A lawyer by trade, Richard Cutler purchased the Mount Rushmore Kampgrounds of America (KOA) at Palmer Gulch Resort in Hill City, S.D., in 1972. At the time, the park was nothing more than a dude ranch that had once been home to a golf course.
After a year of owning the ranch, Cutler and his partners developed the areas first campground at the site and so began the formation of Recreational Adventures Co. (RAC).
Cutler’s son, Kent Cutler, also a lawyer by trade, is now RAC’s president and chairman of the board. He operates the Cutler Law Firm in Sioux Falls, S.D., a business he ran with his father for more than two decades.
RAC in its nearly 50-year history has gone from operating one park to 13 parks spread across the U.S., mainly in northern states. At first, Richard Cutler had linked his Palmer Gulch park to the Holiday Inn brand, when the well-known hotel chain was trying to enter the campground sector, but that failed, and now all of RAC’s parks are under the Kampgrounds of America Inc. moniker.
Besides the Palmer Gulch KOA — which operates as RAC’s headquarters — RAC’s other properties include the Rapid City/Black Hills KOA Holiday in Rapid City, S.D.; Monroe Co./Toledo North KOA Holiday in Petersburg, Mich.; Memphis KOA Journey in Marion, Ark.; Fredericksburg/Washington D.C., South KOA Holiday in Fredericksburg, Va.; Washington D.C./Capitol KOA in Millersville, Md.; Harpers Ferry/Civil War Battlefields KOA Holiday in Harpers Ferry, W. Va.; New York City North/Newburgh KOA Holiday in Plattekill, N.Y.; Astoria/Warrenton/Seaside KOA Resort in Hammond, Ore.; Seattle/Tacoma KOA in Kent, Wash.; Leavenworth/Pine Village KOA in Leavenworth, Wash.; Cody KOA Holiday in Cody, Wyo.; and the Steamboat Springs KOA Holiday in Steamboat Springs, Colo.
RAC operates a federal concessions contract at the Prince William Forest Park in Prince William County, Va., according to Kent Cutler.
Kent Cutler elaborated that RAC also owns two other business ventures, including the Keystone Presidential Wax Museum in Keystone, S.D.
“It features wax figures of every U.S. president,” he said.
The company also operates the Camper Reservation Center, which Cutler said helps owner/operators take reservations during the winter months.
“We provide the service to about 120 KOA parks, but we are willing to help out non-KOA parks as well,” he said. “It helps owners because they don’t have to worry about taking reservations all winter long. It has grown in popularity. Even with the advent of online reservation systems, there are still a lot of people that prefer reserving a campsite over the phone. It isn’t like reserving a hotel room. People want to make sure they are getting the right site, with the right amenities.”
RAC has seen record revenue each of the past 10 years, with a double-digit increase in Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA).
Kent Cutler spoke with Woodall’s Campground Management (WCM) about the growth of RAC, changes it has noticed in the outdoor hospitality industry, and the future of the company.
Below is our edited conversation.
WCM: Your father started with a dude ranch, transformed it into a KOA, and then expanded the company’s presence throughout the U.S. What spurred your father to buy additional parks and continue to expand the company’s footprint?
Kent Cutler: His first purchase after Palmer Gulch was our Rapid City park, which is about a half-hour drive from Palmer Gulch. My dad bought that campground really to protect our business at Palmer Gulch. And as time passed and things started to begin working well, then he began acquiring additional properties.
Besides the 13 properties we own now, we have three properties that we bought over the years we no longer own. One was in Pine Island, Fla., and we sold that at a good time before the real estate market collapsed, and developers were still paying crazy money for property down in Florida. Then there were a couple of others that didn’t work out so well that we got rid of, like a KOA outside D.C, which I don’t think is even in business anymore, and one in Branson, Mo. at one point in time, too. Those properties just didn’t work out the way we wanted them to.
WCM: Obviously, you have a deep relationship with KOA. What do you value most about that relationship?
Cutler: It’s been a good relationship, and they’ve provided us excellent support, and it’s a recognizable brand. We think we bring a lot to KOA as well, particularly with some of our resort properties, like Palmer Gulch, which are some of the more beautiful campgrounds you will find anywhere.
On occasion, we do have some sticking points with KOA. They currently have more than 30 properties that KOA owns as a company, and they are aggressively expanding as well. There are occasions where we compete with each other, but that hasn’t gotten to the point where it has become a big issue at this point.
KOA does do an excellent job at its company properties of trying new things and seeing what results they get before really pushing it on its franchisees. KOA is also good at coming up with new ideas that may make sense, and we’re always willing to listen. Then I guess we make our own decision as to whether it fits and suits our purposes.
WCM: There is a lot of development and park buying going on in the RV park and campground sectors. Has RAC been focusing on acquiring or developing new parks, or have you been focusing on working with what you already have?
Cutler: We are very interested in acquiring parks, and we are actually in the process of working on obtaining our 14th park, and we hope that comes together by April 1. We are actively out in the marketplace looking for acquisition opportunities.
