Trendy camper van startups are poised to take on the $114B RV industry

QUick Facts

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The RV industry is worth 2.2% of the US GDP — so big that economists use it to predict recessions.

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As of May 2019, shipments of Type A motorhomes (big RVs) were down 22.4% from the same time last year, while Type C (mini RVs) increased 5.1%.

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Building a fleet of vans is capital intensive ($60-100k to buy and retrofit a van for camping). At $250/night to rent, a single van can reach profitability in just over a year.

There was a time when I nearly succumbed to the siren song of #vanlife. My wife was working as a travel nurse—I tagged along as a writer/entrepreneur—which meant that, for two years, we moved to a new city every three months. I thought about purchasing an RV on numerous occasions. It would’ve made a ton of sense over short-term apartment rentals, but I couldn’t bring myself to put down the cash—or take showers under a bag with a hole poked in it.

Nevertheless, during my research of the RV industry, I couldn’t help but notice a trend: We’re smack dab in the middle of a one-hundred billion dollar industry undergoing a transformation.

According to a 2019 study by the RV Industry Association, the RV industry has an economic impact of $114B—that’s 2.2% of the entire US GDP. Nearly 25 million Americans—equal to the entire population of Australia—travel the open roads in an RV every year.

Who are these people? Currently, middle-aged and middle class. The largest demographic of RV buyers are people aged 35 to 54 (the average RV owner is 48 years old, down from 49 in 2005), married, with an above-average annual household income of $62k. But the times, they are a’changin…

As baby boomers bequeath trillions of their wealth to their millennial progeny, the future of the RV industry hangs in the balance. And, once millennials overtake the boomers in the country’s spending power, those Christmas-Vacation-style highway mammoths will likely lose their appeal in the exchange. This trend is cresting right now—but hasn’t landed yet. And this inflection point is a golden opportunity for the road dogs ready to chase it.

The RV industry is so massive, it’s a weathervane for the US economy

Big-ticket motorhome sales have long been heralded as the quiet oracle of the American economy. RV prices usually start at $100k, so when RV sales are strong, it’s a good indicator that the country’s economy doing well (more people with disposable cash equals more luxury purchases). Conversely, when RV sales sputter, the economy is soon to follow, because it shows consumers are holding onto their cash.

The RV industry has a multi-decade track record of accurate predictions: The Atlantic pointed out that the last two recessions (2001 and 2008) were preceded by falling RV sales in 1999 and 2006.

So what does the RV industry say about the US economy right now?

At first glance, it’s good. Last year was the second best year on record—483,672 units, down 4.1% from 2017’s record-setting year of all time at 504,600 units. Overall, in the past five years, RV shipments have only trended up year over year. 

“The RV industry hasn’t peaked, and we fully expect that shipments above half-a-million units shipped [sic] will become the new normal in years to come,” said Frank Hugelmeyer, president of the RV Industry Association. The luxury “silver bullet” RV maker Airstream expanded its production last year and achieved a record year of sales to meet the “booming” demand, swelling by 218% compared to five years before.

“The RV space is on fire” states CNBC. It credits the surge to millennials, whose pockets are getting deeper as they age. “Millennials are buying younger than their parents did and their grandparents did,” said Bob Wheeler, CEO of Airstream. “There’s a cultural value of collecting experiences and not things. They’re not really about the big house in the suburbs, they’re more about the adventure.”

It’s true—GoWesty, a camper van product maker, reported to the New Yorker in 2017that sales have increased 55% in the past five years, thanks in part to the “#vanlife” trend.

But—you knew a ‘but’ was coming—Mr. Wheeler and Mr. Hugelmeyer’s predictions aren’t exactly holding water at the moment. According to RVIA’s latest survey in April 2019, total RV shipments were down 24% compared to April of last year.

The same drop slammed the stock price of Airstream’s parent company, Thor Industries, whose stock price tumbled from $156 in January 2018 to $54 in June 2019. In a quarterly earnings call on June 10, 2019, Thor reported a 23% decrease in sales of both towable campers and motorhomes in North America.

There seems to be a discrepancy between the RV industry’s previous outstanding five years and 2019’s poor performance thus far. The answer might have to do with the phenomenon known as the “great wealth transfer.”

The “great wealth transfer” probably won’t include RVs

Baby boomers, the richest generation in history, are aging and preparing to pass down their record-breaking $68.4 trillion in assets over the course of the next quarter-decade, according to research and consulting firm Cerulli Associates. Analysts predict that when millennials inherit these assets, they will take the place of the wealthiest generation in history.

