Profitable farm diversification through holiday letting

The farming industry in the UK has undergone significant changes in recent years with diversification becoming increasingly important for farms. Now, more than ever, farmers are seeking ways to supplement their income and create additional revenue streams.

If you are considering diversification, there are many opportunities available to you, one of the most popular being letting properties for non-agricultural use.

We've therefore put together this guide to farm diversification and holiday lets to outline some of the key considerations for farmers looking at their diversification options.

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The farming industry and diversification

According to the latest government stats, total income from farming in England alone reached £5.7bn in 2022, significantly higher than in 2020, when the total income was £3.6bn. The UK-wide figure according to Statista is £7.94bn – showing consistent growth over the last 20 years, but 2022 in particular saw a step change in total farming income.

One reason behind this revenue growth is farm diversification. Farm diversification with accommodation, in particular, has gained popularity in recent times. Many farms have started offering holiday accommodation, such as cottages or glamping sites, to attract tourists and generate additional income.

According to the DEFRA Farm Business Survey (December 2022), over 68% of farms have already diversified, with 90% of those saying that diversifying has been a success. The most profitable way to do this was to let out buildings for non-farm use, with 47% of farms doing this, generating an average income of £22,300 per farm. It is estimated that the total income from diversified activities in England alone was £1.2bn in 2021.

Legislation, support and grants

Various schemes and grants are available in England. For instance, the Rural Development Programme for England (RDPE) offers grants under the Countryside Productivity Scheme. The Rural England Prosperity Fund provides grants for rural tourism infrastructure, allowing farmers to enhance their holiday accommodation offerings.

For farmers in Scotland, the Rural Payments and Services website details the current support available depending on your farm diversification circumstances.

In Wales, there is a range of schemes detailed on the Welsh Government website but specifically the Agriculture Diversification Scheme encourages the establishment of new agricultural enterprises.

Permanent structures, such as converted barns or cottages, are typically desirable for holiday rentals and may receive more support and grants. Temporary structures, such as glamping pods or shepherds' huts, may also be eligible for support, although it is advisable to check with the relevant authorities for any specific regulations or restrictions.

It is always advisable to seek expert advice to ensure the most suitable and beneficial schemes are targeted and prioritised.

Barn renovations

With their rustic charm and ample space, barns can be transformed into stunning holiday cottages. If you're considering this, ensure that the renovation maintains the original character while providing modern amenities such as fully equipped kitchens, comfortable living areas and en-suite bedrooms. Here are some of the main reasons why a holiday let barn conversion can be a smart move:

• Converting a barn into a holiday let can provide a steady income stream throughout the year, particularly in tourist hot spots or areas of natural beauty.
• Barn conversions make use of existing structures and land, minimising the need for additional investment and construction costs.
• A holiday let barn conversion can attract tourists and extend the traditional holiday season in rural areas. By providing high-quality accommodation that is warm and comfortable in the colder months, you can attract guests who wish to experience the unique charm of farm life.
• By offering holiday accommodation that appeals to guests throughout the year, you contribute to the local economy by attracting visitors who will spend money on local businesses, restaurants, attractions and services.
• Investing in a barn conversion can enhance the overall value of the farm. By utilising and improving existing assets, such as barns, you can increase the attractiveness and potential sale value of the entire property. Additionally, the diversification of income streams can make the farm more resilient to economic uncertainties and provide a broader appeal to potential buyers.

Other farm diversification accommodation options

While the benefits of barn conversions are clear, here are some alternative farm diversification ideas to consider:

• Shepherds' huts: These compact and cosy huts offer a unique glamping experience for guests. They can be equipped with comfortable beds, basic cooking facilities, and even wood burners. Set them in picturesque locations on your farm, offering guests a tranquil retreat close to nature.
• Glamping pods: Glamping pods provide a comfortable and unique outdoor experience. These eco-friendly pods can include amenities like a comfortable bed, heating, electricity and private bathroom facilities, allowing guests to enjoy the great outdoors without sacrificing comfort.
• Treehouses: A treehouse can be an exciting and quirky accommodation option. Make sure to prioritise safety and comfort by including sturdy construction, comfortable sleeping arrangements and all necessary amenities.

