Until recently, Cavco Industries Inc.’s marketing reach was largely confined to the Western half of the United States, with most of its park model sales occurring within a few hundred miles of its factory in Phoenix.
According to a press release, it wasn’t until 2006 that Cavco opened a factory in Texas, which gave it access to the Texas market.
But with its recent acquisitions of Fleetwood Homes and Palm Harbor Homes, Cavco said it now has more production facilities than any other company in the park model business.
“It gives us a strategic advantage,” said Joseph Stegmayer, Cavco’s president and CEO, “because having multiple facilities lowers the freight costs for campground operators who purchase Cavco park models.”
Cavco’s Rocky Mount, Va., factory was the first to broaden its product lines to include park models, which it did last year. This year, however, Cavco is also producing park models in Woodburn, Ore., Napa, Idaho, Austin, Texas, and Plant City, Fla.
Combine the multiple factory locations with Cavco’s increasing innovations
in park model designs, which now include off-grid solar-power park models and custom designed units for Kampgrounds of America (KOA) and other companies, and it’s easy to see how Cavco has managed to achieve at least modest sales growth at a time in which most companies continue to struggle with the recession.
“I think we have to be somewhat cautious given the economy overall,” Stegmayer said. “But there are a lot of positives to our park model cabins. There’s the lower price points, the affordability aspect. We’re also willing to try anything. We’ve done a lot of prototyping of various units, not only in the campground arena, but in the dealer arena, and that helps us a lot. It helps us bolster our reputation for being very flexible, very creative.”
This has helped Cavco increase its business with KOA, which holds its annual convention in Las Vegas next week. It also enables the company to participate in upcoming tradeshows elsewhere in the country, including the Recreation Vehicle Industry Association’s (RVIA) National RV Trade Show, which takes place Nov. 29 to Dec. 1 in Louisville, Ky., and the Outdoor Hospital Convention and Tradeshow, which the National Association of RV Parks and Campgrounds (ARVC) is hosting in Savannah, Ga., from Nov. 29 to Dec. 2. Cavco will also showcase its park models at the Tampa RV Show, which is slated for Jan. 10.
And while Cavco has derived much of its park model business from campgrounds the past couple of years, the company is also seeing renewed signs of interest from consumers who want to purchase a park model and have it set up in a campground for use as a weekend retreat or vacation cottage.
“It’s a much lower investment than investing in a second home or condo or even a large RV,” Stegmayer said.
For more information on Cavco’s park model products, visit www.cavcoparkhomes.com.
Cavco Industries Inc., a builder of manufactured housing and park models based in Phoenix, reported financial results for the first quarter of fiscal 2012 ending June 30.
Net sales for the first quarter of fiscal 2012 totaled $98,981,000, up 108% from $47,505,000 for the first quarter of fiscal year 2011.
Net income for the fiscal 2012 first quarter was $17.45 million compared to $850,000 reported in the same quarter one year ago. Included in net income for the quarter was a gain on bargain purchase of $18,8 million resulting from the acquisition of Palm Harbor Inc. Fleetwood Homes Inc., a subsidiary owned 50% by Cavco and 50% by Third Avenue Value Fund, completed the acquisition of substantially all of the assets and assumption of certain liabilities of Palm Harbor Homes on April 23, 2011. Palm Harbor had been in the business of manufacturing and marketing factory-built housing and providing related consumer financing and insurance products.
During the quarter, Cavco incurred $744,000 in acquisition related costs for the purchase of the Palm Harbor Homes assets. It expects to have additional transaction-related expenses during fiscal year 2012. Interest expense of $1,461,000 was recognized during the first quarter of fiscal 2012 since April 23, 2011, primarily related to securitized financings and a mortgage construction lending facility of the finance subsidiaries acquired.
Net income attributable to Cavco stockholders for the fiscal 2012 first quarter was $8.6 million compared to $518,000 reported in the same quarter one year ago. Net income per share based on basic and diluted weighted average shares outstanding was $1.26 and $1.25, respectively, versus basic and diluted net income per share of $0.08 last year.
