Easing into various seasonal celebrations, and from there into year’s end, various RV industry representatives have been spewing predictions for 2024 that are short on context and long on wishful thinking and data cherry-picking. Call it the holiday effect, an irresistible compulsion to make things merry by spiking the statistical punch, morning-after hangover be damned.
Consider, for example, the glowing news announced at KOA’s recent annual convention by CEO Toby O’Rourke that the franchise behemoth had crossed the $500 million mark in annual revenues, up 36% since 2019. Receiving considerably less emphasis was the news that camper nights in 2023 were actually down 4.8%, and up only 5% over 2019, an increase initially notched by a pandemic-driven camping explosion that now seems to be waning. Revenues going up even as camper nights decline can be explained only by higher rates—and, indeed, escalating fees may explain in part why camper nights are down. Camping is getting just too damn expensive.
Indeed, the annual Generational Camping Report, released by RMS North America last week, found that “price is still a driving factor in campground destination decisions,” with a third of respondents “selecting the cost of reservation as their top concern.” Contrasted with O’Rourke’s ambition to increase camper nights by 2% next year, even as she projects a further 5% annual growth in revenue, that concern appears to be a circle that can’t be squared.
Or consider the persistently upbeat outlook propagated by the folks who build RVs. In one trade show after another this fall, dealers and manufacturers conceded that yes, traffic was down—“attendance might not have broken any records,” “traffic was clearly off somewhat”—but that they were optimistic about 2024 and beyond. Precisely why was never made clear, but it might have something to do with an industry penchant for pulling numbers out of the air. On Sept. 1 of last year, for example, the RV Industry Association was forecasting wholesale shipments in 2023 of 419,000; as of Dec. 6, that had slipped only a bit, to 391,499. Today it looks unlikely that even 290,000 RVs will roll out the door in 2023—but that hasn’t prevented RVIA’s statistical geniuses from calling for a rebound to 369,700 units in 2024. Why? Well, why not?
There are a few—a very few—voices calling out this forecasting malpractice. Industry consultant John Spader, for example, has observed that as of June 30, the average North American RV dealer’s debt to equity ratio had ballooned from .97:1 in 2021 to 1.73:1 in 2022 to 3.64:1 in 2023. As he notes, the debt-to-equity ratio is “arguably the most important measure of a dealer’s financial health” and its ability to manage debt. Most lenders want to see a ratio of 4.0:1 or less, so as this trend continues in the wrong direction, expect to see a growing number of RV dealerships going belly-up as they fall afoul of financing covenants. Disappearing dealerships don’t do much to increase sales
A more extensive—and bleak—analysis of this trend by Gregg Fore, whose industry-friendly credentials include induction into the RV/MH Hall of Fame, was published by RVBusiness a week ago. “Margins on sales have dropped, costs of nearly everything has risen, and maintaining safety in cash flow is more critical than ever,” he wrote. “Some dealers will see the handwriting on the wall and close voluntarily rather than lose their entire personal asset base. Others will be forced to do the same as cash flow reaches critical levels.”
RV park promoters and investors tend to be cavalier about such developments, claiming that with so many millions of RVs already cluttering the landscape, a constriction in the supply pipeline will be immaterial to campground owners. But RV parks are part of a larger ecosystem; when any part of it is diminished, the greater whole will feel the effects. Or as Fore also points out, fewer RV outlets will result in a higher percentage of larger dealers, “meaning the consumer will be forced to work harder to make a purchase and to get service (emphasis added).” In other words, owning an RV is going to become more expensive and more of a headache than it already has been.
The same economic forces that are crippling the RV industry are battering the camping public as well, with predictable results. Persistently high interest rates, two overseas wars, the ongoing threat of a federal government shutdown and a polarized, fractious political climate have soured consumer sentiment, which now has fallen for four consecutive months. Consumer spending has followed suit, dipping 0.1% in October, just ahead of the holiday season and the first decline since March. With two-thirds of Americans saying their household expenses have risen over the last year but only one in four saying their income has increased in the same period, it’s perhaps predictable that credit card debt is shooting up and retirement accounts are being ravaged through hardship withdrawals.
None of that adds up to a rosy outlook for next year—at the very least, it’s going to challenge the airy notion, advanced by some (I’m looking at you, Frank Rolfe), that the RV park industry is somehow immune to the economic forces that affect everyone else. Yes, people who already own RVs will want to use them—but not if they can’t afford ever-higher site fees, or if they can’t get their RVs serviced at a reasonable price within a reasonable time frame. Not if they can’t keep up with the outsized payments on their over-leveraged RV loans and have to unload their white elephants. Not if a tightening job market slowly makes that “work from anywhere except the office” lifestyle ever more fanciful.
The party was fun while it lasted, but they’re taking away the punchbowl and tomorrow you’ll wish they’d done so sooner.
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