Country Vacation Enterprise

 
 
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 Industry highlights | Regulatory/operational basics | Marketing basics | Operation basics | Economic/finance basics | Resources | Key management issues

Industry Highlights

  • Agri-tourism in Alberta is an emerging industry. It is responding to a growing demand for access to farm and ranch lifestyles and products from what is largely an urban audience.
  • The Ontario Ministry of Agriculture, Food and Rural Affairs defines agri-tourism as the economic activity that occurs when people link travel with agricultural products, services or experiences.
  • Farms and ranches that offer agri-tourism experiences to the travelling public have existed in Canada for over 20 years.
  • Several Canadian provinces have recognized potential for agri-tourism and have prepared strategy-related documents about the industry. These include Newfoundland (1999), Saskatchewan (1998), Manitoba (1997), Ontario (1996) and Nova Scotia (1996) already have such documents.
      Table No. 1 - Status of Canadian Agri-Tourism Industry
      RegionWorking Farms/Ranches
      with Country Vacations
      Per Cent of Farms/Ranches
      Featuring Country Vacations
      Atlantic17525
      Quebec20028
      Ontario17525
      Prairie Provinces13519
      British Columbia253
      Canada700100
        Original Source: L. A. Dernoi (1991) Canadian Country Vacations: The Farm and Rural Tourism in Canada; Presented in An Agri-Tourism Strategy for Nova Scotia, July, 1996.

    • There are two types of farms and ranches that have accommodations and recreation activities in Alberta. The first type is farm/ranch stay. These operations offer overnight accommodation in a family home, a cabin or a campsite. Breakfast is either provided or self-catered. The second is a farm/ranch vacation. These operations feature longer visits, averaging 3.5 days in length. Visitors stay in the family home, on-site cabins or cottages. Activities, both on and off-site, are included as part of a package. The farm/ranch also serves as a staging area for day excursions.
    • A full range of other agri-tourism enterprises and activities also exist in Alberta. They include farm tours, festivals, rural petting zoos, bed and breakfasts, horseback riding, vegetable and fruit u-picks, fishing, wild boar hunting, rural tea houses, country stores and barn dances.
    • Alberta country vacation operators offer a variety of opportunities. Some include horseback riding as a main attraction, while others feature a quiet relaxing farm experience away from the hustle and bustle of city life. Some enterprises stress proximity to large urban centres for a quick getaway. Others feature themes based around the traditional working ranch lifestyle.
    • Agri-tourism ventures also are a venue for educating people about modern farm practices. These ventures provide an opportunity for farmers, market gardeners and ranchers to promote their lifestyle, rural community and homegrown products.
    • The Alberta Country Vacations Association (ACVA) was established in 1971. It was one of the first organizations to help develop and promote farm/ranch experiences in Alberta.

      Table No. 2 - Distribution of Country Vacations in Alberta
      Alberta Regions
      Farms/Ranches with Country Vacations*
      South (of Calgary)
      21
      Central
      9
      North (of Edmonton)
      7

      *Note: Other enterprises exist that are not members of ACVA, do not advertise in the Alberta Accommodation Guide and are 'non-working' commercial guest ranches.
      Source: Complied from a review of the 1999 Alberta Accommodation Guide and the 1999 Alberta Country Vacations brochure. The numbers represent country vacations on farms and ranches that are operated to contribute to the overall agricultural-based family income.

    • In the United States, there were an estimated 2,000 farms offering vacation packages (Vogeler, 1977). During the 1990s, rapid growth was experienced in the northwestern states.
    • In Europe, agri-tourism is one of the most rapidly expanding tourism elements. Austria has a long tradition of offering farm vacations, going back to the 19th Century. Today, Austria provides the largest number of farm accommodations in Europe; a total of 21,000 farm homes, or 7.5 per cent of all farms.
    • There are many reasons for the emerging popularity of agri-tourism experiences. The primary reasons include:
      • nostalgia - a desire to "go home"
      • a curiosity with rural lifestyles or reaffirming traditional values
      • learning vacations - learning to ride a horse or observing modern farm practices
      • health consciousness - a desire for homegrown food
      • close-to-home getaways - reasonable prices and good value
      • favourable exchange rates, hospitality and open space for international guests

    • Many Alberta farm and ranch operators who enter the country vacation business look to it as a way to supplement their existing agricultural-related income. Some new entrants to the marketplace are from overseas and are motivated to establish country vacation businesses to accommodate an emerging European market. Others are seasoned operators who are striving to make their business a primary income source.
    Regulatory/Operational Basics
    • The establishment and operation of a country vacation venture in Alberta is not regulated by a specific Government Act. Rather, there are a number of government departments and organizations that provide start up information, referrals and operational guidelines.
      • Alberta Agriculture and Food's rural development specialists - business provide information and guidelines for developing market gardens, Farmers' Markets, food processing and related farm and ranch diversification options.
      • Alberta Economic Development's Tourism Development Branch (TDB) provides start up information, tourism statistics and market trends for country vacation operations.
      • The Prairie Farm Rehabilitation Administration (PFRA) has information about wetland management for improving wildlife and waterfowl habitat as a tourism resource, dugout construction, wells and the provision of trees for farms and ranches.
      • The Alberta Craft Council provides start up information, business planning and marketing advice for the production of rural craft. This can be a value-added opportunity for on-site country vacation sales.

