Arru et al.

Agricultural and Food Economics (2021) 9:27

https://doi.org/10.1186/s40100-021-00199-z
Agricultural and Food
Economics

RESEARCH Open Access

Economic performance of agritourism: an

analysis of farms located in a less favoured
area in Italy
Brunella Arru, Roberto Furesi, Fabio A. Madau* and Pietro Pulina

* Correspondence: famadau@uniss.it
Department of Agricultural Abstract
Sciences, University of Sassari, Viale
Italia 39/a, 07100 Sassari, Italy Farms that operate in less favoured areas (LFAs) often suffer in achieving adequate
profits. Diversification strategies, such as direct selling and offering recreational
services, can play an important role in integrating earning sources and, as a
consequence, increasing farm profitability. Such opportunities would depend on the
efficient distribution and use of farm resources among different activities as well as
the added value creation of farm output. However, achieving positive results is not
obvious in LFAs due to different types of inherent constraints (geographical, social,
economic). The paper aims to evaluate the role of agritourism in affecting the
economic performance of multifunctional farms located in a less favoured area of
Sardinia (Italy). To be more precise, using so-called working farm income as the main
indicator resulting from balance sheet analysis, production factor rewards are
determined for 15 agritourism farms. The results show controversial performance but
basically highlight the difficulty agritourist farmers have both remunerating their
work at market price levels and being profitable. This research contributes to the
debate on LFAs and offers useful reflections for policy-makers and practitioners
about the potential and critical aspects of agritourism in LFAs.
Keywords: Balance sheet analysis, Multifunctionality, Working farm income,
Agritourism

Introduction
The areas facing natural or other specific constraints (ANCs) in the past referred to as
“less favoured areas (LFAs)” are territories characterised by different types of handicaps
(geographical, social, economic) that limit development perspectives. According to the
Council of the European Union (EU), LFAs can be classified into three categories: (a)
mountain areas, which suffer from a short crop season due to high altitude and/or
steep slopes; (b) areas facing significant natural constraints; and (c) areas affected by
specific constraints (Council of the European Union 2013 Regulation No 1305/2013,
art. 32).
Among others, these constraints threaten agricultural land use persistence in LFAs
because of low factor productivity and income opportunities (European Commission
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Arru et al. Agricultural and Food Economics (2021) 9:27 Page 2 of 21

2017). On the other hand, LFAs play an essential role in maintaining highly valuable
landscapes and preserving biodiversity and rural cultural heritage, making high-quality
food production and working opportunities actually possible (Cooper et al. 2006).
Farmers continue to operate in these areas based on these factors. Moreover, the life-
style motive, social, and cultural contexts and traditions, and the expectation of future
land values are important, too (Cooper et al. 2006). Least of all, so-called socio-
emotional well-being, i.e. emotional attachment to the business, improves family
wealth, stemming from the fact that family members work in the same business
(Gomez-Mejia et al. 2011). In such circumstances, family and small-size farms—the
main farming models in the EU—play a crucial role in the socio-economic and environ-
mentally sustainable development of rural communities and the promotion of a healthy
lifestyle in LFAs (European Commission 2013; Toader and Roman 2015).
Previous studies have shown that lifestyle and market-oriented goals can coexist
(Bredvold and Skålén 2016). This means that farmers’ socio-emotional well-being and
affection for land and traditional values cannot neglect the capacity to reward family
members’ work. On the other hand, farms have to remain socially and economically vi-
able in the long term. Since 1992, the EU Rural Development Policy (RDP) has sup-
ported such coexistence by ensuring a compensatory payment for farmers that operate
in LFAs. Furthermore, small and disadvantaged farms are recovered by RDP by a broad
range of measures (e.g., aid for capital investments, support for increasing market
orientation) in order to reinforce their income and reduce the gap that would hinder
their viability and sustainability. However, the main EU effort is aimed at promoting
farm diversification by expanding possible income sources. The underlying rationale is
that diversification is one of the most effective strategies for income stabilization and
enhancement, especially for small and disadvantaged farms (Marsden et al. 1989; Ilbery
1991; Bateman and Ray 1994; Johnsen 2004; Vik and McElwee 2011).
Farm diversification triggers broad processes with reference to core activities in reac-
tion to external pressures, aiming to maintain the business and improve economic per-
formance (De Rosa et al. 2019). The transition towards multifunctional and pluriactive
agriculture is key to safeguarding farm profitability. It develops through three paths
(Henke et al. 2014): agricultural diversification (planting new and alternative crops,
often combined with the use of marketing strategies focused on niche markets and dir-
ect selling), income diversification (re-locating farm resources to off-farm activities),
and structural diversification (starting new on-farm activities) (Ilbery 1991; Bowler
1992; Markelova et al. 2009; Fischer and Qaim 2012).
Among new on-farm activities, agritourism, considered a subset of rural tourism
(Phillip et al. 2010), is an internal income diversification strategy that emerges from a
lack of off-farm income opportunities and a desire to balance the agricultural income
(Streifeneder 2016). Agritourism is one of the most relevant and innovative diversifica-
tion processes in agriculture. It has dramatically increased in Europe and throughout
the world in the last 30 years (Nickerson et al. 2001; Meert et al. 2005; Knowd 2006;
McGehee 2007; Sznajder et al. 2009; Arroyo et al. 2013; Vogt 2013; Fagioli et al. 2014;
Schilling et al. 2014). Among the many contributions to the scientific debate about the
definition of agritourism activity (Phillip et al. 2010; Flanigan et al. 2014; Streifeneder
2016; Broccardo et al. 2017; Liu et al., 2017) and different national and regional public
laws and regulations, it is possible to identify a common feature, which is the offering
Arru et al. Agricultural and Food Economics (2021) 9:27 Page 3 of 21

of recreational services by farms. Broadly speaking, agritourism is a style of holiday that

