Farm Diversification

VisitScotland information shows that in 2007 13% of overnight stays by tourists was in self-catering or rented accommodation, with domestic visits accounting for 90% of Scotland’s tourism.  The average length of stay for domestic (Scottish and English) tourists is 2.9 - 4.4 nights.  There is a recognised trend for domestic tourists to take more holidays, albeit as shorter breaks. 

There is also an increasing demand for high quality, value for money, self-catering holidays of either 3 or 7 nights.  Increasingly, visitors now decide on what activity/interest/experience they would like to pursue and then look for appropriate accommodation, rather than choosing a location first. 

It can be expected that there will continue to be an increase in the number of older visitors who will, in general, be healthier and have more money to spend.  Tourism organisations also expect an increased interest in holidays that promote good health and well-being.

Generally, the market for such accommodation is relatively strong despite over-provision in some areas.  It is important to fully research the market in the local area as part of the business plan. According to VisitScotland, almost 16 million tourists took overnight trips to Scotland spending nearly £4.2 billion, supporting about 9% of all employment.

To gain a competitive advantage it is useful to be able to provide a marketing package that includes high quality accommodation plus, for example, fishing, golf, shooting or other sport, nature interest, or some other activity.

The main competition is from other farmers and organisations specialising in purpose-built accommodation (e.g. Forestry Commission and private entrepreneurs).

Visitor and tourism trends for each of the VisitScotland regions can be viewed on the VisitScotland's Research and Statistics by selecting your region from the drop-down menu under the section "Tourism in your Area".  Here you can find reports detailing the local tourism market with statistics about vistor numbers, trends, etc.  You can also find out about Scottish occupancy rates for self-catering accommodation (and other types of accommodation) on the Visit Scotland website.

Some of the physical requirements for self-catering accommodation are listed below.  This is not an exhaustive list; more details can be obtained from tourist authorities such as VisitScotland.

• The accommodation must offer clean, comfortable, furnished facilities for visitors who are provided with the means to cater for themselves. There must be an area for use as a lounge and dining area, sleeping accommodation, bathroom and toilet, plus catering facilities - all adequate for the number of occupants.
• Adequate means of heating must be available at all times.
• Good access and parking for cars.
• Sufficient seating, beds and bedding, furniture, toilets, bathrooms and equipment (kitchen and dining) for the maximum advertised number of occupants.
• All floors must have suitable floor finishes or coverings.
• A regular cleaning service (as a minimum, between each new let).  Personnel also available to deal with faults, breakdowns etc.
• To achieve a minimum entry requirement to the VisitScotland Self Catering Classification scheme there should be at least 18.6m2 enclosed floor area (living, sleeping, cooking and bathroom areas) for a 2 person unit, plus 7.4m2 for each additional person normally accommodated.  Higher star ratings will require greater floor areas.  More details on the VisitScotland Quality Grading Scheme can be found at www.VisitScotland.org.
• Laundry facilities for washing bedding etc between lets.
• The accommodation must comply with all health and safety and other relevant legislation.
• Provision of units suitable for disabled access will increase the potential market for the accommodation.

A range of Welcome Schemes have been developed by VisitScotland whose aim is to guide consumers with a range of specialised interests to those establishments that pay particular attention to their varied needs. Accreditation to such schemes may increase interest in your accommodation.

The cost of building, refurbishing, converting, furnishing and equipping premises for use as a self-catering establishment can be considerable, depending on the number of units involved and the nature of the project.

• Conversions: Very difficult to estimate; rule of thumb, perhaps £1000/m2, to be less than a new building.
• Chalets: £30,000 to £50,000 each.
• Furnishings, etc: Potentially £5,000-£25,000/cottage or chalet.
  
  

Running costs are very difficult to estimate due to varied nature of self-catering accommodation.

• Electricity / Heating: Highly variable, dependent on time of year, weather etc
• Repairs/replacement: estimate 5% of capital costs of equipment; could be variable
• Advertising costs: Vary according to whether an agency is used or the business advertises by itself.  Agency costs could be around £100 upwards, depending on the level of service.  A website is essential.  There is increasing use of the internet for finding out about, and booking holidays.  The costs associated with maintaining and updating websites, along with any training required should be allowed for.  Initial costs could be £500 upwards for developing a website and further, annual running costs.
• Cleaning: £20 - £30/week approx. per unit.
• Rates: Holiday accommodation is assessable for rateable value if it is available for letting for 140 days or more per financial year. Approximate values are £150-£300 per bed space.  More detailed assessment values should be obtained from the local authority.
• Insurances:  Suitable property and public liability insurance will be required for units.

£250 - £550+ per week, depending on size, quality and season.

Average season: 30 weeks (range 20 -40).

Average occupancy rate (for 30 week season): 73%

Planning permission will be required for any change of use of buildings, building conversion or new build for self-catering accommodation.

Self-catering accommodation will be liable for business rates.  However, the Small Business Bonus Scheme came into effect from 1 April 2008. Under the scheme relief is set at 50% for properties with a total rateable value up to £8,000, 25% for properties with a total RV between £8,001 and £10,000 and 12.5% for values between £10,001 and £15,000.

Competition from other accommodation providers can be a threat.  The market should be fully researched before committing to developing a business.

Although not as labour-intensive as, for instance, farmhouse bed and breakfast, there will be a requirement for cleaning and maintenance.

Any signposts, local advertising may be subject to planning permissions and or local council approval.

Please remember that special consideration must be given to the VAT aspects of diversification as the new activity may not be treated the same as the existing farm business from a VAT stand point.

The "Welcome Host" and "Scotland’s Best Service" programmes have now been retired after more than a decade of service to the Scottish Tourism Industry. A portfolio of courses have been established under the banner of Tourism Development Programme: 100k Welcomes and consists of 3 courses.

• 100k Welcomes Leadership (for owners, managers, supervisors and those with responsibility for recruiting, training & developing staff))
• 100k Welcomes Operations (for front line staff)
• 100k Welcomes Stars (for ‘Stars’ of the front line and/or managers of the future)

In the Highlands and Islands HIE's Hospitality Assured online self assessment comprises 10 key steps which you can measure your tourism/hospitality business against. The assessment is designed to help establish how your business is performing and will help you understand the things you do well as well as identify where improvement is needed.

Other training may be available through the Scottish Enterprise network and local tourist forums.

Through the Scottish Rural Development Programme (SRDP) 2007-2013 funding is now available for rural businesses throughout Scotland for diversification and renewable energy projects. Specifically, support is delivered through Rural Development Contracts – Rural Priorities which was launched in April 2008.

For further information about what support is available see the Section on Rural Development Contracts – Rural Priorities.