Return on investment for a shepherd’s hut

If you’re considering setting up a glampsite it’s essential that you know what returns you can realistically expect. Unfortunately, whilst this question is often asked the information is about as about as forthcoming as a shy badger, so we intend to put that right here with a step-by-step guide to calculating a prudent return on investment (ROI) for your glamping business.

There are several factors that will determine how much money you make; how much you charge, how many units you have, your occupancy levels, your setup costs and running costs.

How much can I charge?

This will depend on what you’re offering in terms of accommodation and facilities as well as where you’re situated. It makes sense that the more desirable your offering the more you can charge per night and as shepherd huts can be used all year you don’t need to shut down in the winter months maximising your occupancy.

Do some research; find out what your local competitors are charging and what they are offering. But don’t stop there, take a look at what’s going on up and down the country, see what inspires you and what you think would work well at your site. Then set your imagination free, think about what you’d enjoy and have some fun with it. Aim to build something you can get passionate about as this can only help you when it comes to your marketing.

Top end sites are charging over £200 per night but a more realistic and highly achievable fee for most sites would be in the region of £80.00 low-season, £95.00 mid-season and £110 during high-season so that is what we will work with here.

Ultimately how you decide to structure your pricing is up to you. For the sake of this exercise we have taken the 2018 calendar and worked out the significant dates. This will give you your high-season periods (we have marked them in green). Weekends should be popular all year round, but week days and low-season periods will be harder to fill so as an incentive we have reduced the price on those dates. Then we have simply filled in the calendar accordingly.

How many huts should I have?

Working on the above figures, a single hut at 100% occupancy would gross £34,285 per annum.

Now that we know how much one hut will gross we can think about how many you will need to deliver the income that you want. Obviously how much land you have is also a deciding factor here and it’s important to be realistic about how many huts you accommodate without feeling like a caravan site.

A mistake commonly made is that two huts equals twice as much income however this isn’t automatically the case. The pot of people looking for a glamping holiday reduces with each additional hut so it’s wise to factor this in to your equations.

We have worked on 3 huts for this exercise with the first running at 80% capacity and each subsequent hut seeing a reduction of 10%.

Hut Rental	Full	80%	70%	60%
Income from 1 hut	£34,285	£27,428	£24,000	£20,571
Income from 2 huts	£68,570	£54,856	£47,999	£41,142
Income from 3 huts	£102,855	£82,284	£71,999	£61,713

Total income for three huts based on 80% | 70% | 60% occupancy

£71,999

These figures are pessimistic as they work on flat percentages and don’t consider the fact that you are likely to be fullest during your highest earning periods. Likewise, you can expect your occupancy rates to increase as you become better established but being cautious in your calculations at this stage should result in a successful business model.

How much will it cost to set up my glampsite?

This will clearly depend on what you want to offer and what you already have in place. There are a huge number of options here and you can really let your imagination and personality come to the fore.

Good shepherd hut manufacturers should give you as much or as little help as you need. At White Peak Shepherd Huts, we offer a full advice and design service and we are happy to consult on how to get the best from your chosen target market; and if you’re not quite sure who that is we’ll help you with that too.

Shepherd huts

For this exercise we will work on an 18ft luxury shepherd hut complete with a double bed with under-bed storage cupboard, wood burning stove, shower room, kitchenette containing Belfast sink, small fridge and oak worktop.

Shepherd hut 1	£32,500	inc VAT
Shepherd hut 2	£32,500	inc VAT
Shepherd hut 3	£32,500	inc VAT
Total for 3 huts	£97,500	inc VAT

If you’re placing an order for more than one hut at a time, ask your manufacturer if they can offer you a discount. A 5% discount on this order would mean a saving of £4,875 on the whole order or £1,625 per hut which would cover the costs of equipping each hut.

