Michigan State University Extension
Tourism Educational Materials - 33839810
06/06/02
Can a Farmer Make Money with an Outdoor Recreation Sideline?
Answer: NO, if all costs are accounted for. Following are
the reasons why and a discussion of how a recreation
enterprise CAN be a money-maker.
By Eugene F. Dice, Extension Specialist, ID: E0790
Far too much ink has been devoted to singing the praises
of outdoor recreation sidelines for farmers without a
reasonable explanation of either the psychological or
economical reality. The "fun" aspect rather than the
income potential has been the focus of such articles. What
the recreation user does is very detailed in such print,
but the cost and income to the owner are usually
neglected.
Nature of Sideline Incomes
Outdoor recreation enterprises do not offer good
profit-making sidelines for farming operations. Sidelines
of this type usually do not generate enough total dollars
to be really attractive as profit makers. Sidelines of any
type are necessarily looked upon as small scale
operations. They can consume excessive amounts of family
labor, and offer only minimal income as the reward. When
costs are applied to family labor inputs, depreciation,
facilities, and equipment, taxes and others, the net for
the recreation sideline will probably show red.
Non-Profit Objective
Many outdoor recreation supplements to farming operations
are not entered into for the purpose of profit
maximization. They are seen by the farm family as an
exciting distraction that offers individual members extra
opportunity to "mix" with other types of people, to share
their properties with others, and to provide a little
extra "spending money." These gestures are to be applauded
since they are in the same family of personal values as
volunteer leadership, and are expressions of altruistic
motives without concern for profit.
Care must be taken by educators and advisors to would-be
recreation farmers that the profit maximization objective
and the non-profit incentives are not intermixed or
misinterpreted.
The trap becomes one of deciding what measures are to be
used to gauge success. Gross or net income or possibly net
worth are generally used as indicators of success. Others
argue that success can only justifiably be measured when
including the "satisfactions achieved" by the owner and
his family.
A recent study by Murray* in Michigan among small scale
recreation enterprises verifies this. Respondents answered
the two questions (generalized): (1) what was your income,
and (2) was your business successful. Many who were
actually operating with economic losses stated that their
business was successful. In short, they were gaining some
types of non-monetary rewards that were, under their
considerations, equal to or superior to the quest for
economic profit.
*Murray, Roger D., "Commercial Campgrounds in Michigan: A
Study of the Factors That Contribute to their Financial
Success." unpublished thesis for Master of Science,
Michigan State university, Department of Park and
Recreation Resources, East Lansing, Michigan, 1974.
It is well to first examine the goals and the philosophy
of the farm family before making recommendations. Goals
can be completely non-monetary, a combination of monetary
and non-monetary, or strictly monetary Obviously, it
doesn't make sense to talk about profit maximization to a
farm family whose goals are of a non-monetary nature.
Likewise, it would be wrong to stress non-monetary goals
if the sole interests are to maximize the return on the
investment.
Typical Recreation Supplements
There are many types of recreation that have been added as
supplements to farming enterprises in the state. Success
has been more a function of the family ability than of the
type of activity. Some recreation sidelines have been in
the form of land leased. For example, to the Michigan
Department of Natural Resources in order to provide areas
for activities like snowmobiling. These types actually
call for little if any extra inputs by the farm family.
Even these dollars are not clear-cut profit if you
consider the pressures on the family due to disregard for
private property from some of the public. A $3 an acre
lease income may lead to a $5 an acre headache. Fee
fishing in the farm pond, access fees from hunters,
hikers, trappers, parking space for lake or river access
on one's private property are other minimum cost forms of
recreational incomes. Most, however, do not reach a very
large income scale.
Following is a partial list of types of recreational
sidelines found on Michigan farms:
Fee Fishing Riding Arenas
Hunting Preserves Hay Rides
Picnic Areas Nature Walks
Primitive Camping Cut your own xmas trees
Boarding Pleasure Horses Rental Cottages
Swimming Boating Access
Sleigh Rides Boat Rentals
Farm animal zoos Canoe Rentals
Sugar Bush Ski slopes
Orchard Tours Motorcycle Trails
Modern Camping Farm vacations
Snowmobile Trails Children's camps
Pick your Own Farm museums
Bridle Trails Golf
Typical of large recreation enterprises that were
developed from farming operations are several large modern
campgrounds with a market value in excess of $100,000
each, and numerous golf course facilities. Significant
investments have been made in several skiing facilities
and farm animal zoos in different areas of the state.
Comparison of Farm and Recreation Production
There are some functional similarities between recreation
production and farm production procedures. Each operates
on inputs of family labor, self management skills and each
utilizes a land base for creation of a salable product.
The recreation enterprise, however, is usually based on
marginal agricultural land while most farm production
occurs on primary agricultural land resources. Both are
highly seasonal in nature and highly dependent upon
weather conditions.
Dissimilarities exist in terms of marketing and
distribution of the product. Whereas most farm products
are picked up or transported by middlemen for processing
and marketing to the consumer who may be far removed from
the site, the recreation customer is a direct retail buyer
who comes to the site to purchase and consume the product.
Thus the recreation consumer is in a sense a captive,
on-site buyer to whom other goods and services may be
marketed. This income opportunity is maximized when the
customer stays in residence for more than one day (as in
the case of a campground or lodging facility) and is in a
minimal state when the customer is present for brief
periods of less than a day (as in fee-fishing or horseback
riding).