It’s important to analyse the market demand in your area and tailor your accommodation options to suit the needs and preferences of your target guests.

You might also want to consider creating unique selling points for your accommodation, such as farm experiences, nature trails or animal interactions to attract guests looking for an immersive farm getaway.

Remember to research local planning regulations and ensure that your diversification plans comply with any necessary permissions or restrictions.

What do guests want from a farm holiday?

There is a growing demand from holidaymakers seeking unique and authentic experiences. Here at holidaycottages.co.uk, we have seen a surge in bookings for farm-based holiday homes – as well as strong growth in the number of farm-based properties listed, now standing at over 1,700 properties!

Joby Mussell, Chief Commercial Officer at holidaycottages.co.uk, said: “There is a distinct shift from mass-market tourism towards ‘agri-tourism’ and unique experiences, such as stays on working farms. We’re finding that holidaymakers crave more interesting, individual and authentic experiences that offer a window into the location they are visiting.”

When it comes to booking a farm holiday, guests are looking to experience a relaxing and memorable stay in a rural setting. The thoughtful touches matter: a warm welcome (and not just metaphorically speaking either, the heating left on in the colder months helps towards a positive guest experience), extra treats in the welcome pack, an espresso coffee machine, music streaming and entertainment facilities, quality furniture and white goods.

An open fire or wood burner makes your property more attractive in the off-peak seasons, and a hot tub will make your property stand out. To appeal to the widest audience possible, most holiday properties benefit from welcoming dogs.

How to integrate guests with existing farming activities

• Assess the potential risks and put in place safety measures to ensure that guests and any animals on the farm are kept safe.
• Many guests are eager to learn about farming and rural life. Provide them with educational materials such as brochures, videos, or books that explain the different farming activities taking place on your property. You can also offer guided tours around the farm and engage in conversations to answer any questions they may have.
• Depending on the type and size of your farm, you could offer activities such as feeding the animals, grooming them, or even allowing guests to participate in milking or herding sheep.
• Consider organising workshops or experiences that give guests a taste of farm life. This could include activities such as sheepdog training, baking classes using farm produce, or even seasonal activities like apple picking or harvesting vegetables.
• Plan activities and experiences around your farming schedule and make sure that guest involvement doesn't disrupt essential farm operations.
• Make it clear that farm activities are optional and allow guests to decide their level of involvement.
• Seek feedback from guests regarding their farm integration experience. This will help you understand what worked well and areas where improvements can be made.

Farm diversification success stories

Having gone through some of the key factors involved in farm diversification, here are some examples of properties letting with us located on working farms.

The Little Man, Threlkeld, Lake District

This fantastic pod on a working sheep farm attracted 105 bookings in 2023. Beautifully finished and with its very own hot tub, this dog-friendly romantic retreat is one of three pods on this site – a prime example of successful farm diversification.  

Dragon's Eye - Llygad y Ddraig, New Quay, West Wales

Garnering an impressive 100 bookings in 2023, this exceptional property sits on a working farm with another cabin and three small camping pods. The distinctive design of this glamping pod includes a rotating king-size bed, while outside guests can sit on the patio and revel in their glorious lakeside surroundings.

Penkill Lodge, Turnberry, Ayrshire

Cosy and well presented, this stylish property is one of three lodges on a 370-acre working beef and sheep farm. Attracting 82 bookings in 2023, it ticks a lot of boxes with couples looking to stay on a farm: spectacular sea views from its elevated position, a housed hot tub and a charming decked area.

We’re here to help

At holidaycottages.co.uk we have a wealth of experience working with landowners and farmers to help them make the most out of holiday letting. If you’re just starting out, we can help bring to life your farm diversification ideas, and advise on property layout and interior decisions. If you’re already up and running, we can provide booking projections and help you optimise your property for a higher income.

Please browse our let your cottage page for more information about working with us or contact our friendly team.

This article is published for information only and offers no advice. It provides only an overview of farm diversification through holiday letting and introduces the potential options available to those considering diversifying in this way. No action should be taken without seeking professional advice.