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At this point, RV travel is experiencing what may become known as the longest extended season in its history -- and Equity LifeStyle Properties (NYSE: ELS), one of the biggest players in RV resort communities, is enjoying the benefits.
Navigating 2020: A smoother ride than for other travel operators
While many vacation resort communities saw profits plummet due to the pandemic, Equity LifeStyle enjoyed an unpredicted early surge in bookings for its portfolio of RV resorts and campgrounds. Reporting a 15% increase in core transient (i..e., people who only stay at a property a short time, such as vacationers) business in the fourth quarter of 2020, this roadtrip-specialized real estate investment trust (REIT) activated fall and winter marketing campaigns to continue boosting RV and other camping vacations as a "safe" way to travel. Meanwhile, its manufactured home (AKA mobile home) division didn't experience more move-outs than in a regular year.
Purchasing an RV used to be a life goal for retirees only, while renting one was seen as an unduly expensive. cumbersome alternative to just booking a hotel or cruise. But that mindset changed drastically in spring 2020. And as long as people avoid sharing air with strangers, this self-contained vacation mode -- where you literally travel under your own roof -- will continue to benefit in bookings.
Camping also remains popular, especially with COVID-19 now being understood as an airborne virus that seems to spread more rapidly in enclosed spaces. And let's not forget that this REIT also has a substantial portfolio of marina slips, which appeal to an age/wealth demographic in between campers and RV owners.
The long game: Not just conversion, but customer loyalty
Hotel and vacation rental resort owners have been trying to predict a "return to normal" for months now. And while their time of uncertainty extends, Equity LifeStyle is playing a long game. The company can sustain growth only if it can convince people not just to take that one-off RV vacation, but to fully adopt an RV lifestyle. And it is.
Equity's Thousand Trails membership pass, which provides access to more than 80 RV parks, saw a 6% YOY increase in passes sold, plus a 15% increase in upgrade sales. This represents not just a fast revenue boost, but a substantial uptick in customer loyalty, especially given that camping is supposed to be a low-cost way to vacation.
Like all other REITs, this one will grapple with the consequences of long-term unemployment among some sectors and an eventual discontinuation of COVID-19 relief measures, especially to its mobile home side. However, the full-year core community base (i.e., people who live in one of the managed communities year-round) has grown among renters and owners alike.
In fact, 2020 was great for new home sales, seeing a 30% increase from 2019. If there is a 2021 jolt of rental move-outs, it shouldn't affect the overall outlook too much, since only 6% of the company's mobile home units are rentals.
The bottom line
Equity LifeStyle was not altogether 2020 pandemic-proof. Travel restrictions impacted its fourth quarter, to the tune of a $2 million drop in seasonal RV revenues, and executives on the earnings call specifically mentioned the disappearance of Canadian travelers. Southern resort regions just aren't the same without the snowbirds. But nonetheless, the company's in growth mode right now -- with 2,100 newly acquired RV sites and four closings on entitled land in 2020 -- whereas most vacation resorts are just surviving.
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