is spent on a farm (Sznajder et al. 2009). The diversification and generation of add-
itional income through touristic on-farm activities mainly concerns two tourist services
(Arru et al. 2019): preparing and serving meals mainly made from farm and/or local
products, and providing overnight accommodation.
Agritourism is “linked to internal and external push-and-pull factors within the
framework of agro-structural change and rural area development” (Streifeneder 2016,
p. 251). Indeed, this sort of diversification, on the one hand, can capture the increasing
and segmented tourist demand, guaranteeing a further income source for farmers (Tew
and Barbieri 2012; Schilling et al. 2014, 2016; Arru et al. 2019).
On the other hand, from a multifunctional perspective, the recreational function al-
lows farmers to promote sustainability, incentivises good farming practices, and has
positive implications in terms of rural territory development (Tew and Barbieri 2012;
Mastronardi et al. 2015; Flanigan et al. 2015). In particular, agritourism farms imple-
ment strategies oriented towards finding job opportunities for farm family members.
The characteristic phases of agritourism development are described by Arnold and
Staudacher’s (Arnold and Staudacher 1981) theoretical model, which involves a pre-
phase and three main stages. In the pre-phase, one can observe limited involvement of
the farmer, who is reluctant to spend time away from the main activity and therefore
devotes few resources to investing in building and infrastructure renovation in order to
dedicate them to reception activities. Later, the farmer starts offering overnight and
meal services but does not reduce the work effort devoted to agricultural activities in
favour of agritourism, still conceived as a mere additional activity that could generate
work overload. That is why the earlier kind of agritourism activity was the basic kind of
bed-and-breakfast service. In the second phase, the farmer enlarges his capacity by in-
creasing the number of rooms and tables in order to increase the income to be rein-
vested within the company. Finally, intensification of the agritourism activity pushes
the farmer to divert attention from core agricultural activities and devote a larger part
of his work to recreational services. This gradual development allows him to increase
income coming from different sources of his multifunctional business (Bellencin-Mene-
ghel 1991).
It is important to emphasise that the life cycle of an agritourism would be closely
linked to the life cycle phase of the tourist destination in which it is located (Petrović
et al. 2016). According to Butler (1980), the tourist destination life cycle consists of six
main phases. The first phase (research) is characterised by infrastructure or superstruc-
ture scarcity, and by allocentric tourists. The latter, according to Plog (1974), are curi-
ous, adventurous and prone to new discoveries, they love destination unspoilt by
tourism and are drawn by natural resources, historical and cultural heritage, turn to
unstandardised structure, and ask for minimal comforts. In the second phase, the in-
volvement, the number of tourists (who become more “near-allocentric”, i.e. less ex-
treme in terms of commitment towards new experience not see everything to be
familiar) increases considerably inasmuch are attracted by a rural destination that is
new and still not established. The seasonal tourist movement prevails, and its impact
usually leads the public sector to be involved in tourism development in the destin-
ation, whereas the private sector is involved in the enrichment of material basis. The
development phase sees growth and differentiation of supply, where local enterprises
Arru et al. Agricultural and Food Economics (2021) 9:27 Page 4 of 21

progressively lose control to national and foreign enterprises. The consolidation phase
is characterised by the mass tourism that becomes the most important local economic
sector, although its growth rate flows begins to slow. In the stagnation stage, tourist
numbers have reached their peak, the destination’s image has been well-established but
is no longer fashionable. Finally, the post-stagnation stage can present the scenario of
stabilisation, rejuvenation, or decline.
On the other hand, some normative constraints limit the expansion of agritourism as
a farm activity. In Italy, for example, the income generated or the labour spent with ref-
erence to agritourism and to “activities related to agriculture” cannot be higher than
those of the main farm activity, i.e. the production of food/feed/energy goods (the
choice of the prevalence criterion is made by the farmer). This prevalence constraint in
favour of agriculture implies that agritourism can increase the farm’s turnover, but it
cannot overcome its weight with respect to the main agricultural activities.
All these arguments considered, this paper aims to evaluate the economic perform-
ance derived from agritourism farms located in an LFA of Sardinia (Italy), the geo-
graphical region of Montiferru. The study explores the ability of farms that offer
recreational services to be actually profitable, with specific reference to their develop-
ment phase. In more detail, using balance sheet analysis according to Serpieri’s model
(1950), this paper aims to answer the following question: are agritourism farms located
in an LFA like the Montiferru region capable of adequately rewarding the work of fam-
ily members?
Some studies have been published on the role of agritourism and/or of specific agri-
tourist activities in specific contexts such as mountain farming. Recently, Stotten et al.
(2019) investigated on the impact of more types of accommodation supplied by farmers
on the preservation of the farm in the Ötztal valley in Austria. However, excluding the
mountain areas sensu scricto, to the best of our knowledge, this paper is the first to ex-
plicitly study agritourism as a response to the income problems of family farms in
LFAs.
The work is structured as follows. Section 2 illustrates the peculiarities of the area,
the characteristics of the farms and the research methodology. Section 3 presents the
research results. The last section concludes the paper, draws implications for practice,
policy-making and academia, and suggests avenues for further work.

Materials and methods

Study area, choice of farms and data collection
The region of Montiferru is geographically located in the middle-west of the island of
Sardinia. According to European Commission (2017), it is an area in total danger of
abandonment of land use. In effect, the presence of a multiplicity of negative factors of
an economic, environmental and settlement nature have jointly contributed to deter-
mining its low level of development. It is a hilly region that covers 487km2, with a
population density (close to 24 inhabitants per square kilometre) significantly lower
than the national average (Istat 2019). The morphological and environmental character-
istics of the Montiferru territory have dictated the shape of the local agricultural econ-
omy (Arru et al. 2019). As typically observed in Sardinian hilly and mountain areas, the
leading practice is sheep breeding, and most of the arable land is therefore covered by
Arru et al. Agricultural and Food Economics (2021) 9:27 Page 5 of 21

grazing. Sheep are bred for milk production, which is almost totally processed by the
local dairy industry (Furesi et al. 2013; Camanzi et al. 2018), where the meat from
lambs has to be considered a conjoint output. Sheep grazing is quite exclusively carried
out following extensive or semi-extensive management rules. Furthermore, horticulture,
olives and grapes are widespread in Montiferru.
In the last decades, the number of agritourism businesses has increased considerably
in Montiferru (Arru et al. 2019), and this characteristic makes the region particularly
worthy of being taken as a reference case in this study. The increased farm diversifica-
tion and tourism services, basically meals and overnight stays as on-farm activities,
arises from the actions of 2 main categories of factors.
First, the Sardinian RDP has promoted the creation of a virtuous local action group
(LAG) in the region. Driven by the strategic mission of making the productive local sys-
tem competitive, the LAG has initiated actions aimed at encouraging and fostering val-
orisation paths and supporting traditional and identity food production. Among the
supported activities, agritourism has emerged as one of the main diversification tools
developed by farmers to promote local production, culture and tradition.
Second, recurrent crises of agricultural markets push farmers to search for opportun-
ities to integrate low and volatile agricultural income. An attractive opportunity has
been identified in the growing demand for food and wine tourism in this area (e.g. Mal-
vasia and Vernaccia local wines), which has also been leveraged to make the entire en-
vironmental and cultural heritage of the region known, further shifting the seasonal
tourist flow from the coasts to the hinterland, such as Montiferru. Although Montiferru
is less known by tourists than other Sardinian regions, it is starting to benefit from
rural tourism, and it has become an appreciated destination in the last two decades.
The development of tourism and the increasing interest in food and wine routes have
promoted farm diversification, and have led to agritourism being considered as an op-
portunity to diversify income sources.
Based on these findings (local residents involved in tourism, emergence of secondary
tourism facilities such as agritourism, tourism season development, greater policy in-
volvement, increase in marketing and promotion activities), Montiferru is currently in
the involved stage. Therefore, given its condition of LFA and its phase in the Tourist
Area Evolution (Butler 1980), the Montiferru region analysis appears useful in under-
standing a possible evolution path of a LFA as well as which private and policy actions
should be done to increase the income of farms and the rural-area employment. Draw-
ing on the data provided by the Regional Agricultural Extension Service Agency
(LAORE), a total of 18 agritourism businesses operating in the Montiferru region were
selected. Most were founded in the last decade; therefore, they operate in the early
phases of (Arnold and Staudacher 1981) life-cycle model. This means that agritourism
is often far from the maturity stage. This is a crucial point in assessing the economic
performance of farms and the ability of agritourism to positively affect incomes today.
A sample of 15 farmers agreed to provide economic information about their agricul-
tural and recreational services activities. The data were collected in 2017 by direct in-
terviewers with the farmers. The main characteristics of the sample are reported in
Table 1.
The farms are all family-run; except for 2 of them, they are still run by the founder.
Twelve of the 15 farms have a relatively small utilised agricultural area, while 9
Arru et al. Agricultural and Food Economics (2021) 9:27 Page 6 of 21