Obviously, some farm products are marketable direct to
consumer at the farm. Thus a fruit grower may combine a
recreation supplement to assist in attracting customers to
the site and then offer "pick your own" products. However,
realistic costs and return budgeting are likely to show
that the recreation component does not provide a
competitive return on its own cost.
One example of miscalculation exists with the ideas for
"farm vacations." Here, a struggling farm family perceives
that new successes are available by turning parts of the
farming operation into a tourist operation. Two points are
to be made. First, if part of the incentive is to show
city folks how farms operate, they miss the target since
most vacation farms are not typical of modern farming
operations and farm family life. Secondly, close analysis
will show that the family member with the new work loads
is mother. She will be the one who prepares meals for
guests, cleans up the quarters, and launders the linen. In
all, the few families who can be accommodated for the
season will have added only a few dollars to the family
income while the principle burden will be borne by mother.
In other states, where this activity is practiced to a
greater extent, most facilities include large new
investments that take on the nature of a tourist business
rather than a farm business and have phased into a major
income source rather than a supplemental one.
How CAN Recreation Be a Money-maker?
Where is the "money-making" opportunity in recreation? In
a strictly management and economic sense, farm based
recreation has to be of such scale as to cater to massive
numbers of users. Fees are normally pegged at such a low
figure that literally thousands of users must cross the
ticket line in order to provide substantial income. When
there is an opportunity to capitalize upon the large scale
user numbers, it soon becomes evident that a supplemental
recreation enterprise is not the answer but rather that
the recreation venture itself becomes the major income
producer and the entire management and production scheme
turns to that activity. Such is the case, for example,
with a highly developed ski area in Saginaw County which
consists of two man made ski slopes, a chalet restaurant,
gift shoppe, a bar, and a ski pro shop. This operation
began as a fruit and berry farm with a roadside market.
To make money in the outdoor recreation business, one must
have access to large numbers of potential customers,
develop a good production and marketing program, and
utilize the recreation business as the major, not the
supplemental, activity. The profit opportunity in
recreation can only be maximized if the management focuses
upon it with all available skill and ability. In this
sense, it is far more complex than agricultural production
because of the need to provide facilities and programs
that will weave together and capitalize on all the
peculiar expectations of thousands of people at the site.
Feasibility Study Problems
The feasibility suggestion that a prospective owner of a
supplemental recreation enterprise must be able to "get
along with the public" is an overdone figment of a lazy
imagination. Good marketing and management principles
suggest that if the owner-manager cannot pleasingly face
the buyer public then the astute manager will place
someone else in the contact position. If there is a profit
opportunity, the owner-manager need not be the person in
direct contact with the buyer. One highly successful fruit
grower in southwestern Michigan disguises himself as one
of the workers and none of his recreation customers
recognize him as the owner.
Too many "feasibility studies" completely ignore the role
of management in evaluating the opportunity for successful
operations. The location, the site conditions, the
population available all are important but, did you ever
wonder what would happen if you could try two different
managers on the same very best site and location. Would
you expect them to both produce the same income? An
important role of the manager is to develop and maintain a
flow of customers that will yield a good profit margin.
Yet, feasibility studies of managers have not been
invented.
Feasibility studies help analyze the population in the
market area and that accessible by means of travel
arteries, physical conditions and possible alterations on
the site, the amount and kinds of competition, plus some
projection of future population available to the
development. Some even detail the basis of borrowing
capital for the development.
How do you define the differences between the one who
succeeds and the one who fails under similar conditions
and expectations? Some people succeed where failure is
expected. Certainly, performance and experience will prove
helpful. Probably the best measure of success for a
certain family or manager is his (their) record of
performance. If they have been achieving success in a
current enterprise, then it can be expected that success
will be possible in a new enterprise, given time to orient
to the new field. There would be a low level of success
expectation in the new field for those whose performance
records show continuous low success levels in previous
fields.
There are few instances where it can be proven that "he
would have been successful except he was in the wrong
business." It is wrong to suggest to an unsuccessful
operator that he can become successful just by adding a
little recreation sideline to his current farming
operation.
Why is it Important?
Outdoor recreation is a significant user of land. Between
1/4 and 1/3 of all land surface in Michigan is used for
outdoor recreation (public and private). Recreation,
however, is not the exclusive user of much of this
acreage. On both private and public land, recreation is
part of the multiple-use syndrome. Although most multiple
use occurs on forest lands, some also occurs on tillable
and pasture lands.
Not only are we concerned about "best use" of our land
resources, we must also have great concern over best use
of our human resources. There are too many instances of
recreation supplement failures after the farm family has
exhausted both human and dollar resources. If family
labor, dollar resources for development, and other
resources like marginal land are available, it usually
makes better sense to improve or expand production and
marketing of the existing operation (with a little
additional management education input) than to experiment
with unfamiliar kinds of projects. In short, if the farmer
through skilled management has achieved successful
profit-making it is more logical to intensify that
activity than to venture into the unknown (unless scale is
such that two major enterprises; farming and recreation,
can be operated by dividing management between two or more
people). At the same time, it does not seem realistic to
believe that an unsuccessful farmer can become a
successful recreation manager.
MSU is an AfifrmativeAction/Equal Opportunity Employer.
Cooperative Extension Service programs are open to all
without regard to race, color, national origin, or sex
Issued in furtherance of cooperative extension work in
agriculture and home economics, acts of May 8, and June
30, 1914, in cooperation with the U.S. Department of
Agriculture Gordon E Guyer, Director, Cooperative
Extension Service, Michigan State University, E Lansing,
Ml 48824
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