Western Canada has the highest rate of recreational vehicle (RV) ownership in Canada, at 68 per cent of those who camp, according to the 2018 North American Camping Report. Of the 9.1   million Canadian households who go camping, the majority opt to rough it in an RV, a ratio that approaches three out of four in B.C. and Alberta.

Today the average size of an RV on western roads is 40 feet long and 13 feet wide – twice the size of such vehicles two decades ago – and they are often rigged out with furnishings, TVs and complete kitchens.

The problem is where to park for the average 4.5 annual camping trips that owners use them. While there are public campgrounds, about 25 per cent of owners wheel into privately owned campsites, and this is where recreational real estate investors can make money.

“The big problem is that the RV units are getting better, made with more conveniences and there are great finance plans to purchase. Lots of units are  being sold every day,” said Rudy Nielsen, president of the Niho Group, which includes LandQuest Realty that has been involved in selling B.C. recreational land for decades. “So you might have a unit but unless you book well into advance a place at a private or government campsite in summer you have nowhere to go.”

This year another demand element has been added to the equation: work on natural gas and oil pipelines in B.C. and Alberta that attracts mobile contractors who need inexpensive lodging. A campground in northern B.C., the Cariboo or in northwest Alberta converted to RV sites could prove a profitable play, according to real estate agents who work in this niche market.

Based on Western Investor research, however, the real market is in southern B.C., where the camping season is longer, and the province tends to attract RVers from across Canada and from the U.S.

If you plan on converting a parcel of land for RVs, the camp must be capable of offering or upgrading to sewage stations, 30-to-50-amp power outlets, water hookups, and often Wi-Fi services and even pools or clubhouses to attract visitors.

There are few listings for existing RV campgrounds, and investors have to be careful in the choice of location and the amenities. 

An example of an existing RV campground for sale is the Dominic Lake Resort, a short drive from Kamloops in the Thompson-Okanagan region. Owner Al Pike said the property is profitable; his family simply wants to move on.

Dominic Lake Resort is nearly 10 acres on the 90-acre lake and includes 26 RV sites, a lodge and two cabins. The RV sites are fully leased at annual rates that range from $2,100 for inland sites to $3,000 for lakefront parcels. There are only three RV sites per acre, which suggests more could be added. The resort is listed by Michele Cummins of Re/Max at $850,000, which is about the price of a two-bedroom condo in Vancouver.

Re/Max Sabre Realty has an RV campground riverfront parcel between Creston and Cranbrook. This development, which began in 2010, has 126 RV and cabin lots, of which 44 have been sold by the way of shares in a limited company. Each lot sold for around $40,000 and there are 82 lots remaining, of which 32 are on the waterfront. This package is listed at $1.66 million by Sabre agent Larry Berisoff, who notes that RV parks have a singular advantage over manufactured home parks: they are not subject to provincial rental regulations. 

A riverfront RV development site near Creston covers 45 acres with 126 RV lots that are sold, not leased. It is priced at $1.6 million. | Re/max Sabre Realty

In Alberta, there is an RV park for sale on a 118-acre site that includes serviced lots. Located along the Red Deer River in Settler County, it includes a laundry, mini-golf course and family amenities and is priced at $2.2 million by Salomons Commercial. 

Like any commercial real estate investment, an RV campground requires due diligence on the part of the buyer, notes appraiser Trevor Hanson of Soderquist Appraisals Ltd. of Red Deer. Hanson said that, because there are so few sales each year and properties often have a variety of set-ups, it is difficult to assess true market value. At a minimum, buyers should check that the financials support the payments and maintenance costs and provide a livable income in what is really a seasonal business.

68-room motel with 11 two-storey townhouse rental units located on the main highway. There are 3 buildings plus a full-service 69-seat restaurant. The building has a full basement for storage, mechanical, electrical, workshop and staff use. There is also an office adjacent to the 2-bedroom manger's suite. There is a pool and a hot tub on the premises as well.

