Publisher’s Note: KOA Chairman and CEO Jim Rogers is arguably the industry’s most relentless marketeer. A former Harrah’s Entertainment Inc. executive, he has etched KOA’s yellow brand into the American psyche and now looks to change the face of KOA’s 463 parks — and American campgrounds in general — with the infusion of more and more sedentary camping “cabins” and “lodges.” Here are the highlights of an interview conducted during KOA’s Nov. 17-20 convention at The Woodlands Waterway Marriott in the Houston suburbs.
RVB: The general atmosphere of your convention was pretty positive, given all of the headwinds that the American economy has faced recently.
Rogers: KOA has just come out of its strongest summer in 47 years. If you take camper nights and registrations for the period of June, July, August and September, we’ve just exceeded anything we’ve done in the past. Where we hurt in 2009 and anticipate hurting this winter and probably early 2010 is in the Snowbird markets that are more dependent on a fixed-income lifestyle. What we did not see last year in America is the transient Snow Bird.
So, we had the resident Snow Bird that headed into Texas and Arizona and committed to three or four months, but the people who were going down and spending a month here and there did not show up. And that’s what we don’t have any certainty about.
Having said that, the cruise lines are indicating very strong advance reservations, which to me is the same market that we look at for this transient Snowbird. But it’s hard to predict that. Again, we anticipate the 2010 summer will be as strong as 2009’s was, if not a little better.
RVB: Looking back at September of 2008 and the economic meltdown that occurred then, could you have imagined that you’d be sitting here now coming off a near-record 2009, with gains anticipated in both camper nights and revenues?
Rogers: No. We went into our plan for 2009 very concerned. The surprise was that we quickly became the affordable (lodging) option. America traded down. They traded down everything they’ve done, and we exceeded expectations. They’ve gone to Costco more aggressively than they did previously, as they did with the camping alternative. If people were going to take a vacation, instead of staying at a Marriott or going to Europe, they decided to go camping again.
There were record tent sales last year in the United States. People found a different way to get outdoors. And, again, we continue to see people staying closer to home – even though Yellowstone Park, a distant destination, posted a record year.
And when they went to a KOA campground, they didn’t find their grandfather’s campground. They found the latte machine, they found (park model) lodges that had a bathroom and kitchen in them for $125 and a swimming pool and they were surprised. They were hooked. We continue to see 14-15% of our campers are first-time-ever campers. And among the first-timers, 50% are families. That’s great news for us that we are bringing in new people to experience KOA and the campgrounds that we’ve got. That’s going to play well long-term.
RVB: So, what do you really think these newbies are looking for in terms of camping accommodations?
Rogers: Anyone who has an investment in an RV brought their gear out of the garage this year. They might not have used it for a while. But our greatest growth will be a double-digit increase in camper nights in the lodge business — the 400-square-foot park model that offers a kitchen and a bathroom and a deck out front. That’s where our greatest growth is, and that’s why we’ve developed the new models with three suppliers, General Coach, Cavco Industries Inc. and Thor’s Breckenridge division.
RVB: What, in your opinion, is behind this evolution to more sedentary – or “destination” — styles of lodging?
Rogers: A lot of things are. Initially, it was this trend toward staying closer to home. People didn’t want to spend the gas or didn’t have the RV and they wondered what to do. In the process, people began to realize that these accommodations were there.
If you talk to our franchisees, they’re going to tell you they had 20 requests (for park model “lodges”) that exceeded what they could fulfill.
At the same time, the lodge customer gives us the highest satisfaction rating by 10 points. If you ask our lodge customer what they think of the experience, they are way above the average. They have the highest intent to return and they tell us they get the best price value. And they are paying the most for the experience. It’s all there. What a future!
RVB: What’s the demographic profile of a “cabin” or “lodge” customer?
