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Canada’s largest institutional investors are putting money into campsites and caravans in Europe, looking to affordable family summer vacations for profits.

From woodland lodges to safari-style tents by the seaside, some of the country’s major funds are backing businesses that offer inexpensive ways to escape the city and reconnect with nature. These sites are typically more rustic than a hotel resort but offer more amenities than a campground, with WiFi, restaurant dining and swimming pools.

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The latest entrant is Ontario Teachers’ Pension Plan, which said last week that it would take a 40-per-cent stake in European Camping Group (ECG), a French company that operates more than 20,000 mobile home rentals and other similar structures across France, Italy, Spain, Croatia and beyond. Most visitors to the ECG sites are from the U.K., Ireland and Northern Europe and the company has been expanding to add parks in new markets.

“They’ve been in the industry a long time; they know which are the better sites. For them, the question is around growth: Where would they want to add to their capabilities?” said Jo Taylor, senior managing director of international operations at Teachers. He said that Teachers’ investment will help ESG build its real-estate portfolio by acquiring land in areas where it currently rents property for its holiday units.

Other Canadian firms have also seen potential in this industry. In 2015, Brookfield Property Partners LP bought Center Parcs in a deal estimated to be valued at £2.4-billion ($4.3-billion). The company runs holiday villages in the U.K. that offer family-friendly, outdoorsy getaways with swimming, cycling and other activities. These are popular holiday options, with the U.K. holiday-parks industry currently generating an annual £4-billion of tourism spending, or 14 per cent of Britain’s entire tourism economy, according to the British Holiday and Home Parks Association.

In late 2016, Onex Corp. also acquired a leading British holiday-park operator called Parkdean Resorts for £1.35-billion, making it a major operator of caravans, camping pitches and chalets across England, Scotland and Wales.

“In good economic times, price-conscious consumers trade up from staying with friends and families. In downturns, largely better-off customers trade down from overseas holidays to stay domestically. This is a nuance that we really like about the business,” Onex senior managing director Robert Le Blanc said in a conference call with analysts after the deal. He added that he’d personally visited 25 Parkdean sites and been impressed by the offerings.

But this business isn’t without risks – fluctuations in flight prices, weather patterns and currency all have an impact on demand. At the end of 2017, Parkdean took a goodwill charge of US$56-million, “due to weaker than expected performance since acquisition, driven primarily by lower caravan sales,” according to Onex’s financial disclosure.

A recent report by research firm IBISWorld stated that the operators of U.K. caravan and camping sites have had a volatile few years. “After contracting sharply during the economic downturn, the industry bounced back strongly, largely on account of the rise of the staycation trend. Cash-strapped consumers favoured cheap weekends at the seaside or in the countryside over expensive foreign holidays. However, as consumer confidence returned and disposable incomes began to rise, the recovering popularity of foreign holidays has caused industry growth to slow.” At the same time, the industry has benefited from the popularity of glamping, a portmanteau of glamourous camping, that could “entice younger image-conscious consumers,” the report stated.

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Mr. Taylor said there’s still plenty of growth prospects for ECG, where revenues climbed by about 25-per-cent annually in the decade through 2017. The business benefits from a lot of repeat customers who want to return to the same site annually with their growing families. Unlike some other providers, ECG’s customers can book a particular rental unit, guaranteeing them a location.

Mr. Taylor expects that there will be some consolidation of European holiday parks in the future as larger operators benefit from technological improvements and economies of scale that make them more efficient than smaller, family-run businesses. Teachers is taking a stake in the ECG business alongside existing private-equity investors The Carlyle Group and Montefiore Investment. The investors did not announce a transaction value. Based on the company’s disclosed financials and recent comparable transactions, the enterprise value of ECG’s business is estimated to be about $1-billion.

Mr. Taylor said that the ECG team is looking at expanding through Europe − perhaps through Portugal and more locations in Croatia − as well as exploring more land ownership for its resort sites. Buying the real estate can have financial as well as business planning advantages, but requires more significant upfront capital investments, which Mr. Taylor said is one reason why the company would want a financial partner like Teachers.

There’s also the question of how to get people to visit the sites outside of peak seasons.

“This business has really got a window that’s the classic May-to-October timeline. The challenge for this team is how they’ll also build the shoulder seasons ... in terms to trying to increase the level of activity of people that use their sites,” Mr. Taylor said.

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