March/April 2008

Cheap overseas airfares hit hard

Photos and story by DENNIS AMOR

THE future looks bleak for Australia's caravanning industry, according to a shock report.

Leading business information analysts IBISWorld predict a decline in the number of basic caravan parks and camping grounds across the nation as parks fall victims to developers and a change in accommodation styles.

The traditional caravan park: future looks bleak

In its recently released 35-page Caravan Parks and Camping Grounds in Australia report, the company said: "Overall, caravan park establishments will continue to decrease gradually as their valuable sites are converted to higher and better return uses, including as hotels and resorts.

"Long term only caravan parks will also decrease, along with long term residents."

IBISWorld suggested they would also suffer from the "continuing very high growth" in overseas travel resulting from cheap international airfares from Jetstar.

"In 2007-08, this industry is estimated by IBISWorld to comprise about 1450 long term and short term stay enterprises, representing a decline of 0.6 percent over 2006-07, due to continuing decline in long term caravan parks," the report said.

And it goes on to warn that things will worsen in 2009-10.

"IBISWorld forecasts much lower economic growth, and this will have a significant impact on the clients for caravan parks as employment growth slows along with household disposable income."

The report continued: "From 2010-11 onwards, the forecast significant improvement in domestic economic growth, together with stronger growth in travel demand, is expected to lead to stronger growth in industry revenue, profits and employment, and therefore value added, due to expected strong recovery in average site rates and profit.

"Over this period, there will continue to be increasing investment in new accommodation styles and facilities in caravan parks ... at higher tariffs. Increasingly, the management of caravan parks is expected to come under the control of professional investment and hospitality companies and property trusts, and will further improve their operations and profitability.

"Overall, caravan park establishments will continue to decrease gradually.

"However, caravan parks will always remain particularly vulnerable to any adverse changes in economic conditions and in household disposable income as a direct result of their guest profile."

IBISWorld believed this year's major threats to the caravan industry would be high fuel prices and increasing and high interest rates.

"Also, significant growth in Australians travelling overseas will continue at the expense of domestic holidays. Strong competition will also continue from some other forms of low cost accommodation," the report warns.

It goes on to point out that due to the industry's nature - small business and owner-operated and managed - returns may at first appear to be high.

"However, for most industry segments there is a requirement for a very large input of owner's time, much of which is unpaid, and/or operators who take their income in dividends and not wages.

"Recently, operating costs have risen greater than average in areas such as electricity, water, fuel, waste removal and land tax, with generally rising land values."