Kampgrounds of America, Inc.

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Kampgrounds of America, Inc.

550 North 31st Street
Billings, Montana 59101
Telephone: (406) 248-7444
Fax: (406) 248-7414
Web site: http://www.koakampgrounds.com

Private Company
Employees: 190
Sales: $26.6 million (1998)
NAIC: 721211 RV (Recreational Vehicle) Parks and Campgrounds; 71399 All Other Amusement and Recreation Industries

Kampgrounds of America, Inc. (KOA) is the worlds largest system of privately operated campgrounds. The company enjoys a reputation of consistently providing clean and conveniently located camping accommodations across the United States. Almost all of KOAs 500 campgrounds are independently owned and operated. Each campground pays KOA a franchise fee, as well as a yearly royalty. In return, they can use KOAs universally recognized logo, and can reap the benefits of belonging to a well-known and highly respected network. The pioneer of franchised campgrounds, KOA has had to evolve to keep up with changes in the camping industry. As tent camping has declined in popularity, KOA has built furnished cabins (Kamping Kabins and Kamping Kottages) to house visitors. Moreover, KOA caters to recreational vehicle (RV) travelers in a number of ways. Since 1992, KOA has expanded aggressively into international markets. The company is owned by the family of Oscar L. Tang.

The Early Years: 1962-75

In the early 1960s, Montana businessman Dave Drum took note of the abysmal condition of most American campgrounds. He observed that campgrounds across the country were owned and operated by a hodgepodge of entities, ranging from various branches of government to private individuals and companies, and were by and large pretty spartan and scruffy places, according to the Billings Business Journal. At the same time that the nations campgrounds were often unsatisfactory, young Americans were taking to the roads in record numbers. These baby boomers sought affordable, decent accommodations, and liked the idea of sleeping outdoors.

Drum recognized an opportunity. The Billings, Montana-based entrepreneur had already revolutionized the Montana cattle industry by building two massive feedlots in the mid-1950s. However, one of the parcels of land he had earmarked for a feedlot lay vacant because a local farmer had cut off irrigation. Drum convinced Robert Boorman and two other Billings investors that his scenic property on the Yellowstone River nevertheless offered considerable profit-making potential. The 1962 Worlds Fair was scheduled to be held in Seattle, Washington, and Drum anticipated that a significant number of travelers would be passing through Montana on their way to the event and would desire affordable but pleasant accommodations. Drum and his partners built a new kind of campground that featured individual hot showers, clean restrooms, and a convenience store. They hung up a sign and watched with gratification as their site filled up with customers.

Rather than resting on the laurels of his initial success, Drum was sure that his concept had appeal beyond the local level. He quizzed campers and sent questionnaires to former campground guests and chambers of commerce in towns and cities of all sizes. The responses to these surveys provided Drum with his customer demographics and with leads on locations with high campground demand, explained Western Business. Determined to build a franchised network of campgrounds, Drum bought out his original co-investors and found two more. The group cast about for a name for their endeavor and settled on Campgrounds of America. However, they could not obtain a copyright for this moniker because Campground was an everyday word. To circumvent this problem, Drum and his associates opted for the distinctive name Kampgrounds of America. In 1962, they sold their first franchise in Burley, Idaho.

In the next few years, they rapidly expanded, selling franchises to campground owners across the United States. It was Daves idea, pure and simple, one-time investor Boorman told Western Business. Developing a directory of franchises put people in the campgrounds. To ensure that KOAs rapid growth did not compromise the quality of the companys product, Drum insisted that each campground maintain certain standards of cleanliness and service. Each franchisewhether an existing campground that had converted to KOA or a first-time enterprisewas expected to provide basic amenities. Hot showers and sanitary facilities were required of all franchisees. As a result, KOA quickly developed a reputation for offering a consistent level of accommodations. As the Worcester Telegram & Gazette explained, KOA changed the way a lot of campers, accustomed to roughing it, felt about campgrounds.