    • In addition, the following agencies and organizations should be contacted when determining the feasibility of operating an agri-tourism enterprise.
      • Alberta Bed and Breakfast Association (ABBA)
        • provides rural farm/ranch based bed and breakfasts with inspection criteria for membership (ABBA B&B Standards - 1995)
      • Alberta Country Vacation Association
        • provides guidelines and membership networking opportunities with its membership to ensure quality country vacation experiences
      • Alberta Health and Wellness - Regional Health Authorities
        • provides guidelines for ensuring sanitary conditions (potable water and hot tubs) and the preparation of food (meals, handling, conditions for use of farm raised products such as eggs and meat); Bed and Breakfast Health Standards (1997)
      • Alberta Hotel Association
        • establishes criteria in consideration of meeting acceptable inspection standards to participate in the Alberta Accommodation Guide
      • Alberta Infrastructure
        • provides information about signage for provincial highways
      • Alberta Labour
        • provides information about Bed and Breakfast Accommodation and the Alberta Building Code (1996)
      • Alberta Finance
        • provides the procedures for remitting the five per cent Alberta Hotel Tax for farm/ranch lodging over three rooms
      • Insurance companies
        • provide property and liability coverage for guests, including waiver conditions for participation in farm/ranch activities like canoeing, riding and cross-country skiing
      • Local municipal government office
        • answers inquires regarding land use bylaws, development permitting and signage for municipal roads
      • Public Lands - Alberta Tourism Recreational Leasing Process (ATRLP)
        • handles applications for the use of public lands for tourism related use
      • Revenue Canada
        • provides information on the tax implications associated with owning and operating a country vacation business. These might include the use of farm/ranch homes, cabins and lodging facilities for guests, the use of vehicles, equipment, utilities and professional services, and meals.
    Marketing Basics
    • Some of the key marketing issues that need to be considered by agri-tourism hosts are as follows:
      • Guests for Alberta's farm/ranch accommodation and related recreational activities come from three points of origin: Alberta, other parts of Canada and international locations. The point of origin varies significantly for Alberta, in comparison to the other Prairie Provinces.

        Table No. 3 Origin of Guests

        Prairie Provinces
        Per Cent from
        Own Province
        Per Cent from
        Rest of Canada
        Per Cent from
        International
        Manitoba
        60
        20
        20
        Saskatchewan
        41
        76
        24
        Alberta
        27
        18*
        51
        (44% from (Europe)

        *Note: The Alberta figures do not add to 100 per cent because there is an unknown per cent of guests from Saskatchewan and Alberta. Source: Compiled from the Agri-Tourism Industry in Manitoba, A profile of Operations and Issues, 1997; The Alberta Country Vacation Association, personal communication with Margie Moore, President, February, 1999.

      • According to the Alberta Country Vacations Association, the United States makes up only three per cent of its market. However, visitors from the United States are very satisfied with Alberta country vacation offerings. They particularly like the service component. Initially, American visitors appear unaware of the favourable exchange rate. This indicates latent demand potential.
      • In anticipation of further demand from Europe (44 per cent of current market origin) and after studying the 1998 Taguchi and Iwai research about Austria (the largest supplier of European country vacations), Alberta operators should be aware that guests are now seeking a higher standard of accommodation. They are now putting more emphasis on the cleanliness of the homes, sanitary facilities, larger rooms and quality of furnishings.
      • Alberta Country Vacation Association operators use numerous techniques to promote their businesses. Indications are that word of mouth advertising and referrals are still fundamental to a successful operation.

          Table No. 4 Alberta Country Vacations - Promotion Techniques
          Techniques Used
          Per Cent Effective
          Referral or Repeat (Word of Mouth)
          38
          Other
          23
          Internet Web Sites
          20
          Alberta Accommodation Guide
          9
          Travel Alberta Visitor Information Centres (9)
          6
          ACVA Brochure
          4
          Source: Compiled from personal communication with Carol Ohler, Secretary, Alberta Country Vacation Association (ACVA), February 1999. Note that the "Other" category refers to promotional activities initiated by individual operators that are not co-ordinated by ACVA.

        • Alberta has a ready-made image of being unspoiled, uncrowded, safe and friendly. This established image can be capitalized upon by farm/ranch managers.
        • For many operators marketing an agri-tourism enterprise requires switching hats. Farm managers need to focus on the fact that it is experiences, rather than commodities, that they are promoting. They can't deliver a country vacation experience to their local grain elevator or auction market.
        • Marketing involves more than simply advertising and expecting people to arrive.

      • A marketing strategy is needed. To develop a marketing strategy you need to consider the following basic marketing techniques.(Compiled with adjustments from Assessing the Potential for Farm and Ranch Recreation, Neil R. Rimy and Richard L. Gardner, 1992. University of Idaho, College of Agriculture, Cooperative Extension System, Bulletin No. 699.)
        • learn from your competition
        • define your product
        • target your customer
        • match capacity to demand
        • advertise and promote
        • walk in your customer's shoes
        • value your product and service

      • Learning from your competition means exchanging ideas with farmers and ranchers already in business. Would-be agri-tourism operators often fail to take advantage of this opportunity to learn about the business. Visiting existing businesses allows you to:
        • learn about customer's point of view
        • observe hospitality
        • obtain guidance on business planning and marketing
        • learn about the lifestyle and family commitment that is required
        • build a network among like-minded operators
        • make decisions based on good information
        • discover benefits of co-operation with other operators

      • Defining your product helps entrepreneurs avoid trying to be all things to all people in the initial planning stages. There is a tendency to over estimate one's strengths and in so doing dilute the end product. It is important to focus on those items that can be done well. Strengths can be identified by paying attention to the following:
        • Is your location more accessible or remote than others?
        • Is your planned type of "experience" new to the region?
        • Is your location ordinary or geographically scenic by western standards?
        • Do you have the required capacity to serve projected markets?
        • If offering accommodation, how unique is it?
        • What off-site attractions and activities (e.g. heritage sites, canoeing) can be utilized?
        • What marketing partnership possibilities are there?


