Holiday park profits looking up

Caravan and camping grounds have settled into a nice earning pattern, which near-term trends look set to sustain. By JASON BAKER.

By Jason Baker

There are good times ahead for Australia’s caravan park and camping ground industry, despite a patchy performance over the past five years.

IBISWorld estimates that holiday parks (which generally provide cabin or villa accommodation) caravan parks and camping grounds generated more than $1 billion in revenue for the first time in 2007. 

The journey to the $1 billion mark has had its fair share of bumps and humps, however. The strong Australian dollar and higher fuel prices saw earnings decline by 1.7% in 2004 and 2.1% in 2006 as more holiday makers chose overseas destinations. As a result, despite strong 4% growth in 2005, industry revenue in 2006 was $977 million, the same as that achieved in 2003.

But 2007 was a better year – and, perversely, it was the housing affordability crisis that did it. As buying or renting residential property has moved further out of reach, many people sought long term residency in caravan parks last year, delivering a revenue boost of 4.8% and pushing industry revenue to $1.02 billion.

In 2008, strong economic conditions and continuing strength in long term caravan accommodation should result in 3.5% growth in revenue; although downside risks threaten in the form of high petrol prices and the resurgence of the dollar.

In the five years to 2012-13, IBISWorld forecasts average growth of 3.2% thanks to the strong Australian economy and higher accommodation tariffs as park owners invest in new accommodation styles and improved facilities.

Risks to growth for the industry in the years to come include rising fuel prices and cheap air fares to international destinations from discount airlines such as Jetstar.

The caravan park sector itself is expected to change shape significantly over that time, with the number of establishments decreasing gradually as sites are converted to higher and better return uses, and long term caravan parks decline in numbers.

The holiday and caravan park businesses that will succeed in the next five years will have effective performance monitoring systems, a loyal customer base, compete on quality more than price. The more effective will undertake joint promotions with other local attractions or tourist operators to maximise the effectiveness of advertising and marketing expenditure.

IBISWorld supplies business information databases, including industry reports, company reports and business indicator reports. www.ibisworld.com.au