Referring to the first fiscal quarter, Joseph Stegmayer, chairman, president and CEO, commented, “During this eventful quarter, we closed on the Palm Harbor transaction and continued the associated operations under their new ownership structure. The Palm Harbor businesses are in the process of transition and have already demonstrated resilience post-bankruptcy. Certain streamlining actions have taken place which should improve operating efficiencies and financial performance over time. Work will continue during the next several quarters to integrate the Palm Harbor retail, manufacturing, finance and insurance lines of business for the overall benefit of the Cavco group of companies.”
“With respect to marketplace conditions, general economic challenges, including low consumer confidence levels, unemployment and underemployment, overall housing sector weakness, and restricted mortgage loan markets continue to impede new home sales activity, even in the affordable housing market in which we operate. However, we believe Cavco’s strategic initiatives during the past two years, including the Fleetwood Homes and Palm Harbor transactions, improve our ability to pursue existing demand while better positioning us to take advantage of future opportunities.”
Cavco Industries Inc.’s acquisition of a Fleetwood factory in southern Virginia is playing an increasingly important role in the company’s market strategy by manufacturing a diverse mix of manufactured and park models for a growing dealer base.
According to a press release, before Phoenix, Ariz.-based Cavco acquired Fleetwood’s housing division two years ago, the Rocky Mount factory only built HUD-code homes, as it had since 1968.
But with the Cavco acquisition, the factory’s product mix now includes not only Fleetwood-brand manufactured homes, but Cavco’s own lines of manufactured homes as well as park models.
“We’re pleased with the progress we’ve been making,” said Tom Satterwhite, general manager of the Rocky Mount factory, which employs 60 people.
“We’re happy, too, because the Rocky Mount facility gives us a strategic market reach we didn’t have before,” said Tim Gage, vice president of Cavco’s specialty division, noting the company now has improved access to the Northeast and Mid-Atlantic states because expensive trucking costs have been eliminated.
In addition to manufactured housing, the plant is producing several new park model lines. The Rocky Mount factory initially produced custom-designed park model cabins for campgrounds affiliated with Kampgrounds of America Inc. (KOA). But now the facility builds both cabins and traditional vinyl sided park models for a growing number of independently owned and operated parks as well as KOA-brand campgrounds throughout the Eastern U.S.
Cavco said the factory is also opening up new distribution channels for park models, both through street dealers and at campgrounds that want to sell the products to consumers as weekend retreats or vacation cottages.
“We’re constantly becoming stronger and getting more distribution and more retail turns on our product,” Satterwhite said.
The company said it is also developing growing number of sales leads through its websites and by participating in a growing number of tradeshows, such as the upcoming Pennsylvania RV and Camping Show, which is scheduled Sept. 14-18 in Hershey Pa., the National RV Tradeshow scheduled for Nov. 29 to Dec. 1 in Louisville, Ky., along with North Carolina RV shows in Charlotte, Greensboro and Raleigh.
With more than 40 inches of annual precipitation and three times as many cloudy days as sunny ones, upstate New York seems like the wrong place to determine the extent to which people can satisfy their energy needs with solar energy.
But Dr. Renee Scialdo Shevat argues that it’s actually an ideal place, since most of America has a similar climate. And she hopes to prove it with the energy production and consumption data she collects from the nation’s first “Solar Kolony,” which she is establishing this week at the Herkimer Diamond KOA campground in Hekimer, N.Y., according to a news release.
The “Solar Kolony” is a collection of three fully furnished “park model” cabins, which will be available for rent throughout the camping season. But unlike the “Kamping Lodges” that are available at other KOA campgrounds, Dr. Shevat’s units are powered exclusively by solar panels with a backup propane generator.
“We’re hoping to complete the installation of our ‘Solar Kolony’ in time for Earth Day on April 22,” Dr. Shevat said, adding that she is already receiving reservations from consumers who want to rent the environmentally friendly units.
Herkimer Diamond KOA installed its first solar powered park model cabin from Phoenix, Ariz.-based Cavco Industries last May. But the unit was so popular with campers that Dr. Shevat decided to install two more of Cavco’s solar powered park models this month, thus creating the nation’s first “Solar Kolony.”
But while many consumers will be enticed by the novelty of spending the night in the nation’s first “Solar Kolony,” Dr. Shevat is eager to study the Kolony’s energy production and consumption data, which she plans to share with the New York State Energy Research and Development Authority.
