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Business Observer Thursday, Apr. 30, 2009 13 years ago

'Rolling Condos'

The recession is pummeling the RV business. But a few adventurous entrepreneurs see a big payoff in the high-end segment of the market.
by: Mark Gordon Managing Editor

The recession is pummeling the RV business. But a few adventurous entrepreneurs see a big payoff in the high-end segment of the market.

The recreational vehicle industry might be in the tank, but real estate on the water is still real estate on the water.

Ed Rymer, a local developer who's past projects include the Golden Gate Point condos in downtown Sarasota, saw just that reality in a rundown RV park on the water of Palma Sola Bay, at the edge of the Gulf of Mexico. That serene view was enough for him and a business partner to spend $5.4 million in late 2007 on Holiday Cove RV Park in Cortez, a fishing village just east of Bradenton Beach and Anna Maria Island.

“I didn't know anything about the RV industry,” Rymer says. “But I did know something about the real estate industry, like property next to the water is pretty good.”

Following the purchase, Rymer spent another $1.5 million in repairs, renovations and refurbishments to the 8.8-acre property, which serves as a campsite, social headquarters and parking lot for people vacationing in RVs. Upgrades, which took place mostly last summer and into the fall, included new brick patios at each individual site, a new saltwater community pool and completely redesigned public restrooms.

The old Holiday Cove had 112 RV sites, for which Rymer and Holiday Cove co-owner David Gorin paid about $48,000 per space under the purchase price. The renovations resulted in the park losing 15 sites.

Before the improvements, says Gorin, “this place was an embarrassment” of overgrown bushes and rundown facilities. But with the changes, Gorin now says “the RV business in Florida doesn't have a lot of parks that look like this.”

And the investment in turning Holiday Cove from ramshackled to regal is already paying off: Since reopening last November, the park has sold 32 of its 97 sites, at prices ranging from $79,000 to $199,000 a site, Gorin says. While Rymer declines to disclose specific revenues, he did say that sales are up 20% over the first three months of 2008.

Hurts so bad
Still, the RV industry, long considered a folksy 'rolling-condo' enclave made up of thousands of loyal RV-lovers nationwide, has been buckling under the weight of the recession. For example, some of the largest RV manufacturers in the U.S., a group that includes Country Coach, Monaco Coach and Fleetwood Enterprises, filed for bankruptcy over the past few months.

And Seffner-based Lazydays RV SuperCenter, one of the biggest RV dealerships in the country, is having its own issues as a result of a large sales drop-off in late 2008 and early 2009. For starters, the company, with $258 million in revenues through the first three quarters of 2008, is six months behind on an $8 million debt repayment to bondholders.

LazyDays, which was founded by well-known Tampa entrepreneur and philanthropist Don Wallace in 1976, has also cut its workforce by 30% over the past year, from more than 700 to 480.

With RV manufacturers and dealers hurting so bad and the recession showing few signs of abating, it would seem to be an inopportune time to invest in redoing RV campground sites. After all, the two business models in the industry — renting or selling campground sites — are dependent on RV makers and dealers putting new vehicles on the roads.

Nonetheless, Rymer and Gorin are two of a handful of RV site operators on the Gulf Coast and statewide bucking the negative trend lines.

For instance, RV site developer Bill Harvey is following a similar high-end strategy as Holiday Cove for properties he owns in Okeechobee and Arcadia. Harvey has created country club-like gated communities at those two locations, with amenities such as a Jacuzzi, a 300-person ballroom and pickleball courts.

Harvey winces at the more than $15 million he has spent on buying and renovating the properties, but he is optimistic about the strategy. “We are finding that even in this economy, people will pay to stay in quality resorts,” says Harvey. “We are trying to take the long view.”

Meanwhile, a few large national RV campsite management companies are also trying keep up with the competition. For example, Equity LifeStyle Properties, a publicly traded Chicago-based firm, just completed a $100,000 renovation project at its Royal Coachman RV Resort in Sarasota. Changes there included adding a new pool deck and buying new clubhouse furniture.

