A prospective park owner contacted us to ask “My husband and I are looking to buy a campground. Is there any way you would be willing to share with me usual yearly expenses to run a campground not numbers just a list like insurance, electric, permits etc?” The question is absolutely valid and brings up the additional questions “Do you know what it costs to run your park?” and “do you keep a buffer for un-expected costs?”
Running a campground or RV park brings a mix of factors that will drive your expenses. While some parks are generally inexpensive to operate others are incredibly pricey. Factors such as location, zoning, competition, level of amenities, volume of guests, seasonal impacts, and availability of resources all play a part in driving your costs. Our answer to the question posed by the prospective park operator was: “It won’t be complete because every property is different but here you go (list of expenses):
- Land: Lease or mortgage payments
- Taxes: Land, buildings, income, sales
- Utilities: Water, sewer, electric, cable, internet
- Maintenance: Land, building, utilities, frontage, signage
- Employee: Maintenance, Customer Service
- Marketing/ Advertising: Local, national, print, digital, website, social media
- Opportunity: Can this money create a better return somewhere else. Also time is important consideration, are you running the park?
- Bureaucratic: Dealing with city, county, regional players (and complainers)
- Legal: You will get sued at some point by someone: make sure the next is very good.
- Insurance: Property, liability, disaster
- Equipment: Operations, maintenance, sites
We posted this question and response to the Exclusive Owners Group on Facebook (click here) and another owner responded “Expenses are totally different from park to park. What needs repair this year won’t next year. Example: I had to get 3 different sections of sewer repaired because of roots. Just the other night a guy plugged in to one of my 50 amp sites with a bad plug… fried my box. I had my electrician come out. Turns out prior owners had wire to small for 50 amp. So we are rebuilding correctly from the power pole to the site. Trench, conduit, meter box, electric box, wire. It can add up.
Changing Costs Can Change Income
Big news was made last week when the National Park Service announced a proposal to raise entry fees to 17 of the most popular parks in the country. If you look at the details they are really requesting a demand based pricing schedule to cover… wait for it… additional expenses. Due to the nature of public agencies it is exceedingly difficult for public agencies to reduce expenses leaving them with only one route to break even… raise their fees. What about privately owned business?
Private businesses have a serious advantage over public agencies in this regard. Private parks are capable of making drastic changes in their cost structure to grow revenue without touching rates. Before being able to make these changes private park operators need to analyze their past expenses, categorize those costs and then budget going forward. If the process seems over-whelming we suggest speaking with your CPA or tax professional who will be able to aid you in this analysis.
Knowing Your Costs is Vital
Operating a business has costs and those costs are incredibly important to the viability of your enterprise. Given the above list of costs are we missing anything? Do you do anything to protect yourself from uncontrolled cost increases?
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The above comment is correct. Guests dont realize the expenses on the back end and often times want to complain about pricing. While I don’t own a park we own a campground supply company. This has afforded us the opportunity to speak with many owners and has help give us insight into park management. There’s definitely more costs then people tend to think.
One of the biggest issues in Texas is the property taxes. On one small part of my park, 6.3 acres, the taxes were proposed to increase by 400% last year. I protested and went to arbitration and got it knocked down some but the appraisal district will be back next year (so they promised) with more.
It is getting so that the first $4,000.00 in the till each month goes for property taxes. I have reached the point I can no longer pass those costs on to the customer.
Wow!! That is out of control!!
This avenue seems better for my park. How do you suggest we reduce costs quickly?
Honestly the fastest way is to sit down with your accountant/ tax professional and go through your operating budget. The variations between parks can be dramatic. For some their biggest expense is the lease/ mortgage while others will find insurance and taxes as the biggest cost driver.
As noted in the comment from Randy; your state can be a huge driver of costs. I know that electric rates are climbing exponentially in California causing a lot of park owners to discuss metering sites even for over night stays!
Our biggest expense is what we call bureaucracy. California has become nearly unbearable to try and run a park. Just had a nice conversation with a guest who was complaining about our $52 per night rate. I wrote down all of our costs for that one night and where that money goes; he thanked me for the details and apologized for the complaint.