API and Herron Todd White: Caravan and Tourist Parks Market Update (2015)

Australian Industry - Summary (Source: IbisWorld)

  • 1,430 Businesses (Holiday & Caravan Parks and Camping Grounds) across Australia
  • 30% in NSW, 24% in VIC, 20% in QLD, 12% in WA and 9% in SA
  • Generates Revenue of $1.4BN p.a.
  • 57% powered sites, 16% long term sites, 14% unpowered sites, 13% cabins or units
  • Employs 10,700 people
  • Market Growth last 5 years has averaged 1.9% p.a.


  • Drivers of Demand
    • Domestic Travellers
      • General Economic Factors –such as tax rates, interest rates, employment levels
    • Disposable Income Levels – affordability ▪      affordability issues
      • Travel Preferences - Domestic v Overseas
      • Exchange Rates –Relative cost of Outbound Tourism
    • Competition for the Accommodation $
    • Demographic Factors –ageing population
    • Inbound Tourism –tastes and preferences
  • •   User Profile - 90% Domestic and 10% Internationals
    • 45% Family Travellers
    • 25% Seniors
    • 11% Residents and Long Term Visitors


  • Industry dominated by small “family”businesses
  • Major Players are:
    • Discovery Parks
    • Aspen Group
    • Big 4 Holiday Parks
    • Top Tourist Parks of Australia
    • Family Parks

Industry Specifics

Caravan Parks derive occupancy primarily from tourists and corporate guests.

Parks can be very popular with family groups, school groups, ‘grey nomads’and corporate guests. Often occupancy is boosted by working crews and those seeking longer term accommodation;

Park Occupancy levels fluctuate due to the seasonal nature of the leisure trade;

Depending upon location, occupancy levels during holiday periods and over weekends can regularly exceed 90%, with this reducing during non-holiday periods.

Usually, occupancy over a 12 month period would tend to sit at around 60%.

Occupancy is derived from the following areas:

Leisure guests:

  • Popular with leisure guests visiting the area.
  • Strong events calendars in addition to a number of major tourist attractions.
  • The major tourist attractions can include a wide range of sporting competitions, art and music festivals and well know school holiday programs.
  • Factors such as self-contained cabins, expansive camping grounds and wide variety of children’s activities help ensure a park is very popular with families who seek to utilise the aforementioned facilities


  • Management will often focus on attracting groups to the park. These groups can include school groups on educational trips, sporting and community groups partaking in a variety of competitions and Seniors groups on trips.
  • A function room and provision of meals can attract a wide variety of guests, with much of this occupancy during the week when the traditional tourist trade is quieter.
  • Group bookings for attendance at functions such as weddings and like events can also be popular given the nature of the affordable accommodation and family facilities at Parks.


  • Caravan parks can derive occupancy from working crews and like employees who are working in the area. The self-contained accommodation, open spaces, communal facilities and proximity and access to the work site are factors which can be attractive to this target group;

 “Grey Nomads:

  • Patronage from the growing number of ‘grey nomads’on tour across Australia.
  • This group tend to be attracted to Caravan Parks generally by the existence of powered sites which offer space for their motor homes and caravans.
  • Additional park features, such as tidy surrounds, multiple amenities and barbeque areas are seen as a major positive by this ever increasing group of travellers.

Other Income:

  • Between 3% and 5% of gross revenue is generally derived from ancillary services provided on site.
  • Services can include kiosk sales, internet services and revenue derived from the laundry and camp kitchen.
  • In the vast majority of cases these revenue streams are non-profit making and are thus provided to increase accommodation revenue which is the key component of the revenue derived and thus profitability.

In summary, occupancy levels drive Park viability.  Given that most parks have a seasonality component, good operators attempt to reduce the occupancy “troughs”and increase the “peaks”.

Traditionally caravan and tourist parks, unlike more traditional hospitality properties such as pubs and food service businesses, attract a high gross profit.

This is due to the fact that minimal food and beverage sales are provided at parks with the attraction of this form of accommodation being the self-contained nature of the facilities including provision of camp kitchens and barbeques.

The market for freehold going concern Caravan and Tourist Parks has improved significantly over the past 12 months.

The increased liquidity has been assisted by financiers who have shown a greater willingness to enter the market and fund acquisitions.

Many of these acquisitions have been by larger funds and corporate participants, such as the finance applicant, who are seeking established parks to transform to more permanent parks, otherwise known as Manufactured Home Parks (‘MHP’).

This form of park offers affordable, low end accommodation and due to the strong revenue derived from permanent accommodation sales, overhead costs are considered low and thus profitability high.

Occupancy for Manufactured Home Parks has been high due to both the increasing costs of housing affordability in addition to the lack of affordable retirement accommodation.

Manufactured Home Parks have been popular in the northern states, particularly Queensland and New South Wales, for over a decade.

Discussions with brokers active in this mature market indicate that sales of established parks reflect yields ranging from 7% to 9%, with buyers including Ingenia Communities, Discovery Holiday Parks, Aspen Parks, Alceon Group and Lifestyle Communities. These buyers remain in acquisition mode and are seeking to expand their portfolios into Victoria, South Australia and to a lesser extent Tasmania.

There are a number of private groups, such as that which recently acquired three Melbourne metropolitan parks that are also attracted by the strong cash flow derived from this business type and the attractive yields, when compared with traditional commercial and retail properties and accommodation hotels.

There are a number of property fundamentals required to fit the Manufactured Home Parks model, and as such not all traditional caravan parks can be converted.

These fundamentals include size, layout, location and existing infrastructure.

Given the strong demand for larger parks, many traditional caravan park operators have been priced out of the market. This has resulted in increased demand for larger leasehold going concern properties and smaller freehold properties with yield compression prevalent for these assets types.

The nature of any hospitality venue is heavily reliant on the standard of management and surrounding competition both of which are crucial in generating gross revenue and thus profitability.

Financiers must be cognisant of this potential volatility, particularly when setting loan to value ratios for such assets.

The following should be considered when assessing going concern hospitality assets:

  • Management–The asset class is highly sensitive and heavily reliant on the standard of management, with the revenue derived having a direct correlation to operational management. The consequence of inexperienced and poor management practices can quickly reduce gross revenue and thus profitability;
  • Volatility –The value of going concern entities is reliant on the gross revenue and thus profitability. Given the reduced barriers to entry and high reliance of management, cash flows can be eroded quickly as a result of newly established competing businesses and change management practices. Regular monitoring of such interests is strongly recommended; and
  • Marketability - The market for such assets is heavily reliant on the availability of finance. Given the intricate business operations involved in going concern assets extended due diligence and therefore, extended selling periods are often experienced.

Typically yields for such well located, larger, caravan parks range between 10.00% and 12.00%, with secondary caravan parks with inferior locational benefits and lower underlying land values selling on a range of between 12.00% and 14.00%.

Principal Valuation Parameters

In assessing the value of such assets, regard needs to be paid to the following:

  • Standard and nature of accommodation;
  • Location –what is the reason to stay?  Is it in close proximity to a range of tourist attractions;
  • Management capability;
  • Recent trading history;
  • Current standard of accommodation;
  • Range of additional features forming part of the caravan park;
  • Current Competition;
  • Barriers to Entry;
  • Land holding;
  • Sales evidence of comparable transactions; and
  • Current market conditions.