The outdoor hospitality industry continues to grow, despite setbacks following the 2020–2022 Covid-driven boom.
As with almost every industry, the outdoor hospitality segment has experienced increases in development costs and a softening in demand, as evidenced by declining revenue per room starting in 2023. This is primarily due to strong inflation, higher interest rates, and greater economic uncertainty impacting consumer confidence in discretionary spending.
The following is Sage Outdoor Advisory’s assessment of the state of the outdoor hospitality and glamping industry.
Tailwinds and Green Lights:
- The biggest tailwind propelling the outdoor hospitality industry forward is growing consumer preference. This drives all other factors forward. The following trends are apparent across the entire hospitality industry:
- Unique Stays – One-of-a-kind experiences that are authentic and cannot be easily replicated.
- Shareable – Experiences that are highly shareable on social media.
- Nature Immersion – Nature-based stays and experiences like outdoor adventure, recreation, and national parks.
- Disconnection – Escape from the pervasive screens and schedules to reconnect with loved ones, self, and nature.
- Wellness – Growth in demand for hot tubs, saunas, cold plunges, yoga, and massage services.
- Localized Experiences – Stays that connect and tell the story of local towns, history, founders, and nature.
- In a higher interest rate and higher construction cost environment, many developers continue to look to the outdoor hospitality space as an option to maintain margins.
- Institutional interest from large hotel brands for brand partnerships and outright acquisitions remains consistent.
- Institutional investment interest outweighs the small and limited supply of large and multi-site glamping operations.
- According to STR and CBRE hotel reports, the economy and midscale hotel segments have continued to struggle to recover over the last two years, but the upper scale, luxury, and boutique segments have continued to show strong growth and performance. This is consistent in the glamping market, as the more luxury and upper-scale locations appear to receive robust demand.
- Outdoor recreation, state park, and national parks have enjoyed consistent growth. When normalized for Covid rise and fall, it is typically 2-3% over YoY growth over the past decade.
- Social media has absolutely disrupted and leveled the marketing and advertising playing field for boutique glamping operators. It is not uncommon for savvy single-site glamping locations to have more social media followers and traction than entire hotel brands with hundreds of locations. This allows consumers to experience and connect with founders and locations in ways that were only previously possible for deep-pocketed corporations.
Headwinds and Roadblocks
- Contrary to popular belief, developing glamping resorts is often more expensive and challenging than traditional hotel development. This is because horizontal development over a large area is more expensive than building vertically. In order to create privacy between units and preserve the natural landscape, units are highly dispersed over large areas, often with steep topography, trees, or rocky terrain in between them. Running utility lines, walking paths, and roads in these areas can increase project costs dramatically. While modular units are often cost-effective, the horizontal costs can run up significantly; these costs have high variability from property to property.
- Staffing is often challenging in the more remote glamping locations. On-site staff housing is a necessity in some locations to abate this challenge.
- Expect increases in laundry and room turnover service expense. Many remote properties will be on septic, which will not allow for heavy commercial laundry use on-site. This means outsourcing linens and room turnover expenses can be costly, especially with large drive times for 3rd party services. Spacing between units can also increase room turnover costs. Traveling from unit to unit to clean using only dirt paths and exposed to the elements is more time-consuming and challenging than going room-to-room in traditional hotel hallways.
- As with almost every single industry, outdoor hospitality has seen a softening in demand due to inflation and economic slowdown starting in 2023.
- International travel is expected to decrease in the near term under the current administration, due to geopolitical tensions rising with major tourism partners such as Canada, Mexico, Europe, and many other countries. This is expected to impact the entire hospitality industry. However, this may be offset by less travel abroad for many Americans.
- Government spending cuts to national parks, national forests, and wildland conservation areas may curtail the historically growing outdoor demand, as parks and natural areas experience funding cuts.
- Canvas-based units often have issues like sound and climate control insulation, animal and pest control, and wear-and-tear, especially if a property needs to be packed up and stored in the winter. This can affect the guest experience and increase maintenance costs.
At the end of the day, the outdoor hospitality industry is like any other investment space. There are distinct advantages as well as disadvantages. Whether a project succeeds and provides strong investment returns depends entirely on the property, the market, and the operator’s ability to execute. Find more resources from our glamping map with valuable data layers to outdoor industry guides at resources.sageoutdooradvisory.com.