What lies ahead for the UK holiday park market in 2024?

A Market in Transition

The UK holiday park sector is currently in a period of transition, following the peak market conditions that resulted from the pandemic-driven staycation boom in 2021-22. During 2023, there was a notable increase in distress within the sector, including the high-profile administration of various RoyaleLife group companies.

Development sites and partially developed sites that were under construction (or in the planning stages), as a result of 2021 and 2022 demand are also exposed to increasing finance costs. These increasing finance costs have compounded problems for operators, with lower levels of holiday home (buyer) demand experienced in 2023, which has continued into 2024.

Demand for these types of sites has cooled, as a result of increased construction and infrastructure costs coupled with the slowdown in customer demand for lodges and park homes. This is in part a reflection of the wider slow-down in the residential market and greater uncertainty around disposable incomes as a result of both inflation and higher interest rates, with a number of holiday home manufacturers, including market leader Willerby, reporting exceptionally challenging conditions.

Nonetheless, demand remains strong for larger parks with longer term opportunities to add value (where possible), as long as the assets are sensibly priced.

Mature parks demonstrating a reliance on stable pitch fee were increasingly scrutinised in respect of value in 2023, with recent interest rate increases reducing returns on investment for owners.

We consider parks with low occupancy or partly developed holiday parks to pose the greatest risk currently and are being discounted in the market. This is a reversal of the sentiment seen in 2021 and 2022.

2024 Outlook

Current market sentiment appears to be more positive than 2023, in light of the anticipated peak of the Bank of England base rate. As a result, more holiday park stock is likely to be released to the market in 2024, relative to 2023 and we envisage greater M&A activity from private equity real estate and multi-site operators. Already in 2024, Christie & Co has received multiple holiday park instructions, which we will bring to the market in the coming months.

Irrespective of the economic headwinds that the UK economy is presently navigating, buyer appetite for holiday park opportunities remains strong. This can be seen at both ends of the market in terms of ongoing private equity interest in the sector, regional group operators looking to increase their portfolios and new entrants to the market who are attracted by the sector’s underlying long term economic fundamentals (strong customer demand, high sales margins and secure pitch fee income). Existing park operators that are well funded and sitting on cash reserves will have opportunities to acquire parks at more realistic values relative to 2021 and 2022, with less competition from highly leveraged parties that can now no longer compete with cash buyers or lower leveraged buyers. From a macroeconomic perspective, private equity can enter the market at a lower point in the market cycle, which should coincide with a more buoyant exit point in 5 to 10 years’ time.

From a funding perspective, our sister company, Christie Finance continues to assist buyers in finding funding solutions (both debt and unsecured) and delivering whole of market competitive finance solutions for buyers as well as existing owners, where their business is entering a refinance phase. This fundamental service line ensures the wider Christie Group plc is well placed deliver market-leading brokerage and finance outcomes for its client base.

In terms of current market activity, realistically priced freehold holiday parks continue to generate demand in the market. This sentiment is illustrated by Christie & Co’s recent launch of a mixed coastal holiday park, placed under offer within two weeks of launch following a competitive sale process. Christie & Co are also undertaking various off market mandates for clients both in terms of confidential sales instructions and ongoing acquisition work.

We are also witnessing interest in the holiday park sector from our cross-sector cohort of buyers registered on www.christie.com. Often driven by an interest in diversification, or the comparatively simple business model, we’re seeing hotel and hospitality buyers as well as investors looking to deploy capital in the holiday park market.

Case Study

In 2023, we were instructed to market Project Charles: 29 predominantly residential and holiday park sites from within the wider RoyaleLife portfolio on behalf of Paul Davies, Sandra Mundy and Tom Russell of James Cowper Kreston acting as administrators.

Our carefully designed marketing campaign fully exposed these assets to a wide variety of buyer groups attracting almost 1,000 parties to our data site. Multiple credible bids for the portfolio as a whole, for sub-groups and on an individual property basis have been delivered, with negotiations ongoing.

GET IN TOUCH

For a confidential discussion regarding your business options, please get in touch.

Jamie Keith, Director – UK Holiday & Residential Parks 

P: +44 (0) 7736 615 871 or E: jamie.keith@christie.com