Rising inflation and lowered spending capacity are coming for the recreational vehicles (RVs) industry as fewer people seek out campervans and motorhomes. 

Following a review of all its divisions, New Zealand-based tourism company Tourism Holdings (ASX: THL) has lowered its net profit after tax (NPAT) guidance for FY24. It expects NPAT to be between $45.5 million and $48.1 million. This compares to earlier guidance set in February 2024 for NPAT to be around $68.1 million.

At the same time, it has updated its EBIT guidance from $131.8 million to $102.7 million. It expects its net loss to decline by $17.2 million in Q4 FY24, compared to Q3’s $1.8 million. 

The weakening economy has negatively impacted most regions and business divisions and lowered expectations into Q4. Vehicle sales have been a major factor globally, with sales volumes and margins now declining more quickly than expected in most markets. 

Over 50% of the overall group EBIT decline is attributable to the Australian Retail Dealership division, particularly a shortfall in the sales volumes of high-margin ex-fleet vehicles.

Tourism Holdings specialises in RVs. The Company offers RVs for rent and sale across Australia, New Zealand, the US, Canada and Ireland.

Its rental yields have generally met expectations in most markets. However, a recent slowdown in forward booking intakes for the Australasian shoulder season is leading to a poorer rental performance than earlier forecasts in the remainder of FY24.

With regard to vehicle sales, in New Zealand, there has been a reduction of about 200 in unit sales, marking a $6,817 decline in the average sales margins. In Ireland, there was a 70% reduction in unit sales. 

Based on a preliminary review, thl believes impairment of the UK/Ireland business division will likely occur as part of the upcoming 2024 year-end process.

For FY26, thl has retained the goal of achieving $100 million NPAT. It has considered the assumptions underlying the goal and can foresee a positive rental growth outlook and recovery in the RV sales market globally. However, expectations for FY25 are now below the FY23 Pro Forma NPAT of $70 million.

To address the earnings decline, the Company plans on slowing its fleet purchases across the next 12 months. THL expects its rental fleet to be below 9,000 at the end of FY25 (down from the previous guidance of below ~9,500). In FY26, vehicle sales growth is set to either meet or surpass pre-COVID-19 levels for Australia, the UK and Canada. Its hire days in the USA and New Zealand will remain below pre-COVID levels.

While considering the impairments of its Ireland division, the Company has renewed its US focus. It is continuing to focus on synergy opportunities between Canada and the USA, and aims to generate more revenue sources within the USA. So, in April 2024, it announced Kate Meldrum as the Chief Operating Officer of North America and will be responsible for both the Canadian and USA businesses.