But millennials aren’t really into RVs—at least not the your parents’ gas guzzlers. The latest wholesale report for RV shipments for May 2019 showed that Type A motorhomes (the big RVs) are down 22.4% from the same time last year. In fact, all motorhome shipments (not including towables) were down except one: Mini (Type C), which were up 5.1% over last year.

In other words, bigger isn’t better and small units are gaining market share. But sales might not be the best place to look to measure millennial demand. Part of being a millennial is the inclination to rent expensive things, rather own them. 

To better understand the rental market, I interviewed two founders of successful ‘adventure travel’ rental companies, ROAMerica and Native Campervan.

“I’m not a regular van, I’m a cool van”

The new wave of RV rental startups are betting on smaller, more nimble “Class B” vehicles, often called campervans. These campervans run just 20 feet in length — about half the size of a typical “Class A” RV.

“Most people we know don’t want to rent a [traditional] RV,” says Taylor Hood and Gretchen Bayless, co-founders of ROAMerica, an adventure travel startup in Bend, Oregon, that retrofits commercial vans into luxury campervans and rents them out. “RVs are gas guzzlers. They can’t go on a dirt road for a mountain hike. They don’t fit with the adventurous outdoorsy lifestyle. Our segment is new.” 

“Campervans allow you to have experiences without huge capital expense,” says John Moran, co-founder of Native Campervans, an adventure travel rental company in Denver, Colorado with a fleet of 40 outfitted campervans. “Rentals give you the experience of two weeks out of the year, without needing to purchase and store the vehicle year-round.

Moran doesn’t think the RV industry will be around much longer—-at least not in its current form. “With traffic and population growth and overcrowded national parks, it will be more difficult to drive around in those things. We need something more accessible and mobile.” 

Both Native Campervans and ROAMerica started in 2016, coinciding with the explosion of #vanlife on social media, a spike of 5.5 million photos and posts from people living nomadically in vans.

The movement created a groundswell of interest in campervans, allowing ROAMerica to book their first van through the rest of the year within six weeks of opening.

“In year two [2017], we tripled our fleet and got an office,” says Hood. “Year three we doubled our fleet again. Then we started to see a lot of other companies pop up renting small adventure overland vehicles as well.” 

For Native Campervans, Moran says their business has doubled every year since inception. “We’re turning down a ton of business,” he says. “We’re sticking to Class B — its our model. Campervans are exploding.”

In short, the demand is there. But, unlike your dime-a-dozen ecommerce upstart, capitalizing on it isn’t as simple as creating a Shopify page. In the RV rental business, you gotta spend money to make money.

How much will a fleet of campervans set you back?

According to Hood, a used van usually costs around $20k. Outfitting the interior of the van usually costs another $20-$30k, depending on how elaborate the design is. Then the labor to install everything is roughly $5-$10k. Add cookware and gear for another $5-$20k. 

So out-the-door, expect to pay roughly $50k for a van that has professional design, plumbing, cabinetry, and furnishings. Moran’s numbers were similar. To buy a van and retrofit it or to buy a ready-made one, you’re looking at $60-$100k and upwards from there. “It’s very capital-intensive,” says Moran.

How much money you can make?

ROAMerica rents a van for $250 a night and makes about $10k a month in revenue at the time of this writing. Maintenance costs aside, that means you’d start seeing returns on an $80k van investment after 320 days of booking—about 13 months (assuming a conservative 300 days per year booked).

Moran says revenue has doubled every year. They get “probably an average of 150 bookings per month” at day rates of $109 for a Dodge Caravan (the “OG”), $139 for a Spinner (“Smalls”), and $229 for a Ram Master Pro (“Biggie”) with a minimum 3-day booking period. The “Biggie” is the most frequently booked. They also have multiple locations in Denver, Salt Lake City, and Las Vegas and charge a $300 one-way fee. 

Moran didn’t disclose revenue numbers but doing some math with assumptions, they are probably bringing in $100-$200k per month (bookings are highly seasonal) with a fleet of 40 vans. That’s roughly $1.2-2.4 million/year after expenses.

Another adventure travel company, JUCY, which we discussed in a recent Trends email, was started by two brothers in New Zealand in 2001, with a fleet of 35 camper vans. Today the company has more than 4k vans and cars across Australia, New Zealand, and the US, earning ~$52k/year per vehicle —or some $200m/year in revenue. 