And Salt Springs-based Elite Resorts of America is planning a $200,000 improvement project at its RV campsite in Crystal River, about 80 miles north of Tampa. In total, the company is spending about $1.5 million on renovations for its four Florida properties, including a total makeover of the one it runs in Salt Springs, near Orlando.

“We believe there is a shortage of good, high-end RV sites in Florida,” says Ed Mayer, Elite's president.

To that end, Mayer and Elite's Philadelphia investors are planning to build a 340-site RV park in Tarpon Springs, outside Tampa. Mayer says permitting is just about completed for the project, but financing is moving at a much slower pace. “You find me a friendly banker,” says Mayer, “and I'll know when we will start building it.”

Seeking day-trippers
The Holiday Cove transformation, however, could be the best example of the high-risk, high-reward philosophy needed to compete in the current RV marketplace.

And Rymer has a trump card in that effort: Gorin, his business partner. Gorin is considered to be something of a national expert in the profitability of RV parks, having served as president and chief executive of the National Association of RV Parks & Campgrounds for 14 years.

Gorin also runs a self-named RV and outdoor hospitality consulting firm in McLean, Va. It was through that company, which Gorin founded in 2002, that he met Rymer. The pair bought Holiday Cove in a joint partnership.

In addition to creating a renovation plan for the park, Gorin and Rymer are piggybacking on a three-year-old national industry marketing campaign that focuses on plugging the affordability of 'RVing.' To that end, Holiday Cove is running Internet and some newspaper ads in markets within a few hours of Bradenton, such as Orlando and Tampa — the 'staycationers' who want a vacation but also want to stay close to home.

The marketing effort includes a regularly updated MySpace page and a 'Summer Stimulus' program, where the more days a customer rents an RV site, the more cash back he can get to spend at area restaurants and shops.

The marketing effort was necessitated by the extensive renovations. In addition to the pool, bathrooms and brick patios, the Holiday Cove owners made several other changes to the property, including:
• Installing 50-amp electrical service outlets at each site;
• Overhauling the water and sewer lines at each site;
• Repaving the roads in the complex and adding security fences;
• Remolding the clubhouse and park offices; and
• Building a new laundry and fitness center.

Gorin and Rymer also put the complex through a total landscaping makeover, from new plantings to eliminating more than 50 pine trees.

One constant challenge at Holiday Cove and many other RV parks, past the current economic turbulence, is that the industry has a customer ceiling: Gorin estimates that about 10% of the country's population either own an RV or is interested in owning one.

With a limited customer base, Gorin and Rymer believe it's crucial to be customer-attentive and make the changes that new and old customers want. While the pair still has more than 60 units at Holiday Cove to sell, they like the way things have gone so far.

“This has turned out to be a phenomenal success,” says Gorin. “It's a perfect example of 'if you give the people what they want, you will be very successful.'”

Lazy in Name Only

Times at LazyDays RV are indeed sluggish.

The supersized Seffner-based RV dealer is six months behind on an $8 million debt repayment and has cut its 700-employee workforce by more than 30% over the past year. And some of its top suppliers have filed for bankruptcy.

Even so, the company has been able to maintain one key principle of surviving a recession: Growing market share.

The company, founded by Tampa entrepreneur and philanthropist Don Wallace in 1976, has picked up market share in all five categories it sells in over the past year, from fifth-wheel camper vehicles to travel trailers. While some of those sales have come at steep discounts with profit-eating incentives to lure customers, the company still considers the market share increases a victory.

The company has even seen a significant market share increase in its best-selling categories, such as the Class A diesel motor home segment. LazyDays officials, citing an outside statistical analysis, say the company recently surpassed 10% of nationwide market share in that category. Its dominance in that niche in Florida, meanwhile, increased from 35% in 2007 to 43% in 2008.

In addition to market share increases, LazyDays is using the recession to hunt for bargains. For example, in late April it closed on a $2 million deal to buy out the remaining 154 travel trailers from Fleetwood Industries, a Riverside, Calif.-based RV manufacturer that filed for bankruptcy last year.

LazyDays continues to bill itself as the largest RV dealership and connected campsite housed on one site in the U.S. The company is privately owned through a partnership with a New York-based private equity firm.

— Mark Gordon

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