Maybe it's worth doing at as a luxury B&B? I think with 8 rooms, you are asking for a lot of hassle, for little reward.
However, you could do a hostel with private rooms and see how well the privates sell. You could buy some bunks, and single beds and put them in the rooms and see how they sell. No point investing 1000s in either concept until you test it, or know it will work. Make sure you include breakfast and internet - very important. I wouldn't worry too much about doing a complete/full cooked breakfast. Something simple like a large selection of cereals, fruit, bread, spreads, savouries, tea/coffee/juice, etc. :)