Big players are watching the space closely

“It’s attracting major companies,” Hood says, “Hyundai, Ford, Toyota, Nissan, Rivian, and Atlas are all companies getting into the overland vehicle space.” Overland vehicles are more rugged and self-reliant adventure travel automobiles designed for remote destinations where the journey is the primary goal. Overland culture has been popular in Europe for years, says Hood, and is only now gaining traction in North America. This explains Volkswagen’s strategy behind releasing its new “Grand California” campervan this year for $64,325 in Europe only.

Both Hood and Moran expect the U.S. market to be saturated with “mom and pop” bandwagoners for the next couple years before the products get winnowed out and the experience achieves the quality level it needs to become mainstream. 

Hood, Bayless, and Moran are betting on this minimalistic, environmental shift in the RV industry. They are bridging the gap between RVs and millennials by customizing campervans to be smaller, more modern, and outfitted with the latest tech, especially Wi-Fi.

For example, electric RVs don’t really exist in the States (yet). But if there’s ever an argument for zero-emissions… RVs are near the top. Here’s what the RVIA director said about electric RVs: “The current generation [baby boomers] of RVers wants the biggest one they can afford, but millennials are showing they’re willing to spend the same amount of money on [a smaller RV] with more features. As more younger people enter the market, it’s likely we’ll see a change.” 

Cultural shifts are fueling a rebirth of the RV industry

People are quitting their jobs in record numbers and freelancing remotely. Freelancers and the booming gig economy are expected to become the majority of the U.S. workforce by 2027.

Many workers only need a laptop and an internet connection to make a living. One 29-year-old CEO lives out of his van selling earbuds online and generates $2m a year.

The trend of digital nomadism gave rise to the emergence of digital health—an awareness of the need to spend time away from screens and do things like meditate and be in community. A getaway in a campervan aside a glassy mountain lake is the epitome of digital health in practice.

“It’s a way to get out into nature comfortably and save on accommodation costs,” says Hood. “It’s soft adventure for people who are always on their phones. It’s a way to get in touch with themselves — to recharge your soul’s batteries. It gives you a visceral sense of change.”

“Millennials want to live simply,” Moran says. “Similar to the tiny house industry, there’s a movement to reduce everything to the core experience of the most important aspect of the trip. 

Four lanes of opportunities

Jeff Cavins, CEO of Outdoorsy, heralded as the “Airbnb for RVs,” raised a total of $81.5m in the last year and a half to help owners of underused RVs and campers monetize their vehicles. Cavins told TechCrunch that 31k vehicles are registered on Outdoorsy.com and rent on average for six days at a time, producing an average of $1,900 in income for their owners over that same six-day period.

Here are a few other gaps and opportunities to think about:

  • Fleets and van rentals. Throw a vintage Airstream on your property and Airbnb it for $125 per night, like this couple did in Virginia. Or, be the first travel adventure rental company to assemble a fully electronic RV fleet (you can call it EVRV. You’re welcome).

  • Marketplaces. Create a campervan rental listing and booking site like Outdoorsy (which has raised $75m since their 2014 launch). Or, create an Airbnb-esque marketplace like Roverpass that lets RVers and campervans pay to park their rigs on your property for the night. Or skip the coding altogether, acquire tracts of raw land in pristine locations, then list the sites on Hipcamp to cash flow them.

  • Specialized products. Create mobile and compact “home” technology for digital nomad living—household products that are battery powered and smarter and high-end. Think Tesla for microwaves. Or, write a guidebook for the best campervan trips.

  • Peripheral services. Make fleet maintenance or cleaning easy for businesses like JUCY, that are HQed internationally. Or, provide end-to-end trip planning services. Or, do what the insurtech startup Trov is doing and provide automated mobility insurance for commercial fleets.

Signaling change ahead

The RV industry is morphing, albeit slowly. Entering the space now would be ahead of the curve — but, as Hood and Moran both noted, it would take a lot of capital to tread water until meaningful traction occurs. Moran says when they started with the capital they had, they could’ve bought only two or three RVs, but the unit economics wouldn’t have worked (i.e., they couldn’t charge a high enough price and receive enough bookings for the business to be profitable).

By acquiring a fleet of 40, Moran says they got to the size they needed to be attractive enough for lenders. “We didn’t take outside investment too early,” he said. “We wanted to figure out our business first. But we’re not opposed to outside investors today.”

Changing consumer behavior and shifting wealth are about to turn the RV industry on its head. As conventional RV shipments in North America begin to stall, the worst is yet to come — get ready for a recession, followed by a resurgence of demand for lighter, smaller, and simpler campervans with advanced tech.

The clock is ticking for RV makers to adapt their designs or be disrupted by new players more in touch with the soon-to-be most affluent generation in history. And the first one to reinvent the ‘bag shower’ may just win it all…