During the process of analyzing my very first RV park investment, I stood at my whiteboard and wrote a list of carefully thought out investment criteria for RV parks. I drew on my experience investing in numerous other property types to dictate the criteria for this new opportunity. I took a picture of my original criteria list and I still have it on my desk today.
There are 6 primary criteria and about as many sub-criteria. Under “Desirable Location” are two words that I have been thinking a lot about during the COVID-19 pandemic. Those words are tourism and jobs.
On that day in front of my whiteboard, I chose to avoid investments dependent upon tourism or jobs. Instead, I chose tourism and jobs. I had an RV park under contract that was uniquely located to benefit from both factors and that quality looked like risk management to me. On the contrary, I was seeing quite a few RV parks in the oil patch of West Texas and the refineries of East Houston. The exposure to jobs dependent upon one industry did not sit well with me, so I decided that those deals aren’t for me.
In the midst of a pandemic, I am reaping what I sowed years ago. My RV park investments have been wonderfully resilient and steady through the chaos. Sometimes I feel guilty because I know I’m lucky and others are suffering. However, I don’t want to give luck all the credit when I remember thinking about rainy day risks while standing at the whiteboard years ago.
The journey through this pandemic has been amazing. My RV parks had cancellations en masse. Important springtime rallies of 20-30 RVs cancelled. Spring break tourism was called off. Major events in April and May were cancelled and with that went countless high-value tourists. Tens of thousands of dollars were lost.
Then most of the lost revenue was recovered through the influx of long-term reservations. It was like watching the tourists leave town while a new wave of workers poured in. Although this is the exception, some parks have performed even better than normal during the pandemic. At a minimum, my RV parks have remained profitable and they continue to distribute cash flow.
While I think many RV park owners would share a similar experience as mine, I also know of many who are seeing this play out differently. There are empty destination RV parks that have been hit hard like most other businesses. There are oil-dependent RV parks whose guests have gone home because jobs have vanished with oil’s crash. The owners who shunned long-term guests in pursuit of short-term premium rates in the springtime are feeling the pain. I’m thankful to be stable so I can learn rather than scramble through this pandemic.
It is clear to me that tourism and jobs are essential traits of a solid RV park investment. This pandemic has reinforced my view that managing risk is made easier when a property has options. If the success of an investment is dependent upon one customer base, one industry, or one potential outcome, then the deal is worth dodging.
Want to connect with me? Contact me through my RV Park Guy blog or through RV Park Management.