The park models that Dr. Shevat purchased to create the Solar Kolony have been equipped with energy saving lighting and appliances. But no one knows, at this point, whether it’s more cost effective or green to use a propane generator to produce backup power to recharge the Kolony’s batteries or simply to tap into New York’s existing electrical grid, given the relatively low cost of electricity that’s available between midnight and 6 a.m. “This will be one of many questions we hope to answer during the coming year,” Dr. Shevat said.
Beyond this, she said, campers who spend the night in the “Solar Kolony” will also have a chance to learn about other green building and living practices.
The 400-square-foot units, each of which sleep six, are all unique, but still have one thing in common: green technologies. Some of the units feature bamboo flooring, LED lighting, recycled axels and tires, recycled lumber composite decking, on-demand water heating, energy efficient heating and air-conditioning as well as a complete assortment of eco-friendly cleaning and bathroom products, including coreless toilet paper that leaves no cardboard core at the end of the roll. Even the units’ Amish-style furniture has been manufactured from recycled milk jugs and recycled hickory wood.
Storage tanks are also being set up to capture rainwater that falls on the units so that it can be used to irrigate an organic vegetable and herb garden. Park guests will be encouraged to pick vegetables and herbs from the garden during the summer months and to use them in their cooking while they stay at the park.
“Our guests will not only have an opportunity for a great camping experience, but the dwelling itself becomes an educational tool,” Dr. Shevat said, adding, “My hope is that our guests not only come to enjoy our park and our ‘Solar Kolony’ with friends and family, but come away inspired to live a greener lifestyle.”
For more information about the ‘Solar Kolony’ at the Herkimer Diamond KOA, please contact: Dr. Renee Scialdo Shevat at (315) 717-0175 or firstname.lastname@example.org; Tim Gage at Cavco Industries at (602) 763-5488 or email@example.com.
Cavco Industries Inc. announced that the U.S. Bankruptcy Court last week approved a subsidiary of Cavco as the successful bidder for the assets of Palm Harbor Homes Inc. at an auction conducted under Section 363 of the United States Bankruptcy Code.
Palm Harbor is a manufacturer and marketer of factory-built housing and recreational park trailers and a provider of related consumer financing and insurance products.
A newly formed subsidiary of Fleetwood Homes will purchase substantially all of Palm Harbor’s assets comprising its manufactured and modular housing construction and retail businesses and all of the outstanding stock of its insurance and finance subsidiaries, and to assume certain liabilities of Palm Harbor. Cavco and Third Avenue Value Fund (TAVFX) each owns 50% of Fleetwood Homes. Third Avenue Management, the investment adviser to Third Avenue Value Fund, is a New York-based company with expertise in value and distressed investing.
As previously reported, Palm Harbor and certain of its subsidiaries filed for Chapter 11 bankruptcy protection on Nov. 29, 2010. Shortly thereafter, Fleetwood Homes provided a $50 million debtor-in-possession credit facility to Palm Harbor. On March 1, Cavco’s subsidiary was selected as the successful bidder in the court auction with a winning bid of $83.9 million, subject to certain post-closing adjustments and customary conditions to closing.
At the close of the asset purchase transaction, the then-outstanding balance of the credit facility, including accrued interest, will be credited to the purchase price, thus reducing the amount of cash consideration to be transferred at the close of the transactions contemplated by the purchase agreement. The transaction, expected to close on April 1, will be funded by Fleetwood Homes’ cash on hand along with equal equity contributions from Cavco and Third Avenue.
The successful bid included manufactured housing factories, retail locations, equipment, accounts receivable, inventory, intellectual property, and certain warranty and other liabilities. Palm Harbor’s insurance and finance subsidiaries, including Standard Casualty Company, Standard Insurance Agency, CountryPlace Acceptance Corp., and CountryPlace Mortgage, Ltd. were not parties to the Palm Harbor bankruptcy filing, but the shares of these companies are included in the assets to be acquired by Fleetwood Homes’ subsidiary.