Table 1 Sample overview

Items/farms 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15
Age of farm (year) 60 35 24 6 17 14 67 17 35 4 15 2 37 22 11
Age of agritourism (year) 3 16 5 1 n.d. n.d. 10 n.d. 2 1 15 2 n.d. 10 n.d.
Phases of Arnold and Staudacher’s 3 3 3 3 2 2 2 1 1 1 1 1 1 1 1
model
Land (ha) 72 60 10 9 80 100 70 140 60 3 36 195 60 45 21.5
Family workers (full-time equivalent units)
Agriculture 3 2 1.5 2 1 3 3 5 2 2 3 3 1 2 1
Agritourism 2 2 1.5 2 1 2 3 5 2 1 2 1 2 1 1
Specialization d a b c a a e a a f c a c b b
Restaurant x x x x x x x x x x x x x
Overnight stay x x x x x x x x x x x
Others activities h g g i g
a
Milk
b
Vine
c
Cheese
d
Fodder
e
Wood
f
Mushrooms
g
Educational farm
h
Training laboratories farm
i
Agri-campsite

specialise in milk production and processing. Fourteen farms manage livestock produc-
tion, primarily cattle, sheep and swine.
Agritourism activities have been integrated in recent years (5 farms in the last 4
years). Thirteen farms offer restaurant services. Almost all farms carry out this activity
throughout the year, even if on request and with the bulk of services during the spring
and summer months. The number of seats is contained in a wide range from a mini-
mum of 30 to a maximum of 250. Eleven farms offer accommodations, with an average
of 15 rooms. Among these, only one does not provide this service for the whole year.
Moreover, 4 farms expanded their practice to include an educational farm, while 2
others include tastings and agri-campsites.

Methodological approach
An estimation of the farms’ economic performance was carried out by applying balance sheet
analysis according to Serpieri (1950)’s model, which has been widely used by Italian agricultural
economics scholars when investigating cost structure, profitability and other economic indica-
tors of farms (Atzori et al. 2015). The procedure allows an analysis of farms’ economic perform-
ance by considering the entire bundle of revenues and costs related to the production process.
Basically, Serpieri’s model considers all relevant explicit and implicit costs. First
are the costs incurred for using technical inputs, land, employers and capital en-
dowment provided by non-farm sources. These are also called money costs (Dee-
pashree 2013). Second are opportunity costs that occur when a farm uses internal
resources without any explicit compensation for their utilisation, forgoing the abil-
ity to earn money from their use elsewhere. In broad terms, implicit costs, also
called imputed costs, include the cost of factors owned by the farm and used in its
production processes (Atzori et al. 2015).
Arru et al. Agricultural and Food Economics (2021) 9:27 Page 7 of 21

This cost distinction is important, since it allows us not only to calculate the account-
ing and economic profits (including actual cash payments), but also to factor in the
overall economic profit (Deepashree 2013). An indicative example of implicit cost is
the opportunity cost of a farmer and/or his family members of working in their own
business. In fact, all the selected farms are family farms, implying that at least a part of
the total work is done by the farmer and/or his family. Since an explicit cost (remuner-
ation) is not identified for this work, and considering the farmers’ behaviour in the ob-
served area, also highlighted by the interviews, it is not unreasonable to assume that
the farmers’ objective is not so much to maximise profit but rather to obtain the high-
est level of working farm income (WFI), i.e.:

WFI ¼ Wi  P ð1Þ

where Wi corresponds to the implicit wage that would remunerate the farmer for his
work and P is profit (or loss). In other terms, WFI is the part of income that is incum-
bent on the farmer both as a real entrepreneur, i.e. the one who assumes the risk of the
decision, and as a worker on his farm.
Step by step, the balance sheet analysis was carried out as follows:
Gross farm revenue (GFR) is represented by:

– Value of sold agricultural products (except for meat)

– Value of produced meat expressed in term of live animal gross profit margin
(LAGP)
– Value of recreational services provided
– Financial aid granted to farms

The value of agricultural products sold is easy to calculate, and it corresponds to the
revenues earned from selling farm food/feed products. We handled produced meat sep-
arately from the rest of the products to solely take into account the meat produced in a
given year. This occurs because a part of sold meat in the year could be previously rea-
lised, or part of the meat produced in the year could be sold subsequently. For these
reasons, the average value of meat produced through the LAGP is determined as
follows:

LAGP ¼ ðVs þ Vfii Þ - ðVp þ ViiÞ ð2Þ

where Vs is the value of meat sold in a certain year, Vp is the value of meat pur-
chased by farmers in a certain year, and Vfi and Vii are the value of livestock at the end
and the beginning of the year considered. The former term of the equation represents a
potential revenue item (the value of meat actually sold and saleable meat) and the latter
a potential cost item (the value of meat actually purchased and the cost related to initial
livestock investment).
The value of recreational services provided corresponds to the revenue derived from
agritourism, especially from accommodation and food service on-farm activities. Obvi-
ously, in the case of restaurant service, we avoided the risk of “double accounting” re-
lated to agricultural products both realised and served on a farm. Indeed, we did not
compute in the first item (the value of sold products) the share of farm products used
Arru et al. Agricultural and Food Economics (2021) 9:27 Page 8 of 21

as raw input for a restaurant, and we considered the entire value of meals provided in
this item.
Financial aid is basically represented by payments granted by the Common Agricul-
tural Policy (CAP) to farmers, i.e.: (1) direct single payments to farms, (2) subsidies pro-
vided by the Sardinian RDP 2014–2020 measure for animal health and welfare, (3) RDP
compensatory aid for LFAs (the entire Montiferru region is recognised as actually being
an LFA), and (4) other eventual RDP measures.
On the cost side, a distinction between cost related to agriculture, cost related to
agritourism and general cost was made to evaluate the weight of each activity.
The joint analysis of revenues and costs allows the determination of two main bal-
ance indicators. The first indicator calculated is the net farm revenue (NFR):

