In a lockstep march to higher prices

Fair warning: this is a lengthy post, and would be much longer if I hadn’t already sketched out some of the context last October, in a post headlined “Can ‘dynamic pricing’ beget cartels?” It might help to read that before plowing ahead here, but in a nutshell, my basic premise was that the ongoing consolidation of online reservation systems is creating an opportunity—already widely common in the apartment rental business—for cartelization, with Campspot best positioned to take advantage.

Campspot has done nothing since then to dispel that possibility—indeed, just the opposite. And that suggests even higher prices lie ahead for RVers and campers.

Cartelization, briefly, means “an act by market participants to form an association to control or attempt to control generation, distribution, sale or prices” of a commodity or service—price fixing, in other words. It’s illegal in the United States, but that doesn’t mean established businesses don’t want it. They just don’t want to be caught at it. So a key understanding here is the realization that “market participants” may include not just primary players—campgrounds and RV parks—but also secondary parties who have some control over prices, with the consent of the primary players, but who don’t take direct payment.

Until recently, the possibility of price-fixing in the highly fragmented campground industry wasn’t a real concern. When I first got into this business, more than a decade ago, the FTC-fearing sages at the National Association of RV Parks and Campgrounds (ARVC) would get all atwitter if campground owners at an ARVC event would start discussing or comparing rates, but that was an absurd overreaction. With upwards of 12,000 campgrounds scattered across the width and breadth of the United States, all but a comparative handful owned by as many individuals, the thought that there could be any meaningful collusion on prices—or anything else—was laughable.

But times have changed. It’s not that the campground industry is now more consolidated—it is, but still not enough for individual campgrounds to coordinate pricing—but that its reservation systems have moved inexorably to online providers. Whereas campgrounds and RV parks until a few years ago each had their own reservation systems, some so primitive they consisted merely of large wall calendars or complicated index-card assemblies, now virtually all use one of a dozen to 15 computerized service providers that enable campers to make reservations online.

As they became entrenched within the industry, such reservation systems promoted several pricing innovations that eventually overwhelmed resistance from campground owners who didn’t want to antagonize their customers. Cancellation fees, site-lock fees and larger up-front deposits have all become standard, but even more pernicious has been the spread of dynamic pricing, which eliminated the old rate sheets in favor of algorithmically-driven rates that vary according to supply and demand. One result is that even campground owners don’t know what their campers are paying at any one time—but they do know that their bottom lines have gotten fatter, so they’re only too happy to play along.

It’s important to understand that none of this amounts to price-fixing in a traditional sense, and indeed, an argument can be made that it’s almost the opposite. Although a campground owner may set an upper and lower limit for how much his reservation system charges for a site, the actual outlay by any one camper is outside his field of vision, so to speak. Moreover, that campground owner has only a vague idea, at best, of what a competitor 20 miles away is charging for a comparable site, never mind the rate charged by a campground at the other end of the state.

But there is someone who does know all that, and more: the reservation system provider.

Client campgrounds of most reservation system providers number in at least the hundreds, which is a good start but still not enough to efficiently drive prices higher. Campspot is another story. With more than 1,800 private parks in North America comprising approximately 200,000 sites, it has enough aggregated data from numerous unrelated clients to follow in the footsteps of a Texas-based company named RealPage and its proprietary algorithm, YieldStar, which has significantly increased apartment rental rates across the country . As detailed in an exhaustively researched ProPublica article, YieldStar  “suggests” optimum rates for thousands of open rental units each day—rates that often are significantly higher than the market rate, and frequently higher than experienced property managers believe are obtainable. And guess what? Over time, such “suggestions” have been adopted ever more readily.

That’s not to say that Campspot is doing something similar, but to suggest that its growing dominance increasingly puts it in a position to do so. And given the inexorable logic of market dynamics in a consolidating industry (meaning both RV parks and campgrounds and online reservation systems), some such outcome seems highly likely.

