Getting away from it all for holiday-park firm Darwin Escapes
5 February 2018
After stumbling across a rundown holiday park during a cycle ride in an idyllic location, Anthony Esse, CEO and founder of luxury holiday-park firm Darwin Escapes, decided he could do better.
Esse had been out on his bike looking for a country pub while his son was training at the Royal Yachting Association (RYA) development squad at Grafham Water when he came across the park. Although the location was idyllic, litter had been strewn all over the place and a squashed dead rat was at reception.
“I kid you not – the first thing I thought was, I could do better than this,” he tells me. “I asked myself the question, if a business like this can be profitable, what would it be like if it was half decent?”
“I spent two years researching the market and finding out who the players were and quickly established that this was a hugely fragmented industry populated by a lot of ‘mom-and-pop’ businesses. They probably had a shortage of capital and therefore these parks kind of lacked investment.”
At this time the credit crunch was in full swing and asset prices had been collapsing, yet Esse found these businesses were still generating cash. He felt such holiday parks could realistically have long-term periods of sustained cash flow.
Having worked in the investment management profession for more than 25 years, he decided to set up Darwin Escapes through a unit trust called the Darwin Leisure Property Fund. Institutional investors, pension funds and private investors invest in the fund and the money is used to purchase and operate holiday parks in the UK.
“When we set up the fund one of the things that was of key importance was thinking about the investor first,” he says. “By having the operator in-house means that the investor – in this case, pension funds – is going to benefit from the fact that it is in-house and there is no cash leakage out of the fund.”
“We say to all our employees that if they do a really good job it will please our holidaymakers, which in turn provides returns to our investors – these could be firefighters in Merseyside, for instance, or your British Telecom engineer.”
But it wasn’t all that easy for Esse when he first decided to set up Darwin Escapes. Being the first of its kind to both own and operate holiday parks, the fund made many investors wary.
“That was a big challenge – a lot of people dismissed it straight away,” he says. “What surprised me was that some of these were very credible investment managers.” Some managers were put off, says Esse, because the fund was an unknown quantity – it lacked a well-known star fund manager running it and didn’t have a Triple-A rating from an investment research house.
The other big initial challenge for Darwin Escapes, Esse explains, was that no one really knew who the company was as it did not have a track record in owning parks. “It was a real struggle – over a period of six to nine months it was on a knife edge – was this going to go or not? But that seems to be ancient history now,” he says.
But not everyone was sceptical – others had more belief in the fund and invested. Eventually they were able to start Darwin Escapes with a seed of £5million 10 years ago, and the company has grown significantly.
Darwin Escapes now has 23 UK holiday parks in its portfolio, including beach huts in Devon, a luxurious retreat just outside Bath, and even treehouses in the Isle of Wight. The value of the fund now stands at £525million – it is now closed to new investment, and has achieved a 15.14 per cent return for investors per annum, annualised over five years.
One of the first investors in the fund, Mark Dampier – research director at Hargreaves Lansdown and a well known investment commentator – has since said he considered his investment in the Darwin Leisure Property Fund as one of his best ever. The team has launched a second fund for further park development.
Does Esse have any advice for other budding entrepreneurs? “If you believe in yourself just keep going,” he says. “Someone, somewhere will say yes, we will back this. But being an entrepreneur you have to be able to cope with the massive highs and lows, as well as being prepared to say, well I am going to run with this and it may cost me an awful lot.”
“If you have a mortgage or school fees to pay […] in my view, by definition you will struggle to be entrepreneurial.”
His advice for those trying to grow a business is to do your research and properly understand the market you are in. “Don’t worry too much about competitors, because if you’ve got it and you can sell – and sell something you really, genuinely believe in – then you will be successful,” Esse says. “Too many people have a great idea, but if you can’t take it to market – that is code for being able to sell – then it will flounder.”
It is also important to challenge your business ideas, Esse says. He tests ideas with his business partner, James Penney, to look for all the potential things that could go wrong. “Build a good team around you, not of like-minded people, but someone who is going to really challenge you,” he says. “That is the other key to it really.”
For the future of Darwin Escapes, Esse sees a tremendous upside. A golf course has already been purchased using the second fund, and Esse has plans to install putting lodges around the edge of the course.
The mission statement for the Darwin Escapes holiday parks is to create “a lifetime of memories and experiences” for their guests. “As our managing director for Darwin Escapes says if we can carve those memories for life, then great, that is what we are there to do,” says Esse.
This article was published in our Business Reporter Online: SMEs.