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  31 Jul 2022
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Understanding the RV Park Business Model


Owning an RV Park has proven to be one of the most lucrative and low-cost businesses in the United States. As a result, more people are trooping into the business daily.

At its core, an RV Park business model is highly economically secure because it allows for multiple forms of revenue and income.

There are several variations of RV Park business models, and we will break down and clearly explain them further down in this article.

Is an RV Park a good investment

An RV Park is undoubtedly a good investment - with an ROI of around 10% for a residential real estate investment and 7% for a stock market . It is a low-cost and highly sought-after business.

In comparison to many other businesses, it has a low startup cost. It also has high patronage, especially in countries where people are always ready to hop on an RV and go on trips.

An RV Park is a great way to make good returns on real estate. You can check out this detailed guide on how to start your RV park.

An RV Parks could also make more money by rendering lucrative services to campers. RV Parks host events, provide vending machines and breakfast services, sell treats, lease out properties, etc.

What are the RV Park Business Models

Like many other businesses in the hospitality industry, RV parks operate on a Business-To-Consumer (B2C) business model.

The most critical aspects of an RV Park are that its expenses are typically low. The primary expenditures faced by most RV parks are related to the mortgage, property taxes, and utility bills. In most instances, the fees generated from long-term storage or recreational vehicle parking are enough to cover most fixed operating costs.

RV parks can generate both short-term fees from nightly stays while concurrently generating highly predictable revenues from long-term rentals and storage of recreational vehicles.

What differs from one RV park business model to another is usually the expenses cost and the amenities and add-on services offered. Let’s discuss the two prominent business models most RV park owners implement.

Low-Maintenance RV Park Model

This model involves purchasing a landed property that already has an RV plot and then renting them out to people with RVs or mobile homes. This option is less expensive and more convenient for RV Park owners. It also involves less risk and usually receives funding from third parties.

Operating this model of an RV park business comes with a range of responsibilities. These responsibilities could include providing top-notch security, electricity, water, etc. However, day-to-day maintenance of the RV homes is outside your duties.

Luxurious RV Park Model

The luxurious model specifically targets high-income earners. While RV parks are generally regarded as low-budget and accommodating to all, this model may not be so. That is because it offers extra amenities than those usually found in RV parks.

Luxury RV Parks offer utilities like heated pools, golf carts, arcades, pet parks, basketball courts, fitness centers, clubhouses, and many more. They aim to amplify the RV camping experience for those who can afford this model.

Luxury RV parks also provide more satisfactory staff to cater to customer needs during their stay. They also often supply high-wattage power that allows customers to run most appliances.

Although this business model requires you to expend more resources, they come with significantly higher rewards than a simple plot of land .

You can gain better benefits if the land is in a place with high demand and limited supply.

How much revenue does an RV park generate?

We have already established that RV Park makes a good fortune by rendering standard services. However, there is always the question of how much revenue RV Parks generates.

A successful RV Park makes about 50,000 to 90,000 dollars a year . These numbers will increase as the industry grows, especially post-lockdown when more people are warming up and excited to travel with RVs.

RV Park Capitalization Rate (Cap Rate)

RV park capitalization rate is the rate of return an RV park is estimated to produce based on the owner’s investment. By calculating its capitalization rate, you can decide whether it is worth the commitment or not.

How do you calculate the potential rate of return on an RV Park? First, you must determine the amount left after subtracting Operating Expenses from the Gross Income- The Net Operating Income. Operating Expenses mean the cost of running the park, while Gross Income refers to the rent your campers pay.

Net Operating Income(NOI) = Gross Income - Operating Expenses

The Net Operating Income enables you to know your cap rate. How much is left when you remove general business costs from the money you get from customers?

RV Parks boast of a higher cap rate than many commercial properties. Due to the growing increase in demand for RV Parks, they have become more lucrative and less risky than other categories of real estate. RV Parks often yield good returns after a few years of startup.

How do you start your RV park?

Check out this article for a complete step-by-step guide on how to start your own RV Park. Like every other business, an RV Park business requires proper knowledge and planning before startup.

If you’re interested in starting your RV Park business but still don’t know how to start, here are a few things you must consider:

Find A Good Location

One of the first things you must consider before starting any business is the location. How do you determine whether a place is suitable one an RV Camp business?

Tourists make up a significant part of your customers. If that city is a tourist spot, you might want to consider pitching your tent there. That is because tourists are usually RV owners looking for campsites to take breaks and let loose.

Does the city have favorable weather conditions? Campers are always interested in outdoor activities, and the last thing you want is a place with weather conditions that make it unbearable for campers to come out and play.

Also, consider how quiet the area is. Campers need a place free from the noise of everyday activities.

Is the area scenic and calming? Arkansas happens to be one of the most picturesque places for RV Park business, with its beautiful outdoor settings. Is it close to popular tourist attractions?

Consider the people you want to attract and the kind of areas that they would prefer. For example, older people are usually more drawn to quiet environs with a natural setting.

Take Care Of All Legal Requirements

Starting an RV Park business requires you to consider all legal technicalities involved. First of all, what business structure do you wish to adopt?

Choosing a business structure involves deciding whether to go for a Sole Proprietorship, a Partnership, or a Limited Liability business. Each business structure has its perks.

If you’re looking to start a small RV Park business, a Sole Proprietorship is your best option. It requires less paperwork and registration fees. It also makes business operations more simplified.

However, a limited liability business structure would be more appropriate if you’re looking to branch out to other states. It protects its members from liability in the case of legal issues or business debts. Places like Wyoming have excellent privacy protection.

