Holiday parks ready for a staycation bounce

At our latest Hospitality and Leisure webinar, we welcomed a number of panellists from the holiday park sector to give insight into its recovery following a turbulent 2020.

A resilient sector

In the wake of the pandemic and overseas travel restrictions, the staycation trend is gathering momentum – and the UK holiday park sector is poised and ready to take advantage.

After the initial difficulties of last year, demand for holiday park lettings and sales has proved highly resilient. Operators have been working hard to adapt to the new economic and social environment.

A year in perspective

Nigel Edwards, founder and CEO of holiday park data specialists Plum Data set the context for the sector’s outlook at our latest Hospitality and Leisure webinar, reflecting on how the sector fared in 2020.

Occupancy at between 50% and 70% of 2019 levels after the early hit of a ‘missed’ Easter to mid-July, were followed by a full-ish August and a good September and October. This was reflected in higher prices, with those operators employing dynamic pricing better able to make increases.

In revenue terms, the extension of the late summer shoulder period through September and October saw the combination of increased price and fuller occupancy push September revenue per available letting (REVPAL) figures up, often between 50% and 100% compared to 2019. Some operators also enjoyed a better August than in 2019.

While the average price of lettings rose 3% to 20%, the lost holiday periods typically pushed overall 2020 revenue down 60% to 90% of 2019 levels. Revenue from in-park spending was down 25-50% overall, benefitting the customer experience but generating no margin after higher operator costs.

Holiday home sales, although slow initially, jumped significantly in the second half of the year, driven by first-time customers coming from different socio-economic backgrounds to previously.

The staycation bounce

Once confidence rebuilds, the industry appears to be well positioned to take advantage of the staycation bounce, amid growing demand for regular escapes nearer to home.

Changing customer profiles and behaviour are opening up new opportunities for parks and Nigel expects to see new business models emerging, as well as possible market consolidation.

With limited supply of new properties, many parks are already investing in additional holiday home provision to capture likely demand for purchases. Although manufacturers’ prices have risen there will likely be opportunities for greater churn and better margins on sales, irrespective of virus ‘wobbles’ or lockdowns.

But Nigel suggests that a careful balance needs to be struck between maximising revenue and creating loyalty and buy-in from new customers ahead of a recovery in other holiday markets.

Green factors

Our panel agreed with Nigel that operators need to ensure they’re prepared for changing expectations on sustainability, carbon footprint and climate change.

The sector is still at the relatively early stages of tackling environmental, social and governance (ESG) issues, but faces increasing pressure from a powerful combination of investors, lenders, planners, staff, communities around parks, and from some customers.

Operators will need to make behavioural, investment and strategic changes as parks are shaped and reshaped to meet ESG challenges, but should see this as an opportunity to drive customer loyalty.

Park sales

In terms of the asset values, many holiday parks saw revaluations in 2020.

Panellist John Rushby, Head of Specialist Leisure at Colliers International, pointed out a number of proposed developments had moved forward as some operators seized the opportunity to refresh existing parks and planning applications.

But while the industry demonstrated its resilience in defending income and margins last year, he warned of possible casualties among highly leveraged businesses.

His colleague, Head of Parks Agency Richard Moss, highlighted general confidence in the UK parks market is positive, driven by pent up consumer demand for holidays and ‘sanctuaries’ to escape from home working.

This is making holiday parks an attractive property asset class, with sustainable yields and a current under-supply that is pushing up prices in some areas, accompanied by a surge in demand from prospective buyers.

Ultimately, the sustainability of the market will be determined by the desire and financial capability of consumers to spend in what is a discretionary spend sector.

Planet caravan

Chris Ling, CFO with Park Holidays UK pointed out that caravan sales have been remarkably resilient, with a distinct uptick in demand last summer. Site fees remain strong and there are fewer vacant bases.

While caravan parks have adapted to keep owners and holiday makers safe during the pandemic, there may well be a brake on future developments. He anticipates the business should perform well once the Covid restrictions are lifted, starting with opening parks for owners, followed by hire and touring and finally the park complexes reopening.

Operators will need to capitalise on their new owner bases, provide good customer experience; for example, by providing high quality Wi-Fi and utilities so they can easily work away from home and creating precious word-of-mouth marketing.

They will also need to keep a close eye on longer term trends, such as environmental management and Covid-related changes in social behaviours, to develop future service offerings.

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