In that regard, two recent developments suggest that Campspot’s drive toward overwhelming its putative competitors is gathering steam. The first is its announcement Feb. 14 of “Campspot Accelerator,” unabashedly described as a “new revenue-driving feature” for campgrounds. Basically an advertising platform grafted onto the reservation interface, Accelerator “placements” are “intentionally selective and thoughtfully designed to create the most value for the consumer while maximizing the potential for the campground.” Translation: campers reserving sites through Campspot will be enticed to spend extra money, with a portion of the proceeds going to the campground.

Thus far, Campspot is offering two such “accelerators.” One is a partnership with RVshare, which connects RV owners and campers looking to rent an RV—which, okay. But the truly innovative offering is Sensible Weather, which is selling an insurance-like product that “reimburses a camper’s reservation costs when rain impacts their experience.” Claiming that weather “is the most stressful part of planning a camping trip,” Accelerator now offers to make the insurance available for purchase when booking “to help increase camper confidence and enhance the overall experience.”

This adds a whole new dimension to what reservation systems offer, and until other providers catch up, promises to give Campspot even more of a competitive edge in building its client base—and why wouldn’t an RV park owner jump at the chance? But Campspot isn’t just broadening its sales appeal by adding new revenue generators to its menu. It’s also getting a promotional assist from . . . wait for it . . . ARVC, the same organization that once upon a time got panicky when members asked each other about their rates.

Two days after Campspot made its Accelerator announcement, ARVC sent out a membership email blast with the subject line, “Save Time With Campspot.” The actual message, featuring a prominent ARVC logo over a Campspot picture of a happy couple looking at a laptop screen, started with: “Campground owners and operators love the time-saving, stress-reducing features of Campspot. In fact, you might even catch Campspot owners doing a little happy dance in front of their computers from time to time.”


The email goes on to tout Campspot’s grid optimization, provides a link for requesting a demo, and quotes a happy customer. It doesn’t mention any other reservation system provider, even though most, like Campspot, are Supplier Council Members of ARVC—and most provide similar grid optimization features. And it never acknowledges that this email was a paid advertisement, which most assuredly it must have been, because why else would it have gone out?

The bottom line is that Campspot is moving quite aggressively toward monopolizing the campground reservation business, raising the specter of still higher rates for RVers down the road. This move is being greeted with the ready compliance of campground owners who see nothing but more profit for themselves. And it’s happening with the ironic cooperation of ARVC, which apparently has pivoted 180 degrees from its once-overblown anxieties about price fixing.

Who would have thought that a backwoods industry like this would end up on the cutting edge of money-extraction practices?

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Can ‘dynamic pricing’ beget cartels?

How long will it be before reservation software companies serving the campground industry take a lesson from apartment leasing agents and adopt a killer algorithm that will send your site-rates soaring?

One of the biggest mysteries in the RV park business, for campground operators and campers alike, is how rates are determined. How much “should” be charged for a water-and-electric RV site? Should a back-in cost less than a pull-through? How much more should be tacked on for a sewer connection? Fuzzy questions all, frequently answered by seat-of-the-pants calculations. But here’s the most difficult one of all: how often, and by how much, should rates be increased?

Historically, the simplest answer to that last question was to increase all rates each season by a similar percentage, explaining to campers that this was the price of “the increased costs of doing business.” Another approach was for campground operators to see what other parks in the area were charging and make corresponding changes, this time explaining to campers that the adjustment was to keep in line with “the market rate.” But that’s old school.

These days a rate sheet is as outdated as paper itself. These days it’s all about “dynamic pricing,” an algorithm-driven way of setting rates that fluctuate with demand–an apparently hands-free approach that absolves campground operators from any responsibility for camper resentment over higher prices. Indeed, with dynamic pricing, higher rates are the fault of the campers themselves. Who, after all, can argue with the iron logic of supply and demand?

