2021 KOA Response to KOA Owner’s Association Resolutions presented at 2020 KOA OA Annual Meeting

February 15, 2021

Kampgrounds of America, Inc.
550 N 31st Street,
TW3 Fourth Floor
Billings, MT 59101

RE: Owners Association Resolution Responses

Dear KOA Owners Association,

This letter highlights Kampgrounds of America, Inc. responses to the Owners Association resolutions presented at the 2020 KOA Virtual Convention and two carryover resolutions from 2019. KOA has provided an appropriate level of supporting information to create transparency around each response. We thank the Owners Association for presenting these resolutions and we look forward to continuing our positive working relationship.

Sincerely,

Darin Uselman
Chief Operations Office,
KOA Franchise
Click here to view the full PDF version of the letter and resolution response.

Letter provided from Darin Uselman, KOA

Area 3 – Resolution 1:

Area 3 hereby resolves to request KOA form a K2 liaison user group consisting of franchises/OA members in order to better funnel ideas and requests directly to the K2 team and be kept informed as to the road map and current direction of the team.

KOA Response:

KOA respectfully declines to take action on this resolution as it believes that this liaison user group already exists through the Franchise Advisory Committee (FAC). The FAC Technology Sub-Committee is led by Andy Metroka, SVP Info & Tech Services, and includes franchisees selected by the Owner’s Association and KOA. KOA actively engages this committee and other franchisees throughout the year to collect user input regarding functionality scheduled within the K2 roadmap. Although KOA will not take additional action to formulate a new committee, it reminds its franchisees to
leverage their FAC Technology Sub-Committee in funneling ideas and requests, and encourages the OA members of the FAC committee to more formally debrief the OA at large. KOA will help communicate the purpose of the FAC and the committee members to the system to help with this resolution.

Area 3 – Resolution 2:

Area 3 hereby resolves to request KOA to develop the ability for K2 to integrate with 3rd party vendors such as Airbnb to allow a guest to book through a site such as Airbnb and have it book directly into K2.

KOA Response:

KOA respectfully declines immediate action on this resolution. KOA is currently conducting research on a multitude of options surrounding Online Travel Agencies (OTA). The scope and effort for creating appropriate channel connections is substantial. We certainly acknowledge that a direct connection with K2 is important for efficiency and as such, it is part of our development roadmap. As we evaluate our options, KOA is focused on identifying an approach that eliminates the paralyzing effect that the airline and hotel industries endured as a result of their OTA foray. We are looking to engage with both existing and emerging OTAs in a way that capitalizes on the value of the KOA brand and KOA.com, ensures premium placement of our inventory, and protects our campgrounds from exorbitant booking
fees. We have hired a respected consultant in the field who is helping us with this project during the first half of 2021.
KOA understands our franchisees’ desire to look at OTAs for attracting new customers that may not be considered traditional campers. Our 2021 marketing efforts contain a 70-30 spend, split between acquisition and retention. We are actively working through productive media channels to reach new customers.

Area 4 – Resolution 3:

Review of Standards & Thresholds for Founder’s/President’s Annual Awards

  • In general terms, members think that said Awards have become too common and that the thresholds for achieving such should be reviewed and raised in order to maintain the value of said Awards.
  • Specifically, members think that the Awards have become so common that they are becoming more of a “Participation Trophy.”

KOA Response:

KOA will take action to evaluate what, if any, modifications should be made to the President’s and Founder’s award criteria. Two factors contribute to the KOA Awards process each year. The first includes the Quality Review and the second consists of the Net Promoter Score. KOA will review and evaluate the current awards structure in parallel with the validation of the 2022 Quality Review Weighted Scoring Average during site visits this year. The teams are currently working to calibrate the 2022 Weighted Scoring Average against the current QA method. Once calibrated, the weights will be adjusted to achieve the goals of the QA program which are 1) Enforce KOA’s contractual standards consistently across the system, 2) Apply appropriate weights based on the guest experience and revenue production, and 3) Appropriately modify awards standards to drive KOA quality.

Area 4 – Resolution 4:

Schedule Annual Meetings between KOA Business Development Consultants (BDC’s) and each Franchisee.

  • While members unanimously commended the BDC’s on their assistance with onboarding through the KOA conversion process, onboarding to K2 process, and generally being accessible and responsive to questions/concerns, members think that BDC’s should take a more proactive approach via a scheduled annual meeting (via phone, ZOOM, or other platform – not in-person) with each franchisee.
  • Membership is aware that BDC’s have access to information unavailable to individual franchisees that is invaluable; however, dissemination of said information, business guidance, and general consultation should be proactive, not reactive, in nature.