	1st Hut	2nd Hut	3rd Hut	Total
Bedding including spare sets	£500	£500	£500	£1,500
Towels including spare sets	£90	£90	£90	£270
Kitchen equipment	£300	£300	£300	£900
Ornaments & pictures	£200	£200	£200	£600
Lanterns	£60	£60	£60	£180
Total	£1,150	£1,150	£1,150	£3,450

Now that we have our huts looking pretty we need to consider the day to day running costs.

Consumables

Toiletries will need to be changed for each guest, log baskets need to be topped up. Will you be leaving your guests wine, biscuits or welcome hampers? Your decisions here should be reflected in your charging structure. Including the luxury toiletries made by local producers is a wonderful touch but remember to factor it in or it will come straight out of your pocket.

Running costs

You need to consider the day to day costs of running your glampsite. Huts need to be cleaned, laundry washed, and the grass needs to be cared for. This is often more time consuming than people realise and if it’s to be a side line business you may need to pay someone to do it for you, but again this will come out of your profit.

Next consider marketing; having an online presence is essential for most businesses now and particularly so for the holiday industry. Whether you market through a third-party site or build and manage your own website or combine both options, there will be a cost component.

Third party booking sites often take an upfront fee (Go Glamping charge £125 upfront regardless of the number of bookings you receive) or a percentage of your bookings  (Airbnb charge a 3% booking fee and no upfront fee). They can be a great way to get started as they enable you to piggy back off their existing online presence and credibility.

Doing it yourself can be extremely rewarding and gives you complete control over the way you appear to your audience, but it’s extremely time consuming and takes a high degree of skill and dedication to get your voice heard.

There are a great many more things that you can do to get your name out there from hosting events to competitions; social media to fliers. Marketing is another way to get creative and have fun but the cost of each of these marketing routes needs to be carefully measured against returns.

Maintenance

Well-built shepherd huts should require little maintenance above that which you’d expect to carry out in any holiday cottage. Wooden windows and doors will need to be re-painted in line with paint manufacturers guidance (generally between 5-7 years) and floors and woodwork will need the occasional oil to keep them looking their best.

Breakages will need fixing in a timely manner, grounds will need to be tended and worn out bedlinen and towels will need replacing if your reputation is to be maintained.

These are the hidden costs that are often forgotten so factoring in an annual budget for them from the outset is essential.

How much you spend on each of these elements will be governed in part by your location and the setup of your site and partially by personal preference.

Overall annual expenditure

We have calculated our figures on an average expenditure and you running the glampsite yourself. It is entirely possible to spend a great deal more or less depending on the products you choose and whether or not you decide to employ someone to do some or all of the maintenance.

	1st Hut	2nd Hut	3rd Hut	Total
Cleaning equipment	£200	£200	£200	£600
Laundry	£240	£240	£240	£720
Toiletries	£200	£200	£200	£600
Marketing *based on Airbnb + Go Glamping	£925	£825	£725	£2,475
Maintenance and repairs	£600	£600	£600	£1,800
Total	£2,165	£2,065	£1,965	£6,195

From here you can put together a business plan based on the amount of income you want to earn and the amount of money you have available for purchasing your huts.

Total Capital Expense

	1st Hut	2nd Hut	3rd Hut	Total
Total Capital Expense	£32,500	£32,500	£32,500	£97,500
Set up cost	£1,150	£1,150	£1,150	£3,450
Total Capital Expense	£33,650	£33,650	£33,650	£100,950

Total Pre-Tax Income

	1st Hut	2nd Hut	3rd Hut	Total
Annual Income	£27,428	£24,000	£20,571	£71,999
Annual Expenditure	£2,165	£2,065	£1,965	£6,195
Total Annual Income	£25,263	£21,935	£18,606	£65,804

When comparing this to holiday cottage rental you can see that the income vs expenditure is very attractive as the nightly rental rates are generally higher and the capital outlay is considerably lower. Well-built shepherd huts are essentially small, timber framed houses and when looked after they provide a prudent investment that will be around for many generations to come.

If you want to discuss how you can turn your glamping dream into a reality then get in touch.

Tel:  07761 983312

Email: josephine@whitepeakshepherdhuts.uk