11 minute read
Making the most of the Cottage Industry
Most farms will have at least one former farm-worker’s cottage. Typically these are either let long term on a residential tenancy, or short term as self-catering holiday accommodation, providing useful diversified income.
In a previous edition of Rural Matters, we examined the pros and cons of both these options, but this article focuses on properties made available for self-catering holidays. In light of the current health crisis, holiday accommodation providers have had to adjust to significant new routines and procedures.
So what exactly are providers facing? We asked Fiona Campbell, chief executive of the Association of Scottish Self Caterers (ASSC), and Melinda and Robert Kennedy of Supercontrol, a company which provides management software and expert guidance for those in the self-catering business.
With holidaying abroad facing restrictions, and an increasing number of countries joining the quarantine list, holiday accommodation providers across the UK are experiencing increased demand from British tourists. However, it is not quite as simple as greeting eager holidaymakers as they arrive. The self-catering industry dried up completely during the lockdown, meaning that many lost out on at least three months of income, on top of having to refund those who could no longer come. So, when the self-catering sector cautiously re-opened, many providers were met with a surge in demand, while also adhering to cleaning and Health and Safety measures which have increased immeasurably compared with previous standards. The role of the Association of Scottish Self Caterers (ASSC) has arguably never been more important. The ASSC has been around for over 40 years, and its members maintain the principles of “quality, integrity, cleanliness, comfort, courtesy and efficiency” offering visitors to Scotland consistently high standards of accommodation.
The self-catering industry is a £723 million sector in Scotland, and therefore a significant part of the national economy. The crisis will have reduced this contribution, however, it may serve as an opportunity for change, and innovation. Fiona Campbell of the Association of Scottish Self Caterers commented: “We’re optimistic about the future and welcome the incredible demand for staycations, which adds significantly to that atmosphere of positivity and determination.”
“The ASSC continues to undertake critical activities to support its members against threats to the industry, such as the Short-Term Lets Regulatory Framework, Transient Visitor Levy/Tourist Tax, Business Rates Review and the increasing ‘cost of doing business’.”
Guests can rest assured that the accommodation on offer through ASSC members is not only comfortable and clean, but that it is also compliant with government guidelines, and that guests are offered flexibility and the promise of a refund in the face of ‘force majeur’ cancellations. As bookings and cancellations now need to be managed so quickly and frequently, property owners are looking to technology to help them stay one step ahead. For this reason Robert and Melinda Kennedy of Orroland Farm founded Supercontrol in 2007. Supercontrol is a platform designed for the self-catering market, providing an online management system enabling more bookings with less work. The software has specific tools to analyse turnover and occupancy rates. Supercontrol recently introduced its Master Cancel software.
Robert Kennedy explains: “The owner or agency changes their terms to offer flexible cancellation terms to their guests. They will offer a full refund of any accommodation costs up to two days prior to arrival. If the cancellation falls between 60 and 2 days prior to arrival then they can make a claim to Master Cancel”.
Undoubtedly this has been an invaluable procedure during the last few months. Robert continues: “Making a claim is a simple process. If the dates aren’t rebooked, or if they are re-booked at a lower price, then Master Cancel will reimburse you 90% of the accommodation value.” With this simple system, it is clear to see why there has been a significant increase in owners engaging Supercontrol’s services through the Covid-19 period.
Another area where Supercontrol can help self-caterers is through their price optimisation packages. The key software for this is Beyond Pricing, which sets prices for individual properties, based on local market data. This software has been proven to increase revenue by 10-40% and enhances flexibility for owners. Robert concludes: “Despite months of lockdown and the inevitable hit on revenue, we are extremely optimistic for the future. Covid has already brought a boost to selfcatering since the market re-opened and demand is higher than ever. Overseas travel is likely to be impacted for some time, making UK self-catering the first choice for many. This will include a large number who haven’t used self-catering previously, driving yet more opportunity to our sector in 2021 and beyond.”
So while the debate remains whether to enter into the short let holiday market, or to let longer term, with the inevitable pros and cons of both options, there is assistance available from the Association of Scottish Self Caterers and Supercontrol. If you are considering changing from letting a property long term to a holiday rental, or vice-versa, or for advice on any aspect of letting a property please contact your local Galbraith office. n
Poppy Baggott poppy.baggott@galbraithgroup.com 07557 973 220
Rose Nash rose.nash@galbraithgroup.com 07342 053 317
Rural – land of opportunity and resilience
COVID-19 has undoubtedly had a devastating impact on a number of sectors, from financial markets to tourism and leisure. Yet what of the impact on the rural sector, and the outlook for rural land and property?
The rural sector has traditionally been a countercyclical asset class, performing well when others have faltered during times of economic uncertainty. It has not only weathered some of the most severe economic downturns in history but has done so whilst providing excellent financial performance, most recently following the 2007/08 global financial crisis. In times of economic uncertainty, private, institutional and corporate investors have been attracted to the rural sector due to its relative safety, transparency and potential for capital growth. This has led to the sector being considered a relative safe haven, on par with gold and precious metals. For the private investor, rural land and property can also provide tax efficiencies, lifestyle and recreational benefits.
