 Business is booming this
summer for RV rental operators. That’s one reason why
47-year-old Randall "Randy" Smalley, president and
chief executive officer of Cruise America, Inc., is smiling.
Another reason is that after several years of restructuring its
fleet of rental units, reorganizing the internal structure and
relocating from Florida to Arizona, the company’s profit and
loss statement is showing strong signs that his innovative
management ideas were sound. The company recently reported a
profit of $2.7 million, or 46 cents a share, on $95.6 million in
revenues for fiscal year 1997, a 170% increase from 1996’s
$1 million. In fiscal 1995, the company reported a $200,000
profit. That represented a turnaround from fiscal 1994, when the
company lost $3.1 million largely due to a write-down of 1,000
RVs. The year before, it lost $800,000. So the company is on the
right track,
Cruise America, the
world’s largest RV rental and sales company, celebrated
it’s 25th birthday on July 4th. The company rents a fleet of
4,100 RVs, including motorhomes, truck campers and motorcycles.
The company writes more than 52,000 contracts a year. Nearly half
the customers are foreign.
Cruise America employs
about 400 people system-wide during the summer, including 170 in
the Arizona headquarters. The total drops to 220 during the
off-season. It operates 16 hub locations and 90 satellite rental
centers across the United States and Canada.
A few weeks ago RV News
visited Smalley at the company’s headquarters in Mesa, AZ,
to learn how Smalley was able to lead the company to such a
dramatic turnaround. According to Smalley, there were a lot of
factors in Cruise America’s new success, but moving to
Arizona was a key element.
Smalley told RV News,
"Moving to Arizona was the best thing we ever did. We were
going to move out of Florida, and looked at several other states.
The RV business, especially the motorhome business, is a West
Coast business and even more so on the rental side. People rent
motorhomes to tour and where do they want to tour? The National
Parks. We had been talking about coming west for awhile so when
this opportunity came up we moved."
Cruise America bought the
two-story, 100,000-square-foot complex on a 9.9-acre site from
the Resolution Trust Corp. (RTC) for $2.2 million, less than a
third of its original price. The facility had been originally
built by a developer for an RV dealer, but as with many ventures
like this in the eighties, the dealer defaulted and the developer
went bankrupt so the property ended up with the RTC. Smalley
said, "We happened to be in the right place at the right
time. We bought this place really cheap and we are happy to have
it."
The facility houses
administrative offices, a maintenance operation, re-manufacturing
op-eration, showroom, reservations center and retail store.
While Arizona did not offer
financial compensation for relocating, Cruise America was offered
incentives by Wyoming, Nevada, South Dakota, and New Mexico, but
the Arizona facility outweighed the amount of money being offered
by the other states.
Smalley said, "Our
plan was to be as close to California as possible without
actually being there. It’s so difficult to do business in
California — it’s expensive. For example, license
plates. In California it costs $1,000 to $1,500 a year for a
license for a rental unit and over here it costs zero."
Smalley paused then added, "Well, it doesn’t cost zero.
We still have to pay the fees, but in Arizona you get it rebated
back through the sales tax. You talk about 4,000 vehicles at
$1,000 a piece, that’s a lot of revenue."
And while the move to
Arizona has contributed to the company’s success, it was
Cruise America’s decision to transition to modular RV
designs that has had the most significant impact.
Smalley said, "Ten
years ago the annualized utilization of the fleet was 33 percent
— the units were idle two out of three days. Today, however,
the utilization is over 50 percent. The end result of this
greater efficiency is they accrue mileage more quickly. Where
they used to turn 15,000 miles a year, they are now turning
25,000 miles a year. So the need to rotate the fleet becomes even
more intense.
"All through the 1970s
we didn’t have any problems. We were buying 1,500 units a
year and selling 1,500 units a year. The market is just not the
same anymore. That was back in the days of $15,000 motorhomes.
Today, were talking $45,000 motorhomes. We had to find a better
way to rotate the fleet." Continued
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