In many ways, Drums innovation of campground franchising mirrored the contemporary development of budget hotel chains. Like these motel franchises, KOAs cropped up at regular intervals along the nations newly constructed interstate highway system, making them accessible and ubiquitousa traveler could count on finding a KOA at virtually any point in his journey. Like the more successful of these motel chains, KOAs hallmark was cleanliness and consistency, not opulence.

Changes in Leadership: 1975-85

Drum left KOA in 1975. His role as president and chairman was assumed by Darrell R. Booth, who presided over KOAs continued growth and development. By 1980, 800 campgrounds had entered the KOA fold. Booth also oversaw KOAs acquisition of Sir Speedy, Inc. A leading copy and printing services chain that operated on a franchise basis similar to KOAs, Sir Speedy had suffered from mismanagement and was bankrupt. KOA purchased the ailing company to provide it with more balanced earnings throughout the year. Campgrounds were a cyclical business, booming with visitors during the summer and lying largely vacant during the long stretch between Labor Day and Memorial Day. Nevertheless, the acquisition surprised a number of analysts. The only thing the two companies had in common [was] that they were both franchise operations, a KOA executive told the Orange County Business Journal.

KOAs leadership changed hands again, following Booths death in 1980. In November of that year, Hong Kong businessman Oscar L. Tang purchased Booths entire stake in the company and took the helm. Tang became the driving force behind KOA, but preserved many of the strategies his predecessors had implemented. Like Drum and Booth, Tang initially focused on growth. Tang also recognized that the individual campground franchises were the key to the companys success. In the early 1980s, KOA franchisees had founded the KOA Kampground Owners Association. Rather than antagonize its franchisees by making significant management decisions from on high and then imposing them on the individual operators, as many other major franchisers had done, Tang and his management team sought to solicit input from the individual campground owners. KOAs relationship to its franchisees was unique in other ways as well. Rather than charge a hefty up-front fee, as was common in the franchising world, KOA looked for owners who were willing to devote what the Billings Business Journal termed sweat equity.

In the early 1980s, Tang made another decision that was to have a significant impact on KOAs long-term success. In an effort to gain more control over the companys direction, Tang took KOA private, thereby freeing himself from accountability to shareholders. This was an important decision because shareholders tended to measure the companys success solely by its rate of expansion. In this new arrangement, however, Tang was able to refocus the company first and foremost on the quality of its campgrounds. As a result, Tang and company president Art Peterson began to cull some 200 campgrounds that had sunk below KOAs standards. Analysts and company executives praised Tangs move in later years, crediting KOAs privatization as having laid the foundation for its future success. Another result of this new decision-making latitude proved less salutary, however. In 1985, KOA chose to enter a new area of business when it purchased Mid Pacific Air Corp. and its Mid Pacific Airline unit. Unfortunately, the airline would eventually enter bankruptcy proceedings.

In any event, KOAs overall success during this period was aided by the flourishing of the entire camping industry during the late 1980s and early 1990s. The U.S. recession of this period contributed to a steep increase in the number of consumers who camped, as families eager to travel but who were constrained by tight budgets, flocked to KOA and its competitors. Indeed, two million more Americans took camping trips in 1990 than in 1989, according to the Atlanta Journal-Constitution. A 1991 survey conducted by KOA revealed that over one-third of Americans who planned vacations that year intended to stay overnight in a campground. Peoples passion for camping was also fueled by a surging awareness of environmental issues. Moreover, as baby boomers married and started families, they turned to camping as a pleasurable family activity. Just as they had embraced camping as traveling teenagers, baby boomers returned to camping as a way to be together as a family. Its really just a change of values, a spokesperson for the Recreational Vehicle Industry Association told USA Today. The baby boomers who strived to achieve so much, so fast now want to relax and enjoy it.

