How to improve sales and profitability when your caravan holiday park is in financial distress

Comment from Andrew Howe, chief executive at Bridge Leisure Management

Is your holiday park business in financial distress, and are you desperate to improve sales and profitability?

Debts outweighing savings

While the dictionary definition describes a business that cannot pay its debts, I view distress as the point when a park operator stops achieving their commercial targets.

When you are no longer producing the results that will keep you and other interested parties, such as shareholders and your bank, comfortable with how the park is doing, you face the option of making changes or falling into financial distress.

How caravan parks get into financial distress

There are two main reasons why holiday parks get into financial trouble; too much borrowing and some element of poor or unwise management. Often both occur at parks that get in serious trouble.

A classic management fault is focusing on revenue but not looking at the costs incurred in driving the business – having a view of both is the only way to really ensure that your park is profitable.

Parks face variables as diverse as exchange rates and the weather, consumer trends and fashions, so having a clear commercial focus that allows the operator to continually look at their business and make sure it is doing the right things to be profitable is crucial to success. An assumption that everything will be ok is a very risky strategy.

Some parks can work brilliantly with just one type of business, such as touring, hire fleet or owners, but it is worth considering whether a blended operation might be more profitable or more stable.

Owners must also be prepared to look closely at their own performance. A distracted owner who loses interest in day-to-day operations will soon encounter problems, as will an owner that does not fully understand the sector and the key drivers that make holiday parks commercially successful.

Tackling financial problems

Spotting the early signs of a financial problem can be key to turning round a bad situation. Cash is the best indicator of financial health, and if you are struggling to pay the bills on time you should be looking at the underlying causes.

Caravan park manager worrying about financial success

Some parks can make half or more of their annual profit in a few peak summer weeks, so if that period doesn’t go well the rest of the year becomes very difficult to manage. A well thought through cash flow forecast will help you to ensure that the cash you take in the peak weeks lasts all year round, and to identify where there are any pinch points that need to be managed.

Once you have spotted an issue, the most important thing is not to ignore it and hope the situation will improve.

Stop; analyse the problem; recognize what’s going wrong, and get support as quickly as possible. As Einstein’s definition of insanity says, you won’t get different results by keeping doing the same things!

Steps to succeeding

The first stage to managing a park out of distress, or indeed to prevent financial difficulties occurring in the first place, is to put in place checks and balances to identify problem areas. A decent cash flow  forecast, preferably extending 12 months into the future, helps a lot and is not difficult to put together. Start cutting costs by reviewing suppliers and finding cheaper options and cut out purchases that you don’t really need to make.

Focus solely on the areas that will make a real difference. Don’t spend hours deciding on the colour of your menus if it means you are missing the fact that staff costs are greater than the income the bar produces. Be ruthless about deciding what areas need your attention and where you can improve sales.

Two heads really are better than one, so bring team members on board, give them responsibility and welcome their feedback. Most people respond well to being accountable for a part of the business.

Laying off team members is always a tough decision but it can be a good way to cut costs and demonstrate positive action to the banks. However, staff reduction can backfire in lots of ways and is something to be done carefully and with good advice from a legal and operational viewpoint.

Discounting your product can help to generate sales and cash in the short term but should not be viewed as a long-term solution; it will only mask deficiencies in your product offer for so long.

Borrowing money to turn the situation around is an option that should be considered carefully. This is possibly a great solution if it leads to increased sales, but might also be the last thing you should do. Careful thought, avoiding making the decision out of desperation and good advice are the keys to getting it right.

Getting help

Outside support is the right choice when you don’t know what to do or when the things you have done are not helping. It is also helpful to find someone who can help you present things in a way that will give comfort to your bank; if your situation gets worse they are the party that will make the decisions about your business so this is very important.

Few people regret getting help, but many wish they had.

This is a proactive move that will help the bank keep faith with you and delay them putting in their own advisors who are usually accountants and not best placed to help you run your business better.

Choosing operational help can give you expert fresh eyes to identify improvements to the performance of your business or help find out where the issues are.

You can never get advice too early but you can certainly get it too late. A good operational advisor will be willing to have a quick look for a very low fee and then be honest about what they can do to help.

I speak from experience. Bridge Leisure Management has helped a number of small and high profile businesses through tough times. We’ve acted for park owners and for banks, which gives us an important understanding of both sides.

Our focus is always on the business. We look at what can be done to improve cash and profit or reduce losses, and on how to engage with the bank and get their ongoing support. Most importantly, we bring unemotional business focused experience to the situation and can quickly help to isolate issues and start finding solutions.

I have seen time and again that a good manager can lead a park out of distress, so take action now to give yourself the most chance of success.

Bridge Leisure Management provides support services for holiday park owners facing financial distress. Click here to contact Andrew and the Bridge Leisure Management team.