What remains true of land today, as in previous years, is that they aren’t making any more of it. In recent times, scarcity of supply and historically low costs of borrowing have sustained land values and competition remains strong in most regions of the UK. It remains to be seen whether rural land values will enjoy the same levels of exceptional capital growth that they have over the last 30 years, however the market fundamentals remain robust and the long term outlook is positive for agricultural land. However, increasing land values are not the only reason for the sector’s strong performance and resilience. A large proportion of the strong counter cyclical performance is attributable to the diversity of the sector and the income that can be generated from it whether through development, forestry, renewables or commercial property. The rural sector has the potential to deliver a number of these objectives, whilst generating returns for landowners from new and alternative land use.
As part of the recovery from COVID-19 the sector is now, more than ever, in the spotlight from all corners of society to deliver economic, environmental and social objectives. The UK Government has recently adopted the mantra to “build back better, build back greener” with additional support for housing and infrastructure projects, whilst promoting a green, clean recovery. The rural sector has the potential to deliver a number of these objectives, whilst generating returns for landowners from new and alternative land use. However,
a sustainable long term strategy is key. ‘Build back better’, alongside reforms to the planning system, provides the opportunity for landowners to promote, or work alongside developers, to deliver land for valuable residential, commercial and employment uses. The approach has also been echoed by the Scottish Federation of Housing Associations (SFHA), who believe that the delivery of 53,000 affordable homes between 2021 and 2026 “can build recovery from the pandemic”, generating 200,000 jobs, boosting the economy by £2 billion whilst raising £100m in tax revenue.
New infrastructure projects, such as improvements to the road, rail and broadband networks, also have the potential to open up rural areas, reducing travel times whilst increasing desirability and consequently value. Alongside possible reforms to the planning system, this illustrates how landowners can aid the economic recovery whilst generating potentially significant returns. An increasing requirement to demonstrate biodiversity net gain for new developments could also provide opportunities for rural land owners. Biodiversity net gain is where the impact of a development on biodiversity is assessed and any loss is mitigated or offset through on site or offsite measures. Whilst this is an additional cost which must be taken into account by a developer, offsite measures have the potential to provide an alternative income stream for landowners.
As well as providing land for residential development and infrastructure projects, we should not forget about what lies beneath the surface. Minerals, and more specifically those required to construct the developments and infrastructure projects envisaged by the Scottish and UK Governments. By promoting potential mineral sites, and working alongside operators, the rural sector is once again supporting government targets whilst providing returns for landowners.
A key element of a well-diversified rural estate is residential property. Following the easing of lockdown restrictions and the requirement to work from home, Galbraith has witnessed a noticeable shift in tenant demands, with a greater emphasis on gardens and outside space as well as home offices.
Initially, the holiday letting market was adversely affected by lockdown measures, however an increase in staycations has seen many holiday lets booked out until the end of the summer season. The market is currently buoyant, and is providing a valuable income stream for many private and rural estate owners.
The residential sales market has also been reinvigorated post lockdown, with an increase in enquiries for countryside properties. Following the announcement of the SDLT and LBTT holidays enquiries for countryside properties have increased, with purchasers keen to take advantage of what is a significant cost saving. In many cases, we are seeing properties sell significantly in excess of asking price. Whilst the COVID-19 pandemic has been the principal concern in recent months, we cannot overlook Brexit and the challenges it poses to the rural sector. The UK’s withdrawal from the European Union (EU) has presented unprecedented challenges to the rural sector, not least subsidy reform following the exit from the Common Agricultural Policy (CAP).
However, alongside the challenges sit opportunities; with an ever increasing shift towards Natural Capital and the concept of Public Money for Public Goods in England. Whilst the Scottish Government currently favours a more direct replacement to the existing subsidy regime, both concepts will undoubtedly result in a change in management practices.
As a signatory to the Paris Agreement, the UK, along with a number of countries across the world, has committed to reduce its carbon emissions to net zero by 2050. The Scottish Government has gone one step further and has committed to net-zero by 2045. Governments and companies are therefore rapidly turning their attention to how they can reduce their carbon emissions. In some instances in advance of the deadlines set by the Scottish and UK Governments. Many organisations also have ambitions to become net sequesters of carbon and see this as a potentially lucrative and valuable income stream.
There is a clear opportunity for the rural sector, with household names committing significant capital to acquiring land for carbon sequestration purposes. Yet there is still some way to go for the accreditation and trading of UK schemes to develop, and there are a number of competing accreditations across the world, which adds complexity to the market. For landowners, it has the potential to provide a valuable income stream from land with limited agricultural productivity, whilst also complementing existing commercial investments such as forestry. Renewable energy also has a role to play in the reduction of carbon emissions and the delivery of a green economy. With the cost of renewable infrastructure now at a point where onshore wind, solar and hydro can be a viable subsidy free opportunity, it remains a key component of the diversified income stream of the rural sector. Additionally, the change in focus towards offshore wind can still provide windfall receipts and additional revenue streams for landowners whilst delivering sustainable green objectives. The move towards electric vehicles, and the infrastructure that goes into supporting them, will also be an interesting development for the sector.
The rural sector has undeniably been affected by the COVID-19 pandemic, however when compared with other asset classes, it has been relatively resilient. There are certainly challenges on the horizon, however the rural sector is well placed to meet them and there is significant potential upside for rural land and property owners. The robust fundamentals which have historically made the rural sector an attractive investment in times of difficulty are likely to prevail. The only difference is that on this occasion, the diversity and breadth of opportunities which have provided resilience and attractive returns in the long run, are more abundant than ever. n
Crawford Mackay crawford.mackay@galbraithgroup.com 07909 978 641