Rogers: They skew more to families and first-timers and people who drive up in a car. It’s basically a customer who is right now using a motel or hotel. That’s where we’re going. We are learning from our Australian friends (Big 4 Holiday Parks, with whom KOA has a marketing partnership), who have 32% of their inventory in cabins and lodges.
You are going to see KOA on Travelocity, Orbitz, hotels.com. You talk about a new market and what we’ve got to offer; we’ve got to get the inventory out there.
Plus, KOA is going to produce a million directories in 2010. We intend to mail 400,000 to our Value Kard holders, and in the middle of the directory is a five-page, full color lodge brochure. You are going to begin to realize there is indeed a different offering in that experience. The fact is, with a motel, you get a room. What we are going to tell people is that this is a social activity.
RVB: To what extent do you anticipate expanding your lodge business?
Rogers: We’ve got 4,000-plus cabins (smaller units without water), but we only have about 1,000 lodges (generally park models with full facilities) among our 56,000 sites. That’s about 10% that are currently this type of accommodation. We’ve got to increase that inventory to go out to the market and grow this segment of our business – tremendously.
In the next three to five years, we hope that gets closer to 15-20% of our total inventory. It won’t happen that fast. That’s an aggressive goal. We are going to lead the charge at our 25 company-owned properties.
RVB: Needless to say, this would be a huge shift in the basic character of a so-called RV park or campground if it actually occurred to the extent that you’re describing it.
Rogers: There’s no question that the mix is dramatic. We have RV inventory with full hookups that is going unused that is getting $40 to $45 a night, and we put in a unit and we get $150 a night using the same real estate using the same hookups and the demand is right there behind it.
RVB: Do all of your lodges exude that “rustic” look that we’ve seen so much of lately?
Rogers: KOA has a team that has gone to the manufacturers, CAVCO and Breckenridge and General in Canada, and designed eight different models that run from a studio model that is probably 199 square feet to the big baby, which is 400 square feet. They all have bathrooms and kitchens and they all have concrete siding that looks like wood. They look like something from New England. Most of the inventory will be a log-side perceived look. That reinforces the cabin look that we’ve created. This is where we have an incredible growth opportunity.
By no means are we going to say adios to the RV industry. But we see the ability to be more diverse to whom we appeal to and we’ve got to reorient how we meet the demand for the supply that is out there.
RVB: So, do you also see growth in the entry-level type campers who, in some cases, prefer tents?
Rogers: We’ve definitely seen an increase in our tenter business. But the problem we’ve had is that over the last few years, we’ve reduced the inventory of tent sites. It’s a matter of figuring out what we have, and, ultimately, we see the tenter converting to a lodge or cabin.
RVB: With regard to private parks, many states are under extreme economic financial pressure. Your thoughts on all that?
Rogers: We all have to realize that public parks are as diverse as commercial parks. And we need to make sure that national parks still draw people for vacations and do a good job of taking care of them.
The more localized experience, the state parks that are indeed in dire shape, I think they will continue to be in difficult shape, and, hopefully, American campers will consider the commercial option more so than they have in the past.
The states need to find a new economic engine.
The other thing is that campers are coming to expect a certain level of services and the states aren’t going to be able to provide that.
So, some people who are partial to public parks have now begun to try the commercial side, and they’re pretty happy. They are more entertained and they are staying closer to home. They are staying longer and they expect a little more. Fishing for four days isn’t going to keep them entertained. They need something else going on. So, while I want public parks to continue to operate, I know that some of the business is going to swing over to us.
For the past nine years, Cavco Industries Inc. has been supplying Kampgrounds of America Inc. (KOA) franchisees with park model “Kamping Lodges” manufactured at its factories in Arizona and Texas.
But as a result of Cavco’s recent acquisition of Fleetwood Homes, the company now has the ability to efficiently service hundreds of KOA franchisees in the Eastern part of the country through an 80,000-square-foot manufacturing plant in Rocky Mount, Va., according to a news release.