      • Networking is invaluable, but at times it is inconvenient or uncomfortable to discuss the pros and cons of a similar business with neighbouring operators. In these situations, contact with a related association, tourism organization or operators in another region or province is recommended.

      • Targeting your customers is important, but sometimes difficult to do. Often markets are not as they were initially perceived. Local and regional markets may have valued traditions concerning where to vacation, while distant or long haul markets may be difficult to access. Some ideas for targeting customers are:
        • obtaining a profile (age, sex, lifestyle, family, couple, origin, length of stay) of current guests of similar establishments
        • considering proximity to large urban areas and international airports or, alternatively, decide what unique characteristic of your establishment may draw customers (e.g. isolation, nearby attractions, on the way to noted destination, theme, design or service component)
        • researching market and consumer trends to identify where to position your operation (e.g. a surge in interest in Farmers' Markets and u-pick operations may indicate a trend towards taking the next step - on-farm experiences)
        • studying the important role that nostalgia plays as people become further removed from their rural roots and wish to reaffirm traditional values through farm and ranch experiences (96 per cent of Canadians live in urban areas)
        • examining the demand for learning vacations by a generation of the urban based population that has little or no link to farm and ranch practices
        • promoting the value for the dollar benefits to markets in the United States and Europe (e.g. take advantage of the strength of the American dollar and Alberta's positive image for open space, unpopulated countryside, friendly people, vacation safety and western heritage theme with Europeans)

      • Advertising and promotion can be effectively started after you have defined both your product and potential customer. The next step is to get the word out.

        Table No. 5 A Checklist of Promotional Vehicles for Event Organizers
        Vehicle
        Type of Audience
        Who it Serves Best
        Pro
        Con
        Price Range
        Internet web siteGeneral to special interestDistant travellers (US, overseas and other provinces)Available 24 hrs. per day, 365 days of the year; easily updated25% of population on-line$100 to $1,000 to develop – annual hosting $100 to $500
        Newspaper GeneralRegional marketPossible free coverage for newsworthy itemCan have limited audience$250 to $3,000 per ad
        RadioHousehold segments determined by programmingLocal to regional exposureAble to pinpoint target marketsFrequent use required; expensive$35 to $120 for 30 seconds plus development costs
        TVVaries based on time of daySpecial events, major attractionsProfessional appearance; large audienceExpensive; needs repetition to be effectiveOne 30 second announcement $200 to $3,000 plus development costs
        MagazineGeneral to special interestSpecial events, attractionsCan penetrate special interest marketsExpensive; limited exposureClassified ad $85 plus; display $1,000 to $5,000
        BrochureFollow-up for initial inquiriesSmall to – medium operatorQuick checklist of offeringsNeeds annual updating$150 to $10,000
        Word of mouthSpecificSpecial interestFree; based on good performance and networkingTime required to build reputationN/A
        Direct mailTargeted by interests/locationFollow-up with existing customersLow cost; measurableConfused with junk mailCurrent postage rates
        Coupons/gift certificatesSpecial interestAttractions and events; current customersAttracts new clients; repeat bookingsMay be thrown away$100 to $3,000
        Trade showsTargetedBusinesses with excellent presentation skillsCreates awareness; may lead to salesRequires long-term presence$750 to $1,500
        Tourism assoc./org. marketingTargetedCo-operative approachCan be cost-effectiveIndividual product profile diminishedVaries based on formula
        Source: Format adapted from Market Planning Skills Program, Alberta Tourism, 1991; updated with revisions, additions and 1999 pricing by CANtravel.

      • Walk in your customer's shoes by anticipating how your product and service will be perceived before your guests arrive. As the saying goes, you never get a second chance to make a first impression. A checklist of marketing considerations when operating an agri-tourism business is as follows:
        • everything you do contributes to your business image
        • first impressions are important (your appearance, smile and attitude)
        • be courteous in taking reservations
        • establish a farm-gate entrance that is orderly and pleasing to the eye
        • provide good directions and post attractive and well positioned signage
        • promptly greet guests upon arrival and provide an orientation to your property
        • provide open and forthright directions about house rules (guest quarters, common areas, private or out-of-bounds facilities, activities and safety concerns)
        • be an ambassador for your community, region and industry (know the local attractions, history and services)
        • emphasize locally grown and processed food products (regional cuisine) as part of your menu
        • emphasize authentic rural craft, either as a display or as an item for sale

      • Place value in your product and service as it is important to your business. The establishment and operation of an agri-tourism business is sometimes initiated for reasons other than profit. These reasons can include sociability, unused capacity and pride in ownership. However, farm and ranch operators are often looking to diversify their agricultural practices to supplement their income. Establishing a price for the experiences and services offered should take into account not only the time and effort of family members involved in the business, but also the value of the location/setting of the country vacation.