Another legal area you should consider is the Zoning Regulations in the area. Does that area have strict laws that could limit you from operating commercially? If it doesn’t, you can file for the appropriate permits.

If you feel overwhelmed by the stress of meeting these requirements, try making a checklist of all the legal documents and the right time to get each one .

Determine Your Business Costs

Venturing into your RV Park business, you must determine business costs- how much it would take to purchase equipment, pay staff, acquire a park, etc.

If you’re looking to acquire a park, do you plan on renting an existing RV park, or do you wish to build yours?

Renting a park is always cheaper, easier, and faster to do. Either way, you’d need an estimate of how much you can put into acquiring one.

Next, consider how much you’d need to spend on equipment- A swimming pool, games, electricity, WiFi, and the likes. These are essential utilities that a standard campsite should have.

Hire Efficient Staff

Your business needs staff that is ready to work hard and be committed. Technology has reduced the need for manual labor and unnecessary paperwork. While the work is lesser, the staff should always make themselves available during business hours.

They should be responsive to the needs of campers. First impression matters, and whoever the campers meet at the front desk will affect their general impression of your business.

An enthusiastic staff always creates a calm and friendly environment. These are part of what your business needs to build its reputation.

Advertise Your Business

You’ve acquired your park, as well as the necessary equipment. However, your business isn’t getting the desired traction. Now, this is where advertising comes in.

Advertising comes in different ways- By word of mouth, social media advertising, making flyers, and creating a solid website.

Social media advertising is one of the most popular ways to get your business out there, especially these days when almost everyone is on the internet. Who are your target customers, and where can you find them?

Social media platforms like Facebook, Instagram, and Pinterest are places you can spread the word about your business. Have you got new promos and services you’d like to share about your business? Make them known on your social media page.

Another great way to advertise is by making flyers and spreading them out. You can also create an ad in your local newspaper to let people in that area know about your park.

Creating a solid website is another way to go. Your website should be easy to navigate. It should also have great content, contact information, and reviews from past campers. That way, potential customers know just how fantastic your services are.

Sources of Funding for an RV Park Business

An RV Park requires sufficient funding to start up and maintain. Every potential business owner must consider where and how to source funds.

Here are some ways an RV Park business can get funds:

Applying For Loans

For a bank to grant a loan to a business owner, the owner has to have a solid business plan. No bank wants to give out loans to businesses with no prospects.

A Small Business Administration Loan is also available. An SBA loan is a way small businesses get funding. It provides benefits like support to start and maintain your business, a small down payment, no collateral- as opposed to other loans- and many more.

Getting Investors

One thing we’ve consistently hammered on is how rapidly the RV park business is growing. With new RV parks springing up, there is a lot of competition.

What sets your business apart and makes it worthy of investment? You need something concrete to prove how strategic your business aims to be. For this reason, you’d need an RV park business plan.

Nobody wants to invest in a business that has no promise. Yes, the RV Park business is lucrative, but no industry can boast 100% success. As a business owner - selling yourself and your business should be a top priority.

Renting Out Equipment

Renting out equipment is one of the surest ways to get funds for your business. You can rent out canoes, kayaks, and other camping equipment.

As an RV Park business owner, do you have an equipment rental option for campers? Many campers may not have enough space to accommodate their equipment. In that case, renting out yours is a great way to get funding.

What kind of equipment would your campers need at your campsite, considering its location? For example, if your campsite is by a good river, it’s no debate that campers would need canoes, kayaks, surfboards, and so on.

To ensure orderliness in renting out your equipment, set up a pickup station or area where staff can keep track of inventory and store it safely after each use.

Renting Out Your RV

The RV rental business has always been a lucrative one. However, following the advent of the pandemic in 2020, more people have taken the RV route to travel.

We have young and older people rushing to go on tours, vacations, and the like. Considering the travel restrictions, RVs have been a reliable mode of transportation.

Not everyone can afford to own an RV, but RV Park business owners allow them to rent one. By renting out RVs, RV parks have managed to get more funds to run their business while making travel more convenient for people.

You can rent out your RV through RVshare, a platform that brings RV owners and renters together to rent RVs and gain income.

Providing Laundry Service

One of the essential services your park must offer is laundry service. No camper wants to go through the hassle of finding a laundromat.

By making provision for laundry service and getting campers to pay for this service, you can generate income for your business. You can make commercial-sized washing machines available for your campers/customers.

Make sure you have enough washers and dryers to accommodate the demands of campers. The service should also be reasonably priced.

Providing Breakfast Service

Breakfast is an important meal that campers need to start their day. By making sweet and exciting breakfast options available, you can generate more income for your business.

Some parks sell meal tickets to campers to grant them the choice of buying meals at any time.

RV park pitch deck

An RV Park Pitch Deck is a document that offers practical information like your business plan, target market, competitor analysis, business goals, and more.

Thanks to modern-day technology, we now have software like Dropbox that help businesses monitor the investors that look at their pitch deck, engage, and share. They also look at what areas in their pitch deck they are losing investors, thanks to real-time notifications.

If you’re looking to follow a particular template to create your RV Park Pitch Deck, you can check out detailed videos on Youtube to help.

Conclusion

Due to the general appeal of RVs, RV Parks remain relevant, despite the economic challenges and the impact of COVID. It’s also a bonus that the cost of acquiring a suitable park area doesn’t seem to change just how much an owner can make in the long run.

While acquiring an RV Park requires significant financial commitments, many RV Parks seem to get back much more than they put in.

An RV Park already has a great business model, and with the right business plan; and a good deck pitch deck, you will no doubt stay in business for a long time.

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