RV Park Mastery: Episode 16

White Lab Coats Needed

Science is defined as “the intellectual and practical activity encompassing the systematic study of the structure and behavior of the physical and natural world through observation and experiment”. So how can you apply that lofty goal to RV parks? In this episode of the RV Park Mastery podcast series, we’re going to drill down on the science of evaluating RV parks and bringing factual discipline to the emotional process of investing.

Episode 16: White Lab Coats Needed Transcript

Science, when you hear the word, you just think about white lab coats and test tubes and Bunsen burners. Or do you think about RV parks? Because in fact there is a science to the RV park. This is Frank Rolfe of the RV Park Mastery Podcast. We're going to talk about a little bit about the science in determining whether the market can really support your RV park or not. Now there's some stats out there that if you really think about them logically, will point you in the direction of what we're going to talk about. Here they are, the average person with an RV typically travels around four-hour drive to get to their RV destination. Now, there are destination RV parks out there that are cross country. What studies have found is the average RV user is more geared towards weekend jaunts than they are taking off for weeks at a time.

The average RV owner spends roughly 23 nights per year in an RV park. And they log in that journey typically around four to 5,000 miles. So if you do the math, what's it tell you? It tells you the typical round trip of an RV is about 500 miles or so. So they're doing about eight trips a year at about three days per trip, the perfect weekend traveler. So if we're saying that RV parks often get the majority of their business within about a 250 or so mile radius, then when you look at your RV park and you draw a circle around that, that's about 250 to 300 miles out, about a four to five hour drive each way when you have the RV. What does that population look like? How many people live within that radius? So the first stop would be, okay, if I draw that circle around that RV park, what's the total population in that circle? 50,000 people? 5 million people? That gives you a rough idea of how many customers you probably can draw from.

Question number two, what is the demographic of that market? If you're talking kind of a wealthy area, that's great. Those people have more money to spend. They might spend even more nights in the RV park. They're going to have nicer RVs. They're going to be less resistant to issues with the economy. So what's the demographics like that group look like? And then additionally, what's the climate look like? Can they do it year round? Are you in an area that's warm? Can people make that weekend jaunt throughout the entire year? Or are you in an area that can get bitterly cold, lots of snow and ice, and people basically just shut down through the winter, wanting to go anywhere? These are all the issues you want to look at in that market right around you. Not all RV parks are created equal.

We own two RV parks down on the Texas-Mexico border. These parks cater mostly to people who are called snowbirds. They live in the Northeast, and then as winter approaches, they go down to South Texas where it's very, very warm where all their friends show up from the past, where they have all kinds of activities. So that's one type of RV park. Then you got the overnighter RV park, place where people stop off on the way, for example, from Ohio down to South Texas. It's just another style. But most of your RV parks, most of the RV parks that you think of when you're looking at investing, these are ones that are served by a market of people who go there frequently, and they've got an attraction and they've got a destination to it. Maybe it's a lake, historical amusement, some kind of thing going on with a forest or a national park.

Those kinds of RV parks are somewhat relying on repeat business because really the RV park industry, that's what it's all about is repeat business, the way you market, your word of mouth, social marketing. These are all the things that make customers come in the door and come back and come back and come back. So when you're looking at an RV park and trying to apply some science as to, is there really a market for this? Well, is this really going to succeed in the future? Probably one of the best starting spots is to really put a careful analysis on the population within that four to five-hour circle. That will tell you a lot about what you've got. Again, it's not all-encompassing. Certainly there are RV parks that still do well that have smaller populations, lower demographics, because they're a unique destination, or they're a snowbird potential, or they're an even overnighter stopping spot.

But for many of the folks today, looking at RV parks and really trying to get a handle on it, one of the key drivers is going to be what is going on with the market. And with that in tune, let's also look at how markets are changing over time. A lot of America is changing. It's changing states. People are moving from one area to the other, maybe because of job upheaval, COVID, just the desire to go somewhere else. So also watch your population trends. If we're really going to be an expert on our market of where things stand within that four to five-hour radius, we need to have an even greater macro idea of what the future is. Are you in an area where people are moving there, or are you in an area where people are moving out? That's some of the demographics that you would want to get a handle on because that will kind of portend to you the future.

And another thing you can look at is future highway development. I've always found this a very, very helpful tool most people are fully unaware of, but every state highway department that I know of produces a guide. They don't talk about it. They don't advertise it. It's not on an ad on late night television, but it's a booklet that basically tells you all current highway projects and where they stand. It groups them. It has ones where they're just discussing it, and then they've started buying the right of way, and then they've actually started doing the bidding to build it, and then that they've actually started building the road and the completion date. And they're many, many years into the future. These guidebooks will show you things for the next decade or more out into the future.

In an area that's got a lot of promising growth, you'll see lots of things going on with the roads, people building new loops, new highways, new state roads. You can take that and overlay that on the market around the RV park. You can say, "Ah, well, here's where this road's going. This one's being enlarged. This one's being improved." That's one great way to get a handle on what's going on in your market and what the future is. And on that note, don't stop there. You can still get a traffic count map of any road in America, showing you what the traffic is. It typically shows you the 24-hour count. You divide that by two, and you have a rough idea of how many cars will be passing in either direction by your RV park every day of the year. Once again, it'll show you how many people there are hitting the road. Very, very important stats.

The bottom line is there are quite a few stats you can get for an RV park. It's not subjective. It's not where you're having to just be riddled with questions of, "Will this investment work for me or not?" No, you don't have to do that. You could actually apply science to your purchase, and you can get a really good idea on what the future will hold. Science is a wonderful thing when it comes to RV parks and RV park purchasing, because it helps take all the doubt out of what you're doing. We've always been hugely reliant on due diligence. Benjamin Franklin said that diligence is the mother of good luck. He was correct back in the 1700s, just as he is today. And so really what's important as an RV park buyer is trying to apply science to every element of the transaction. From your revenue to your expenses, to everything in between, you can get a handle on it. You can be very accurate, but you have to apply science to get there.

Do you have to have a white lab coat to do it? No, you have to look at the deal impartially. You have to say, "Okay, well, I'm not going to take the position I'm going to buy this, or I'm not going to buy it at this point. Instead, I'm going to take a position that I will do my best to do as good a job of the science as I humanly can, therefore mitigating the risk with my investment, giving me the best odds of success." That's all you have to ask of yourself. Then you don your white lab coat, not physically, but mentally. You make a commitment to yourself that you'll do a very fact-based approach to all of the due diligence, and in the end, you'll make a very fact-based decision, with no emotion. It doesn't matter whether you really like the location or not. You want to boil it down to the actual figures.

How will this work out? As long as you always have the scientific approach to anything you do with an RV park, you seldom get disappointed. The definition of disappointment is when things happen in a manner other than what we expected. So if you know what to expect, if you've done your diligence, if you've done your science, if you fully understand the market, its trends, its demographics, it's not hard to make that final decision to pull the trigger and buy the RV park. That's where confidence truly comes from is when you've done all of your homework, all of your basic math, so you know exactly what you're doing. That makes you a better, more secure buyer and typically a more successful RV park investor. This is Frank Rolfe, the RV Park Mastery Podcast series. Hope you enjoyed this. Talk to you again soon.