        Table No. 6 Country Vacation Pricing Guidelines - per Day
        UnitRates
        Rural bed and breakfast$40 to $75 per person
        Farm/ranch stay - five days
        (all meals, lodging, riding; pack trips)
        $500 to $750 per person
        Non-riding lodging; farm activities,
        fishing and meal package per day
        $75 to $90 per person
        Housekeeping cabin/cottage per day$100 per couple
        Various activity/lodging packages
        (fishing, canoeing, golfing, attractions tickets)
        $160 to $250 per person
        Source: Compiled from the 1999 Alberta Country Vacation Association Guide with adjustments by CANtravel. Pricing guidelines do not take into account off-season, special group or package rates.

      • Country vacation experiences appeal to guests who are seeking a return to a lifestyle that is for many just a memory. It is a chance for guests to exchange views with rural families about current agricultural practices. For international visitors, Alberta farms and ranches are positioned for cultural exchanges and best practices comparisons.

      • Currently, the demand for country vacation experiences is primarily during the late May to September period. It is estimated that only 10 per cent of visits take place during the winter months. For a growing number of established operators, the June to August period is showing an 85 per cent occupancy rate. As operators make a greater commitment to marketing, it is expected that demand will extend more into non-traditional seasons.

      • The critical marketing issues for country vacation operators are:
        • anticipating the changing trends in the industry
        • understanding the origin of visitors
        • developing a marketing plan to promote the business
      Operation Basics
      • While it may be possible to recommend the level of inputs that will grow a certain yield of canola per acre, there is not a predictable formula for growing a successful agri-tourism enterprise.
      • Agri-tourism operators need to obtain the most up-to-date and detailed information available on operational and marketing techniques.
      • Operators need to refine their product in the first few years of operation in order to determine the features and practices that give the best results for their particular situation.
      • Before investing in resources, new entrants to an agri-tourism operation should be familiar with the following characteristics of tourism businesses.
        • The market for tourism facilities and services is difficult to define due to changing trends, global competition and influence of seasonal demand.
        • Customers have higher expectations for comfort, attractiveness and urban amenities.
        • Self-catering has potential for growth.
        • Inclusive tourism packages (one price for all services) are becoming popular.
        • Value-added experiences and products are in demand. Operators may bundle regional attractions, experiences and products as part of a country vacation offering.
        • Country vacation operations in Alberta range from add-ons to more primary agricultural pursuits to enterprises that are emerging as major revenue producers.
        • Country vacation enterprises are traditionally located in more remote locations that provide scenic appeal. The remote locations may also initially hinder market development.
        • Based on the key features of a country vacation location, markets may be very narrowly defined (e.g. fly fishing, wildlife photography, proximity to historic site). This requires a targeted marketing strategy.
        • Tourism businesses, including country vacations, are ideally based on reservations. Many operators do not wish casual drop in traffic.
        • Although domestic regional markets are emerging for country vacation experiences, long haul markets (Europe, Eastern Canada and the Eastern United States) have more immediate growth potential.

      • From an overall operational perspective there are additional key items that need to be considered by operators prior to opening the gates for guests. These include:
        • upgrading the appearance of your property to reflect the expectations of guests
        • making improvements a few years ahead of the regular schedule (painting the barn, repairing fences, installing entrance signage with the new enterprise logo and planting flower gardens)
        • making sure there is sufficient parking for tour buses and guest cars, trash containers for litter and sanitary washroom facilities
        • adding a rider to the property owner's standard comprehensive liability insurance policy to cover claims arising from recreational use of farmland

      • The critical operational issues that country vacation operators must address include:
        • developing a business that is suitable for the location and reflects anticipated demand
        • having a targeted marketing strategy
        • being able to refine the business within the first few years to entice visitors and remain cost competitive
      Economic/Finance Basics
      • A country vacation enterprise is a highly variable business. Accordingly, new entrants must be prepared to carefully assess both the profitability and cash flow implications of their proposed operation before investing.
      • Cost information for operating a country vacation enterprise is difficult to obtain. In most cases operators have adapted existing farm and ranch facilities to specific client needs. They have modified facilities over a period of time or built new rooms as finances permitted.
      • The following budget information is presented to illustrate the basic expenditures required to establish and operate a two-room facility, together with a recreational activity in Alberta. It is important to recognize that the following budgets are estimates and are included to provide operators with a framework that identifies the type of information required and the type of analysis they should undertake.
      • Table No. 7 provides estimates of the capital investment required to establish a start-up operation with accommodations of two rooms and a recreation activity based on hiking trails.

