In 1982 John Naisbitt published "Megatrends" which referred to forces so strong in the economy that you could not prosper unless you were aligned with them. There are a huge number of "megatrends" at work in the U.S. economy today and in this RV Park Mastery podcast we’re going to review each one and how it relates to this sector.
Episode 123: Megatrend Power Transcript
In 1982, John Naisbitt wrote a book called Megatrends. Revolutionary at the time, the purpose of the book was to identify for investors that there are some very giant currents in the economy. And if you're on the right side of those, it will propel you to greatness. And if you're on the wrong side of those curves, well, it can crush your business. This is Frank Rolfe with the RV Park Mastery Podcast. We're going to review the various megatrends right now in America and how the RV park industry fits in with those megatrends. Let's first start off with the megatrends of the population. There's two big ones going on right now. The first one is the aging of baby boomers. We're all pretty familiar with that one. We know there's roughly 10,000 baby boomers retiring per day in the United States. And we also know that baby boomers own a lot of RVs. So as they enter retirement, what happens? Well, one thing you find that they do is they decide to take the RV out on the road for a much more extended period of time. It used to be the average RV user was using the RV for roughly 14 days per year, but now that you have these retired people, they can go out and be out on the road for six months if they desire.
And this has always been a big strength of the RV industry. And the RV park industry is simply the fact that so many baby boomers, Those born between 1946 and 1964, like RV travel and own RVs and use the heck out of them often. Another trend we're seeing with the, with the aging baby boomers is literally living in their RVs. So in this case, what happens is they had an rv, but they also had a brick house. They enter retirement, they think, you know what? Why do I need the brick house? What if I just downsize into the RV, cut off all my expenses on the house, use the money from the house sale to fund my retirement, and just basically live in an RV park going forward. You're seeing a lot of that in more extended stay RV parks and also just RV parks located near other services like health care and shopping, where people are literally moving into those RV parks forever. So the aging of baby boomers is obviously very advantageous for the RV park industry. But then you also have the millennials, and the Millennials are actually now the largest segment of the US Population.
They now outrank boomers in magnitude. So how is that impacting the RV park industry? Well, once again, pretty favorably because millennials are only second to boomers as far as their consumption and ownership of RVs. So they're out there hitting the road, staying in RV parks at a very brisk pace. And they do so because they have a very positive feeling about the RV industry, thanks to some very smart marketing that began years ago with a campaign called Go RVing, where the RV industry would advertise and market itself, and a lot of things like extreme sporting events, things that really attracted the millennials. So they grew up with a very positive attitude as they became older and could afford it. They've bought RVs in record numbers, and they also use them a significant amount of the time. So from a population perspective, the RV park industry is in great shape. So what other megatrends are going on? Well, another megatrend worth talking about is the weather. Whether you believe it or not, whether you're a fan of global warming or global cooling or who knows what the heck it is, there's no question that basically, areas that used to have very strong winters, it's growing more mild.
And even places that used to have very strong summer temperatures have also grown more mild. It depends on where you are in the US Map. What it means is many seasonal RV parks may begin to have the ability to extend their season. I'm in Missouri, for example. And in Missouri today, winters are nowhere near what they used to be as far as severity. We don't have hardly any snow days anymore. The temperatures are much more mild. And that's true a lot of different parts of the Midwest and some of the northern states. And that's, again, it's a positive attribute for the RV park industry, because who would not want to have their seasonal RV park being able to stay open maybe for several more months per year? So that's another good megatrend. Now, let's look at some of the other megatrends going on in America. Let's look at, for example, just how the economy is doing. And of course, most studies right now would show the average consumer is kind of gloomy, not thinking things are doing that well. But again, that plays right into the RV park industry, because when times are tougher, people like to escape and go out and use their RV.
And remember, the baby boomers are insulated. They don't even have jobs. Most of them are being retired, so they don't care if the economy crashes or not. But on the more young folks, they're again more likely to need to get that vacation escape. And then additionally, they've learned that the least expensive way to travel is in their RV. So once again, the fact the economy is faltering actually doesn't really hurt RV park occupancy. In fact, if anything, it may actually improve it or make it more stable. And then you have the issues of financing and interest rates. Interest rates are very high right now. They're at 40 year highs. But fortunately in the RV park industry you have some options besides borrowing from banks. You have such things as the seller financing option, which many, many RV parks offer seller financing, which is fantastic for buyers. We love seller financing. That's what got us into the industry to begin with. You also have some loan programs through the Small Business Administration, the SBA and also the Department of Agriculture, the USDA. And these programs allow you to get in to RV parks with a much lower amount down and still a fairly attractive structure as far as a mortgage.
So despite the fact that banking rates are up significantly, banking criteria is tougher because of the higher rates. You still have options in the RV park industry that will insulate you from that. So once again, it's a trend, a megatrend that RV parks are pretty much well able to adapt around. And then you have the option in many RV parks of self managing. Now that's a big trend in America right now is people are very unhappy with their jobs. In fact, studies are showing that the majority of Americans do not like their selection of employment. So what do you do if you hate your job and you don't want to go to work anymore? What option you would have would be to find an RV park to buy and then self manage. You act as the manager of the RV park. Those RV parks typically come with nice housing, either houses that are next door to the RV park or somewhere on the property. And as a result, you go ahead and basically buy a day job when you buy the RV park. And many people in fact have found their favorite part of RV park ownership has been being able to self manage, to control their own destiny, to have power over their own time.
They like working as a mixture of both indoors and outdoors. So once again, that's pretty much on the right side of those megatrends. And then you have the one giant megatrend of interest rate movement going forward. And this is a really, really big one because as we mentioned earlier, interest rates have gone up at a record pace and they're now at 40 year highs. So for you to see interest rates as high as they are today, you would have to be back in the era of Jimmy Carter and Ronald Reagan, which is fairly long ago. And the thing that happens with our country and interest rates is when we have recessions, interest rates typically drop about two to three points. And if we're not in a recession right now, we're pretty close to it. I'm sure there will be one announced either sometime this year or definitely next year. So when you have that recession and the interest rates decline, what happens? Well, if you were investing in CDs, nothing good, because your rates of return would drop significantly. But in the RV park industry, when those rates decline, it makes the values of all RV parks go up.
As the interest rates go down, so do cap rates, and that makes values climb. And as a result, when you're buying an RV park at a time when interest rates are about to start descending, you make extra money. Because even if you don't do a darn thing, if you don't raise any occupancy or anything, right, you still look like a genius because the value of the property increases. And even though you may have not increased anything as far as customers and revenues or cut any costs, you still look smart because that spread between the cap rate and the interest rate starts climbing as those rates go down. And there's no better time to buy real estate than when you're entering a recessionary period, because that force of interest rates and cap rates is probably one of the most significant megatrends for those in commercial real estate and certainly for those in the world of RV parks. The bottom line is RV parks are very, very well aligned with all known US megatrends. I can't really think of any on the horizon right now that are negative, but so many of them are very powerful and very positive.
And again, to do well in business, it's been true ever since the '80s when Naisbitt wrote his book, and long before that. You have to be aligned with the megatrends. You need that power and harnessing that power forward to give you spectacular returns. This is Frank Rolfe of the RV Park Mastery Podcast. Hope you enjoyed this. Talk to you again soon.