We have not built a park from scratch, although our Leavenworth/Pine Village KOA has been completely rebuilt. We acquired that property two years ago, and it was in rough shape. We have spent about $4 million at that park, bringing in about 40 deluxe campsites with patios, furniture, and grills. Cavco Industries Inc. built RAC 10 lodges, and we have also completely redone the sewer, water, and electrical systems. Our contractors were able to use the large rocks they found during excavation in the park’s landscaping, and the park just looks sensational now. It wasn’t built from scratch, but we touched almost every part of the park when we rebuilt it.
WCM: When you are looking to acquire parks, what is RAC looking for in a park before buying it?
Cutler: Location is crucial for us. With the exception of our parks in Tennessee and Florida, we’ve generally been Northern tier park owners. Having parks in proximity with one another is kind of nice too because then the park managers at each park can help each other out when needed. We also want properties that we believe have the potential to obviously develop additional sites and grow the business.
It’s important that we’re able to buy the parks at a price where we can get a good return on our investment. That’s become harder and harder here over the last few years with companies like Sun Communities Inc. fiercely competing with other such firms. They are buying parks at cap rates that we can’t compete with.
We’ve discovered, and it’s not that we want to put ourselves in a box, but we’ve discovered that those companies are not interested in buying one off small properties. When I say small parks, I mean parks that offer between $1 million to $2 million a year of revenue. We think that is an area where RAC is interested in playing, and I think we provide a good option for owners that have one or two parks that are in that range and want to sell.
It’s expensive to buy a property now because you’re purchasing a campground that is basing revenues off its best numbers ever. Because they’ve had record years for so many years in a row now, so that number is the number you start with when you’re buying a campground. Then they want to sell it to you at a really low cap rate too, which also makes things very expensive.
WCM: How has RAC worked throughout the years to adapt its parks to what the camper is expecting?
Cutler: My dad always said, “We’re not in the camping business. We’re in the entertainment business.” And we’ve always kept that in mind. I mean, we obviously are in the camping business, but we have always run our properties for the most part as fun places for families to come and spend time. And so, over the years, what we’ve really been focusing on as far as improvements at our campgrounds is lodges. Those have been very popular. We have also built a lot of deluxe sites on our properties, which feature cement patios and furniture that is set up and ready for campers when they arrive.
WCM: A lot of RAC’s parks are located near tourist destinations, where there are plenty of things to do outside of the park. Do you work to try and keep campers at the campgrounds, or do you recognize that they may be leaving the campground for a while and then coming back?
Cutler: Our ‘Holiday’ and ‘Resort’ branded campgrounds have plenty to do onsite, should a family choose to stay there during the day, whether it be a swimming pool or kid’s activities, like tie dye t-shirts. Halloween is a huge deal at a bunch of our campgrounds. People will come and have big Halloween decorating competitions.
If people come to our parks, they may want to have a day where they go and visit whatever there is to see in the area, and they may choose to stay a day just at the park because their kids want to play in the pool or at some of the other amenities our parks offer. We always make sure there is plenty to do at the park itself if they choose to spend a day at the park.
WCM: You and your dad practiced law as full-time jobs, how has that changed the way you manage and operate RAC’s parks?
Cutler: From day one, our campgrounds have been operated much differently than an owner/operator owned park where you own the property and manage the park by yourself. I have two younger brothers, Chris and Justin, both of them are employed by RAC and have offices at Palmer Gulch. My son, Dylan, actually manages our park in Fredericksburg, Va., now, but my dad and I have always practiced law as our primary occupation and we’ve always paid managers to operate our properties.
That’s one of the hard things when we go to buy a campground. A lot of times, the owner/operators don’t pay themselves a lot of money, which is fine. They can take it out as distributions, that type of thing, but our management style is more expensive than if you’re running it as an owner/operator operation because we have to hire and pay a manager to be at the park, whereas if you’re the owner/operator, you can choose to pay yourself whatever you want.
WCM: Plenty of park owners have issues retaining employees given the seasonal nature of the business. How do you retain employees from year-to-year?
Cutler: The majority of our parks are open year-round, but obviously, business can slow down quite a bit. RAC probably has about 50 year-round employees, and in the summer months, we will have up to 800 total employees. The number of people we employ fluctuates significantly from the winter to the summer months. We often get a lot of the same employees coming back year-after-year. Some of our parks have high school students that have worked at the parks for years. KOA also has an excellent work camper program that we participate in, and we hire a lot of work campers.
Our company has always focused on store sales, and we do well with our stores. To keep our managers busy during the slower parts of the year, we send them to merchandising shows to pick up ideas for products that might work at our stores. We also invest most of our capital back into the parks, so there are always projects going on, some smaller and some larger, that keep our people busy. Managing one of our parks is a full-time, year-round job, whether a park is open or not.
WCM: Looking towards the future, how does RAC stay relevant and keep up with camper trends?
Cutler: We have a full staff at our corporate office, including a marketing person and another person that focuses on merchandising. They work to keep up on industry trends and standards, and they are in communication with KOA regularly. And like I said, the biggest thing that we’ve done is we have continued to invest in and improve our properties. And I think that is no different than any other business. You need to have amenities and you need to have nice parks to have campers want to come and pay the rates to stay there. It’s no different than a hotel room. If you have a hotel and you don’t replace the carpet for 20 years, at some point, it’s going to affect your business, right?