Dynamic pricing, however, is just the first drop in the bucket. Algorithms are capable of doing so much more, especially in an industry that has almost entirely computerized its reservation systems–and in the process opened its gates to a potential trojan horse for even higher rates.

What the future might hold is heralded by an astonishing piece of reporting by ProPublica,  an independent, non-profit newsroom that produces investigative journalism in the public interest. A lengthy article by Heather Vogell, published Oct. 15 and headlined “Rent Going Up? One Company’s Algorithm Could Be Why,” establishes that a significant factor behind soaring apartment rents nationwide is a Texas-based company named RealPage and its proprietary algorithm, YieldStar.

Using data acquired from RealPage’s clients, which include some of the largest property managers in the country, YieldStar “suggests” optimum rates for thousands of open rental units each day–rates that often are significantly higher than the market rate, and frequently higher than experienced property managers believe are obtainable. As a former prosecutor in the Justice Department’s antitrust division told Vogell, “machines quickly learn the only way to win is to push prices above competitive levels.”

In addition to having a comprehensive grasp of what rental rates a major segment of the apartment market is charging, RealPage’s algorithm also calculates how demand for apartments responds to price changes–what’s known as price elasticity. As a result, it can call for disrupting the balance of supply and demand by “suggesting” a supply reduction while increasing rates. Property companies soon learn that they can make more profit by operating at a lower occupancy level–levels that “would have made management uncomfortable before,” as a former RealPage executive explained to Vogell.

While leasing agents would typically lower rents to fill vacancies, YieldStar architect Jeffrey Roper lamented that such practices simply undercut the rental industry. “If you have idiots undervaluing, it costs the whole system,” he said. “We said there’s too much empathy going on here. This is one of the reasons we wanted to get pricing off-site” by taking it out of a property manager’s hands and assigning it to an algorithm.

As a result, Vogell’s article notes, YieldStar’s “design and growing reach have raised questions among real estate and legal experts about whether RealPage has birthed a new kind of cartel that allows the nation’s largest landlords to indirectly coordinate pricing, potentially in violation of federal law.”

What’s intriguing about the YieldStar algorithm is that it seemingly does an end-run around anti-trust considerations, which come into play when industry competitors collude on prices. OPEC is the poster-child example, with major oil producers meeting to set production quotas and pricing targets. RealPage, however, is a third party–its competitors are not apartment mangers but other software providers. And YieldStar does not set rental rates, it simply suggests rates that leasing agents are free to accept or ignore–all of which complicates antitrust considerations and may explain why RealPage has gone unchallenged by the Federal Trade Commission or the Justice Department.

Given all that, it’s not a stretch to think that something similar could be coming to the historically tech-resistant RV park and campground industry. Not only have reservation systems achieved near-universal computerization, but the fierce competition among reservation software companies is rapidly winnowing the ranks.

CampSpot already has carved out a dominant niche, claiming it serves more than 1,800 private parks in North America (there are approximately 12,000 private campgrounds in the U.S.) comprising approximately 200,000 sites. CampLife, Astra, Digital Rez and a dozen others are baying at its heels, all holding out the promise of increasing revenues for their lucky clients. But what many people don’t realize is that all those companies are aggregating the data they receive from their numerous unrelated clients, creating massive data bases that can be useful in all sorts of ways–including the way RealPage has developed.

Reservation software companies were the primary proponents of dynamic pricing, eventually overcoming the entrenched opposition of campground owners who worried about the effect it would have on long-time customers and repeat business. These days, however, such notions of business-to-customer loyalty seem almost laughably quaint, and all the more so with the industry’s increased corporatization. With that “empathy” hurdle now overcome, further monetization of reservation data will face increasingly less resistance.

Don’t be surprised, in other words, if at some time in the murky future the rates at your favorite campground start increasing more than they already have. The invisible hand of the marketplace has a few more tricks up its invisible sleeve.

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