        Table No. 7 Capital Investment Requirements for Accommodations (Two-Rooms)
        Total
        Investment
        Useful Life
        (years)
        Depreciation
        $/Year
        Opportunity
        Cost/Year*
        Improvements and Facilities
        Improvements to yard site
        $3,000
        5
        $600
        $75
        Signs
        $500
        5
        $100
        $13
        Utilities
        $2,000
        20
        $100
        $50
        Costs to develop rooms
            - 2 rooms (10 x 12)
            - flooring
            - paint
        $9,600
        $500
        $50
        20
        10
        5
        $480
        $50
        $10
        $240
        $13
        $1
        Cost to develop hiking trails
        $7,500
        10
        $750
        $188
        Cost to develop picnic sites
        $5,000
        10
        $500
        $125
            Total
        $28,150
        $2,590
        $704
        Equipment
        Riding lawn mower (used)
        $3,000
        5
        $600
        $75
        Additional equipment for accommodations
        $9,560
        5
        $1,912
        $239
        Additional equipment for trail maintenance
        $5,000
        5
        $1,000
        $125
            Total
        $17,560
        $3,512
        $439
        Total Investment Costs
        $45,710
        $6,102
        $1,143

        * Opportunity costs are the cost of using capital estimated at five per cent

      • Country vacation operations differ from bed and breakfast operations in that they offer some recreational activity that gives guests a reason for coming and staying for extended periods of time.
      • The recreation activity or rural experience offered by a country vacation operation is unique for every operation depending on location, the interests of the operators and market demand. Recreation activities for country vacation operations include horseback riding, hay rides, heritage education and fishing.
      • Table No. 8 provides a detailed list of the equipment items that are likely to be required in the operation of the accommodations and the recreation activity.

        Table No. 8 Detailed Listing of Equipment (Two Room Operation)
        Quantity
        $/Unit
        Total
        Equipment Required for Accommodations
        Smoke detectors
            - one for each room
            - one in the hallway
        2
        1
        $20
        $20
        $40
        $20
        Fire extinguishers
        3
        $50
        $150
        Fax machine
        1
        $400
        $400
        Individual drinking glasses (set of 8)
        1
        $100
        $100
        Coffee mugs (set of 8)
        1
        $50
        $50
        Set of dinner plates (for 8)
        1
        $100
        $100
        Kitchen utensils (for 8)
        1
        $100
        $100
        Pots and pans
        1
        $250
        $250
        Waste baskets for each room
        2
        $10
        $20
        Beds (frames)
        2
        $100
        $200
        Mattresses
        2
        $300
        $600
        Mattress protector
        2
        $25
        $50
        Bedding
        2
        $100
        $200
        Currents
        2
        $30
        $60
        Bureaus with mirrors
        2
        $200
        $400
        Bedside lamps
        4
        $50
        $200
        Night stands
        4
        $40
        $160
        Clothing racks
        2
        $40
        $80
        Towels and wash cloths
        40
        $2
        $80
        Outdoor furniture
        6
        $30
        $180
        paper towel dispensers
        2
        $10
        $20
        Washer and dryer
        1
        $1,000
        $1,000
        Kitchen improvements
            - a range hood
            - dishwasher with a sani-cycle
            - 3 compartment sink
            - fridge
            - freezer
            - stove
        1
        1
        1
        1
        1
        1
        $300
        $600
        $200
        $1,000
        $700
        $300
        $600
        $200
        $1,000
        $700
        $1,000
        Dining room
            - large table
            - more chairs
        1
        8
        $500
        $100
        $500
        $800
        Total
        $9,560
        Equipment Required for Recreation Activity
        Used quad
        1
        $3,500
        $3,500
        Chain saw
        1
        $600
        $600
        Outdoor toilets
        2
        $300
        $600
        Hand tools
        $300
            Total
        $5,000

      • Financing a country vacation operation is a separate but related issue. Conventional lenders such as banks are likely to see these enterprises as high-risk ventures. In order to acquire the capital needed to develop an enterprise, individual managers will be required to:
        • have a solid business plan
        • have high levels of equity capital to put into the venture
        • have access to capital from private sources such as family and friends
        • have a sound marketing program in place

      • Access to conventional financing for a country vacation enterprise will most likely be limited to home improvements. Expenditures for equipment will require either equity capital or private financing.
      • Table No. 9 presents the key operating parameters for the proposed start-up operation. These parameters are based on estimates for revenues and operating costs that are felt to be typical of an Alberta enterprise. However, individuals considering developing a country vacation enterprise need to determine the specific costs for the operation they are planning.

        Table No. 9 Key Operating Revenues and Expenses
        RevenuesExpenses
        Room rate
            $100 per guest
            per night
        ACVA membership$400/year
        Local tourist bureau$150/year
        Alberta Accommodation Guide$200/year
        Individual brochure$400/year
        Other advertising$10/guest
        Phone costs
            (marketing the business)
        $2/guest
        Breakfast$3 each
        Lunch$5 each
        Supper$7.50 each
        Food safety course$75 (first year
        Cleaning, maintenance and
            consumables
        $4/guest
        Power and gas$1/guest
        Trail development and maintenance$10/guest

      • Table No. 10 presents complete revenue and expense projections for the start-up enterprise over a five-year period. Guest nights refers to the number of guests regardless of the number of rooms they occupy.

