Wheels of fortune A combination of more people taking “staycations” and higher standards is producing a boom in caravanning. Noella Pio Kivlehan reports on a healthy holiday market
“They’re more than just boxes on concrete,” says John Rushby, head of leisure at Colliers CRE in Leeds. Too right. Caravans are now celebrity magnets, as footballer Rio Ferdinand’s presence at Presthaven Sands Holiday Park in Prestatyn, North Wales, last month proved.
But, the £100,000 a week Manchester United and England defender is not the only one to see the benefits of holidaying in a caravan park. Thanks to the recession, which has spawned the national trend for “staycations”, the parks are now hot properties in the holiday sector.
As a result, they are firmly on the shopping lists of private and public investors alike, who are prepared to pay big money for a slice of a market worth more than £6bn a year. Last year, for example, GI Partners spent £400m buying Park Resorts, which has 37 parks dotted around the UK.
Three of the largest deals in the sector in 2005, 2006 and 2007 involved Cinque Ports Leisure, South Lakeland Caravans and Northdales LLP. The first two were in excess of £100m and the latter worth around £50m. The three were brokered by Sanderson Weatherall in Leeds.
The major players in the market are still family or owner-managed businesses, and only 15% of UK parks are in corporate hands. In fact, the biggest private investors are the Traveller community.
Things look as if they will continue to be bright for potential investors, as the outlook for the market is healthy. Liz Crawford, associate director in the Bristol office of Lambert Smith Hampton, says: “Last year was a record one for caravan site bookings, and bookings this year are up by 40% on 2008.”
She adds that the industry has seen good growth over the past decade: “In spite of the wet summers of the past few years, some parks achieved occupancy levels of nearly 100% over Easter. At the start of 2009, Hoseasons, the UK’s leading self-catering hotel operator, reported a 50% increase in pre-bookings for 2009 compared with 2008, and September also saw bookings up by 25%.”
Parks appear recession-proof
The good news for investors is that the parks are relatively recession-proof. Ian Naylor, partner and head of investment at Sanderson Weatherall in Leeds, points out: “This sector performs reasonably well in difficult economic conditions compared with many businesses or property investments.”
He explains that the parks “are often able to alter their strategies according to economic conditions”, for example, shifting the balance between sales of caravans and caravan rentals.
“We are disposing of a chalet park on the east coast which has attracted serious levels of interest, suggesting that the sector is holding up well in what is considered to be a poor overall property market.”
This is a sentiment echoed by the caravan specialist Edwards & Partners, which has bases in North Yorkshire and Devon. In its annual market report, it states that: “Learning lessons from history, holiday caravan parks traded well throughout the recession of the early 1990s with few business failures. As people tighten their belts, they tend to look for better value, and this often favours Britain’s holiday parks.
Colliers CRE’s Rushby agrees. “We are short of good quality stock. We have the backers – most are cash and private equity – and the banks are starting to lend again. This is because this year has been a good trading year in terms of cash flow, and 2010 is likely to be the same. As a result, the banks are now taking a more optimistic view of the market than they did in 2007 and 2008.”
But Rushby warns that there are dark clouds on the horizon.
“It’s coming to D-Day for a lot of the parks which were acquired in 2006 and 2007. They have been able to survive on holiday business, but traditionally, 50% of parks’ income is from the sale of caravans, rather than the hire. Because of the recession, these sales have fallen away.
As Jon Patrick, director at Christie & Co, says: “The credit crunch has massively curtailed people’s ability to buy new caravans or invest in holiday homes.”
Late surge in buying
Rushby agrees: “As a result,” he says, “everybody has got to the end of a very busy season and now it is time to draw breath and see where they are going from here. Generally, the banks haven’t foreclosed because of the strong trading year, but they will be looking hard at where business from the parks will be in 2010.”
Some good news for the industry is that there has been a late surge in buying. According to Mark Ebo, partner in Edward Symmons, Bristol: “Since the end of the summer there has been an upturn in activity. Over the course of the year I have looked at 50-60 caravan parks, and what I have found is that sales of new and secondhand caravans are near the parks’ targets thanks to a late spurt of activity during September and October.”
What the industry needs is for this late spurt to become consistent. And, if the parks continue to grow the way they have, in years to come it won’t be just one England footballer holidaying at them – it will be the entire England squad.
Unique category, unique opportunities
Caravan parks fall under the planning banner of sui generis. Wendy Sockett, a planner at Colliers CRE in Leeds, says: “Holiday caravan and lodge parks hold a unique position in planning rules and regulations.”
The use of the land for the siting of caravans is controlled through planning legislation, but the internal layout, density, roadways, sanitary facilities and other elements are controlled by a site licence issued under the Caravans Sites and Control of Development Act 1960.
“Any development needed to meet the requirements of the site licence is deemed to be permitted development. This enables site redevelopment and engineering works to be undertaken without seeking detailed permission and thus avoids all the red tape – which can be appealing to investors.”
However, Ian Naylor, partner and head of investment at Sanderson Weatherall in Leeds, says: “The market is still constrained by the resistance of planners to grant new consents, particularly in national parks. This buoys up the values of well-placed caravan parks.”
Caravan parks: the facts
Source: Liz Crawford, associate director, Lambert Smith Hampton, Bristol
