Park Resorts and Parkdean have both been sold as investors look to capitalise on the rise in staycations as a result of the falling pound.
The deals came as travel trends continues to buck expectations, with outbound travel rising despite the increased cost.
At Parkdean, the 73-site company has been bought by Canadian private equity house Onex Corporation for GBP1.35bn from Epiris, formerly Electra. Epiris will also receive GBP405m for its 45% stake in the company.
Epiris originally invested GBP70m in the acquisition of term debt in Park Resorts in 2012, before leading a restructuring of Park Resorts’ debt facilities in 2013, following which it became the majority shareholder.
Epiris has sought to expand organically and through acquisition and between 2013 and 2015, Park Resorts made acquisitions, including South Lakeland Parks and Southview and Manor Park holiday parks. In November 2015, Park Resorts was merged with Parkdean Holidays.
“We are proud of our investment in Parkdean Resorts,” said Alex Fortescue, managing partner at Epiris. “Though a series of bank-related acquisitions and 11 individual transactions we have transformed our original Park Resorts debt position into joint control of a very high-quality, market-leading business with profits of more than GBP100m.”
Epiris reported an uplift of GBP25m on the valuation of its investment at 30 September 2016. Together with proceeds previously received, Electra’s total proceeds from the investment will be GBP515m. This equates to a return of c.3.9x cost, and an IRR of c.46%.
The new owners will continue to pursue Epiris’s strategy and will also be improving the existing parks. “Parkdean Resorts has built the market-leading affordable holiday park business in the UK, with a strong base of loyal customers in an attractive segment of the domestic holiday market,” said Tony Morgan, a managing director with Onex.
At Park Resorts, the company has been sold by Caledonia Investments to a vehicle of Intermediate Capital Group with an enterprise value of GBP362m. The net proceeds represent a premium of 47% to Caledonia’s value of Park Holidays at 30 September 2016 of GBP134m.
Park Holidays was originally acquired by Caledonia in November 2013 for a headline valuation of GBP172m, with the company taking an 81/5% stake. Overall, Caledonia will have realised a net IRR of 44% and a money multiple of 2.9x from its investment.
Under Caledonia’s ownership, Park Holidays accelerated capital investment across the estate driving further revenue growth in addition to increasing the number of parks it operates from 23 to 26.
The fuel which is thought to be driving the interest in the caravan market is the drive to staycations, a word which first popped up after the collapse of Lehman Brothers and has found new life following the EU Referendum, since when the value of Sterling has dropped by 15%. The belief that more expensive overseas holidays would keep the British at home has yet to be proven.
The BHA Travel Monitor reported that there were 450,000 fewer holidaymakers to the UK in the year to November versus the same period in 2015, while outbound figures rose by 5.2%. BHA CEO Ufi Ibrahim said: “Our analysis has shown that there is increasing pressure on the industry through lower inbound holiday passengers and higher outbound holiday passengers.”
VisitBritain said that overseas spending in the UK could hit record levels this year, with the number of visitors potentially rising by 4% to 36.7 million visits. It said that the figures “not only underpin a longer-term pattern of growth for inbound tourism, one of our fastest-growing export industries, but also demonstrates its growing importance as a key driver for economic growth and jobs”.
The UK services sector rebounded in December, according to Markit, which said that the “rate of expansion of activity accelerated for the third month running to the sharpest since July 2015, fuelled by stronger growth in new work. Employment rose at a pace unchanged from November’s seven-month high, and sentiment towards the 12-month outlook strengthened despite ongoing uncertainty regarding Brexit and European elections”.
HA Perspective [by Katherine Doggrell]: The caravan park sector has been described to us by Tom King, senior director, specialist markets – licensed & leisure, CBRE as being very resilient, with counter-cyclical opportunities. When the economy is doing well, the property-loving Brits like to own caravans and when money is tight they stay at home and rent caravans. Plenty of dual-income benefits.
What income the newly-acquired caravan parks are currently looking to seems to be open to debate. The only quantifiable result of the referendum so far has been the fall of the Pound, which has driven hotel transactions and should have driven the public away from EasyJet and its ilk. But, as the surveys have shown, public confidence is running high and with it public debt which, according to a TUC study, is now above its previous peak prior to 2008.
Barrie Williams, managing director, hotels, Christie & Co, told us: “Staycations wouldn’t have helped the market as holidays would already have been booked, but it is likely that those who went abroad and suffered the fall in the currency in 2016 will be rethinking. There are still an awful lot of people who will pay extra, but I would be surprised if it didn’t assist.”
What additional shock will curtail this spending and push up rents in the caravan park sector is yet to be revealed. The most obvious culprit is interest rates, with speculation rising that 2017 will see Mark Carney start to bring rates back up, dependent on whether Brexit makes its presence felt in areas other than the currency.
So far, the taste for overseas travel shows no signs of slacking.