        Table No. 10 Projected Revenues and Expenses for Start-up Enterprise
        (per guest)
        Year 1
        Year 2
        Year 3
        Year 4
        Year 5
        Revenues
        Price per night
        $100
        Guest nights
        30
        125
        250
        350
        400
        Total Revenues
        $3,000
        $12,500
        $25,000
        $35,000
        $40,000
        Operating Expenses
        Total marketing costs
        $1,482
        $2,531
        $3,913
        $5,018
        $5,570
        Total food related costs
        $540
        $1,938
        $3,875
        $5,425
        $6,200
        Facility use
        $90
        $375
        $750
        $1,050
        $1,200
        Total utility costs
        $180
        $275
        $400
        $500
        $550
        Trail maintenance/development costs
        $300
        $1,250
        $2,500
        $3,500
        $4,000
        Insurance
        $300
        $300
        $300
        $300
        $300
        Travel costs (including fuel)
        $2,500
        $2,500
        $2,500
        $2,500
        $2,500
        Business licence
        $25
        $25
        $25
        $25
        $25
        Office expenses
        $1,000
        $1,000
        $1,000
        $1,000
        $1,000
        Professional fees
        $500
        $500
        $500
        $500
        $500
        Interest on operating
        $200
        $200
        $200
        $200
        $200
        Total Operating Costs
        $7,117
        $10,894
        $15,963
        $20,018
        $22,045
        Fixed Costs
        Depreciation
        $6,102
        $6,102
        $6,102
        $6,102
        $6,102
        Opportunity cost of investment
        $1,143
        $1,143
        $1,143
        $1,143
        $1,143
        Total Fixed Costs
        $14,361
        $18,139
        $23,207
        $27,262
        $29,290
        Net Operating Income
        ($11,361)
        ($5,639)
        $1,793
        $7,738
        $10,710
        Cumulative Net Income
        ($11,361)
        ($17,000)
        ($15,207)
        ($7,469)
        $3,241

      • In Table No. 11, the annual net operating income measures the returns to labour and management provided by the owner/operator. Most two-room operations rely solely on family labour. The projections suggest the operation will be able to cover all operating costs, as well as the opportunity cost of invested capital at the end of five years.
      • The modest level of projected returns for the proposed operation tend to reflect reality for many operators of country vacation enterprises.
      • The key factors influencing the profitability of a country vacation enterprise are the bookings generated through the marketing activities and the prices received for bookings. Interested operators should examine expected profit under a range of price and booking scenarios. This will allow operators to better assess the situation they might be entering into.
      • Table No. 11 provides a sensitivity analysis, showing the impact on annual net operating income for a range of prices (per guest night) and a range of bookings (number of guest nights).
        Table No. 11 Annual Net Operating Income for Various Prices and Bookings
        Guest Nights
        50
        100
        200
        250
        300
        350
        $/Guest Night
        $80
        ($11,172)
        ($9,200)
        ($5,255)
        ($3,282)
        ($1,310)
        $663
        $90
        ($10,672)
        ($8,200)
        ($3,255)
        ($782)
        $1,690
        $4,163
        $100
        ($10,172)
        ($7,200)
        ($1,255)
        $1,718
        $4,690
        $7,663
        $110
        ($9,672)
        ($6,200)
        $745
        $4,218
        $7,690
        $11,163
        $120
        ($9,172)
        ($5,200)
        $2,745
        $6,718
        $10,690
        $14,663

      • After a few seasons, operators will know whether they can attract guests and whether this is a suitable business for their particular situation. If an operation can attract guests and show the potential to be profitable, operators often invest in additional facilities to expand the business. Operators who are not able to develop a market often choose to leave the industry.
      • Table No. 12 shows the additional capital invested in the projected operation to develop two more rooms and a guest bathroom after the third season.
        Table No. 12 Total Capital Investment After Expansion in Third Year

        Total
        Investment
        Useful Life
        (years)
        Depreciation
        $/year
        Opportunity
        Cost/year
        Improvements and Facilities
        Cost to develop two additional guest rooms
        $10,000
        20
        $500
        $250
        Cost to develop guest bathroom
        $6,000
        20
        $300
        $150
        Additional equipment for accommodations
        $1,000
        10
        $100
        $25
        Total New Capital
        $17,000
        $900
        $425
        Total Investment (after 3rd year)
        $62,710
        $7,002
        $1,568

      • Table No. 13 presents revenue and cost projections following the additional capital investment to expand the operation. Additional costs for hired labor are included as larger operations often require hired labor in addition to family labor.
      • Also of note is that the Alberta Hotel Tax of five per cent applies to all operations of four or more rooms. Since this tax is collected separately from revenue, then submitted, it is not included in the following income projections.
          Table No. 13 Projected Revenues and Expenses for Expanded (Four-Room) Operation
          Revenues
          (per guest)
          Year 4
          Year 5
          Year 6
          Price per night
          $100
          Guest nights
          550
          600
          650
          Total Revenues
          $55,000
          $60,000
          $65,000
          Operating Expenses
          Total marketing costs
          $7,228
          $7,780
          $8,333
          Food safety course
          Total food related costs
          $8,525
          $9,300
          $10,075
          Facility use
          $1,650
          $1,800
          $1,950
          Total utility costs
          $700
          $750
          $801
          Trail maintenance and clean up costs
          $5,500
          $6,000
          $6,500
          Hired labour
          $6,600
          $7,200
          $7,800
          Total Operating Costs
          $30,203
          $32,830
          $35,459
          Overhead Costs
          Insurance
          $300
          $300
          $300
          Travel costs (including fuel)
          $2,500
          $2,500
          $2,500
          Business licence
          $25
          $25
          $25
          Office expenses
          $1,000
          $1,000
          $1,000
          Professional fees
          $500
          $500
          $500
          Interest on operating
          $200
          $200
          $200
          Total Overhead Costs
          $4,525
          $4,525
          $4,525
          Fixed Costs
          Depreciation
          $7,002
          $7,002
          $7,002
          Opportunity cost of investment
          $1,568
          $1,568
          $1,568
          Total Operating Costs
          $43,297
          $45,925
          $48,553
          Net Operating Income
          $11,703
          $14,075
          $16,447
          Cumulative Net Income
          ($3,504)
          $10,571
          $27,018

        • Table No. 13 indicates that the four-room operation will cover all costs and provide some returns to the owner/operator for labour and management contributions.
        • Cash flow performance is also a significant factor to consider when assessing the economic performance of a country vacation enterprise. The key issue in assessing cash flow performance is whether the operation generates sufficient cash inflows to meet the cash outflows required for living expenses, debt repayment, operating expenses and capital expenditures.
        • Table No. 14 presents cash flow forecasts for the proposed country vacation operation.

