Building an Outdoor Hospitality Empire
How $40k from friends and family became a $100 million glamping success story
Exactly one year ago, I woke up in a king size bed at Under Canvas Mount Rushmore. It was an inspiring stay, and one that catalyzed my obsession with this outdoor lodging brand for people who are more comfortable indoors. In today’s long read, I’ll take you back to the beginning of the company, show you how they scaled, and then offer some guidance about how to find the best Under Canvas location to visit this summer. I’ve also included a cursory analysis of what I believe the business to be worth today.
Chapter 1: A Scrappy Start
Sarah and Jake Dusek met working as overseas aid workers in 2003. When the couple moved back to Jake’s home state of Montana in 2009, the duo started Under Canvas, a safari-style tent camp in beautiful outdoor-focused destinations, with $40,000 borrowed from friends and family.
Initially, the company catered to pheasant hunters and fly fishers. “Such people tend to be well off and appreciative of distinctive experiences,” said Sarah in a 2017 story in Inc. "We had multiple billionaires who would fly in on their private jets and stay with us," says Sarah. "Lots of people out of Texas. Venture capitalists. A whole mixture."
As for infrastructure, Sarah’s time learning about AIDS in Africa inspired safari-style tents that Jake designed and had locally manufactured. Rather than plastic and nylon, the tents were framed in wood and draped with canvas to have a more romantic look that visually minimized functional components like zippers and screens.
Following two years of failing to break $100,000 in sales, the young couple began fielding inquiries from people who wanted to rent or buy their tents. An unexpected breakthrough came in the form of a music festival in New York that rented 150 tents. This single event was close to cash neutral, but did allow Under Canvas to expand their inventory of tents by nearly 40x from the 4 they started with. Not long after, the company owned 600 tents.
While their events business began to achieve momentum with private events bringing in anywhere from $10,000 to nearly $1 million in revenue, the Dusek’s wanted to double down on their four-tent safari camp experience. They had a sense of purpose around helping people access beautiful places.
In 2011, they put hundreds of thousands of dollars on credit cards and leased a property outside Yellowstone and set up 75 tents. Today the location offers organic bath products, a seasonal kitchen, nightly s’mores, live music, morning yoga, activities for kids, and West Elm furnishings. During the day, people enjoy local recreation offerings like hiking, fishing, and horseback riding.
The first Yellowstone location was such a success that in 2014, Under Canvas expanded to Moab and Glacier followed by a 2017 location in Zion.
Chapter 2: Growth
On the heels of nearly $9 million in 2017 revenue, San Francisco-based SBJ made a $17 million growth investment into Under Canvas. At that time, the company had 60 full-time and 150 seasonal workers, recruited mostly from overseas college students eligible to work for three months on a J-1 visa.
The 196-acre Zion location debuted in late 2017, implying that at the time, the 3 operational locations were doing an average of $3 million in revenue, each.
In 2018, Under Canvas opened camps in the Grand Canyon, Mount Rushmore and Great Smoky Mountains. Mount Rushmore received accolades in the Conde Nast Traveler Readers’ Choice Awards in 2020 as one of “The Best Resorts in the World.” Having stayed there myself, I concur. It’s no Park Hyatt or One and Only, but it completely redefines the standard in what amenities-forward lodging in iconic outdoor recreation destinations that otherwise over-index in campgrounds and 2-star motels, can be.
And private equity agrees. In December 2018, KSL Capital Partners came along and made Sarah and Jake very rich. They sold Under Canvas over $100 million. Not bad for a couple that had once been swimming in credit card debt and struggling to get healthcare for their young kids.
But did they sell too soon?
As the outdoor recreation summer vacation became the global default in 2020 and 2021, Under Canvas had a safe, socially distanced, award-winning option. The company added two more camps to its roster during the pandemic. Lake Powell opened in April 2021 and Acadia came soon after in May 2021.
Last year saw the addition of Bryce Canyon, a fully “off the grid” location running entirely on renewable energy. This location included the introduction of a stargazer tent, designed so that a viewing window is positioned directly overhead the king size bed.
Chapter 3: Rinse & Repeat
There are now 11 Under Canvas locations plus a second brand offering called Ulum, which just opened this year in Moab.
With KSL’s backing, Under Canvas has expanded its Bozeman-based headquarters team to 100 corporate employees. While many early days deals were lease to own arrangements, most of the sites are now outright owned by the company. Now CEO Matt Gaghen cites international demand equivalent to about 15% of their total bookings in a typical year. Unsurprisingly, most domestic travelers hail from California or New York.
