112. Campgrounds

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Back in 2016, Mark Lemoyne was at the tail end of a long and stressful career in politics.

I was very much engaged in the public policy arena, worked several years in the Michigan State Senate, and then I was a lobbyist at the state and federal level working in the industries of retail and healthcare.

And after 24 years in that industry, my wife and I hit what we call the midlife reset button. As a part of that reset, Lemoyne met up with an old friend to get some advice on what to do next.

And it led to an unexpected outcome. He says, if I could do anything in the world, what would it be?

And with no hesitation, I told him, you're going to think I'm crazy, but I've always wanted to own and operate a campground.

And rather than laughing at me, he continued with the challenge of, well, then you got to do that.

And within six months, my wife and I sold the house, a second car, furnishings, you know, clothes, different things we knew we wouldn't need. And we bought a campground and jumped in headfirst.

It was like an adrenaline rush.

I remembered coming back from the title office, signing a stack of paperwork that was about a foot high, and literally everything we own, including the 401k, was in the form of a campground.

We had a great sense of accomplishment, but then also looked at each other just terrified with, oh my gosh, what did we do?

For the Free Economics Radio Network, this is the Economics of Everyday Things. I'm Zachary Crockett.
Today, campgrounds.

It's estimated that there are around 27,000 campgrounds in the United States. Together, they have more than 2 million campsites, and they come in many different shapes and forms.

For most campers, tenting is still the entree into camping. You know, it's very economical.
You can, you know, buy a tent for about $100.

Again, that's Mark Lemoyne.

Guests are coming in RVs, whether it be a pop-up or a travel trailer or Class A motorhomes that are literally million-dollar units with all of the creature comforts of home.

Then we also offer accommodations, whether it be small basic cabins or deluxe cabins. And many of us even have what we call unique accommodations, clamping tents, tree houses, train cabooses.

Around half of these campgrounds are publicly owned. They're run by federal agencies like the National Park Service or the Bureau of Land Management, and by state and municipal governments.

The United States obviously has invested a lot of time and energy through the years to protect lands for the enjoyment of the public.

The public parks do a nice job of providing great settings, but usually more base amenities. You know, outhouse perhaps, or a bathroom and a shower, but not much more.

Public campgrounds charge modest reservation fees, but this money usually isn't enough to break even. The average public campground might only recover 50 to 75 percent of the cost to run it.

To stay operational, they rely heavily on tax dollars.

Governments are willing to make this investment because there's still a net economic benefit to the local communities outside of the park, where visitors spend money on things like gas, lodging, and food.

The Park Service estimates that each tax dollar invested in national parks returns $10 in local economic activity. But these economics aren't a concern for the other campgrounds in the United States.

A growing percentage of campgrounds are privately owned and operated, either by large investors or by individuals like Mark Lemoyne and his wife.

Our Our industry is very fragmented in that it is mostly owned and operated by mom and pops, single owner operators.

It's entrepreneurial at its heart, and we operate our parks as if we've opened up our home to our guests.

There are a few different ways to own a campground. For starters, you can buy land somewhere and build one yourself.

Campgrounds can be built on either large tracts of land, let's say 40 acres, 20 of which is the campground itself with the sites on them, or I would probably say, you know, as small as about 10 acres.

That would be pretty tight. If you want to build a mid-sized facility with room for tents and RVs and a couple bathrooms, you're looking at a pretty sizable cost.

You're typically wanting to start with at least 100 sites. And it's estimated that it would be about $15,000 to $25,000 per site.

So if you were building a 100-site campground, you're looking at a top range of about $2.5 million just to build the infrastructure, the sewer, the water, the electric.

You're going to need restrooms and perhaps a general store. And that $2.5 million doesn't include the land.

When you go this route, you also better expect some red tape.

Governments in all 50 states still regulate the operation of a campground because it is a business.

Everything from, you know, you need a campground license and a sales tax license, and you might need a permit to be able to provide water if you're on a well system as opposed to public utilities.