          Table No. 14 Projected Cash Flows (Years 1 to 3 - Two Rooms; Years 4 to 6 - Four Rooms)
          Two Room Enterprise
          Four Room Enterprise
          Year 1
          Year 2
          Year 3
          Year 4
          Year 5
          Year 6
          Cash Outflows
          Capital investment
          Facilities and improvements
          $28,150
          Equipment
          $17,560
          New capital invested
          $17,000
          Total Capital Investment
          $45,710
          $0
          $17,000
          $0
          $0
          $0
          Operating Costs
          Total marketing costs
          $1,482
          $2,531
          $3,913
          $7,228
          $7,780
          $8,333
          Total food related costs
          $540
          $1,938
          $3,875
          $8,525
          $9,300
          $10,075
          Total facility costs
          $90
          $375
          $750
          $1,650
          $1,800
          $1,950
          Total utility costs
          $180
          $275
          $400
          $700
          $750
          $801
          Trail maintenance and development
          $300
          $1,250
          $2,500
          $5,500
          $6,000
          $6,500
          Labour costs
          $6,600
          $7,200
          $7,800
          Total Overhead Costs
          $4,525
          $4,525
          $4,525
          $4,525
          $4,525
          $4,525
          Total Cash Operating Costs
          $7,117
          $10,894
          $15,963
          $34,728
          $37,355
          $39,984
          Cash withdrawals (personal)
          $5,000
          $5,000
          $5,000
          Debt payments
          $4,039
          $4,039
          $4,039
          $4,039
          $4,039
          $4,039
          Total Cash Outflows
          $56,865
          $14,933
          $37,001
          $43,766
          $46,394
          $49,022
          Cash Inflows
          Revenues
          $3,000
          $12,500
          $25,000
          $55,000
          $60,000
          $65,000
          Sources of capital
          Equity capital invested
          $30,000
          $17,000
          Debt capital invested
          $15,710
          Total Inflows
          $48,710
          $12,500
          $42,000
          $55,000
          $60,000
          $65,000
          Net Cash Flows (operating)
          ($8,155)
          ($2,433)
          $4,999
          $11,234
          $13,606
          $15,978
          Cumulative Cash Flows (operating)
          ($8,155)
          ($10,588)
          ($5,589)
          $5,644
          $19,250
          $35,228

        • The cumulative cash flows presented in Table No. 14 indicate that this enterprise requires operating capital for the first three years. However, at the end of the six-year operating period all cash outflows will be covered and a cumulative cash surplus of $35,228 will be available to the operator. The key element in this cash flow projection is the significant level of equity capital ($47,000) invested in the operation. Debt capital from conventional lenders is most often limited to home improvements.
        • The critical economic issue for country vacation operators is being careful to evaluate the economic performance of a proposed operation before investing in facilities and development. Individual operators need to achieve all of the following factors for their enterprise to be viable. Operators need to:
          • have the accommodations and recreation activity to meet market demands
          • effectively market the accommodations and recreation activities
          • achieve a good market price for their service/product
          • provide the lodging and activities at cost that is below the market price for their product
        Resources

        Industry associations
        Alberta Country Vacations Association (ACVA)
        Carol Ohler - Secretary
        Box 396
        Sangudo, Alberta TOE 2AO
        Phone: (780) 785-3700
        E-mail: dohler@telusplanet.net

        Alberta Bed and Breakfast Association (ABBA)
        Elsa Peterson - President
        Box 8, Site 11, RR1
        Cochrane, Alberta TOL OWO
        Phone: (403) 932-3945
        E-mail: dickens@nucleus.com

        Publications/websites
        Travel Alberta - www.tourismtogether.com. This is a place for industry to go for information on tourism product development, market planning and communications.

        Alberta Agriculture and Food
        This site supplies additional information on agri-tourism.

        An Agri-Tourism Strategy, for Nova Scotia, 1996
        Published by: Nova Scotia Department of Agriculture and Marketing
        P.O. Box 190
        7th Floor, Joseph Howe Building
        Halifax, Nova Scotia B3J 2M4
        Phone: (902) 424-6734
        E-mail: godlielm@gov.ns.ca

        Agri-Tourism: Looking at New Horizons, 1996
        Published by: Ontario Agricultural Training Institute (OATI)
        405-491 Eglington Avenue, West
        Toronto, Ontario M5N IA8
        Phone: (416) 485-3677
        E-mail: infooati@oati.com

        A Study of Agri-tourism in Newfoundland and Labrador
        Prepared for: Government of Newfoundland and Labrador
        Department of Forest Resources and Agrifoods
        March, 1999
        PO Box 8700
        St. John's, Newfoundland A1B 4J6
        Phone: (709) 729-6645
        E-mail: cmcdonal@agric.dffa.gov.nf.ca

