How Much Do Campground Owners Make? [Step By Step Example]

Are you looking to accurately estimate your campsite business earnings?
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[NOTE: *Our in-house business planning experts are post graduate qualified with vast experience in helping startup business owners get started profitably and successfully.]

In this post, I’m going to show you how you can accurately estimate how much a campground owner makes.

This is the same technique that our in-house business analysts.

[N.B. Looking to calculate the earnings of RV parks or caravan parks?

…this process will work just as well.]

Here we go…

Step #1: Calculate the total number of nights per season

The first step in the exercise is to define the scope of availability within the season.

Calculating the maximum scope for income potential.

Campground business metrics all begin with an overnight stay. This is the unit upon which the whole business is built around.

Customers pay a particular fee per night. And campsites are open for many consecutive nights as prescribed within a particular season.

This season is often between March to October by law. This gives a 7-month window for generating pitch sales revenue.

The scope or number of nights per of the season is the primary constraint.

Therefore a typical season of 7 months amounts to 245 nights back-to-back.

However, this is not always the case.

Some campgrounds will have shorter seasons as dictated by the local government. Other sites, may be open all year round.

The total number of nights per season gives you a maximum potential on what you can earn.

You can only rent out so many pitches for so many nights – and no more.

Step #2: Count the number of accommodation pitches

The primary form of income of every campsite is the humble pitch fee.

These are the principal building blocks of sales revenue of a campground business.

To estimate how much you might make from running a campsite, your first step is knowing the full scope of pitches on offer.

Remember, fully functional pitches are the only ones that can be actually hired out.

Therefore, in your calculation only count the pitches that are in use. Subtracting any that are unavailable or out of order for any reason, like maintenance.

Step #3: Identify the price per night of each pitch type

Pitches and their prices are heterogeneous.

In simple language,

…each class of pitch is different.

You’ve got grass pitches, hardstanding pitches and hooked-up pitches – all offer different types of value and thus are priced differently to the customer.

Matching up pitches and their respective prices is important.

After that, it’s a simple case of maths.

Multipliers and their corresponding factors…(x) number of pitches at (y) price.

From this ground-up approach, you can very easily and accurately build up a good view of the meatier part of the campsite income.

Step #4: Estimate your bookings spread

What’s a booking spread?

Just think…the distribution of bookings on a campsite will not be evenly ‘spread’ across all pitches.

Over the course of a season, some types or classes of the pitch will attract more bookings than others.

The factors affecting this will be:

• preference of customers,
• pitch availability/maintenance,
• pricing,
• pitches offered by other sites etc.

But arriving at an estimated proportion of bookings per class of pitch will assist you in assembling a well-weighted overall revenue figure for the campsite.

Step #5: Ave. no. of nights per visit

We cannot afford to make assumptions within our estimates. Assumptions threaten accuracy. If your estimates are out of sync, then your budget will be misleading.

Any unfounded facts or figures will only skew and invalidate our final figure.

With this in mind, our next step is to work off a sound baseline of an average number of nights spent per visit.

To get a solid number you can trust at this stage, we use an industry-standard statistic.

Step #6: Gauge ave. park occupancy

From the calculations above, we should arrive at an estimated figure for 100% occupancy of a campsite.

But with the best of all intention, it is unlikely any campsite will achieve 100% occupancy through a season.

The reality is that some potential booking capacity will be dropped. Even cancelled.

Where do we draw the line with our desk estimate?

Again, we use an industry average. This average number of nights is often quoted as a range.

Adopting the lower part of the range gives a more conservative output.

Step #7: Ave. on-site visitor expenditure

Aside from spending on the pitch or accommodation itself, campsite customers often spend on using onsite amenities or activities.

This spend must also be accounted for when building up your picture of total campground revenue.

Again, landmark industry reports give insight to what typical expenditure might look like.

Step #8: Subtract park expenditure & overheads inc. staff

Now, we need to take a view on usual campground operational expenses & overheads.

Because we are just looking at obtaining a ballpark figure at the end of this exercise – we don’t need a detailed breakdown.

Simply, a headline figure will do.

No more analysis needed.

Step #9: Now for EBITDA – the prelude to earnings

Now, with a single number representing the overall park revenue taken from steps#1 – step#6…

…and also an estimate on expenditure Step#7…

We are ready to perform a simple subtraction to arrive at a key financial figure, used by many financial professionals – EBITDA.

EBITDA stands for earnings before interest, tax, depreciation and amortization.

A technical term for what’s left in the kitty after expenses and overheads, but before the following deductions:

• interest repayments on loans
• tax obligations
• depreciation/amortization
  • (…money set aside for replacing capital equipment when it comes to the end of its usable life)

This figure is the most meaningful indicator of your actual earnings from any campsite investment.

This is because depending on your personal earnings profile your obligations to the tax office will differ.