“By Feb. 1, we will have the first Kamping Lodges available at our Virginia facility,” said Tim Gage, vice president of Cavco’s specialty division, adding that the Rocky Mount facility will save East Coast KOA franchisees significant sums of money on shipping costs.
Mike Atkinson, KOA’s director of lodging, said Cavco’s Virginia plant will help KOA franchisees keep their costs down as they continue to move into the accommodations business. KOA franchisees purchased more than 200 Kamping Lodges from Cavco in 2009, and more purchases are expected next year.
“Over 50% of our franchisees will have a lodge with a bathroom by the end of this year, and we expect to see continued purchases of these products,” Atkinson said.
While the location of Cavco’s Rocky Mount facility helps KOA franchisees from a pricing standpoint, equally important is Cavco’s continuing ability to tailor products to KOA’s needs. “If we need to modify a spec or really do something outside the box, they are our ‘go to’ guys,” Atkinson said. “They understand us. They really understand our business.”
Atkinson said that the key for KOA franchisees is to purchase only lodges of impeccable quality because lesser quality lodges don’t have the durability for rental use. “That’s the key,” Atkinson said. “To put high-quality, long-lasting Kamping Lodges in your campground.”
For more information on Cavco’s Kamping Lodges, park models, and other specialized living units, contact Gage at (602) 763-5488 or visit www.cavcoparkhomes.com. For more information on KOA’s use of park model cabins as Kamping Lodges, contact Atkinson at (406) 248-7444 or e-mail him at firstname.lastname@example.org.
The annual Kampgrounds of America Inc. (KOA) International Convention in Houston, Texas, continued its tradition as one of the most productive and lucrative camping expos in North America Thursday (Nov. 19), according to a news release.
More than 500 KOA owners and managers met with leading vendors to purchase the supplies they’ll need to keep their guests supplied and happy in 2010. Nine unique lodges, including a duplex build by Cavco Industries Inc., shown at left, were featured by park model and lodge builders from across the U.S.
See a special YouTube video summarizing the day in today’s featured video.
Today, KOA names its annual KOA President’s and Founder’s award recipients.
Manufactured housing and park model builder Cavco Industries Inc. Thursday (Nov. 5) reported a 2% drop in sales and a net loss for the second quarter ending Sept. 30. The Phoenix, Ariz-based builder said sales totaled $29.4 million, down from $30 million a year ago.
Net loss attributable to Cavco stockholders for the quarter was $163,000 compared to net income of $518,000 reported in the same quarter one year ago. During the quarter Cavco incurred $711,000 in non-recurring acquisition related costs for the purchase of the Fleetwood Homes assets.
For the first six months of fiscal 2010, net sales decreased 34% to $42.9 million from $65.5 million for the comparable prior year period. Net loss attributable to Cavco stockholders for the first half of fiscal 2010 was $1.6 million compared to net income of $1.37 million last year.
As previously reported, Cavco and an investment partner, Third Avenue Value Fund, acquired certain manufactured housing assets of Fleetwood Enterprises Inc. on Aug. 17 through their jointly owned corporation, FH Holding Inc., now named Fleetwood Homes Inc.
The transaction included seven manufactured housing plants and all related equipment, accounts receivable, inventory, certain trademarks and trade names, intellectual property, and specified contracts and leases and assumed express warranty liabilities pertaining to certain of the previous operations. The purchase price of the transaction was $25.8 million and was paid in cash by the subsidiary. Neither Cavco nor Fleetwood Homes incurred debt in connection with the purchase or subsequent operations.
Financial information for Fleetwood Homes is included in the Cavco consolidated financial statements since the date of acquisition.
Nine recreational park trailer manufacturers will be displaying their latest units for the RV park and campground industry in the Park Model Pavilion at the annual InSites Convention & Outdoor Hospitality Expo Nov. 11-12 in Orlando, Fla.
The show is sponsored by the National Association of RV Parks and Campgrounds (ARVC) and will be held at The Rosen Centre.
