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Cavco’s Park Model Business Perking Back Up

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June 1, 2010 by   Leave a Comment

Cavco logoPhoenix-based Cavco Industries Inc. is helping create a market for campers who don’t want to pitch a tent, tow an RV or buy or rent a pricey cabin.

The company’s main business is making manufactured homes, but it has developed a small but steadily growing niche of making recreational park trailers that can be purchased for about $35,000 and up, or rented at affordable prices, according to the Arizona Republic.

Cavco is even producing a solar version and recently installed what it claims to be the first solar-powered park-model cabin that can be operated off an electrical grid at a KOA campground.

Officials with Kampgrounds of America Inc., the world’s largest camping company, credit the little units with expanding its customer base, bringing in more minorities and “jump-starting” a new camping segment that wants an affordable camping experience with some comfort.

“They opened up camping to an entirely new market for us. There’s a level of camper out there who wants the comfort and is willing to pay for it,” KOA spokesman Mike Gast said.

Jim Rogers, president and CEO of KOA, predicts that the commercial-campground industry will become more aggressive over the next five to 10 years in buying units like these.

The 400-square-foot lodges that Cavco makes for KOA are rented for $75 to $150 a night and come with bathrooms and full-service kitchens, and can sleep four to six people. “We call it Marriott camping,” Rogers said.

KOA and Cavco came together about eight years ago. The 48-year-old KOA, headquartered in Billings, Mont., had been renting smaller “Kabins” and “Kottages” for several decades to give customers alternatives to tents and RVs. But most of those units don’t have bathrooms and kitchens. KOA found them to be expensive to maintain and buy.

And for about the past dozen years, 45-year-old Cavco had been making smaller 400-square-foot versions of its manufactured homes as second homes. They are called park models because they designed for RV parks.

Cavco proposed the idea of making more rustic-looking park models for camping. For several years, the two companies tested various materials and the durability of the homes.

Gast said of a typical Cavco lodge: “It looks like it belongs in a campground. It either has cedar or log sides. It comes in on wheels. You add a porch, and all of a sudden you’ve got a cabin in the woods.”

The company bought 250 last year and expects to buy an additional 300 this year, he said.

The lodges have proven to be popular with customers.

“We can’t get enough of them fast enough,” Rogers said of the lodges. “That’s the future of camping in the U.S. It’s looking very good for Cavco Industries as a result of the popularity.”

The bulk of KOA’s business is renting tent or RV spaces, and only about 15% is its lodging business, Gast said. But rentals of the Kabins, Kottages and now lodges have been growing because they offer affordable vacations at a variety of locations.

“We found out last year that camping is hotter than we thought. We had our best summer in 48 years. We did a lot of surveys, and it was the affordability and the desire for a quality affordable vacation close to home that really rang true to customers,” Gast said.

Rogers said Cavco is KOA’s main supplier but it hasn’t been able to buy all its lodges from Cavco because of the cost of freighting them from a plant in Goodyear, Ariz.

Cavco hopes to resolve that issue by starting production at a Fleetwood Enterprises Inc. plant at Rocky Mount, Va., that Cavco acquired last year.

Cavco and other makers of manufactured homes have been struggling during the recession because would-be buyers are having trouble getting financing. Cavco last year lost $3.37 million, after making a profit of almost $500,000 the year before.

Cavco sells about 750 to 1,000 park models a year, and about half of those are recreational types such as the KOA lodges, said Tim Gage, a Cavco vice president.

“The rental market is kind of an up-and-coming market,” he said, and has been expanding every year for the past five yeas.

Cavco has been going to RV industry conventions and seminars to promote the recreational units. Now, it is pushing into solar-powered units for remote campgrounds or campsites that don’t have electrical connections.

Its first “off grid” park-model cabin was installed at a KOA campground in Herkimer, N.Y., to be used as a rental cabin and to showcase green-living practices.

It has solar panels on its roof that can produce two kilowatts of power. It also has a backup propane generator, bamboo floors, axles and tires made of recycled materials, recycled-lumber composite decks, and energy-efficient heating and cooling. Even its furniture was made from recycled milk jugs and recycled hickory wood.

Last year, Cavco delivered its first solar-powered park model to Sacred Rocks Reserve and RV Park near San Diego but that one is connected to an electrical grid.

“One reason for solar is to stay ahead of the game of what everyone else is doing,” Gage said.

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