NFR ¼ GFR - ðIv þ If þ TxÞ ð3Þ

where Iv and If are the costs for the use of variable and fixed (capital) inputs, respect-
ively, and Tx is the value of taxes paid. If is calculated as depreciation charge on fixed
technical inputs (basically buildings and machinery). NFR can be defined as the sum of
compensation due to economic subjects that participate in the production process by
providing capital, management and labour, after deducting all production expenses.
NFR gives us a measure of the increase in farm income generated.
The second balance indicator is net income (NI), which represents the difference be-
tween NFR and the costs that a farmer has to support for remunerating hired labour,
financial capital and land (explicit cost):

NI ¼ NFR - ðWe þ Ce þ LeÞ ð4Þ

where We is the explicit cost for remunerating work (wages), Ce is the explicit cost
related to the provision of capital and corresponds to interest, and Le is the explicit cost
related to the land (rent). Basically, NI represents the sum of the farmer’s income due
to his direct contribution to the production process in terms of capital and work as well
as the entrepreneurial factor.

NI ¼ ðWi þ Ci þ Li  PÞ ð5Þ

Therefore, WFI is calculated by subtracting implicit costs for capital and land from
NI.

Results
Economic performance
GFR shows heterogeneous magnitude, with an average of 89,775 euros (Table 2). An
analysis of the average farm shows that agritourism generates a share of revenue equal
to 46% of total GFR (considering that the part of agricultural production addressed to
agritourism was not computed so as to avoid a double calculation problem).
By detailing each recreational activity provided to each total GFR, for four farms (2,
7, 9 and 11), such activities carry a weight of more than 75% of total GFR. Therefore,
on these farms, the majority (if not all) of the agricultural production is sold through
recreational activities. However, going into the details of agritourism revenue, Table 3
shows that the annual revenue per seat and bed is very low for most of the farms.
Table 2 Balance sheet analysis items
Item/farms 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15
A. Gross farm revenue 226,400 84,250 26,000 48,303 81,400 291,800 150,300 405,410 77,500 141,300 37,450 62,400 260,840 39,267 68,950
A.1 Value of sold products 32,000 3100 20,900 12,000 79,600 213,240 150 217,000 315 8,800 - 31,950 66,000 96,000 22,267
A. 2 LAGP 225,500 75,100 22,000 36,563 46,000 146,000 64,100 152,050 28,000 44,100 11,550 18,000 33,840 5000 2450
A.3 Agritourism 900 4000 – 7375 1,600 14,200 31,250 11,520 5000 – – 4800 – – –
Arru et al. Agricultural and Food Economics

A.4 Financial aids – 150 3100 315 8800 79,600 31,950 213,240 32,000 96,000 20,900 12,000 217,000 22,267 66,000
B. Costs 330,157 107,174 99,548 91,408 108,527 268,132 254,380 420,462 163,196 187,196 120,063 161,946 113,781 90,897 125,360
B. 1 Costs for inputs 91,841 22,932 27,047 15,448 51,396 108,770 40,941 124,560 67,949 74,749 21,185 47,729 30,051 22,762 39,615
B.1.1 Variable inputs (Iv) 81,430 16,880 24,250 9,730 28,180 59,800 29,340 64,900 51,675 47,650 14,050 30,500 16,018 16,000 22,500
(2021) 9:27

General cost 15,080 8980 3850 4200 2580 7000 3840 17,300 7800 9400 2920 2500 2250 2500 7000
Agricultural cost – 2600 9,520 1050 11,800 39,800 21,000 25,600 35,925 7250 6650 21,000 7000 13,000 13,000
Agritourism cost 66,350 5300 10,880 4480 13,800 13,000 4500 22,000 7950 31,000 4480 7000 6768 500 2500
B.1.2 Fixed inputs (If) 10,411 6052 2798 5719 23,216 48,970 11,601 59,660 16,274 27,100 7135 17,230 14,033 6762 17,115
Agricultural cost 1297 880 719 206 5576 35,110 9501 29,000 2624 8494 2797 13,030 6200 462 11,865
Agritourism cost 9114 5172 2079 5513 17,640 13,860 2100 30,660 13,650 18,606 4338 4200 7833 6300 5250
B. 2 Taxes 26,250 3000 8270 2180 11,500 20,000 6000 12,900 800 8000 2800 11,000 8000 8750 16,000
B.3 Explicit costs 108,270 4000 6360 875 3500 6444 88,370 97,410 11,938 44,479 600 23,062 8624 307 10,752
B.3. 1 Hired labour (wages) 108,270 4000 6360 – – 6000 88,370 87,410 4438 44,239 – 23,062 8624 – 10,752
Agricultural cost 22,000 – – – – – 65,370 42,460 – 23,439 – 19,562 8624 – 10,752
Agritourism cost 86,270 4000 6360 – – 6000 23,000 44,950 4438 20,800 – 3500 – – –
B.3.2 Land income 8000 3500 2000 – 1000 6000 5200 10,000 2500 406 900 – 3750 3150 6000
B.4 Implicit costs 103,796 77,242 57,871 72,905 42,131 132,918 119,069 185,592 82,509 59,968 95,478 80,155 67,106 59,078 58,993
B.4.1 Land income 8000 3500 2000 – 1000 6000 5200 10,000 2500 406 900 – 3750 3150 6000
B.4.2 Interests 5796 1742 1871 905 5131 36,918 5869 13,592 8009 5,562 4,578 8155 9356 1928 16,993
B.4.3 Family wages 90,000 72,000 54,000 72,000 36,000 90,000 108,000 162,000 72,000 54,000 90,000 72,000 54,000 54,000 36,000
Page 9 of 21
Table 3 Agritourism revenue details
N. Opening Restaurant Annual revenue per N. Opening Overnight stays’ Annual revenue per Other Revenue other
seats months revenue seat beds months revenue bed practices practices
c
1 110 12 a, b, 206,000 1873 15 12 19,500 1300 –
Arru et al. Agricultural and Food Economics

a
2 120 12 56,000 467 9 12 18,900 2100 d 200
c
3 100 12 22,000 220 – – – – –
4 30 12 a 27,000 900 10 12 7200 720 d 2362
a
5 250 12 25,000 100 25 12 21,000 840 –
(2021) 9:27