Joseph Stegmayer, chairman, president and CEO of Cavco Industries, commented “As a fellow builder with Palm Harbor, we at Cavco and our partners at Third Avenue are thrilled to soon move past the remaining sale procedures, and turn our collective attention toward integrating the Palm Harbor operations. During the entire purchase process, we were and continue to be compelled by our belief in the long-term value of the Palm Harbor brand names and passion of the Palm Harbor people that represent it. We also believe that this combination will make our organization stronger and more capable in the national housing industry.”
“This transaction is consistent with our strategic plans to grow our business while our industry right-sizes in general under currently depressed market conditions. Our intention is to help Palm Harbor continue its heritage of providing quality home building and retailing, financing, insurance products and outstanding customer service,” Stegmayer concluded.
Larry Keener, chairman and CEO of Palm Harbor Homes, commented, “We are pleased and excited that Cavco, through their subsidiary Fleetwood Homes, was the successful bidder for the Palm Harbor assets. Cavco is a financially strong and extremely well managed company. The combination of the Cavco, Fleetwood, Palm Harbor, and Nationwide modular brands and operations creates a powerful nationwide spectrum of products and services. All of us at Palm Harbor look forward to this new opportunity.”
With 67 RV sites, cottonwood trees, rock climbing walls and a three-acre fishing lake stocked with trout and catfish, Rancho Jurupa Park in Riverside, Calif., lives up to its billing as “a perfect setting for a quick escape from the city.”
Operated by the Riverside County Regional Park & Open Space District, it’s also one of a growing number of government-run parks investing in park models as rental accommodations.
“We did a feasibility study and a master plan, and one of the features that was called out was cabins for folks who want to get outdoors and have a nice recreational experience, but don’t have a camping unit themselves,” said Scott Bangle, general manager of park district.
Riverside County just installed six Silvercrest/Western Homes Division park models at Rancho Jurupa Park, and the county plans to add more park models to other county parks in the future. “I could see having a handful of units at every park,” Bangle said. “(They) will be part of our inventory at all of our major regional parks someday.”
Riverside County, of course, isn’t the only government agency that’s investing in park models as rental units. Phoenix, Ariz.-based Cavco Industries Inc. just delivered 25 park model cabins to Lassen National Park in Northern California, and the company is in discussions with other California counties about purchasing parks models for use as rental accommodations, said Tim Gage, vice president of Cavco’s Specialty Division.
“We believe that the government campground parks are a marketplace that hasn’t been fully explored at this point,” said Gage.
Private parks, for their part, have been stepping up their investments in park model cabins in recent years. But despite the significant purchases of park model cabins as rental units by Kampgrounds of America Inc. (KOA), Leisure Systems Inc. (LSI) and operators of independent parks, North America’s private campground sector is still a long way from being saturated with rental accommodations.
In fact, the KOA system, which purchased 317 park models last year, is now waiving royalty fees on park model income for one year on any new units that its franchisees purchase this year.
“The idea is to encourage more KOAs to invest in lodging,” said Mike Atkinson, director of lodging for the Billings, Mont.-based franchisor, adding that park models are “becoming an absolute necessity to grow your campground income.”
Necessity or not, park models accounted for 1,168 of KOA’s 1,530 fully equipped (with bathrooms) rental accommodations systemwide in 2010 and generated over three times as much income as typical RV sites. “Park models have the longest short-term occupancy and you get over three times the money,” Atkinson said.
Atkinson added that most people who could be potential campground accommodations guests have not even been exposed yet to the concept.
Of course, Atkinson cautions that simply purchasing park models doesn’t turn into immediate revenue hikes because they have to be marketed. He says it typically takes three years for them to reach their marketing potential.
Nevertheless, some park operators find that these ordinarily rustic-looking units outperform their expectations.
Scott Cory, managing partner of Ventura Ranch KOA in the mountains southeast of Santa Barbara, Calif., installed four Cavco park models at his park in June of last year. It was the first time his park offered accommodations and he found that his guests responded very favorably to his investment.
“Lodging is the biggest ‘wow’ factor we’ve done at our park,” he said, adding that he plans to purchase six more park models this year. He also complements his park models with glamour tents and teepees.
Manufacturers, for their part, are increasingly rolling out more park model rental options, not only to accommodate rising demand for rental units, but to make up for recent declines in sales to consumers who traditionally purchased park models and placed them on leased campsites for use as their own private vacation cottage.
