Are holiday parks great business investments?

Two very large leisure deals at the back end of last year suggest the UK’s caravan parks, holiday parks and campsites represent a lucrative buy for investors, as holidaymakers opt for staycations to benefit from a weakened, post-referendum pound.

They boast sea views, modern, comfortable caravans and holiday homes, on-site wi-fi and swimming pools. Facilities include bars, restaurants, walking routes, gyms and lots more. Exotic holiday parks in Europe, you ask? No - they’re right here in the UK, and they’re adding up to make domestic holidays an attractive option.

They might not be trendy, but the UK’s caravan parks, campsites and holiday-home sites look to present a canny investment, if we’re to take recent dealmaking activity in the sector, holidaymaker surveys and analysts’ forecasts as a portent.

Late last year, two deals highlighted the strength of the UK’s leisure sector:

Caledonia Investments - a trust - sold Park Holidays, which operates 26 caravan holiday parks across the southern UK coastline, to asset manager Intermediate Capital Group for £362 million.

Private equity group Epiris, formerly Electra, is currently in the process of selling Parkdean Resorts to Canadian private equity firm Onex for £1.35 billion. Parkdean is Britain’s biggest holiday park operator with 73 holiday parks across England, Scotland and Wales. The sale resulted in huge profits for the various investors in Parkdean - Epiris, the leading shareholder, made £515 million.

And they build on some serious activity in the sector over the last couple of years. In 2015, private equity house Blackstone sold Center Parcs to Canadian investment group Brookfield for a reported £2.4 billion. The question may well be asked as to why are these big, vastly resourced private equity houses are getting involved with an industry as tranquil as caravan parks?

That can be simply be answered with another question: are you planning a holiday in the UK this year? Even if you’re not, 35 per cent of UK families are planning a so-called staycation in 2017, driven by the shaky economic climate in the wake of June’s EU referendum result.

With the sharp decline of the pound - it fell 10 per cent against the euro, 18 per cent against the dollar - overseas holidays have become that little bit more expensive, so Britons are considering domestic holidays instead.

Of course it’s not just domestic visitors who are considering UK holidays. The UK received 3.10 million overseas visits in November 2016, setting a new November record, according to the latest data from Visit England.

While certainly a bet, the deals highlighted above suggest investors think Brexit will lead to a rise in domestic holidays, so moves are being made to buy up leisure sites on the thinking that they'll make more money or will increase in value. Some operators, such as Verdant Leisure, owned by private equity house Palatine, are also embarking on buy-and-build strategies as they look to grow their estates.

Scratch under the surface and it’s not hard to see why UK leisure parks are proving popular with holidaymakers. It’s not just the poor pound that’s driving the rise. The sector has undergone something of a transformation over the last decade or so as operators invested in better quality ‘glamping’ accommodation, more on-site services and double glazing and central heating to encourage people to holiday out of season.

The industry is also growing. Late last year councillors in Scotland gave the green light to a major expansion of a holiday park in Fife, a multi-million-pound project that will create one of the biggest holiday parks in the country. Clayton Caravan Park, a family-owned business, will add an additional 171 static holiday home pitches to its estate, bringing the number of caravan pitches to 636.

The park’s managing director Andrew Kennedy cited the “growing trend” of staycations, adding: “Despite seemingly endless political uncertainty, the holiday parks sector has remained incredibly resilient and many businesses have reported increased trade as more individuals choose to holiday at home due to the weaker pound and travel safety concerns.”

According to the NCC, the UK trade body for the tourer, motorhome, caravan holiday home and park home industries, the UK caravan industry contributes more than £6 billion a year to the UK economy and employs around 130,000 people. Some of today’s premium parks now rival their European competitors, which have traditionally edged the pack thanks to their warmer climes.

With holidaying at home looking set to become the trend and big efforts by park operators to improve the look and feel of their sites, caravan and leisure parks are a natural draw for both consumers and business buyers. Now could well be the time to invest in the UK’s leisure sector.

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