Another major UK holiday park business is being toted for sale, as the sector continues to draw in a swathe of new investors, off the back of strong staycation business.
Sky News reported that Onex Corporation, owners of Parkdean Resorts, has hired advisors to prepare a possible sale. The business could be worth significantly more than the GBP1.3bn paid by the private equity investor in 2017.
The move comes as final bids are being checked over at Park Holidays, where a sale is likely to yield around GBP850m for sellers Bidders are understood to include the Universities Superannuation Scheme, the UK’s biggest pension fund, as well as PAI. Park is substantially owned by investor Intermediate Capital Group, which took hold of the company in 2017. Right now, Park has 42 sites around the UK.
Early this summer, investor CVC Capital Partners signalled the opportunity in the market for consolidation and scale economies, picking up Away Resorts in June. It then followed that with the purchase of Aria Resorts, combining the two to create a business that welcomes more than 750,000 guests a year.
Also looking to win from the sector is seasoned hotel investor Blackstone, which in January picked up Bourne Leisure, a business combining three brands including park holiday operation Haven, holiday park brand Butlins, and leisure hotel brand Warner. Blackstone and Starwood Capital shared the GBP1.8bn funding of the acquisition, where the group’s new owner will be weighing up the options of how to grow, and whether to split, the company.
Parkdean has 67 sites across the UK, and has seen continued investment to upgrade the offering. As recently as May, a further GBP70m was committed on new caravans and lodges, as well as improved technology. The business has also talked of building three next generation parks.
The fundamental attractions of the sector remain around a multiplicity of income streams, as well as a scarcity of new sites due to tight UK planning regulations. Revenues can come from management fees, rental of owned units, sale of units, pitch fees, and ancillaries such as food and beverage sales.
The larger scale consolidation plays help underline what has effectively become a two tier market, with major private equity looking at scale consolidations and brand building, while smaller operators and lower tier private equity investors continue to pick off individual sites, growing their own smaller portfolios.
And smaller parks continue to come to market, as owners seek to exit in a strong market; for some family-owned businesses, the stresses of pandemic closures and reopening have clearly triggered a desire to retire. Typical of such deals is the recent disposal of the 97 pitch Brightlingsea Leisure Village. Savills sold the business to Countrywide Park Homes, which operates eleven residential home sites, and four holiday sites.
Ian Simpson, head of leisure & trading at Savills, says the sector has had a busy 18 months, with pandemic-driven operational stresses offset by continued demand from investors. “The question is, how long will it last?” He sees private equity interest in the niche being more extensive than has been seen for a number of years. “There’s a particular intensity at the moment.”
Simpson points to the shift in public mindset, forced on them by pandemic travel restrictions. “People have woken up to the fact that the UK is an interesting and diverse place to holiday.” Having been forced to look at a park home holiday, he said many have discovered that the quality of accommodation was better than they might have expected, having improved in recent years.
With planning restrictions tight, Simpson says a good option for many investors is to take sites upmarket, replacing static caravans with more luxurious lodges, which attract higher rentals. “We’re seeing an improvement in quality.”
Investors in larger parks will be looking to amalgamate businesses, grow a national presence under a single brand, and develop value-add on-site services including food and beverage, sports and entertainment facilities.
“It’s quite different for private operators,” said Simpson, who will not want the operational commitment of additional facilities. A raft of smaller, family-run sites means there is inevitably a steady stream of sites coming up for sale, as owners retire. These are typically acquired by smaller groups, who might have a regional presence; and who are often backed by smaller scale private equity.
HA Perspective [by Chris Bown]: This feels like a hot market – but is it too hot? One industry expert we spoke to certainly expressed concerns that the new money entering the space now, will be relying on a number of stars aligning correctly, in order to deliver really strong returns.
On the plus side is the ESG agenda, persuading individuals to holiday at home, rather than fly; the opportunity to invest a relatively modest sum in a holiday home; and the pandemic-driven idea of taking a long weekend, working from home (or holiday home) either side of a weekend. On the opposite side is a raft of airlines and Mediterranean hoteliers, keenly preparing deals to attract newly-freed travellers from northern Europe. Throw into the mix the potential for an energy price spike, and place your bets.