The displaying companies are: Airstream Inc., Athens Park Homes, Breckenridge Park Trailers, Cavco Industries Inc., Chariot Eagle Inc., CrossRoads RV, Keystone RV Co., Skyline Corp. and Stone Canyon Lodges & Park Models LLC.
Meanwhile, in a related development, ARVC and Thor Industries Inc. announced in October that they have formed a strategic alliance to provide private park operators with exclusive prices on park models and travel trailer units specifically designed for use as rental accommodations at campgrounds.
“Three of Thor’s companies, Airstream, Breckenridge and Keystone, now offer unique lines of park model cabin and travel trailer units that have been specially designed to meet the durability needs of private park operators who are anxious to expand their offering of rental accommodations,” said Shane Ott, Thor’s director of campground relations.
Ott, who was previously president and COO of Kampgrounds of America Inc. (KOA), joined Thor last summer and developed the company’s rental accommodations initiative with ARVC.
“We welcome this exciting Thor program and feel that the favorable pricing and unique designs of these units will be very enticing for campgrounds, RV parks and resorts as they continue to diversify their business base with rental accommodations,” said Linda Profaizer, ARVC president and CEO.
About one-third of the nation’s commercially owned campgrounds, RV parks and RV resorts offer rental units to accommodate families and other travelers who don’t have an RV, but want to enjoy the Great Outdoors – and the numbers are growing.
“Private parks have long seen the merits of investing in park model cabins for use as rental accommodations, and now they have a chance to invest in both park models and travel trailers for on-site rental use at special prices that are exclusive to ARVC members,” Profaizer said. “Many travel trailer owners already leave their units at campgrounds and RV parks and use them as getaway cottages.”
Ott said this strategic partnership, the first of its kind involving ARVC and RV manufacturers, has enabled Thor to develop unique units using the input and experience of campground owners across North America.
The ruggedized features along with a variety of floorplans and cozy design elements offer campground owners durable units built to withstand the rigors of high occupancy usage. The lodging units featured in the promotion include four Breckenridge park models ranging from 22- to 36-feet; two Keystone travel trailers, including one 29- and one 37-foot model; and one 25-foot Airstream travel trailer.
Ott added that while the initial promotion involves Airstream, Breckenridge, and Keystone, additional Thor companies could become involved in the promotion in the future, depending on the level of private park interest.
This has been one of the toughest years ever for RV dealers.
But Swenson RV in La Feria, Texas, is surviving, thanks in part to its diversified product offering, which includes the “Little Hero,” a new line of affordable park models manufactured at Cavco Home’s plant in Seguin, Texas, according to a news release.
“Consumer demand for the product is very strong,” said John Crouch, manager of Swenson RV, which started carrying the “Little Hero” in January. “It’s a price-conscious person’s park model. It’s what our average Winter Texan is looking for.”
Unlike manufactured homes, which are a form of low-cost, permanent housing, recreational park trailers or “park models” are 400-square-foot movable resort cottages that are designed exclusively for part-time recreational use.
Widely used in RV parks throughout the Rio Grande Valley and other winter destinations across the Sunbelt, park models are the product of choice for empty nesters and retirees who are looking for an affordable winter vacation cottage.
“We got into the park model business four years ago because we saw the writing on the wall,” Crouch said. “We the saw that the average age of our customer was getting older. We also recognized that it can be more affordable and more comfortable to spend the winter in a park model than in towable RV or motorhome.”
Owners of towable or motorized RVs typically pay $1,200 or more to park their rigs in Rio Grande Valley RV parks during the peak winter season, while park model owners generally pay about $2,200 to leave their park model onsite for the whole year.
“So what happens is park model owners tend to spend five or six months instead of two or three,” Crouch said.
But while park models have been around for many years, the “Little Hero,” is more affordable than most, with retail prices averaging around $25,000 range. The “Little Hero” features 8-foot sidewalls with ½-inch sheetrock interiors, cathedral ceilings, high-end appliances and vinyl siding.