Using debt from Blackstone and Blackrock, the new leadership team has dialed in a returns model that generates over 20% within year one. Today, Under Canvas is a strong competitor to a typical outdoor resort. And with the “best food” in the local area offered right onsite, Under Canvas has aced their a la carte offerings. Retail partners include Lululemon, Stanley, Pendleton, and branded merchandise for people and pets (who are welcome at camp). Last year, Bluestone Lane became the exclusive espresso provider.
As I look across the landscape of hospitality opportunities that are generationally-relevant and continuing to build brand value, I can’t help but feel bullish about where the KSL-installed management of Under Canvas is taking the resort.
Chapter 4: Tips for Planning Your Visit to Under Canvas
As any good analyst would, I gathered some data (see here) about each location to try to perform a cursory pro forma build for the business. I’ll save this for the epilogue so as not to bore the poets in the crowd. Along the way, I realized that the consumer value prop for this information was some insight into how to optimize your summer travel planning. Here are a few insights that I uncovered.
Across the portfolio, the properties will operate for an average of 175 nights this season with an average of 58 tents, though some locations have less.
The location with the shortest opening window is Glacier - about 20 mins from where I’m spending my summer. This property is open for 96 nights and has a low nightly price of $259 and high nightly price of $444. If you’re interested in visiting Glacier National Park, the heart of the season is July and August.
The Great Smokies, Lake Powell and Moab locations are each open for 236 nights this year. The warm southern Utah climate allows Zion to operate for the longest of any of the locations at 243 nights.
The overall average nightly price for all locations was $420. The locations with the lowest nightly rates are Great Smoky Mountain ($199), Moab ($219), Mount Rushmore and Grand Canyon ($229), and Glacier ($259).
The three locations with the most tents are West Yellowstone (100), Grand Canyon (80) and Acadia (63). If you’re looking for space to roam, Bryce Canyon offers 750 acres, while Moab’s original spot only had 40 acres.
Epilogue: What is Under Canvas worth today?
I established in “Chapter 2” above that the first three locations were generating roughly $3 million a year in 2017. By the end of 2018 when KSL became the new majority shareholder, there were 7 locations, so it seems plausible that even in year one of partial operations, the business was doing at least $1-1.5 million in each new location, providing another $4-6 million on top of the $9 million the previous year. Best I can tell, the business was generating $13-15 million of revenue in 2018. Since it’s on record that the Dusek’s sold the business for more than $100 million (but probably not significantly more, otherwise a higher round number would be socialized), let’s just assume that it was somewhere between $110-120 million. This would imply a multiple of 7.3 - 8.5x revenue multiple at a $110 million exit, and an 8 - 9.2x revenue multiple on a $120 million exit value. This gives us a range of 7.3 (on the low end) to 9.2 (on the high end).
With 2023 estimated revenue, we can use that multiple to figure out an approximate valuation.
Here’s how I built a very simple revenue projection.
Establish number of opening days in the season.
Obtain the low and high rate for the season. Use this to estimate a mean. (Caveat: the better estimate would be to pull all price data and obtain the actual mean. I did not do this, so my estimate is subject to skew.)
Access the tent census from public sources.
Get booking potential by multiplying operating days by average nightly rate by number of tents. This number doesn’t take into account that there are 6-10 different types of tents and that nightly prices are quoted for the least expensive option. This is the primary way that below full capacity operating days are compensated for. As such, the actual fully saturated revenue capacity is higher, perhaps by another 30%, or more.
Estimate food and beverage by assuming an average of 2.5 guests per tent at two meals (breakfast and dinner) per day at $20 each (which smooths variances like dinner costing more than breakfast). I assume that lower occupancy days are smoothed out by higher occupancy tent types and by lowballing my $40/person/day estimate. When I stayed at Under Canvas, I think my breakfast was around $14, plus $5 for orange juice. Dinner options were from about $18-35 and alcoholic drinks were probably between $8-18 each.
Estimate retail by assuming that it generates another 5% of whatever bookings end up being. I assume that the locations with higher nightly rates attract more affluent visitors who scale their discretionary retail spend.
Based on this math, I get to around $48.5 million in approximate bookings, $11.7 million of food and beverage offerings, and about $2.5 million of retail. The total is around $62.3 million.
Since the locations that opened in the last year or two are potentially still ramping, I tend to have a number more like $50 million in my mind (optimistically) of what the business is currently running at.
To revisit valuation, $50 million in revenue today times 7.3x is $365 million. On the higher end, the implied valuation is $460 million.
If I were a banker, I could find a lot of ways to get this above $500 million. In fact, even using the $62.3 million estimate for 2023 revenue with the 9.2x revenue multiple gets us to $573 million. But I’d remind you that Hyatt Hotels, a public company, trades at a market cap that’s just over 2x its trailing twelve month revenue. So if this business is aiming to build a global outdoor hospitality footprint that eventually plays in the public market, institutional investors may not award the company the same valuation that its private equity predecessors did.