Changes in EU agricultural policies towards additional focus on rural development issues raise questions regarding the economic impact of local/spatial competition. Traditionally, farmers have typically been price takers in markets for major agricultural products. This is, however, not necessarily true in the case of local markets for “new enterprises”. This article examines local/and spatial competition for farm tourism services, specifically “Self catering” in Sweden. The results show that spatial dependences exist and have to be considered in the econometric estimation of the hedonic pricing model. Using spatial econometrics it is shown that the price is affected by the average price, the demand for and supply of lodging in the regional market. Notable is that the results indicate that local competition has a positive effect on the price while regional competition has a negative effect. Marketing channels used as well as size and ranking of the service were found to affect the price of lodging. Diversification does not seem to positively affect prices. The findings illustrate the potential importance of local competition for rural developments studies. It also raises questions concerning policies promoting diversification and multifunctionality as a way of revitalizing urban areas.