Also, the amount of lending you might have within the business will be unique.

Step #10: Est. earnings

Next, you need to apply your own expected tax treatment. Whatever your tax band, apply the relevant percentage of tax deduction.

Now some guesswork is needed for your expected interest repayments on any business loans or mortgages.

And finally, an estimate on deprecation payments.

Having subtracted these numbers from your EBITDA – what you are left with is your estimated earnings.

BONUS: Equation for calculating campground owner earnings!

This is an equation for summing up the whole exercise above:

The figures

• Sl = season length in days
• Pn = number of pitches or accommodation units
• Pp = price per night
• Bs = bookings spread
• Occ = average park occupancy per season
• Vexp = average on-site expense per visit
• Ex = park expenditure
• Ov = overheads
• Tx = income tax
• In = interest repayments
• De = depreciation

The equations

Stage 1. ((Pn x Pp) * Sl) * Bs = EPR100 [Estimated 100% pitch revenue]

Stage 2. EST100 * Occ = EAPR [Estimated adjusted pitch revenue]

Stage 3. EAPR + Vexp = TECR [Total estimated campground revenue]

Stage 4. TECR – (Ex + Ov) = EBITDA

Stage 5. EBITDA – (Tx + In + De) = Projected earnings i.e. what you can expect to take home

Real example calculation for estimating how much a campsite owner makes…

Our example campground is actually a caravan park.

It is a real park located in Skegness.

The park has only 1-year trading history.

Why so short a history?

The current owners and founders of the park are developers by trade. They started up the new park as a project to build with full planning permission granted and then to sell on.

They have not invested in any marketing or advertising to promote their short stay pitches.

Here are the financials, facts and figures:

• tenure: freehold
• owner’s residence: yes (5 bed)
• asking price: £795,000
• season length: (?)
• trading history: 1 year
• acreage: 2.3
• no. of total pitches: 36
• no. of pitches used for seasonal rent: 22
• no. of pitches used for overnight stays: 14
• touring van fee per night: £25
• mean average occupancy (Mar-Oct): 55%
• seasonal pitch fee: £1,800
• fee per pet per night: £1
• direct and indirect costs: 68% of T/O
• interest, Depreciation and Tax: 14% – 18% of T/O

Let’s try our equation for estimating what you might earn from running such a campsite…

First off – we are unsure how long the season is because the broker advertising the site simply doesn’t say.

We will assume this site meets the typical standard of operating a 7 month season. A safe guess.

It’s rare to find a campsite running a shorter season. Also, it would be unwise to assume a year-long season. This only exaggerates our earning figure by 40%.

By taking our guess at a 245-night season length, the remaining steps of our calculation should fall into place.

1. There is only one quality of caravan pitch (16 amp electrical hook-up), yet two methods of hire (seasonal/overnight)
2. 22 out of 36 total pitches are used by seasonal owners for a fee of £1,800 each per season.
   • In a year, the seasonal hire revenue will be £39,600
3. If you were to take the remaining 14 short stay pitches and invest in some advertising you could expect to hire them out successfully:
   • With a pitch price per night of £25, a season length of 245 nights and ave. occupancy of 55%, your expected short stay pitch revenue would be…
     • a further £47,162.50 per annum
     • (…with 1/3 short stayers paying for dogs, that number now looks like – £47,791.33)
4. This would make your combined park revenue…
   • £87,391.33 per annum
     • (*remembering all electrical hook-up is included – and that there are no park amenities or activities to attract further revenue.)
5. To arrive at our EBITDA we subtract our benchmark costs and overheads of 68% (which is equivalent to direct and indirect business costs = £59,426.10)
   • …leaving EBITDA of £27,965.23
6. Your earnings figure after tax, interest repayments and depreciation would be around (18% of T/O turnover)…
   • £15,730.43 per annum

Any adjustments?

You could probably add an additional £6,000 for savings on cleaning costs between bookings on your 22 seasonal pitches…giving you earnings of around £21,000 per annum.

Aside from this, it’s probably safe to assume this figure not being far off your take-home pay for investing in this freehold £795,000 caravan park.

It’s worth remembering that your own housing is taken care of with a 5 bedroom owner’s residence.

Plus, the property benefits from an annexe, which you might choose to rent out for side income.

With oil fired central heating, kitchen garden and solar-powered electrical supply to your residence – further savings could be made on that figure of ~£21,000.

Not bad.

Now, let me hear your thoughts…

So that’s my approach to estimating how much campground owners make.

It isn’t exact…there will be exceptions to the rules. No two campsites are the same.

But as a general framework, I think it’s well-founded and produces moderate results.

Good enough for making a broad, educated guess.

Have you invested in campsite businesses before? How did you approach estimating potential income?

Are you a professional agent? What model do you work from?

Before you go … let me know by leaving a comment below.