So there are definitely expenses on the front end.

If you don't want to deal with all of this, you can buy an existing campground instead.

You can find dozens of them for sale on listing sites like Campground Marketplace or through a specialty campground broker.

But you're likely to pay a bit of a premium since you're buying both real estate and an established business.

A campground with 100 sites and a good location with a proven customer base could set you back around $4 to $6 million.

Even if you manage to get a campground up and running, it can be hard to market it to campers. Many buyers choose to purchase a campground franchise from Campgrounds of America or KOA.

That's the path that Mark Lemoyne and his wife took. We purchased our park in 2016 for $1.6 million.
It had been a KOA the entire time and was owned by its original owners.

They operated it for 42 years and they get the credit for building a beautiful park on top of what was formerly a blueberry field. So all the infrastructure was there.

Lemoyne's campground in Benton Harbor, Michigan, is one of more than 520 franchise locations in North America under the KOA brand.

In addition to owning his his own campground franchise, Lemoyne is now the senior vice president of franchise operations for Campgrounds of America.

KOA is the most recognized brand in the outdoor hospitality industry. And one of the biggest benefits that we get as a franchisee is just that awareness.

Just affiliating ourselves with the brand alone puts us on the map.

All franchisees are independent business owners and operators, so the greatest asset that they own is the land and the buildings themselves.

And KOA's partnership really is just for the operation of the campground itself.

As a franchisee with a recognizable campground brand, you can get more visibility, but it doesn't come for free. You have to fork over a percentage of the revenue you earn from campsite bookings.

We pay royalties, and the royalties are applied to our registration revenue. It's 8% for the royalties, and then we also pay 2% specifically for marketing and advertising.

In 2023, KOA reported that its franchises collectively brought in around $500 million in campsite registration fees. That averages out to just under a million dollars in revenue per location.

And that doesn't include additional income from things like on-site general stores and restaurants.

But running a campground is about more than just putting your boots up by the fire and roasting marshmallows.

It involves seasonal swings in demand, sky-high electrical bills, and a lot of calculations about occupancy rates. That's coming up.

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Mark Lemoyne's campground is set on 40 acres of land not far from the eastern banks of Lake Michigan. It's shrouded by maple and pine trees, and well-manicured paths lead to a stately general store.

About half the land is devoted to campsites, almost all of them for RVs.

My park, I have 130 sites. That would include 101 RV sites, nine tent sites, and then 20 cabins.
And how many guests are are coming through there every year?

We see 15,000 guests from all over the U.S. as well as international countries.

Like many privately owned campgrounds, especially those in franchise systems like Campgrounds of America, Lemoyne's Park is heavily developed.

This isn't a state-run campground with little more than a carved-up picnic bench and a well-used grill.

We've got a nice in-ground heated pool. We've got a playground.
We also have a nice pond that we do catch and release fishing on.

And for the area of our property that is not developed, we have carved a walking trail.

One of the things that I found interesting is that while we try to offer guests sites that are the value sites, that are less expensive and lesser bells than whistles, lo and behold, it's our more expensive sites with the larger amenities that go first.

The $1.6 million investment that Lemoyne made nine years ago has paid off. Today, his campground generates around $1.5 million in annual revenue.

He says around 85% of that money comes from the site rentals. Private campgrounds generally charge higher nightly rates than public campgrounds.

But Lemoyne says they're still beholden to market forces.

The market is ultimately going to dictate price, and that can be determined based upon the competition that you you have in the area.

There's other public parks or private parks that charge a little bit less.

There's a number of other private parks that are always surrounding every location and you take a look at what they're charging and ultimately most tent sites are, I'll say, $40.

And then you go up to the RV class, which could be $50 or more. Most of our RV sites always offer at least water and electric.

But then when you start adding sewer or things like patio and then grills and furniture, those price points will go up.

I think the most expensive RV site that I have ever paid for myself would be for about $200 a night.

