Caravan parks remain attractive as domestic tourism increases

During 2022 there was $203.8 million in caravan park sales recorded across the country, this is 30 per cent down on 2021 results albeit 42.6 per cent up on 2020 results. The reduction in turnover during 2022 is in line with the broader commercial market which has been hampered by the growing difficulty in obtaining finance. This has deterred many investors. As other segments of the hotel and leisure sector saw uplift in activity during 2022, caravan parks assets remained tightly held by astute investors keen to capitalise on their positive cashflow, as well as future land banking, keeping transaction activity down.

Over the past four years we have seen demand from travellers increase across caravan, camping and cabin sites, excluding lockdown periods. In 2022 we recorded an increase in domestic tourism, resulting in strong improvements in hotel occupancy rates, with caravan and camping sites no exception. The national occupancy average (for caravan, camping & cabins) for 2022 sits at 61.5 per cent well ahead of 2019 (prior to COVID-19) results of 49.4 per cent. Looking by state, Tasmania and Queensland have continuously averaged above the national rate, while Western Australia has bucked the trend showing high occupancy during the lockdown periods in other states.

The increase in caravan and RV sales over the past ten years has done much to spur on this segment of the market, no longer considered a retiree holiday option. The uptake by younger generations and families has seen the number of registrations increase between 3 per cent and 4 per cent per annum.  During COVID-19 was a strong appetite for these vehicles resulting in continued growth in registrations, closer to 5 per cent per annum, however, there has been a mismatch in demand and supply with a lag in the delivery felt over the last couple of years similar to the broader motor vehicle industry.  Furthermore the wider range of offerings including fully electric RV’s has added to the already rising prices due to the disrupted supply chain and increased cost of goods and labour.

With demand for these vehicles continuing to rise, so too has the cost to occupy sites across most of the country. With increased occupancy comes rising prices, revenue achieved in caravan/camping sites growing as much as 43.2 per cent in NSW to $46/site. Tasmania is currently home to the most expensive sites at $61 representing a 26.7 per cent annual increase. This is due to the limited supply and occupation often eclipsing 75 per cent in a market which has seen strong domestic tourism over this 12 to 18 months. Queensland remains home to more than a quarter of all caravan and RV registrations and has recorded strong increases in revenue in these parks, currently averaging $42/site up 36.7 per cent. Western Australia has enjoyed the most consistent level of occupancy over the past few years. Despite border closures during COVID-19, demand stemming from local visitors was instrumental in growing average rates over the past few years to now average $52/site, a 16.6 per cent annual increase.

Looking ahead, the viability of caravan parks as an investment looks sound particularly due to their long term potential, coupled with domestic tourism levels continuing to increase as the drive segment grows. The current high cost of airfares and accommodation has aided in the uplift in demand for occupiers, keeping vacancies low and the prospect of continued rate increases high. The large land parcels associated with these sites are also attractive, opening up future opportunities and alternative uses as well as their often positive cash flows stemming from high occupancy and growing returns. However, the increases to interest rates may result in some softening in values and an expected reduction in investment activity during 2023 as quality assets continue to be tightly held.