Why taking a holiday is good for your superannuation and retirement

Anne Fuchs: Hello, and welcome to Super Insider, a podcast on all things the economy, investing and retirement and what it means for you. It's proudly brought to you by Australian Retirement Trust, and I'm your host. My name is Anne Fuchs. I am a lucky duck, because today we are recording Super Insider from Byron Bay from the G'Day Discovery Park. It's a beautiful day here in Byron, coming to visit one of our precious assets, what I describe as the jewel in the crown of Australian Retirement Trust’s over $300 billion in assets. This is one of our absolute favourites. With me are some very cool dudes. Grant Wilkins, who's the CEO of G'Day Discovery Parks. Lots and lots of parks. And Michael Weaver, who works with me at Australian Retirement Trust as head of Global Real Assets and head of our UK office, and maybe has a cooler job than me because you get to go out and find all of these cool businesses to invest in that make our members money, and travelling the world to see that. You're also a lucky duck.

Michael Weaver: Very lucky.

Anne: Welcome. You're good, Grant?

Grant Wilkins: Very well. Thank you, Anne.

Anne: Before we get into it, of course, I need to remind you that this is general advice and general information only, and you will need to decide if it is right for you. Here we go. Discovery Parks. For those of you who are listening, and you can't see what it is, and you're not watching us on YouTube, it's a pretty special place. Do you want to describe what these assets are, Grant?

Grant: Discovery Parks is a network of over 90 parks located right around Australia. Everything from Byron Bay to Cradle Mountain to the Kimberley and southern WA. It's a portfolio right across Australia. In addition to that, we've got about 300 parks in the G'Day Group network. They're a licensee or a franchise network. They get to be part of our group and benefit from all of our investment in marketing and systems. We sell their products; they sell their cabins and their powered sites to a much bigger network. In addition, we've got another app called WikiCamps.

Anne: WikiCamps.

Grant: There we go. This is the travel companion when you want to travel around Australia and go exploring. There are 2,500 staff in a very big industry.

Anne: Lots of Australians employed there.

Grant: Yes, a lot of Australians employed. Obviously, we really give great memories to a lot of Australians who travel around this wonderful country. It’s a big industry; $27 billion is the size of the industry. About 15.9 million nights.

Anne: I can't comprehend that. My brain goes into a malfunction when you say 15.9 million nights. Wow!

Grant: Yes. It’s a much bigger industry than most people realise, because lots of Australians like to get out and see the regions. We provide that opportunity for a safe place to stay with great experiences so they can go and see this wonderful country.

Anne: You mentioned WikiCamps. That sounds like something I'm looking up on Google when I want to research something. It clearly probably is, but it's researching camps maybe.

Grant: WikiCamps is the No. 1 app in the App Store.

Anne: Get out of town!

Grant: Unbelievable! Once again, your members own it. It's a travel companion. It has everything from reviews of every single caravan park and even camping spot around Australia. It has points of interest. We call it the travel companion. It’s a trip planner. You can plan your trip around Australia and know where to stay. It's an absolutely fantastic tool that people use. Our vision is to be the undisputed leader in regional travel experiences. When you put WikiCamps together with G'Day and Discovery, we really are a very powerful company and we're really excited about what we can do and unlock the wonders of Australia.

Anne: When people think of caravan parks, probably a lot of people think of the grey nomads only. We came in last night. I've just been walking around. There are so many young families with young kids that are going to go and spend the day in the water park, jumping on a trampoline or in the pool. Or young people who are clearly driving around and seeing the country, young surfers and chilled looking people here in Byron Bay.

Grant: That's right. It's a very diversified customer base. Everything from nomads to families. We call it pester power. We love pester power! We love the fact that the kids get involved in the water parks and the jumping pillows and all of that great fun stuff in our parks, and that's what brings them back time and time again.

Anne: Pester power -- remember that one! I know many people in Australia have holidays in caravan parks. Michael Weaver, I'm going to bring you into the conversation. Did you have a holiday when you were growing up in a caravan park? What was it about this particular investment that as someone looking at how we can deploy our members’ capital to generate a really strong return so that they can retire well with confidence, and what was it about this portfolio? Was it a bias towards just happy memories or was it something more?

Michael: No. You'd like to think that we do a bit more diligence.

Anne: Sorry!

Michael: One of the things we really liked about it -- we actually made our first significant investment into Discovery Parks just after the GFC. The global financial crisis had happened.

Anne: Was that 2009 or 2010?

Michael: Yes, 2010 by the time we actually invested. It was one of those investments that we looked at and we said, ‘How did it perform during the GFC?’ A lot of businesses were really impacted. The revenue that was generated through the holiday parks was actually quite stable. Then we looked into why that was. People still wanted to have a holiday. They still wanted an experience. They still wanted to go and have fun with the family, or grey nomads still had that plan that they wanted to travel. We looked at it and said, ‘We think it's actually more stable than it might appear.’ We decided to do more work and then we invested.

