said, many do not have to expand right now.
“While it may be desirable to expand, they don’t have to,” he noted.
Jayne Cohen, president of Campground Consulting Group, said inflation and high interest rates have killed some projects and delayed others, but she said there is still considerable growth and development taking place in the private park industry across the country.
“Economic realities, primarily interest rates, the inaccessibility of funds and high construction costs are extremely challenging,” she said, adding, “Funding is extremely challenging to get and expensive when you find it.”
“We have a few expansions under study and conducted approximately a dozen more recent feasibility studies and have almost an equal number in the works,” Cohen noted. “Some of these will lead to new RV park development and/or expansion. The interest rates are making it tough and what would have stabilized in three years is now taking five or longer.”
Despite these obstacles, many park operators and developers are still moving forward with their plans to build new parks and expand existing ones.
“We are still busier than ever with new development, expansions and operational audits,” Cohen said. “A lot of people (are) still looking for properties. (It’s) tougher to find a property to build on and acquisitions, but they are finding them and continuing. Overall, (there are) just more obstacles and challenges, but those with the appetite are moving forward. (We’re) finding a lot of clients doing their diligence right now and looking for opportunities. (They are) running studies now, which may not turn into development for a year or two when rates are possibly lower and money freer and costs (go down).”