KOA Response:

KOA is actively taking action and progressing towards a more proactive approach in reaching its existing owners while maintaining its strong assistance for our new franchisees. An additional Business Development Consultant has been hired to expand KOA’s ability to progress towards the goal of this resolution. Our progress will be measured throughout the year and adjusted based on the effectiveness of our outreach and feedback from our franchisees. KOA will also continue to facilitate 20-Group and OA meetings which extends our outreach to more campgrounds.

Area 5 – Resolution 5:

Area 5 brings forth the resolution that a second approved uniform company be brought forward by Inc. to allow for healthy competition to encourage better quality uniforms in terms of fit, material, and cost for all campgrounds. The monopoly held by Graphic Imprints has led to high cost, ill fitting, and inferior materials, which a number of the campgrounds have brought to the attention of Inc. to no avail. Having a second option for approved KOA uniforms would allow for choice as well as healthy competition and hopefully better-quality products.

KOA Response:

KOA’s contract with Graphic Imprints extends through April 2022. Two years ago, KOA examined another vendor to provide the Yellow Shirt solution to its franchisees. Ultimately, a number of factors influenced KOA’s decision to retain Graphic Imprints as the approved uniform provider. Those factors included:

  • Ability to source PMS 109 overseas at lesser inventory levels than the larger uniform companies. Inventory needs to be right-sized for both the system and the vendor.
  • Competitive Pricing based on our shirts’ technical specs.
  • Graphic Imprints can react quickly to our concerns and work with us to find solutions due to their Billings location.
  • KOA would rather be a big fish in a small pond versus a small fish in a big pond for service.
  • Graphic Imprints knows our franchisees personally and although there have been occasional problems, they do desire to fix issues and strengthen relationships.

After retaining Graphic Imprints, KOA negotiated pricing on an overseas polo to replace the current polo at a better price point. Here are the features between the two polos:

Former Polo New Polo
Price: $18.95 Price: $16.95
5 oz. 100% Polyester Pique 4.76 oz. 100% Jersey Recycled Poly (RPET)
Stain Release Finish Stain Release Finish
Quick Dry Quick Dry
Rib-Knit Collar with 3-Button Placket Rib-Knit Collar with 3-Button Placket
Open Cuffs & Square Bottom with Side Vents Open Cuffs & Square Bottom with Side Vents
Snag Resistant

KOA was anticipating the launch of the new overseas polo by spring 2021 but then COVID-19 hit and the overseas market struggled to react for approximately eight months. During that time, KOA relied upon the domestic yellow polo option to mitigate the oversea change. The domestic option has not proven to be as resilient as the overseas shirt and has led to complaints about its performance. Looking forward, there are great options coming this year. KOA will be communicating these options to the system and closely monitoring the quality of these polos throughout the year. KOA is not opposed to relooking at vendor options ahead of the Graphic Imprints contract expiration.

Area 7 & 8 – Resolution 6:

Be it resolved that the KOA Campgrounds in areas 7 & 8 have suffered financially more significantly than any other region in the KOA system from the effects of Covid19, and furthermore were largely unable to benefit from the help KOA corporate gave to southern KOA campgrounds in subsidies for cancellation charges. So be it resolved that KOA Inc should consider a one-time royalty reduction/credit as a means of compensation for the Canadian KOA campgrounds.

KOA Response:

KOA respectfully declines to take action on this resolution. KOA does not plan to implement a one-time royalty reduction/credit as a means of compensation for Canadian KOA Campgrounds. Royalty reductions are not negotiable or an option for any part of our business. Other methods have been deployed as needed but we do not reduce royalties primarily for contract consistency and fairness across the franchise system.

Looking back on 2020, we believe it is important to acknowledge some of the more severe restrictions that were placed or continue to be placed on certain locations. There is no doubt that Canada has been severely impacted by the border closure between our two countries and interprovincial travel restrictions. In fact, those provincial restrictions have even increased in provinces like ON which cause additional anxiety around Canadian camping revenues for 2021 as our parks prepare to open their doors this spring. Similarly, there were other regions and markets that experienced substantial financial effects from the pandemic. States like Alaska, portions of CA, Maine, parts of Michigan, Minnesota, Montana, Nevada, New Mexico, North Dakota, New York, Oregon, areas of Tennessee and portions of Washington were impacted heavily as a result of COVID-19 restriction. In fact, 12.5 percent of franchisees were down more than 20% in 2020, with four out of five of those parks not in Canada. The entire KOA Family is concerned for the owners of our North American KOAs that have experienced the more severe effects of the pandemic. As your partner in business, our financial success is also impacted when your businesses decline. To highlight this aspect of our relationship, KOA’s Canadian business was off 31% in registration royalties and a total of 43.5% pretax profit when compared to 2019. These figures are not meant to dismiss the financial challenges in Canada or any other region, but rather to say our businesses and their success mirror one another.