Anne: We all need a holiday no matter how challenging times can be or how tight the budget can be every now and again. I guess that's what's really special about these Discovery Parks. They're within reach for everybody. They're affordable no matter how old you are. That's what makes it such a compelling investment.

Grant: Yes. If you think about where these holiday parks are. They're on amazing land on beaches and rivers. At the end of the day, if you can provide the opportunity for families to experience this sort of land in incredible locations, it's an amazing part of what the investment really is. It's got freehold land and then a connection to what this country has to offer.

Anne: Prime real estate Australia.

Grant: Absolutely.

Anne: You were the CEO back in 2010?

Grant: Absolutely, yes.

Anne: How do you find each other, without that sounding a peculiar question? I know you have developed a really strong sense of trust. Take me back in time to 2010 when this deal was put to you, Michael Weaver. Help describe for our listeners and viewers what that was. How does an investment like this land on your desk for consideration about whether you're going to invest members’ money?

Michael: We see lots of different investments. Our job is to think about every investment that comes our way and think about which ones make most sense for our members. At the time, the business was looking to raise some capital to take it through the next stage of development, and they had a private equity investment. We looked at the investment and said, ‘Does this make sense for our members?’ We bought a 27 per cent stake as part of that process. But underwriting what we thought the thematic of the industry was, what we thought of the management team, what we thought of the growth prospects, what we thought the income would be as well as the growth. Thinking about how this sort of business would compound returns for members over time. So, from a really long-term perspective, real estate-wise, we thought that this would be a good investment for our members for the long term that could continue to grow from there. It was early 2014 and we went from about 27 per cent to about 95 per cent of the business at that point in time.

Anne: Michael, our members, I'm sure, are wondering, how do caravan parks like this grow their super?

Michael: We really like the business because it has both incomes, or yield, from everyone coming and staying. They obviously pay rent to stay.

Anne: Like we did last night.

Michael: Yes. It also has growth. Potential to continue to invest, both through buying new parks but then also development within existing parks. It's a part of such a nice growing industry. We expect people to continue to travel around Australia and see more of the country. We think the thematic behind it is actually really strong as well. So, a combination of those factors means it should create good returns for members, and it has since we've invested, and we expect that to continue.

Michael: There is a lot of development opportunity. It's the largest investment in the real estate portfolio that I'm responsible for looking after, along with the infrastructure portfolio. I think for us, when we look at this sort of investment, we think it can continue to grow the same way we expect Australian Retirement Trust to grow. So, that ability to grow together is really a unique value.

Anne: This is what it actually means in real life. It's not just a number on a page, it's people living their lives and having great memories.

Michael: Yes, and making tough decisions as businesses grow. You've got to make the right decisions whenever we're looking at investment and thinking about what we're going to invest our members’ capital in. There are lots of different investments out there. Our job is to make sure we avoid ones that aren’t so good.

Anne: It’s what you say no to as well.

Michael: Yes, that's really important.

Anne: Grant, you have this incredible vision not just for discovery parks, but I think it comes from a love of this country and wanting to create economic opportunity for regional Australia, create jobs, create sustainable, secure, happy communities. That's what I see in you. Why did you think that partnering with Australian Retirement Trust was the best way to fulfil that vision that you have rather than floating?

Grant: I think Australian Retirement Trust, or superannuation, is a really stable capital. I think at the end of the day, if you think about the listed environment with an IPO market or something, it's obviously volatile. This is about long-term growth. It's property. You need to have a long-term vision with a long-term strategy. I think partnering with Michael and with ART, Australian Retirement Trust, gave us the ability to set a strategy and work towards executing it. We've been quite aggressive in terms of our growth strategy. We haven't been an organisation which has stood still. We've actually been talking to ART about the growth strategy right the way through, and that's helped us grow. We've had access to capital, we've invested in our parks, we've acquired parks, we've invested in systems and that growth has been very stable with the help of ART.

Anne: The facilities are beautiful here. It's all brand-spanking new. Lovely products in the bathroom, too, which I wouldn't have thought…

Grant: There we go.

Anne: of at a caravan and cabin park. Michael, I'm guessing that wasn't at the top of your list of what excited you about this investment and how it can make our members money? Can you actually break down for those who are really interested in the money side of this what are the features of this asset that are compelling in terms of an investment profile and what role does it play in our wider portfolio?

Michael: It's actually the largest investment in our real estate portfolio. It’s quite a large investment. It is quite diversified in terms of size around Australia. So, it’s a very large business. When we look at what's the potential for growth from an investment, we think about what are the long-term dynamics of that industry. The industry has been growing for a long time.