        Agri-tourism in Austria and its Implications for Japanese Rural Tourism
        Published in Rural Tourism Management, Sustainable Options
        International Conference, September, 1988
        Published by: The Scottish Agricultural College (SAC)
        Auchincruive, Ayr, Scotland UK KA6 5HW
        Phone: 44 1292 525056
        E-mail: leisure@au.sac.ac.uk

        Assessing the Potential for Farm & Ranch Recreation; Bulletin No. 699
        Published by: University of Idaho, College of Agriculture, Cooperative, Extension System Moscow, Idaho 83843
        Phone: (208) 885-7911

        Farm and Ranch Vacationing, Vogeler, 1977 in Journal of Leisure Research 9 (4):291-300 as cited in Recreation on Agicultural Land in Alberta
        Published by: Environment Council of Alberta Edmonton, Alberta

        Farmers' Markets in Alberta: A Direct Channel of Distribution, January, 1998
        Alberta Agriculture, Food and Rural Development and the University of Alberta, Department of Human Ecology
        AARI Report - Project #95CR16

        Guidelines for Alberta Country Vacations Association, adapted from Travel Alberta's Minimum Standards for Approved Guest Ranches and Country Vacations, November, 1997
        Published by: Alberta Country Vacations Association
        Box 396
        Sangudo, Alberta TOE 2AO
        Phone: (780) 785-3700
        E-mail: dohler@telusplanet.net

        Recreation on Agricultural Land in Alberta, Chapter V,
        Farm-Based Recreation and Tourism Enterprises, 1982
        Published by: Environment Council of Alberta Edmonton, Alberta

        Saskatchewan Agritourism Strategy, 1998
        Published by: Saskatchewan Wheat Pool
        2625 Victoria Ave
        Regina, Saskatchewan, S4T 7T9
        Phone: (306) 569-4411

        Small Farm News, Small Farm Center, Cooperative Extension, University of California
        Agricultural Tourism: Emerging Opportunity
        Published by: Small Farm Center
        University of California
        One Shields Avenue, Davis, CA.
        Phone: (530) 752-8136
        E-mail: sfcenter@ucdavis.edu

        The Agri-Tourism Industry in Manitoba: A Profile of Operations and lssues, l997
        Published by: Rural Development Institute,
        Brandon University
        270-18th Street
        Brandon, Manitoba R7A 6A9

        Alberta Government Departments
        Alberta Agriculture and Food
        Rural Development Specialists - Business
        Phone toll free by dialing 310 - 0000 and then specialist's phone number

        Alberta Economic Development
        Tourism Development Branch
        Bill Reynolds
        10155 102 Street, Commerce Place
        Edmonton, Alberta T5J 4L6
        Toll Free: 310 - 0000
        E-mail: bill.reynolds@gov.ab.ca
          Key Management Issues
          • Key management issues for an agri-tourism enterprise include determining the type of operation to run, the resource required and whether goals are long-term or aimed at a quick fix. You also have to decide whether or not to acquire livestock, upgrade/build facilities, hone people skills and develop a marketing strategy.
          • If you are a full-time farmer or rancher, managing an additional tourism enterprise may be difficult. Many Alberta landowners that engage in agri-tourism involve family members in the operation, along with pinch-hitters - people who will come in on short notice for the period of time they are needed. Other operators hire high school or college students to work during the summer or for special occasions.
          • Agri-tourism visitors will want to ask questions. The questions may be invasive (personal questions) or they may be challenging (concerning animal welfare, chemical use, feedlot practices or logging plans). Some guests may be unaware of farm and ranch lifestyles and how a livelihood is fashioned. They may also complain about normal farm smells and dust. Therefore, operators must be willing and able to deal with all types of people in a friendly, welcoming manner.
          • Labour is often a limiting factor in farming/ranching and the same holds true for agri-tourism enterprises. At peak times it is not unusual to spend 70 to 75 hours per week working on preparation and customer relations.
          • If you continue to investigate an agri-tourism enterprise as a business opportunity, it's essential that you are able to answer a number of questions concerning management, marketing and presentation of your product/service. These include:
            • Are you prepared to learn all you can about agri-tourism by visiting existing operations, joining industry organizations, attending workshops and reading all you can about providing the experience and marketing?
            • Have you clearly defined the market(s) and customers that you will be marketing to? Have you clearly defined the operational practices you need to implement in order to produce the quality of product required by your markets?
            • Have you clearly defined the marketing activities that you should perform in order to access the specific segments that you have identified?
            • Are you aware of the amount of time you have to devote to continuously marketing your product and improving your production performance?
            • Are you aware of the resources required to establish a farm/ranch country vacation enterprise and the returns that can be expected?
            • Are you prepared to manage the risks associated with agri-tourism?
          Compiled by:
          Dave Kidney - Agri-Tourism Consultant - CANtravel "A Western Canada Consultancy"

          Technical advisors:
          Bill Reynolds - Tourism Development Branch, Alberta Economic Development
          Dean Dyck - Farm Management Specialist - Alberta Agriculture and Food
          Lynn Stegman - Rural Development Specialist - Business, Alberta Agriculture and Food
          Sharon Stollery - Rural Development Specialist - Business, Alberta Agriculture and Food
          Susan Nicoll - Agri-Venture Specialist, Manitoba Agriculture

          Source: Agdex 888-2. Februrary 2001.
           
           
           
           
          For more information about the content of this document, contact Duke.
          This information published to the web on February 1, 2001.