The Recreational Vehicle industry has slowed dramatically according to shipments. According to a July 2023 survey by the RV Industry Association (RVIA), total RV shipments have plunged 47.7% so far this year, with July’s units down 30.5% compared to the same month in 2022. This rapid descent can be attributed to converging economic headwinds that have suppressed consumer appetite.
Foremost among the factors stymieing RV demand is inflated pricing. Persistent inflation has gnawed away at discretionary income, leaving less room in family budgets for luxuries like campers and motorhomes. Simultaneously, the Federal Reserve’s interest rate hikes have driven up financing costs, making loans prohibitively expensive for many buyers. On top of affordability challenges, surging fuel prices have increased the operating costs for recreational vehicles, deterring some who balk at the pump price volatility.
Exacerbating matters is an oversupply of RV inventory. Expecting robust sales to continue, RV manufacturers ramped up production in 2021 and early 2022. However, softened consumer enthusiasm left dealership lots overflowing with excess inventory. Now, abundant supply amidst weakened demand has sent shipments into freefall.
With that being said, the foundational investment thesis of RV parks remains, with the demand of RV sites and the supply of RV sites available are still at a disconnect.
Industry insiders remain downbeat about the sector’s prospects for the 2024 season. The RVIA projects that lackluster retail conditions will persist until inflation ebbs, interest rates plateau, and gas prices stabilize. Dealers will likely have to offer deep discounts to whittle away at swollen inventories. A few manufacturers have already halted production lines in response to sluggish order activity.
As a broker of RV park communities, I have witnessed firsthand how this sales slump has created a dichotomy for owners and investors. For existing park operators, many saw huge increases to top line revenues with the boom of “Covid Camping”, however have seen drop offs in reservations and the YoY increases of revenues seem to be plateauing. While we are not seeing a reversion in the growth of revenues the speed at which they were growing is not going to be a forever assumption. While lower demand has hurt their income, it has meant less pressure to expand quickly. On the investor side, the market disruption has tamped down sky-high valuations as parks are not seeing the growth anticipated. Interest has cooled considerably from the frenzy of recent years. However, astute investors realize parks represent a long-term investment and view this as an opportunity to acquire assets at a more reasonable price, anticipating an eventual rebound. Though the short-term challenges are immense, the intrinsic value remains for RV parks with prime locations and facilities.
Though this market disruption has severely impacted park revenues, the underlying value proposition remains strong. Once economic stability returns, pent-up demand for RV vacations should unleash. Camping remains a cost-effective and enjoyable way for families to travel and explore the outdoors. As inflation settles, recreational vehicles will regain their affordability. This slight downturn appears temporary. For long-term owners and investors, RV parks represent enduring assets. Their locations near top destinations, array of amenities, and sense of community cannot be replicated. Patient capital invested today could reap significant rewards when the clouds recede. For RV parks, brighter days lie ahead!
SOURCES:
RVBusiness. “RVIA: July Shipments off 30.5%, Year-To-Date off 47.7%.” RVBusiness – Breaking RV Industry News, 25 Aug. 2023, rvbusiness.com/rvia-july-shipments-off-30-5-year-to-date-off-47-7/. Accessed 5 Oct. 2023.