When the pandemic first emerged, KOA reacted quickly to address the enormous flood of cancellations throughout the system. Serious concerns were raised about the ability for the system to return customer deposits at the scale with which cancellations were being received. We saw early evidence among parks that were open and facing these cancellations that deposits were not being be refunded. As such, KOA moved forward with reimbursing deposits for reservations with check-ins between March 1 and April 30, 2020. This action was done in an effort to all but guarantee the KOA camper would be made whole and protect the KOA system at large from any potential camper negativity surrounding cancellations. This decision was not made lightly, especially as KOA was reforecasting its profit to be down some 85%-90% at that time and governmental programs were not yet readily available. KOA stands by its decision to protect the system and its customers and believes this decision played a role in the camping comeback as restrictions were lifted. It was not a subsidy to offset parks’ finances for all parks.

KOA is designing a specific marketing promotion aimed to reduce deposit liabilities and drive occupancy. This promotion will be available to not only Canada, but other markets that have experienced heavy financial impact as a result of the pandemic. The details of this offering will be rolled out through KOA’s marketing team in the next couple of weeks. KOA has also retained a Canadian lobbying firm who is working specifically to address restrictions ahead of this season. We are investing quite a bit of money towards this effort and feel this investment is necessary to
help us navigate the political system and have influence in Canada.

Unresolved 2019 – Area 1 – Resolution 1:

Area 1 proposes a resolution for those campgrounds that work towards obtaining a
commercial grade Wi-Fi bandwidth for their guests, be awarded an adjustment on their
royalties to help compensate the cost of this upgraded service. Should this resolution
be adopted, then it is requested to have a designated icon/label on all marketing
platforms.

KOA Response:

KOA’s current standard requires parks to offer WiFi and cover 95% of the park. KOA’s current standard does not contemplate a per site bandwidth speed that ultimately our campers current desire or will desire. The question is, what should that standard be? Per FCC, Broadband is defined as 25 Mbps download and 3 Mbps upload, especially during
peak time of 7-10pm. As of today, only one KOA vendor guarantees such bandwidth and that is Access Parks. Are these speeds truly required? For work from home, remote learning, streaming, etc., these speeds will likely be necessary. For checking emails, etc., the bandwidth would not need to be at these speeds.

Approach: It makes sense to land on a speed test app/provider to begin benchmarking
each KOA’s current bandwidth potential, especially during the peak time of 7-10pm.
With that intelligence, and consistent approach to measuring speed, KOA could then
begin to understand where the standard may need to be and thus, land on a benchmark
that can be measured for any royalty consideration.

Next steps:

  1. Finalize a Speed Test provider. Our recommendation is speedtest.net. The app can be applied for both Android and IOS operating systems. Utilize 2021 Quality Reviews (yes, we plan to be on the road) to complete a
    pricing group inventory per park and detail the bandwidth across the system.
  2. After collection period, determine a bandwidth standard that is both realistic and aspirational.
  3. Consider incentives that reward franchisees who have invested in quality WiFi per our standards and encourage other franchisees to invest in their WiFi utility infrastructure.

Unresolved 2019 – Area 7 – Resolution 2:

Whereas Canadian KOA franchise owners cannot add subsequent charges
to any credit card in the K2 system that involves and is marked as Blackline. This results
in liability to all the Canadian franchise owners due to inability to collect on Charge to
Site, Damages to Accommodations, etc. Therefore, to be resolved KOA Corp needs to
deal with Chase and Blackline to insure this is resolved.

KOA Response:

KOA continues to work with Chase Canada on the best solution for tokenization. Chase Canada has two tokenization methods: 1) A fully integrated solution and 2) A semiintegrated solution. With KOA’s proprietary reservation system, the semi-integrated solution was initially given to KOA by Chase Canada. eConduit was selected as the middleware solution provider for the semi-integrated solution that rolled out in 2020. A challenge developed when Chase and eConduit discovered that unlike Axia (the US card present solution), eConduit does not manage its own tokens and only passes the Chase token through to K2. KOA stepped in to provide token management similar to Axia. To provide this token management function and use the token for subsequent transactions, additional information is required to be sent with the token. A piece of information required is the card expiration date. Chase does not expose this information to eConduit. Without this expiration date, KOA, as the 3rd party token manager, cannot submit tokenized transactions.

Two options exist going forward:

  1. Chase believes that the front desk employee could ask the customer for the credit card expiration date for manual entry into K2. The credit card would still be dipped into the terminal but the expiration would be manually entered. With the expiration date populated in K2, and in combination with the partial token received from eConduit, it is believed that the token would then be able to be reused for Charge to Site, Damages, etc. The KOA IS team will work to test this solution.
  2. KOA is also evaluating another vendor to replace eConduit which may give KOA the ability to deploy a fully integrated solution with Chase. Requirements are being evaluated to determine feasibility. This would be the preferred method as the expiry date and token are exposed at the same time with a fully integrated solution.