Profits Warning for your Holiday Stay
Farmers are consistently being told to diversify their businesses and one of the most common forms of diversification is the rural holiday stay. But the danger is that increasing energy costs may make this unviable if you do not check your costs and ensure you are charging enough.
When I was an agricultural Bank manager I found to my surprise that in general rural holiday accommodation had higher occupancy levels in Lincolnshire, often 90% or more compared to Norfolk or Suffolk which were just over 60%. However, Norfolk and Suffolk attracted a premium of higher fees. The profits made were usually comparable whether Lincolnshire or Norfolk with the higher occupancy levels tending to balance the lower charges made to guests. However, as we look at higher energy costs unless that is passed on to guests the lower occupancy level may have the edge of incurring less costs, especially in the winter months.
So if you supply holiday accommodation as part of your farming business you need to ensure you are examining costs and, in particular, the viability of winter rentals.
Some of the items that you need to examine the pros and cons of:
Log burning stoves – if you are fortunate enough to be able to harvest your own wood this can be helpful in reducing cost. But remember even harvesting your own wood is a cost in time and energy.
Gas boilers – check how old this is and get advice whether a more modern boiler will cut costs. Upgrading the boiler on my home reduced gas bills by a third. Ensure thermostats are positioned well. Consider whether you should control a guests heating with a remote system such as Hive.
Electricity – coin op meters – this is an old fashioned option, but tends to be unpopular with guests.
Washing machines and dryers – if you have cabins or several holiday stays close together you can control the cost by having no washing machines or dryers in the premises but rather have a laundry room that you charge to use or supply a simple laundry service yourself.
Appliances – consider lower consumption induction hobs. Having better quality kettles that are insulated or have temperature controls can now save up to £200 a year. Supply guests with solar chargers for devices may help.
Caravan hook ups and electric car charging points – check you are charging enough for using these. Build in high cost increases for next year’s bookings, it is far easier to drop a price if things change.
Insulation – this may sound obvious, but it is often overlooked.
Consider solar voltaic systems with storage. This requires considerable capital spend, but may be viable for adjoining cottages or a group of log cabins. The systems I have seen have been typically around £25,000 to run two cabins or one house, or two small cottages. The viability and success of these is possibly yet to be proven, but if energy costs continue to rise spending that money today may appear good value in a relatively short period.
Other heating technology: Solar water radiators are a tried and tested efficient water heating system that appears to have fallen out of fashion. Key to these is correct installation, but they are relatively low maintenance and tend to have a long life. I know of houses that have used this as a primary heating for well over 30 years. Ground source heat pumps tend to work best on new builds and can be costly to install. From discussions with those using them they experience a 3 to 1 return on energy usage so a typical saving of at least a third compared to gas or electric heating.
Air source pumps - I have come across very mixed experiences with many making little or no saving compared to oil central heating, whereby others have saved 50% on traditional heating bills. The things I have observed with air source pumps are:
They appear to work best on new build accommodation.
I have seen them work very well in the northern counties of Durham and Northumberland and less well in Norfolk, Suffolk, Cambs and Lincolnshire. However, I have also seen them work well in southern counties when they have been fitted to exposed rural properties with little cover from neighbouring buildings. The most common mistake I have seen is for people not to have large enough units which appears particularly relevant in the southern counties.
Biomass – if you have biomass boilers to heat poultry sheds or grain stores, and especially if you are fortunate enough to have an old Feed In Tariff consider whether the plumbing can be created to heat your farm stay. If a neighbouring farmer has an anaerobic digester discuss with them whether you could pipe and purchase excess heat from them. Think outside the box.
Green credentials – you can avoid cost by having a green unique selling point of being off grid. Some pod and cabin accommodation simply has low tech and low energy accommodation with little, or sometimes no electricity. Battery power and solar cells are sometimes used. It can be a unique selling point even if your guests have to wear extra clothes!
Close for winter – often winter guests expect cheaper prices when in fact they incur more cost. Closing for winter is a real option.
The problem is that guests that book a long time in advance often pay less and you lose the opportunity to charge more as costs increase creating a potential loss for your accommodation.
Whatever you do consider the cost and ensure your holiday stay business is viable.
Readyfields Farm is a delightful group of cottages and cabins just off the A1 near Caunton, Nottinghamshire. Check them out on Facebook. https://www.facebook.com/Readyfieldfarmcottages/