6 150 12 b 140,000 933 – – – – d 6000

a
7 80 12 62,500 781 24 12 1600 67 –
8 80 12 c 79,000 988 24 12 66,300 2,763 e 6750
a
9 100 12 25,000 250 12 12 3000 250
10 35 6 22,500 643 15 6 21,600 1440 –
a
11 40 12 8750 219 10 12 2800 280 –
12 120 12 18,000 150 – – – – –
13 30 12 30,000 1000 16 12 3840 240 –
14 – – – – 12 12 5000 417 –
15 – – – – – – – – d, f 2450
a
On request
b
Weekends only
c
Activities concentrated in the months between May and September
d
Educational farm
e
Agri-camping
f
Tastings
Page 10 of 21
Arru et al. Agricultural and Food Economics (2021) 9:27 Page 11 of 21

With reference to the costs, we found heterogeneous results among farms regarding
the incidence of items and distribution of costs between agricultural and agritourism
activities.
To be more precise, when we considered hired labour (wages), we found that on four
farms, the work is done exclusively by the farmers. The data did not show a link be-
tween the intensity of hired labour and the share of revenue derived from agritourism
on-farm activities on the whole. It must be pointed out, however, that the farm that re-
ported the highest incidence of agritourism in terms of revenue (11; almost all GFR is
composed of agritourism practices) shows the highest hired labour cost. This suggests
that on this farm agritourism has increasing relevance and is actually in a more devel-
oped phase according to the Arnold and Staudacher model.
The balance sheet analysis findings show that one farm has a negative NFR (Table 4),
meaning that the farm production process consumes more input than the income it
produces. Furthermore, if the explicit costs of labour and land income are taken into
account, the situation becomes worse, given that other two farms show negative values.
Taking into consideration the implicit cost as well, it appears that only 10 farms show
positive WFI. This means that 33% of farmers interviewed are not even able to at least
partially reward their work at the market price level. Moreover, going into the WFI de-
tails, the findings show that few farms achieve a congruous level of WFI. Indeed, WFI
appears positive but under 10,000 euros at five farms; therefore, considering that WFI
involves both implicit wages and profits, it implies that income generated is far from
adequate.
Finally, the estimation of implicit wages allows us to understand whether farm family
work is adequately rewarded and whether the activity is eventually profitable (the posi-
tive difference between WFA and implicit wages). For this assessment, the basic salary
of a permanent non-specialised worker was calculated based on the so called “local law
salary tables”—normative tables that indicate a reference for salaries in agriculture and

Table 4 Results from balance sheet analysis

Item/farms 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15
Net farm 108, 58, − 30, 18, 163, 103, 267, 8751 58, 13, 3671 222, 7755 13,
revenue 309 318 9317 675 504 030 359 950 551 465 789 335
(NFR)
A – (B.1 +
B.2)
Net income 39 54, − 29, 15, 156, 14, 170, − 14, 12, − 214, 7448 2583
(NI) 318 15, 800 004 586 989 540 3187 072 865 19, 165
677 391
NFR –
(B.3)
Working − 49, − 28, 8873 113, 3920 146, − 8104 7387 − 201, 2370 −
farm 13, 076 19, 895 668 948 13, 27, 059 20,
income 757 548 696 546 410
(WFI)
NI – (B.4.1
+ B.4.2)
Profit (or − − − − − 27, 23, − − − − 45, − 82, − 147, − −
loss) 103, 22, 73, 43, 127 668 104, 15, 85, 896 613 99, 059 51, 56,
757 924 548 105 080 052 696 546 630 410
(A – B)
Arru et al. Agricultural and Food Economics (2021) 9:27 Page 12 of 21

that they are used for setting the contract salary—, which indicate 1200 euros per
month (i.e. approximately 1500 euros including social security and sickness benefit at
market price levels). Such value was applied for each family member based on the
amount of work they perform on the farm. Consequently, only two farms (6 and 13)
fully reward family work and show a positive profit.

Remarks from economic indicators analysis

Some economic indicators were calculated to give more detailed information about
agritourism productivity and profitability.
The first indicator is the GFR per hectare, which gives information about land prod-
uctivity. Using the utilised agricultural area (UAA) for measuring used land, we calcu-
lated productivity (LaP) as follows:

La P ¼ GFR=UAA ð6Þ

We found that diversity in GFR cannot be precisely attributed to land productivity

(Table 5). Indeed, it appears that there is not a strong relationship between GFR and
productivity, although the notable point is that the two farms with the lowest UAA (4
and 10) are those with the largest LaP. Specifically, farm 10 shows land productivity
sensitively higher than the average.
However, considering the small size of the observed sample, we applied the non-
parametric Spearman’s rank correlation test to verify a possible correlation between
LaP and farm revenue. Results reported in Table 6 show that the correlation is weak
and not statistically significant (for α = 0.10). At the same time, no significant correl-
ation was found between LaP and WFI, implying that land is not a factor that signifi-
cantly affects farmers’ incomes.
A second indicator concerns labour productivity. Farm diversification can lead to
positive effects for family-run farms in creating value and, as a consequence, increasing
economic productivity, with special reference to labour productivity. Furthermore, we
expect to save costs (e.g., transaction costs) and increase labour productivity due to rec-
reational services and other related activities downstream of agriculture.
A previous study found that labour tends to be less efficient, in terms of single-input
efficiency estimated, than most of the inputs in agritourism farms, especially in Sardinia
(Arru, 2019). This would occur because the weight of labour involved in recreational
activities does not exceed the labour spent in agricultural practices according to the
Italian regulations on agritourism. This constraint implies that farmers are not fully
able to divide labour based on their own needs, with probable consequences in terms
of efficiency (inefficient allocation of the input) and productivity.
Furthermore, we observed extensive employment of family work, often for both agri-
cultural and recreational activities. This can represent a source of inefficiency due to
difficulty in achieving rational work allocation.
In the light of these considerations, we calculated the labour productivity (LbP) for
each farm, as follows:

Lb P ¼ GFR=WU ð7Þ

where WU represents working unit (WU = 1800 working hours according to EU

indications).
Table 5 Diagnostic indicators related to balance sheet analysis
Item/farms 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15
Arru et al. Agricultural and Food Economics

Land productivity
Gross farm revenue (Euro) 226,400 84,250 26,000 48,303 81,400 291,800 150,300 405,410 77,500 141,300 37,450 62,400 260,840 39,267 68,950
Utilised agricultural area(UAA) 72 60 10 9 80 100 70 140 60 3 36 195 60 45 21.5
Land productivity (LaP) 3144 1404 2600 5367 1018 2918 2147 2896 1292 47,100 1040 320 4347 873 3207
(2021) 9:27