On average, Les Moyne wants to see at least 60 to 70% of the campsites booked every night and closer to 100% during peak summer months. The price of a site can fluctuate based on demand.

Some campgrounds are now experimenting with dynamic pricing, similar to what you see with Uber rides or airline tickets.

If you buy a plane ticket earlier, it's going to cost a little bit less, but as that plane fills up, it might cost more. Or camping, in many respects, now is working exactly the same way.

The old strategy of just setting your rate and forgetting it all year long has changed. So, most guests, if they book earlier, they are going to get the better prices on the better sites.

As the supply and demand chain changes and adjusts, that price is going to go up and down accordingly. 10% of that revenue gets kicked back to Campgrounds of America.

But Lemoyne gets to keep all of the money from other income streams, which makes the general store important to the business.

The store really is, from an economic standpoint, the engine because the store revenue is not tied to the royalties at KOA.

In our general store, we have RV supplies, apparel, and then toys or grocery items that you might have forgotten, mustard, ketchup. In the morning, we have lattes and espresso and muffins.

Firewood is my number one product.

In total, Lemoyne says the average family of four that stays at his campground spends around $150 per night.

That includes the site that includes some firewood, maybe some marshmallows and graham crackers and chocolate, making everybody's favorite camping treat.

And then they might buy a sweatshirt or a knick-knack. Due to the harsh Michigan winters, Lemoyne's campground is only open six months of the year.
And he has to make enough to cover the offseason.

Across our industry, the overwhelming majority of our revenue comes in the summer months of June, July, and August, you know, basically between Memorial Day and Labor Day.

And as a seasonal business, it's like farming. You need to make money when the sun is shining, but those bills come in year-round.

Running a campground isn't cheap. Lemoyne pays taxes on the land, ongoing fees for business licenses, and labor costs for seasonal workers.

I have at my park as many as 22 to 25 staff members that usually are retired individuals that we call work campers who come and exchange time at our campground for the work that they do.

And we also hire high school and college students as well.

And then there are the electric bills. They are more than my mortgage in my house used to be in an entire year.
You know, 130 sites and everybody's plugging in on a hot July day.

And some RVs have two or three air conditioners. That meter is cooking for sure.
What's your peak electric bill? My peak electric bill, I've paid as much as $15,000 once in a month.

Are there less obvious expenses that come up? I mean, trees literally in your own park can snap an electric line over time.

And then all of a sudden, you have a number of sites that have no electricity.

I think one of the most unexpected repairs that we might have to do are on behalf of a guest who forgets to unhook the water line to our water. And as they pull off, it snaps.

And then I've got a geyser in the park. And how much does something like that set you back? Usually a couple hours.
The digging is the most druduous work.

All costs considered, Lemoyne aims to make around a 30% profit margin. If he has around $450,000 left over from his $1.5 million in annual revenue, he's a happy camper.

You've got that 30% to be able to reinvest back into the campground or, you know, a novel idea with most business owners, especially mom and pops, is ultimately you'd like to pay yourself.

Looking back, how do you feel about your decision to pivot careers nine years ago?

It's incredibly cathartic.

Many of us are in industries where you may or may not see the results of the efforts that you're putting into a job, and government would be one of the greatest examples of that.

And now I get no greater joy than walking around my campground on an evening and seeing families sitting around the fire, enjoying stories, or kids riding their bikes.

But in some respect, respect, running a campground isn't too dissimilar from the political world that Mark Lemoyne left behind.

I'm running a small community. I'm the president, I'm the Congress, I'm the Supreme Court, the governor, I'm the chief of police and the dog catcher, all wrapped in one.

For the economics of everyday things, I'm Zachary Crockett.

This episode was produced by me and Sarah Lilly and mixed by Jeremy Johnston. We had help from Daniel Moritz Robson and Davin Abuaji.

And thanks to listeners Madeline Nasser and Brian Roy for suggesting this topic. If you have an idea for an episode, feel free to email us anytime at everydaythings at freeconomics.com.

Our inbox is always open. All right, see you next week.

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