Company Perspectives:

Its easy to camp, and economical, too. Whether youve camped before, or never set foot on a campground, KOA can help you get started. With more than 35 years as the family camping industry leader, KOA knows what Kamping is all about. KOA offers the best of both worldseasy access to the great outdoors, with all the comforts and conveniences that take the rough out of roughing it. You can count on KOA Kampgrounds for clean rest rooms, individual hot showers, a coin laundry, and a convenience store. In fact, KOA Kampgrounds are inspected annually to make sure they live up to KOAs high standards for facilities and customer service.

International Expansion in the Early 1990s

The United States was not the only nation experiencing an outdoor activities boom. While KOA had long eyed international markets, and had launched franchises in Canada as early as 1970 (45 KOA campgrounds operated in Canada by 1993), it had delayed extending its network beyond North American borders. In 1992, however, KOA signed a master franchise licensing agreement with investor Shinsuke Nikaido for the development of KOA campgrounds in Japan. American-style car camping had grown in popularity in Japan, and the Japanese were experiencing an increased sensitivity to environmental issues that paralleled developments in the United States. The number of campers in Japan nearly doubled between 1988 and 1992.

In September 1993, the first KOA in Japan opened in the Okayama Prefecture west of Kobe. Two dozen more Japanese KOA campgrounds were scheduled to be built by 1994. All would offer the same amenities as their U.S. counterparts. KOAs interest in international markets was twofold. The company naturally wanted to introduce other nations to the benefits of camping KOA-style, and also hoped to attract American tourists traveling abroad to foreign KOAs. More importantly, though, KOA sought to use its foreign campgrounds to promote its U.S. campgrounds among international travelers. As the Billings Gazette noted, foreign visitors who become familiar with KOA in their homeland will feel more comfortable choosing KOA when they come to America. In keeping with this strategy, KOA joined international tourism organizations, forged alliances with foreign camping chains, and advertised in international markets.

In the wake of the North American Free Trade Agreement (NAFTA), which increased economic links between the United States and its North American neighbors, KOA accelerated its plans to expand into Mexico. In 1996, the company debuted Acapulco West KOA, the first in a series of KOAs planned for Mexico. Relying on U.S. consumers familiarity with its brand, the campground particularly targeted Americans vacationing in Mexico. In 1998, the company also opened Mexican KOAs in Puerto Vallarta and Tecate.

A Changing Industry: The Mid-1990s and Beyond

Despite its success in both U.S. and international markets, KOA faced a rapidly changing camping industry in the mid-1990s. Tent campings popularity declined during this period, as increasing numbers of campers elected to travel and sleep in RVs. A number of factors led to the boom in RV camping, the most important of which was demographics. The United States was an aging nation. Not only were the number of young families declining, but the number of retired and semiretired people was increasing, especially as the baby boom generation moved into its 50s. Buoyed by a strong economy, these older Americans frequently opted to purchase (or rent) RVs and to travel for extended periods of time. As a spokesperson for the recreational vehicle industry explained in a 1997 press release, the vanguard of the great boomer generation [had] reachfed] prime RV-buying age.

RV campers had a different set of needs and demands than the tent campers of the 1970s and 1980s. By 1998, about 60 percent of all KOA campers were in RVs, and with more luxurious RVs becoming the norm, KOA campground operators were often required to provide cable television and even Internet connections on top of the customary electrical, water, and plumbing hookups. Moreover, wider RVs necessitated that campground operators build larger sites for the bulky vehicles.

RV campers alone, however, were not the only force driving changes in the industry. Campersboth young and old, tent and RVwere increasingly less inclined to give up comfortable amenities when camping. In addition, more American families were headed by single parents, who wanted outdoor vacations that took less preparation, planning, and equipment. These trends led to the tremendous popularity of an older feature of some KOA campgroundsKamping Kabins. These rustic cabins, which provided beds, air conditioning, heat, and an eating space, had first been introduced by KOA in 1984, and the company rushed to add new ones to meet burgeoning consumer demand. By 1998, more KOA campers stayed in Kamping Kabins than in the traditional tents, and 90 percent of all KOA campgrounds contained Kamping Kabins.

