How the world's largest campervan rental company got through the pandemic and came out on top

Friday, 14 October 2022

The Covid-19 pandemic has been an incredibly tough time for tourism companies but campervan company Tourism Holdings is seeing a strong rebound in demand.

The world’s largest campervan rental company, based out of New Zealand, has come back stronger from the global pandemic that shut down its main market.

Auckland-based Tourism Holdings offers intrepid travellers roadie adventures through the United States, United Kingdom, Australia and New Zealand.

That’s a great place to be when tourism is booming. But it faced the single biggest challenge in its history when Covid-19 closed borders around the world, wiping out the international travel market that underpins its business.

“Clearly any tourism business that is reliant on international tourism, as we were, has had an incredibly tough time – there’s no doubt about that,” says chief executive Grant Webster.

The Detail looks at how tourism businesses are coping as the upheaval and uncertainty of Covid drags on, and the “reset” that will bring a new kind of visitor. (First published February 1, 2022)

* Christchurch-based campervan company shuts its doors due to Covid-19

* Tourism Holdings turns focus to campervan sales as rentals hurt by Covid

Tourism Holdings suffered two years of losses due to the pandemic but expects to return to profit this year as the international travel market rebounds. On Wednesday it raised its expectation for profit this year to more than $30 million as it benefits from strong demand at higher prices amid constrained supply.

The company’s shares have gained 11% on the NZX this week, closing up 1.7% on Friday at $3.05.

While many businesses went cap in hand to shareholders to keep themselves afloat during the pandemic, and even though tourism businesses were particularly hard hit, Tourism Holdings got through on its own without asking shareholders for more money.

“For a tourism operator, they have come through relatively unscathed,” says Forsyth Barr head of research Andy Bowley, who follows the company.

Campervans were set up as quarantine centres during the pandemic, including these in Christchurch. (File photo)

Tourism Holdings made 140 workers redundant in 2020 after activity dried up at its Kiwi Experience bus tour and Waitomo glowworm caves and rafting businesses.

To help retain jobs, it offered super cheap $29 a day campervan rentals coming out of lockdown in 2020 as part of its ‘Get Moving’ campaign to stimulate the local market. The promotion took off, and was replicated in other markets like the US where campervans had gained popularity as “Covid cocoons”.

To keep cash coming in the door, the company sold down its campervan fleet, taking advantage of a surge in demand as people who were prevented from travelling overseas switched their focus to domestic travel. It achieved record profit margins on those sales.

Bowley says the company was fortunate to have assets that could be easily sold and turned into cash, something not all tourism businesses were able to do.

“Businesses ultimately run on cash,” he says. “If you don’t have sufficient liquidity around cash, you don’t operate as a business so the ability for them to divest the fleet throughout Covid provided them quite a lot of flexibility on their balance sheet.”

The company found alternative uses for its campervans like quarantining overseas arrivals, and accommodating essential employees, and its manufacturing arm switched to building more ambulances and mobile policing units.

It sold some assets, like its peer-to-peer motorhome rental services Mighway and Share a Camper, and quit its technology joint venture Togo Group which had weighed on earnings.

Having healthy cashflow meant the company could pay down debt and acquire assets that would make it stronger coming out of the pandemic.

It bought the remaining stake in the country’s largest campervan manufacturer Action Manufacturing and in its UK motorhome partnership Just Go. And it’s in the process of acquiring its largest rival, Australia’s Apollo Tourism & Leisure, which will strengthen its position in its home markets and enable its expansion into Canada.

“They’re strategically growing the business,” says Bowley. “They’re coming out of Covid stronger than they went in. They’re in a very, very good position.”

Tourism Holdings has issued new shares to help pay for the acquisitions, showing that the vendors see benefits in continuing to be involved in the larger company rather than just taking the money and running.

Webster says they’ve improved the business and set it up for the next five to 10 years of growth.

Tourism Holdings is now ramping up its vehicle manufacturing at pace as it seeks to meet the pent-up demand for travel coming out of the pandemic.

Harbour Asset Management portfolio manager Shane Solly says the company has done a great job of getting itself in a financially strong position, which then enabled it to grow.

“They have certainly navigated what has been a really challenging period,” Solly says. “Just like their vans, they don’t stand still. They have come out of this with a pretty sound business that can actually start growing again.”