Labour productivity
Gross farm revenue (Euro) 226,400 84,250 26,000 48,303 81,400 291,800 150,300 405,410 77,500 141,300 37,450 62,400 260,840 39,267 68,950
Working hours (WU) 5.00 4.00 2.23 4.00 2.00 5.33 5.50 0.72 2.16 5.20 2.20 3.22 4.00 2.30 2.61
Labour productivity (LbP) 45,280 21,063 11,659 12,076 40,700 54,747 27,327 563,069 35,880 27,173 17,023 19,379 65,210 17,073 26,418
Agritourism revenues/gross farm revenues
Gross farm revenue (Euro) 226,400 84,250 26,000 48,303 81,400 291,800 150,300 405,410 77,500 141,300 37,450 62,400 260,840 39,267 68,950
Agritourism revenues (Euro) 225,500 75,100 22,000 36,563 46,000 146,000 64,100 152,050 28,000 44,100 11,550 18,000 33,840 5,000 2,450
Agritourism/GFR 0.996 0.891 0.846 0.757 0.565 0.500 0.426 0.375 0.361 0.312 0.308 0.288 0.130 0.127 0.036
Capital/labour ratio
Capital (Euro) 193,183 58,06 62,36 30,17 171,027 1,230,600 195,637 453,07 266,95 185,396 152,602 271,821 311,881 64,25 566,417
Working hours (WU) 5.00 4.00 2.23 4.00 2.00 5.33 5.50 0.72 2.16 5.20 2.20 3.22 4.00 2.30 2.61
Capital/labour 38,637 14,515 27,964 7,543 85,513 230,882 35,570 629,264 123,027 34,151 69,364 82,391 77,252 27,935 217,018
Page 13 of 21
Arru et al. Agricultural and Food Economics (2021) 9:27 Page 14 of 21

Table 6 Spearman’s rank correlations among diagnostic variables and some balance sheet analysis
findings
Variable 1 Variable 2 Coefficient p value
Land productivity (LaP) Gross farm revenues (GFR) 0.396 0.138
Land productivity (LaP) Working farm income (WFI) 0.332 0.214
Labour productivity (LbP) Gross farm revenues (GFR) 0.921 0.001 ***
Labour productivity (LbP) Working farm income (WFI) 0.485 0.069 *
Agritourism revenues/GFR Gross farm revenues (GFR) 0.157 0.556
Agritourism revenues/GFR Working farm income (WFI) 0.164 0.539
Agritourism revenues/GFR Labour productivity (LbP) 0.010 0.968
Capital/labour ratio Gross farm revenues (GFR) 0.371 0.164
Capital/labour ratio Working farm income (WFI) − 0.032 0.904
Capital/labour ratio Agritourism revenues/GFR − 0.325 0.224
N = 15

Table 5 shows the LbPs calculated. A sensitive degree of heterogeneity was found
among the calculated LbPs and a significant relationship between revenue and product-
ivity was estimated (Table 6). In other words, the most productive agritourism farms
(concerning labour) are most probably the same farms characterised by the highest rev-
enue. This suggests that labour significantly affects production, and as a consequence,
rational and efficient use of labour would improve the ability to increase the farm’s
gross revenue. Furthermore, efficient use of labour and the consequent effects on pro-
duction would generate positive outcomes in profitability. Indeed, both profitable farms
(6 and 13) show higher labour productivity than the sample even if the most productive
farm (8) shows no profitable activity. Any evident relationship was found between
labour productivity and the stage in which lie the farms according to the Arnold and
Staudacher (1981).
The relationship between labour productivity and working farm income is weaker
than the one mentioned above (Table 6), but it is still significant. Obviously, it depends
on the weight of familial and hired work, which differs among the observed farms.
A third diagnostic indicator is the ratio of agritourism revenue to total GFR (Table 5).
As reported above, this ratio is sensitively variable, mainly depending on two factors:
the phase achieved by the agritourism farm in its development process (some farms are
at the beginning stage of agritourism diversification) and the need to respect the nor-
mative prevalence constraint. According to these factors, the calculated ratio would re-
flect different agritourism models. Indeed, a significant correlation was estimated
between this ratio and the GFR and WFI. This suggests that the weight of agritourism
revenue with respect to the farm’s gross revenue can be an indicator of the develop-
ment phase the agritourism business is in according to the Arnold and Staudacher
framework, but cannot itself be considered as an efficiency indicator, i.e. as a proxy for
the farmer’s ability to be productive and remunerative. However, findings reported in
Table 5 put on evidence as the farms that lie in third development stage show, on aver-
age, a greater value in this indicator (0.895) than the others (0.497 and 0.242 for that
operating at phase 2 and 1, respectively).
On the other hand, we also estimated the correlation between this ratio and the LbP
indicator. The results suggest that a significant relationship exists, and it implies that
Arru et al. Agricultural and Food Economics (2021) 9:27 Page 15 of 21

the sources of farm value, agritourism services or agriculture stricto sensu, are not gen-
erally related to labour productivity. This means that labour productivity affects farm
revenue but is not prevalently oriented to a specific farm activity, at least so far.
The last indicator calculated is the ratio of capital invested to labour used, which
would reflect the level of capital intensification at the observed agritourism farms. Cap-
ital was defined in terms of fixed capital (e.g., buildings, plants, machinery) and working
capital.
The fourth indicator also shows heterogeneous values (Table 5), implying different
degrees of capital intensification (or, vice versa, labour intensification) among the
farms. The agritourism farm showing the highest ratio is number 8, even if it is not
profitable. At the same time, other farms (especially 6, 9, and 15) reveal a high ratio of
capital for the labour involved, but capital intensity does not lead to their profitability,
or at least to achieving a positive working farm income. This result would indicate
overcapitalization of these farms and inefficiency in using capital.
The estimation of the relationship between this indicator and other variables would
confirm farm overcapitalization. Indeed, a not significant correlation between capital
intensification and GFR was found, probably depending on the fact that some farms
have invested capital for agritourism services but this activity is not yet well developed.
This can be underlined also considering the correlation between this indicator and the
impact of agritourism practices on GFR. Even if not statistically significant, we found
an inverse relationship, implying that the decision to move towards management with a
higher rate of capital, probably due to replacing more of the business with agritourism,
has not yet transformed into a shift in revenue towards agritourism.
Furthermore, any correlation between the value of this indicator and the development
phase of the agritourist farms was found.