“We’re looking at doing more rentals because more and more campgrounds are realizing the benefits of having park models versus transient RV sites,” said Tyler Steele, vice president of Canterbury RV in Goshen, Ind.
“Listening to the needs and desires of campground owners and then turning that input into an affordable and profitable cabin design has been a crucial key to our growth,” said Andy Davis, sales manager for Pinnacle Park Homes in Ochlocknee, Ga.
Some park model manufacturers, however, still focus most of their attention on producing units for consumers who want to buy them for use as vacation cottages that they can place on leased or purchased campsites in campgrounds, RV parks or resorts.
“We’re probably about 10% for campground rentals, while 90% of our production is for retail sales,” said John Soard, general manager of Fairmont Park Trailers in Nappanee, Ind.
Joe Follman, sales manager for Chariot Eagle Inc. in Ocala, Fla., added that park operators that rent or lease sites to park model owners can benefit from having a steady income stream. “I think there’s still a lot of room to grow in this industry, both in the Sunbelt and up north,” he said. “There’s still plenty of business out there. We’re such a small percentage of the RV business.”
A continuing roadblock is the availability of financing, both for consumers and parks that want to purchase park models for use as rental accommodations.
“You can show how quickly they can be paid off, and how it’s a great investment to put cabins in. But the lenders are just not buying aggressively,” said Dick Grymonprez of Athens Park Homes in Athens, Texas. “If we could get financing, all of us would be building more cabins. I can’t tell you how many campgrounds tell me, ‘If you can get us financing, we’ll buy six.’ I can’t tell you how many roadblocks we face getting them financed.”
But there is money out there. Parks are continuing to purchase park models. And, increasingly, manufacturers say that the best sources are local lenders rather than nationally known lenders that have little knowledge or experience with the park model product.
The same approach can also help consumers find sources of financing for park models they’d like to purchase as private vacation cottages. “We’re recommending that dealers work with their local banks and educate them about the lack of defaults in the park model world and why it’s a good business model for them,” said Steele of Canterbury RV.
Even as manufactured-home sales continue at their lowest levels in about 50 years nationwide, Phoenix-based Cavco Industries Inc. is attempting to grow more by buying another one of its rivals, The Arizona Republic reported.
Cavco in August 2009 bought one of its largest competitors, Fleetwood Enterprises Inc., out of Federal Bankruptcy Court for $26.6 million and now is attempting to buy Dallas-based Palm Harbor Homes Inc., for $57.5 million.
Palm Harbor filed for bankruptcy reorganization in November, and the purchase would be subject to an auction and court approval. The company’s products are sold in Arizona and it has a manufacturing plant in Tempe.
“We are trying to grow in a down market and get positioned for when things turn around. That is our strategy,” Joseph Stegmayer, Cavco’s chairman, president and CEO said on Friday (Jan. 28).
He said a number of rivals have shut down and that Cavco officials believe their balance sheet is strong enough to support acquisitions.
A Palm Harbor purchase would be expected to give Cavco more sales in the Southeast, from Florida to Texas, where Palm Harbor is strongest, Stegmayer said. With the purchase of Fleetwood, Cavco was able to boost is distribution to 35 states, from 10.
Cavco, also a builder of recreational park trailers, is the second- or third-largest maker of manufactured homes. Stegmayer said he couldn’t be sure because Champion Home Builders Co., a Pennsylvania company believed to be among the top three, is private and doesn’t report its sales.
At any rate, he said the potential purchase definitely would not boost Cavco into the No. 1 spot because of the sales power of No. 1 Clayton Homes, a Tennessee firm owned by Berkshire Hathaway and Warren Buffett. Palm Harbor is believed to be the third or fourth largest, ranking behind Cavco, Stegmayer said.
Over the past two years, the manufactured-home business sold the lowest number of homes since records were first kept in 1959, Stegmayer said. About 50,000 homes were sold nationwide in 2009 and 2010. Cavco expects to sell about 5,000 in its current fiscal year, which ends March 31.
While financing has become more available for qualified buyers, he said the biggest problem is a lack of confidence.
“Our retailers say customers come in and look,” he said. “But they just don’t want to make a decision now because they lack confidence in the economy, where the economy is going.”