Many guests wanted even more luxurious accommodations. To satisfy this demand, KOA debuted Kamping Kottages (units offering full kitchens, bathrooms, and dining areas) at select locations in 1998. KOA also introduced campgrounds that verged on resorts. For instance, the companys Saco/Portland South KOA in Maine touted whale watching excursions and deep sea fishing. Furthermore, in June 1996, the company debuted its first family adventure ranch near Butte, Montana. With a roster of activities ranging from horse-riding to cattle drives, this KOA represented a new breed of camping. No longer just an inexpensive method of travel, camping had become an end in itself. As the Worcester Telegram & Gazette explained, what was once viewed as a rustic blue-jeans and hiking-boots experience has become more sophisticated.

Key Dates:

Dave Drum founds KOA with three other investors.
KOA franchise expands into Canada.
Drum sells his share of company.
KOA purchases Sir Speedy, Inc.
Family of Oscar L. Tang acquires KOA.
KOA introduces Kamping Kabins.
First KOA franchise opens in Japan.
First KOA franchise opens in Mexico.
KOA introduces Kamping Kottages, as well as KOA RV and Boat Storage.

Demand for more activities and amenities like these led to a change in the profile of the average KOA franchisee. Camping was an increasingly competitive industry, and the cost of building a modern campground soared. KOAs president, Art Peterson, told RV Business that constructing a campground in 1998 cost approximately $10,000 per campsite. The trend at the turn of the century was for professional investorsrather than the individual owner/managers who had long formed the core of campground operation nationwideto launch KOA franchises. The company adjusted to this shift. Beginning in 1996, the company implemented untraditional growth strategies to reach out to investment buyers, according to RV Business. Rather than waiting for individual owners to start campgrounds, KOA began to build more expensive campgrounds itself, which it then sold as turnkey operations to investors willing to put up money but not sweat equity.

KOAs capacity to adapt to consumers changing demands kept the business successful in a shifting industry. Rather than rest on its laurels, though, the company continued to innovate. In 1998, for instance, KOA teamed up with the Disney Company to promote the entertainment titans line of Goosebumps audio products. In exchange for selling the Disney audiotapes in its onsite convenience stores, KOA was given the right to use Disney characters on its signage.

Always seeking opportunities for growth, KOA also launched a new enterprise in 1998. Recognizing that many RV campers had no place to store their cumbersome vehicles for most of the year (especially since many neighborhood committees forbade the permanent parking of RVs or boats on the street), KOA created an independent companyKOA RV and Boat Storageto cater to this segment. By March 1999, KOA had opened three boat and RV storage facilities. With its long track record of success, familiar brand, and willingness to innovate, KOAs future prospects appeared bright.

Principal Subsidiaries

Sir Speedy, Inc.

Principal Competitors

Affinity Group Holding, Inc.; Global Outdoors; International Leisure Hosts, Ltd.; Outdoor Resorts of America, Inc.; Thousand Trails, Inc.

Further Reading

Five Regional Risks Pay Off, Western Business, November 1, 1985.

Glazner, Elizabeth, King of Copies, Orange County Business Journal, March 26, 1990, p. 13.

Goldenberg, Sherman, KOAs Art Peterson, RV Business, May 1, 1998, p. 17.

LaRocque, Ray, Montana Idea Grew and Put a K into Campground, Worcester Telegram & Gazette, April 5, 1992.

More Happy Campers Pitching in Across U.S., Atlanta Journal-Constitution, May 19, 1991.

Nottingham, Nancy, Camping Worldwide, Billings Gazette, January 15, 1995, p. 1.

Old Timer Celebrates Its 25th Year of Camping Out, Billings Business Journal, July 1, 1987, p. 19.

RV Industry Is Riding High with Another Strong Season Forecast, Business Wire, March 26, 1997.

This Year Is KOAs Silver Anniversary, Billings Business Journal, July 1, 1987, p. 1.

Tom, Denise, Boomer Families Go Camping, USA Today, July 25, 1991, p. C8.

Rebecca Stanfel