“People are looking at these and looking at $50,000 trailers and are realizing how affordable they are,” said Christine Summers, a zone manager for park model sales for Cavco Homes in Seguin, adding that the company is expanding its dealer base in Texas and across the Sunbelt an effort to gear up for the coming winter season.
“I’m taking seven to nine calls a day from dealers who are interested in carrying these units,” Summers said. Newest dealers for the “Little Hero” include The RV Shack in Livingston, South Main RV Park in Houston, Wholesale Homes in Fredericksburg and Affordable Homes in Lytle.
Summers added that there is plenty of room for park model growth in Rio Grande parks. Some bed-and-breakfast inns are also exploring the idea of using them as guest cottages, she said.
For more information on the “Little Hero” and other Cavco park models, call Summers at (830) 379-4485 or visit www.cavcohomes.com/littlehero/default.asp.
Fleetwood Enterprises Inc. today (Aug. 11) announced that Cavco Industries Inc. and an investment partner, Third Avenue Trust Value Fund , through FH Holding Inc., their jointly owned corporation, have been named the highest and best bidder for certain of the company’s manufactured housing assets.
The winning bid was determined through an auction held by the company, in consultation with the Committee of Creditors. A court hearing to approve the sale is scheduled for Wednesday at 1:30 p.m. PST in Riverside, Calif.
Cavco’s final offer of $21.8 million was an increase on a net basis after adjustments of approximately $3.8 million over Cavco’s previously announced offer for the same assets. In addition, Cavco agreed to buy Fleetwood’s idled Woodland, Calif., plant for $4.8 million.
Cavco, headquartered in Phoenix, Ariz., is a leading producer of manufactured housing, park model homes and vacation cabins in the United States. Third Avenue Management, the investment adviser to Third Avenue Value Fund, is a New York-based company with expertise in value and distressed investing.
Cavco opened for business in 1965. Cavco’s factory-built homes are produced under various trade names and in a variety of floor plans and price ranges. The company employs approximately 600 people and operates two manufacturing plants in the Phoenix area and one in Seguin, Texas. Additional information about Cavco can be found at www.cavco.com.
Third Avenue Management manages approximately $13 billion of assets for private and institutional clients. Most or all of Third Avenue’s proposed investment in Fleetwood Enterprises Inc. will be made by Third Avenue Value Fund, the company’s flagship mutual fund.
Founded in 1950, Fleetwood Enterprises Inc., and its various subsidiaries, historically produced, distributed and serviced recreational vehicles and manufactured housing. On March 10, however, the company filed for Chapter 11 protection and the former industry leader has been dismantled. Additional information about the company’s reorganization may be found online in the news section of www.fleetwood.com or www.kccllc.net/fleetwood.
Fleetwood Enterprises Inc. has extended until Saturday (Aug. 8) the bid deadline on the sale of its manufactured housing unit.
The auction, should it be required in the case of competing bids, will be delayed similarly to Aug. 10, at 2 p.m. The final hearing to approve the sale will remain as scheduled on Aug. 12.
As of Friday, Cavco Industries Inc., a manufactured housing and recreational park trailer manufacturer based in Phoenix, Ariz., and an investment partner, Third Avenue Trust Value Fund, have submitted the lone bid. The partners have offered $28.9 million for seven Fleetwood plants, trademarks and other assets.
Fleetwood filed for Chapter 11 bankruptcy protection on March 10. It has ceased travel trailer production and has already spun off most of its motorhome business to American Industrial Partners.
During an investors’ conference call last week, Cavco President and CEO Joe Stegmayer explained Cavco’s reasoning behind bringing in a partner to make the Fleetwood purchase. Each party would own 50% of the Fleetwood housing business. He called it “a prudent approach” and a way to conserve the company’s cash in these difficult times.
Despite recording a $1.5 million loss for the most recent quarter on sales of $13.6 million, Cavco is in “a strong financial condition” and has no long-term debt, he said.