Checking into buy or build opportunities in the West as Canada-wide revenues hit a record high

Investors are taking note of the Canadian hotel market like never before because performance indicators are strong and have been steadily improving for some time. In 2017, Canada saw the highest prices per room for a single asset sale in its history and also stellar RevPAR (revenue per available room) performance. 

In this healthy environment, hotel investment opportunities are present in throughout Canada and in particular Western Canada; however, this does not necessarily mean that opportunities are present everywhere or are easy to identify. First of all, averages never tell the full story. The RevPAR for all of Canada grew a record-breaking 7.7 per cent in 2017, but the performance of individual markets within Western Canadian varied wildly. At one end, the Vancouver Airport market sustained a remarkable 14 per cent increase in RevPAR, while the Regina market suffered a severe 10.5 per cent decline. Between these two bookends strong performances outweighed the weak ones by a considerable amount. 

The key to a successful hotel investment is knowing the conditions that best diminish risk in that particular market. For those markets that merit an investment, the best option may be to acquire a site and build a new hotel, or it may be that acquiring an existing asset is the best route to success. 

Prior to entering a hotel market, an investor has to be in agreement with two foundational, non-negotiable principles:

1. 1. Hotels live and die according to the number heads in beds each night. Since this is a risky proposition, leveraged equity return expectations should be in the mid-to-high teens Without the possibility of a high return from the start, a hotel investment may yield no return in the end.

2. 2. Hotel investments require a long-term time horizon to cope with market cycles. The market can quickly go from a high point like in 2018 to what happened in 2009 when the financial crisis wiped out the market. At these low points, hotels can lose more than 25 per cent of their value and be virtually impossible to finance.

Build

Many hotel investors find success in building new hotels when they have a superior site, a strong brand, and a product that has been tailored to meet the needs of the local market. This winning recipe can quickly propel a new property to the top of its competitive market, but only if the correct ingredients are put into the mix.

Finding a site is easy, but finding a site that is actually conducive to a successful hotel development is much more difficult. If you can easily find a site for a hotel development, then so can competitors. The Calgary Airport market is currently experiencing this situation, where the availability of easily acquirable sites has resulted in a glut of new hotel supply that is not easily being absorbed. 

Controlling an excellent site in a market with high barriers to entry is the best land scenario. At present, most of B.C.’s Lower Mainland would be categorized as having high barriers to entry. In this area, potential hotel sites are competing with residential condo uses, which is driving up prices and limiting the availability of land. Consequently, the region has seen few new hotel developments in the last decade, but those that have all been strong performers. A prime example is the reinvented Rosewood Hotel Georgia, which netted the highest price per room ever paid for a hotel property in Canada at $929,000 per room in 2017.  

Expertise in building is also an essential consideration. The most successful hotel developers have an expansive knowledge of construction, including both costs and schedules.  

Buy 

If you lack building expertise and have not secured a great site, buying your way into the hotel market may be the better option. Canada on the whole is now more of a seller’s market than a buyer’s market. That said, the resource-based lodging markets in Alberta and Saskatchewan have been running contrary to the general national performance; in these provinces, some buying opportunities may now exist.  

When looking at an acquisition, there are three essential considerations that must be taken to heart: 

1. 1. It is crucial to look at the potential new supply in the market and project how your purchase would fare against a brand-new hotel. 

2. 2. The additional costs associated with an acquisition must be quantified and included in the vision for how the investment will perform. For example, an asset with deferred maintenance or that is facing brand-mandated renovations may require extensive, additional capital costs. 

3. 3. Professional management needs to be secured for the asset, as this is integral to the successful performance of a hotel investment. 

The hotel market is often a small slice of a real estate portfolio, but it deserves attention given the returns that can be achieved for those willing to take the risk. When considering an investment in a hotel, it is important to find locations that have strong demand fundamentals and potential barriers to entry that will limit the amount of future competition. With some digging and proper due diligence, these opportunities can be found in Western Canada.