Anne: What is the growth rate?

Grant: It's well above CPI. Over the period of the last 20 years -- we started the business in 2004 -- it's been a very stable business. Forget about addition of cabins and things like that which grow the income greater than CPI; the general industry has been going at about 4 to 4.5 per cent over that period.

Anne: Year upon year upon year?

Michael: Yes. You have inflation growth. You have market growth. One of the reasons the market grows is that Australia is growing. There are more and more people in Australia. It's helped by demographics. We've mentioned grey nomads. That's helpful. More and more people do want to see Australia. I've been fortunate to see a bit of Australia. I'd like to see more. There are 90 parks all around the country. It's an amazing network to be able to see. One of the other advantages is income and growth. But then different parts of the country will be just going better than other parts at different points in time. That diversification is actually really helpful. We think from an investment perspective it gives you good downside protection, because not everything is impacted by one event. There have been challenging events through time.

Anne: We should talk about that. 2020 would have been a really hard year for this group with the fires but also the pandemic. That's probably where you got a little bit of your grey hair, Grant.

Grant: I started going grey about then. Absolutely.

Anne: Do you want to describe 2020?

Grant: We've had many moments in our 20 years. We've had floods and bushfires. The great part about the business is it’s just so resilient. Certainly, like every other business, there was three months of uncertainty when everybody was locked down and people weren't able to travel. But it wasn't long after when everybody realised that they could travel within their own state or get not too far away from home that really the resurgence of caravan and camping was very strong. People went out and invested in new caravans.

Anne: This is a thing.

Grant: Bought a new caravan and then they had to upgrade the car. All of a sudden people have invested $100,000 to $150,000 in a car and a caravan, and that means they're invested in the industry.

Anne: Forever.

Grant: Yes, and that means they want to use it. If you've got a caravan, you want to get out there and use it on the weekends. Really post COVID there's been a resurgence of new caravan sales. The industry, as I said, just continues to go from strength to strength, and it's because it's an affordable holiday. Any Australian, every Australian, can afford to go to a holiday park. Whether it's an unpowered site or a deluxe cabin, there's something for everybody.

Anne: Grant, how will Discovery Parks benefit Australian Retirement Trust, ART, members over the next 1, 5, 10, who knows how many years?

Grant: The great part of Discovery Parks and the G'Day Group is the opportunity. We've got so much opportunity to continue to expand the portfolio from an acquisition perspective, but then we've got new markets. We're the owner of El Questro, which is a luxury lodge in the Kimberley. It's absolutely stunning -- 700,000 acres of land, beautiful campsites, glamping and a luxury lodge. There's the luxury part of our business, but then there's over a billion dollars of development potential within our parks as well.

Anne: What does that mean?

Grant: When you look around this park, you can see that there are deluxe cabins, and you've got some glamping over the back there which you went and had a look at. The opportunity to turn a low yielding, unpowered site into a cabin is quite significant right across the portfolio. Having said that, we need to make sure that we've got caravan sites available to the market, because that's obviously why they come. It's that opportunity to really have a luxury piece, continue to grow the portfolio through acquisition. But then obviously the development part is really the major driver of the financial returns over the next sort of 5 to 10 years. We're really excited about the billion dollars of development potential.

Anne: And your message to our 2. 4 million members -- we've got more and more people listening to Super Insider who aren't members, which is also cool. What's your message to them?

Grant: My message to all of your members is to get out there and enjoy the parks. This is your investment. You own this business. The more that you go and explore this wonderful country and stay in the G'Day parks or Discovery Parks, it obviously helps your superannuation. So, get out there and get amongst it.

Anne: It's a beautiful virtuous cycle of using your retirement, spending your retirement savings in something that you're invested in, which is also creating economic opportunity. And for regional communities all around Australia, prospering small businesses.

Grant: Absolutely.

Anne: Creating memories.

Grant: The benefit to the regional communities is unbelievable. The local coffee shops ...

Anne: I had a cracker of a coffee this morning.

Grant: The impact that we have on the local communities is really important too. Caravan and holiday parks are a major part of the Australian economy.

Anne: Certainly, I know in Queensland small business represents I think it's more than 95 per cent of the Queensland economy. You've got a big portfolio in Queensland, too -- my home state. That’s good. South Australian/New South Welshman here in Byron Bay. Thank you so much for coming on to Super Insider. How was it?

Grant: Fantastic.

Michael: Really good.

Anne: We'll have you back again. To our listeners and viewers, thank you so much. Please tell your family and friends, subscribe to Super Insider, give us a top rating and we'll see you again very soon.

This transcript has been edited for length and clarity.