Discussion and conclusion

In 1975, the EU priority in the LFAs definition was the farm income level. In 2005, the
focus of EU attention shifted to the natural handicaps suffered in the regions, preferring
them as criteria to define LFAs for socio-economic consideration (Castel et al. 2011).
Nowadays, the situation has not basically changed.
To deal with the exodus from farms located in LFAs, the abandonment of agricultural
land, and the loss of biodiversity, rural cultural heritage and, in broad terms, the coun-
try’s history and culture (Cooper et al. 2006), direct EU payments for farming represent
pivotal income support for family farm businesses within LFAs (Takayama et al. 2019).
However, they cannot lead to achieving the goal of maintaining the population in these
areas if the farm families operating in such areas are not adequately paid for their
work.
In this study, we examined the ability of farms in the LFA of Montiferru to reward
family work by adopting diversification strategies through the establishment of
agritourism.
First of all, the analysis focused on the diversity of revenue and the relative sources
among farms. We found that such characteristics cannot be associated with specific
business farm models (Broccardo et al. 2017) but are preferably linked to the ability of
individual farms to use their resources and to differentiate the activity. We observed a
sensitive heterogeneity among selected farms that allows us to assume that they operate
Arru et al. Agricultural and Food Economics (2021) 9:27 Page 16 of 21

in different development phases based on the theoretical model proposed by Arnold

and Staudacher (1981). Some farms would be placed in the initial phase of develop-
ment, e.g. few beds and no reduction in agriculture labour in favour of agritourism.
The consequence is a lack of presence, which can lead to a deficit situation. This is be-
cause the Montiferru region is in the involvement stage of Butler’s model (1980) and is
attracting near-allocentric seasonal tourism, which, moving from the most renowned
areas of Sardinia, asks for more adequate structures. Certainly, the level of seasonality
“undermines business profitability and the capacity to reinvest and renew the infra-
structure” (Pulina et al. 2006, p. 1014). Moreover, the seasonality issues affect also the
other main activity. Arru et al. (2019) found that especially restaurant services are not
fully utilised in agritourism in the Montiferru region—since these services are cali-
brated taking into account the highest summer tourist flow—making agritourism farms
inefficient. However—even if it is a remote hypothesis—at the basis of low rate of effi-
ciency in restaurant services might be the lack of adequate skills in agritourist farmers
(e.g. depending on the development stage in which they lie). Farmers should provide a
broader range of services and attractions to deseasonalise the business and thus supple-
ment the income and boost employment (Pulina et al. 2006; Arru et al. 2019).
In this study, we found that capital intensification is not sensitively related to profit-
ability, or at least the ability to increase the family income. These data could depend on
the inefficient use of services, especially restaurants, as reported above, depending, on
the one hand, on the seasonality of such activities (Parte-Esteban et al. 2015; Mhlanga
2018), and, on the other, by the fact that these farms are operating in the initial phase
of development.
Another group of farms would be placed in the second phase of Arnold and Stauda-
cher’s model, showing an adequate balance between agriculture and tourism. On these
farms, agriculture and tourism revenue are quite equal to each other and are often rein-
vested in agriculture.
The “prevalence constraint” in favour of agriculture would be respected in terms of
revenue or use of labour (the labour used for agritourism cannot overcome that used
for agriculture). The labour factor explains the critical role played by tourism activities
in generating farm profit. Indeed, they are family businesses that took the multifunc-
tionality path not only to increase their sources of income but also to make their farms
autonomous with regard to the family’s occupational needs (Cardillo and Cimino
2017). The data suggest that farm family members find job opportunities on the farms
and that these chances increase with increased agritourism activity. On the other hand,
a great prevalence of agritourism within agricultural practice can lead farms to ineffi-
ciency, especially in labour use, due to the need to ensure prevalence in agriculture
work, and it can affect the ability to achieve satisfactory remuneration.
Indeed, the last group is composed of farms where agritourism is the main activity,
and therefore they are in a phase characterised by the importance of diversification in
the farm strategy. However, we found that this high specialization in agritourism is not
correlated with the economic dimension of the farm, implying, among other things,
that strategies highly devoted to diversification are also promoted by small farms even
if their economic performance is generally unsatisfactory.
The labour productivity results are linked to production size. This implies that more
efficient use of labour is one of the main tools for achieving a good level of economic
Arru et al. Agricultural and Food Economics (2021) 9:27 Page 17 of 21

production. Therefore, on these types of farms, it is important to balance three needs:

rational labour allocation, and respect for the prevalence of agriculture practice in
terms of labour involved and/or revenue achieved.
Another important point to consider concerns the ability of farms to generate con-
gruous WFI. Only two companies are able to remunerate the work of family members
equal to the minimum wage and, as a consequence, to be (more or less) profitable. Re-
suming all these arguments, we can conclude that, on the one hand, agritourism gener-
ates jobs for farm family members, but, on the other hand, this labour, which is defined
in reference to the hourly labour cost established by the provincial rates, is not ad-
equately remunerated or, in some instances, is not rewarded at all. Therefore, the
choice to pursue a path of differentiation allowed these newly established farms located
in LFAs to integrate the farm income, although it is not enough yet.
This result can be analysed through a double reading. The first interpretation con-
siders the farmer incapable of valuing his work. As shown by previous studies on agri-
tourism (Phelan and Sharpley 2011), although agritourism has become more
established as a means to integrate farm income, this development path can be affected
by the lack of key business competencies needed for success. This, in turn, impacts
LFA development, and this lack of skill needs to be addressed through training courses
to support agritourism farmers. In particular, on need programs that take into account
the special relationship between the farmer and the farm that has to see as business
(Vik and McElwee 2011). The farm understood as a firm (Tohidyan Far and Rezaei-
Moghaddam 2019) required a more market-orientation in order to survive (Phillipson
et al. 2004; Meert et al. 2005; Jones et al. 2009), and farmers have to increase their
managerial knowledge to respond to the growing demand for food and rural tourism
demand adequately. Indeed, “the recognition of business opportunities and strategic
planning are major requirements for farmers. Through this, farmers are able to find
ways and strategies to create a profitable business” (Vik and McElwee 2011, p. 392).
The second interpretation arises from the fact that farmers and their families gener-
ally live on the farm and consume the products obtained from the activity, and often
their first goal is to achieve socio-emotional well-being. Such forms of revenue are
hardly summarised to a synthetic economic value that can be added to the NFR. Fur-
thermore, the value they attach to lifestyle is never included in the balance sheet
analysis.
If the farm’s goal is to obtain the highest level of WFI, not all farms achieve it.
However, the challenge must be not only to make the WFI positive, but also to
generate a profit that allows farms to increase the range of possible strategic
choices; to favour economic, social and environmental resilience; and to overcome
the vulnerability of rural areas. The demand for recreational activities on farms has
increased over the last decades and is expected to increase in the future (Barbieri
et al. 2016). The development of agritourism allows farmers to capture new food
tourists’ demand (Hall et al. 2004) and increase the agricultural production that
can be sold, raising farm income and encouraging farmers to seek new innovative
strategic paths that increase their profit. More generally, given that food tourism is
pivotal in regional tourism promotion, which, in turn, is a vital element of agricul-
tural development (Hall 2003), agritourism in LFAs may be an appropriate re-
sponse to farms’ income problems.
Arru et al. Agricultural and Food Economics (2021) 9:27 Page 18 of 21

