Changing Product Lines To Make More Money

An RV Park is simply a parking lot for recreational vehicles. And how you utilize that land and permit can have a huge impact on your net income and asset value. In this RV Park Mastery podcast we’re going to explore potential avenues for many RV Parks that can be more valuable than what they’re doing now.

What is The RV Park Mastery Podcast?

Welcome to the RV Park Mastery Podcast, where you will learn the correct way to identify, evaluate, negotiate, perform due diligence on, renegotiate, finance, turn-around and operate RV parks. Your host is the 5th largest owner of RV and mobile home parks in the United States, Frank Rolfe.

There's nothing wrong in changing product lines for maximum profitability. Marlboro started off as a woman's cigarette brand, and then it realized it could make more money if it was able to convince consumers it was a men's cigarette. There are a million examples in all kinds of product categories in American business where people have taken their product, their widget, and repackaged it into something different because there was a more profitable use of their factory and of their time. And RV parks are no different. People are starting to take your regular RV park and they're repackaging it into things that make more money. This is Frank Rolfe with the RV Park Mastery Podcast. We're gonna talk about some of the ways people are starting to repackage RV parks into other uses because those uses create higher EBITDA.

Now, let's start off by saying there are several basic types of RV parks out there. You've got your overnighter, the place when you're driving down the highway that you stop and you spend the night or maybe you might spend two nights there, but it's not your end destination. And then you have your destination RV parks, typically near something that people want to hang out with for a while. Average tenancy runs about two weeks. Might be a Six Flags, it might be some kind of scenic wonder, whatever the case may be, the destination RV park is where people are going to. And then you have your extended stay RV park. Somewhat like the destination RV park, the goal there is to get longer-term tenancy. So on the extended stay, sometimes people stay for an entire season because they like the scenery or the cool weather in the summer, whatever the case may be. But in all cases, if you really look at the numbers on those three style of RV parks, what you see is the longer people stay in the RV park, the more money that you make.

So what if you were to take that extended stay concept and extend that for a lifetime? What if your customers were to stay rather than an average of 14 days or maybe even 90 or 120 days? What if they stayed for 365 days? Think of how that would boost your bottom line. Well, that's why many RV park owners are beginning to start converting their properties into things that are more akin to full-time housing. So how does that work exactly? Well, let's say you've got a RV park in a major metro area and you're running it as an RV park. But if the city would allow you to put RVs in there and they can sit without any timetable. Some cities have no maximum number of days. Some do, but many don't. You can bring something in and you can have it stay for 29 years and they have no problem with that. Then you may be missing the boat trying to operate that RV park as an RV park as opposed to just an affordable housing spot. There's a very famous RV park down in Dallas called Hi Ho. Hi Ho's been around forever. It was around when I had my very first property. And they converted that thing over time to where basically people lived there their whole lives. And why not? If you're gonna be living in a travel trailer or a fifth wheel or a motorhome and you work in Dallas or like to stay near the city, then Hi Ho is for you. They have a space. The rent is affordable. You don't have to move around.

And as Hi Ho transitioned from a standard RV park into more of a long-term tenancy property, what did it do? It boosted the revenue enormously. When I got in the business, many old-timers told me, "Yeah, you need to do what Hi Ho has been doing." They got the plan. And that was the plan. The plan was to realize people could live in those RVs on a regular full-time basis and to encourage that. Instead of billing by the day or by the week, it's a whole lot easier to bill by the month. A lot less management on top of that, too. Another thing people are starting to do with a lot of RV parks is they're starting to look at, wait a minute, maybe I could repopulate this with something other than RVs, yet fully in line with their RV permit. We had some RV parks down in South Texas, we've been doing just that. We've been importing park models into vacant lots and then selling those park models off. A park model is something that's small, typically under 400 square feet. It's delivered on skids, sits on the ground, and it gives the person living in it a much more traditional stick-built housing model than their RV. You've got a full-size bathroom, full-size bedroom, full-size kitchen, ADA compliant, all the bells and whistles, everything that anyone would want. And we found a lot of those people in those RVs, particularly in some of those extended stay communities like this one where it's seasonal, they don't like hauling that giant motorhome or fifth wheel down from many, many states to the north. It scares them. Those things are big. As they get older, they don't want to do it. And we tell them, "Look, you can sell your RV and you can buy this park model. You never have to drive it down again. And if you want to come down here seasonally, just get in your car in Ohio and just drive straight down. So much easier, no stress. You can stop at fun things along the way as you go." That's a way, again, you can convert an RV park into something that's more full-time. And you know what? When many people come in and they start living in those park models, what do they decide? They decide, "You know what? I don't need my house back in Ohio. I'm just gonna sell that thing, put the money in the bank, and just live here year-round." That's typically what happens on that.

Now, another way of getting long-term tenancy in an RV park is through the new things that young people love, right? Different forms of tiny homes and those type of deals. Because in America, you typically can't put tiny homes in any other property. You can't put them on a single-family lot. You can't even put them in a mobile home park because they're lacking what's called the HUD seal. They were not built to mobile home specs and therefore the government stops you from bringing it into a mobile home park, but that's not true of RV. RVs don't have HUD seals. So whether you know it or not, with your RV park, you kind of have a monopoly for anyone who wants to live in a tiny home in your entire market. I have seen RV parks, there's one that I drive by frequently in Indiana, half of the park is now tiny homes. They basically cut the park in half. On one side, you have nothing but tiny home neighborhoods, and the other half you have traditional RV. I bet you over time, I bet 10 years from now, the traditional RV side is also gone and the whole thing is one gigantic RV development. Again, what you're trading is nightly rent or weekly rent for monthly rent. And on top of that, look at the management efficiency as you go more to a full-time tenancy. You don't have people moving in and moving out. There's not as much stress on the manager. You also don't often have to have or field as many amenities. People are now not stopping for the mini golf. They're stopping because it's the least expensive way they can live and the lifestyle that they are accustomed to.

Now, I'm not suggesting you take your existing RV park and just jump right into my concept here. This is something that you can do very slowly. This is the kind of thing that Conrad Hilton used to call a "build another wing on the motel" concept. You can crawl, then walk, then run with it. But if you have vacant lots, perhaps you should test it. You could try it. You could bring in a park model. You could let a tiny home move in. You could see if there's a way to encourage people to stay longer. Because every time you're able to convert a space from being vacant to full, you're making money. Every time you're able to convert a customer from a short tenancy to a long-term, you're making money. And in the RV park business, that's what it's all about. It's trying to maximize your income. And if changing product lines is what gets you there, then that's a great idea. This is Frank Rolfe for the RV Park Mastery Podcast. Hope you enjoyed this. Talk to you again soon.