The company last week reported net income of $24,000, or 0.4 cents a share, for the quarter ending Dec. 31, compared with a loss of $1 million, or 16 cents a share, a year earlier.
“That’s not a lot of profit this quarter but a big swing from last year, so we are pleased to move from the red to the black,” Stegmayer said.
Net sales grew 9% to $39.6 million compared with the same quarter a year earlier. It was the first quarter since the Fleetwood purchase in which sales could accurately be compared with the previous year.
Editor’s Note: Wall Street Cheat Sheet, a newsletter for investors and entrepreneurs, filed comments on Sunday (Dec. 19) following last week’s quarterly report by Winnebago Industries Inc. Excerpts of the newsletter follow.
Winnebago Industries Inc. sports a $443 million market cap and has beaten estimates in six of the past 12 quarters.
The company’s balance sheet remains very strong with no debt and about $3 per share in cash.
Operating margins were 3.5% excluding a $644,000 asset sale gain.
Gross margins rose from 0.6% all the way to 9.1%.
Did You Hear That? CEO Bob Olson said on the call that “the outlook for 2011 looks good and labor availability is the one possible constraint the company could have later in fiscal 2011.”
Analysts at Morningstar noted that they “think Winnebago can be successful if it does not leverage up the company over time to make deals and only pursues acquisitions with a high probability of sufficient return. We will reduce our fair value if management starts to constantly make acquisitions simply to bring in more revenue without sufficient regard to long-term profitability.”
Competitors to Watch: Thor Industries, Skyline Corp. and Cavco Industries Inc.
Technicals: After last week’s rise, shares of WGO are not far from completing a cup-shaped base dating back to this past May. The stock’s 50-day moving average is poised to break above its 200-day line in the coming days, and volume has been steadily increasing for the past four weeks. All are bullish signals, and a breakout above $17.43 may be the beginning of the company’s next move higher. However, understand that cup-shaped bases often have handles, meaning that initial breakouts often fail, with the following “handle” breakout being the move that augurs in favor of future gains.
Commentary: WGO swung to a fiscal first-quarter profit that handily topped analysts estimates. Higher deliveries and a rise in average selling prices were behind the gain. The RV maker has returned to profitability in recent quarters, recovering from an industry crisis that saw some competitors file for bankruptcy. Still, it faces consumers who are reluctant to make big purchases due to persistent high unemployment and housing woes. The company is an interesting play for those seeking exposure to large-scale consumer purchases.
Cavco Industries Inc. reported a 249% increase in sales for the first quarter ending June 30.
The Phoenix-based builder of manufactured homes and recreational park trailers said on Thursday (Aug. 5) that net sales for the quarter totaled $47,505,000, up from $13,595,000 for the first quarter of fiscal year 2010. The first quarter 2011 results include the Fleetwood Homes operations which, as previously reported, were acquired during the second quarter of fiscal year 2010.
Net income attributable to Cavco stockholders for the fiscal 2011 first quarter was $518,000 compared to net loss of $1,449,000 reported in the same quarter one year ago. Net income per share based on basic and diluted weighted average shares outstanding was $0.08 versus basic and diluted net loss per share of $0.22 last year.
“We are pleased to report positive earnings for the first quarter of the new fiscal year, however there remain a number of impediments to the company’s achievement of sustained, satisfactory operating results,” said Joseph Stegmayer, chairman, president and CEO, while commenting on the quarter. “Incoming order rates are still turbulent, limiting our factories’ opportunities to increase production levels and hampering efficient production planning and execution. Additionally, gross margins continue to be adversely impacted by a product mix favoring smaller, less amenitized homes.”
Stegmayer continued, “Challenges pertaining to consumer manufactured home lending abound including restrictive underwriting guidelines, irregular appraisal processes, and limited secondary market availability for manufactured home loans. To address these negative forces, we and the industry as a whole continue to work with lenders and regulators on ways to improve the prospects for the borrowing needs of buyers of affordable factory built housing.”
“The second quarter of fiscal year 2011 that we have now begun marks the one-year anniversary of the Fleetwood Homes business combination. We believe the integration of Fleetwood Homes has gone well, and that we are properly positioned to take advantage of opportunities to further improve our operating performance,” Stegmayer concluded.
Phoenix-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.