Moreover, a noteworthy fact that cannot be attributed to the case is that one of the
two companies showing positive results is the only one connected to a path of enhance-
ment of local products, the Malvasia di Bosa wine route. This route draws on the main
products of the area in order to promote the territory, and with it the wineries and
agritourism, as well as hotels and restaurants, through the different paths of land-
scape—environmental and cultural interest. Furthermore, four other companies belong
to national associations, two to LAG, and one has joined a consortium aimed at pro-
tecting indigenous grape varieties and local specialties. These data show the potential
benefit of including agritourism in food and wine routes, which provides a chance to
show up for the increasing demand for food experiences.
Our analysis shows the potential of agritourism to be a valid tool to support farms in
LFAs. However, when the strategic objective is to avoid farm families leaving these
areas, their work must be given a fair return. The challenge is to ensure that these
farmers, whether they want to stay in the market and develop an increasingly competi-
tive tourism market, embrace the challenge of changing their goals and creating busi-
nesses that maximise profit. Wider and greater tourism supply, as well as greater
business skills and adherence to food and wine routes, can be viable options for the
future.
The main impact of this study lies in considering the role of working farm income in
determining the achievement of farm goals. The analysis of overall economic farm
profit (Deepashree 2013) including both explicit and implicit costs allowed us to evalu-
ate the opportunity cost of a farmer and/or his family members working on the farm.
Indeed, although the socio-emotional factors cannot be ignored, the study of LFAs can-
not disregard the analysis of a farm’s ability to pay for all the resources used in its activ-
ity. Farmers are called to transform their agritourism in terms of structures and
mentality (Ciolac et al. 2019) inasmuch, although the achievement of long-term profit-
ability may not be the firm’s purpose, it is a condition for its continuity and growth
(Brunelli and Carlo 2019), as well as to create new wealth and wellness for rural
community.
A final remark comes from the need to increase the business skills of farmers and
their family members as well as highlighting exposure opportunities in the channels
that most attract food tourism demand.
With reference to policy issues, it is well accepted that agritourism integrates farm in-
come, and conserves and creates value for rural area (Broccardo et al. 2017). Neverthe-
less, because cooperation and networking skills are pivotal prerequisites to realise
business opportunities (Vik and McElwee 2011), business skill development pro-
grammes and the promotion of local operator networks are needed in order to avoid
the depopulation of LFAs and care for the landscape. Several companies are in the first
stage of Arnold and Staudacher (1981), and their structure is not adequate to respond
properly to the growing food and rural tourism demand. However, due to the reason-
able circumstance in which less profitable businesses have a lower chance to access to
capital and vice versa, the state or local government authorities can make easier access
to external financial resources, for example, developing programs that would financially
support agritourism with their initial fixed costs. Although in the new Common Agri-
cultural Policy (CAP) there is an “intervention group” aimed at supporting investments,
tangible and/or intangible, which contribute to the achievement of the specific
Arru et al. Agricultural and Food Economics (2021) 9:27 Page 19 of 21

objectives of the PAC, the above purpose clashes with the 14.7% reduction in the EAFR
D fund allocation for Italy (European agricultural fund for rural development) for the
2021–2027 period. It should be noticed that the eighth key objectives of the future
CAP “Vibrant Rural Areas” aimed at favour jobs and growth in rural areas has to deal
with the peculiarity of farm entrepreneurs and the fact that “farmer are motivated by
things other than financial reward” (Vik and McElwee 2011, p. 393). The European
Union must invest in programs that push towards a change in the mentality of the
farmers, who have to look not only at socio-emotional well-being and accounting
profit, but also overall economic profit. Only the latter can be a valid measure of farm
efficiency in achieving the goals, i.e. farm families being rewarded for their work, and
obtaining a profit that makes the strategic choices for farm survival actually feasible.
In addition, in light of the other key objectives of CAP 2021–2027 inspired by the en-
vironmental, social and economic dimensions of sustainability, and the role of recre-
ational activities in sustainability promotion, and good agricultural practices
encouragement, with a positive impact on farms, households and rural territory devel-
opment (Tew and Barbieri 2012; Mastronardi et al. 2015; Flanigan et al. 2015), it is par-
ticularly important that policy-makers promote a shift of perspective of farmers
perhaps too focused on subjective success factors (Mäkinen et al. 2009) towards a new
agritourism business model that aims to increase firm’s profitability—that is in line with
“with economic and non-economic benefits for society and the local community”
(Broccardo et al. 2017, p. 2). This represents a viable option for overcoming the lags of
farm income behind the rest of the economy. Finally, in light of the advantages offered
by the network of local entrepreneurs and the “g” group of CAP “cooperation” inter-
ventions, the activity of the States should be directed towards the development of these
activities in the LFAs areas.
In terms of academic implications, this study shows the need to expand research on LFAs
in terms of analysing the elements that can contribute to maintaining the population in these
areas, starting from the farms’ overall economic profit. There are clear limitations to the case.
First is the small sample size, although it covers nearly all agritourism in the area. Second, it
relates to one specific Italian region. Clearly, further large-scale studies or comparative studies
in other LFAs are needed, but the study provides a sound starting point.
Abbreviations
Ce: Explicit cost related to the provision of capital (interests); Ci: Implicit cost related to the provision of capital
(interests); GFR: Gross farm revenue; If: Cost for the depreciation charge on fixed technical inputs; Iv: Cost for the use
of variable inputs; LAGP: Live animal gross profit margin; Le: Explicit cost related to the ownership of the land (land
income); Li: Implicit cost related to the ownership of the land (land income); NFR: Net farm revenue; NI: Net income;
P: Profit (or loss); Tx: Value of taxes paid; Vfi: Value of the livestock at the end of the n year; Vii: Value of the livestock at
the beginning of the n year; Vp: Value of meat purchased in an n year; Vs: Value of meat sold in an n year; We: Explicit
cost for remunerating work (wages); WFI: Working farm income; Wi: Implicit wage

Acknowledgements
Any person or institution needs to be acknowledged.

Authors’ contributions
The study was jointly carried out and written by the authors. All authors read and approved the final manuscript.

Authors’ information
BA and FM are junior and senior assistant professors, respectively, at the University of Sassari (Italy). RF and PP are full
professors at the University of Sassari, Italy.

Funding
This research was carried out by the PROMETEA (PROmozione della Multifunzionalita dEl seTtorEAgro-turistico) granted by
the INTERREG Marittimo-IT FR-Maritime EU Programme.
Arru et al. Agricultural and Food Economics (2021) 9:27 Page 20 of 21

Availability of data and materials

The datasets analysed during the current study are not publicly available due to confidentiality of personal data but
are available in a restricted form from the corresponding authors on reasonable request.

Declarations
Competing interests
Each author discloses any actual or potential conflict of interest including any financial, personal, or other relationships
with other people or organizations that could inappropriately influence, or be perceived to influence, their work. The
funders had no role in the design of the study; in the collection, analyses, or interpretation of data; in the writing of
the manuscript, or in the decision to publish the results.

Received: 21 December 2019 Revised: 25 March 2020

Accepted: 15 June 2021

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