Getting price-gouged by private equity in the UK's happiest resort (2023)

This is really a story about EBITDA.

"People who use EBITDA are either trying to con you or they're conning themselves."

I've just come back from Center Parcs and have been many times over the past 15 years (but took a break between COVID and now due to their policies over that period). It was fantastic as always, but I'm not sure everything is well.

The park has demand-based pricing for the accommodation, but this doesn't apply to activities or restaurants. We dined out every day, yet despite the park being full, the restaurants were at 25-50% capacity, whereas on earlier pre-COVID visits you'd have to reserve weeks in advance. The same was true for the activities - except for the cheapest options like pottery painting. The cost of living crisis seems to have truly hit Center Parcs' guests, and I'm wondering if it has the ability to adapt to this, as well as it adapts the prices of the accommodation.

PE is terrible, but this isn't a good example as there's plenty of competition for Center Parcs. Plus they raise their prices during school holidays when there's greatest demand, that's not an unfair practice, that's rationing out a limited resource when demand is greatest, economics 101.

Bad PE looks like private equity trying to corner the market in vets[1] and dental practices[2], services that you don't really have a choice over.

[1] https://archive.ph/bTwcD

[2] https://www.lincolninternational.com/perspectives/articles/i...

So building an amazing product (as the author says), and then charging however much you can for it is “price gouging”

(Thanks Kamala. The only reason I imagine this article popping up now is the price gouging wording)

As far as I knew from econ 101 this is generally just supply and demand and efficient pricing.

If the price is too high, don’t buy it!!

Notably... This business owns a lot of forest in the UK.

The UK doesn't have much forest.

So, they can make themselves appear more valuable by pushing up the price of forest land.

Forest land used to be priced based on the lumber value - which is almost nil. There was also the pricing element of the possible agricultural value if it were to be cut down (which is also almost nul, because the land is usually unsuitable for agriculture). There is also the very high value if you were somehow able to build houses on it, but the very low probability of being able to secure permits to do so.

However, I have noticed odd real estate transactions in the last ~decade for forest land. Specifically, a few companies have been buying up lots of forest land, dividing it into tiny parcels, often just a few hundred yards in each direction, and selling it for 10x the price.

Most don't sell, but a few do - and thats all you need to make the basis of a new market price.

Now when you value all of center parcs land, it looks way better!!!

And there is a 2nd factor... Center parcs usually get permission to build lodges on their land as temporary forest huts, and since they aren't made for anyone to be resident in, this is normally seen as an okay use of otherwise protected forest. Gradually over many years they can slowly turn it into a brownfield site by trimming out trees. 20 yrs down the line they might get permission to build actual houses on the land. Suddenly it's worth 100x as much.

I would 100% not be surprised if center parcs end up making more money by this conversion of forest land to residential (skirting laws designed to protect forests) than they make from decades of running the parks.