“We want to preserve capital and have it available to inventory finance our distributors,” he said. “We have to be prepared for it (downturn) to continue for some time. This provides the opportunity to leave our balance sheet in a very pristine condition.”
All seven of the Fleetwood plants are operating but at a low level of utilization, he said. On average, each plant has the capacity to produce about 1,000 homes a year, he estimated. Cavco’s plants are operating at a 25% utilization rate, he added.
If successful, Cavco would take over the Fleetwood business “in a fairly short order” as it is Fleetwood’s intent to make a “fast transfer of assets,” Stegmayer during the onference call. The Fleetwood name would be retained.
If the Cavco/Third Avenue bid fails, Cavco has other options, Stegmayer continued in answer to one investor’s question. “We don’t feel we need to do anything immediately, but we have looked at other projects,” he said.
When first announcing its offer on June 30, Stegmayer noted, “The Fleetwood brand is one of the strongest in the industry, and we are excited to have this opportunity to integrate Fleetwood’s strong family of product offerings with our own growing business.”
Third Avenue Management, the investment adviser to Third Avenue Value Fund, is a New York-based company with expertise in value and distressed investing. Third Avenue Management manages approximately $13 billion of assets for private and institutional clients. Most or all of Third Avenue’s proposed purchase will be made by Third Avenue Value Fund, the company’s flagship mutual fund.
Cavco and Third Avenue’s $28.9 million “stalking horse” bid is subject to execution of a definitive acquisition agreement (with customary conditions to closing) and bankruptcy court approval. The purchase price is subject to adjustment for the assumption of certain warranty liabilities and other customary post-closing adjustments.
The Fleetwood assets proposed for purchase include seven manufactured housing plants, one office building, all related equipment, accounts receivable, inventory, certain trademarks and trade names, intellectual property, and specified contracts and leases. The manufactured housing plants are located in Nampa, Idaho; Woodburn, Ore.; Riverside, Calif.; Waco, Texas; Lafayette, Tenn.; Douglas, Ga.; and Rocky Mount, Va.
The proposed purchase does not include the company’s operating plants in Alma, Ga., Elizabethtown, Pa. and Garrett, Ind. The facilities included in the proposed purchase currently employ more than 700 people in seven states.
Cavco Industries Inc., a Phoenix, Ariz.-based manufacturer of recreational park trailers, manufactured housing and cabins, announced Wednesday (July 29) financial results for the first quarter of its fiscal year 2010 ended June 30.
Net sales for the first quarter of fiscal 2010 totaled $13,595,000, down 62% from $35,509,000 for the first quarter of fiscal year 2009, according to a news release.
Net loss for the fiscal 2010 first quarter was $1,449,000 compared to net income of $853,000 reported in the same quarter one year ago.
Joseph Stegmayer, chairman, president and CEO, said, “Our first fiscal quarter results are representative of the continued challenges faced by the general economy and our industry, which are especially poignant in our core Southwest market area. For the five months ended May 2009, industry-wide reported manufactured home shipments continue to be very low at 380 and 611 in Arizona and California, respectively. In an effort to further streamline our cost structure in this environment, we have moved our Phoenix, Ariz., park model and vacation cabin operation to one of our other nearby factories. The combining factory had excess capacity available for a second production line, which is now being utilized for these specialty products. The transition was completed by the end of the first quarter with no interruption to the customers of that business.”
He continued, “While business conditions are certainly challenging, we are well positioned to expand our presence in our current markets. Meanwhile, we are continuing the previously announced bid process for seven operating Fleetwood Enterprises Inc. manufacturing facilities in as many states across the nation. Through a 50% owned subsidiary, we signed an asset purchase agreement last week, and are now working toward potential ownership in the near term. There are no assurances that this transaction will close or that it will be in the form currently contemplated. We do believe that a successful purchase will be a positive long-term strategic move for both the Cavco and Fleetwood Homes brand names.”