Virginia Agritourism: A Profitability Analysis

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Date
2014-09-11
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Virginia Tech
Abstract

Agritourism in Virginia is a rapidly growing industry that adds additional income to a farming operation, and helps mitigate risk. Therefore it has become a good strategy for farmers to generate higher levels of profit, but much of the literature in Virginia and surrounding states focuses more on the motivations of operators for starting their agritourism venture. Thus, the purpose of this paper is to empirically analyze demographic, operational, and financial factors and evaluate their correlation with higher levels of profit. The first step was to apply key factors in industrial location discussed by Sloagett and Woods (2003) to agritourism in Virginia.

Next, a survey was conducted to produce primary source data on Virginia agritourism operators and how these success factors relate to their ventures. Initial findings suggest a very homogenous demographic amongst operators. In addition, there were four other main findings. First, promotion is highly important and there is a need for increased road signage in Virginia. Second, additional income is a large motivator among operators and 76% of operations indicated their business was somewhat profitable. Third, those near the metropolitan areas of Virginia Beach, Roanoke, and Washington, D.C. tended to have the highest perceived profitability. Finally, operators are highly afflicted by obstacles such as road signage, finding qualified employees, and taxation, all of which can be addressed or mitigated by the state government.

The final portion of this paper tests the relationship between these factors and profitability of agritourism operations in Virginia. The empirical results reveal that those operators with a motivation for addition income and higher levels of education, with more acreage, with a higher percentage of their gross farm income attributed to agritourism, and those, on average, that have greater money spent per visitor all correlate with higher levels of profit. On the other hand, the following characteristics appear to have a negative effect on agritourism profits: wineries, greater estimated time to the nearest interstate and difficult access to capital. Assuming operators of agritourism venues seek to maximize profits, these findings illustrate to current and future operators how to adjust procedures and improve their business strategies.

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Keywords
agritourism, profitability, location, order logit
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