Rural landscape in Slovenian Istria is highly attractive for tourism as a special cultural landscape offers exploring many natural and cultural heritage elements. Nevertheless, the majority of tourists and economic development are concentrated on the narrow coastline. Many traditional settlements in city outskirts are exposed to stagnation and degradation, mainly due to the aging population and emigration. Only few young people, who are generally not in touch with tradition and the environment, return to rural areas. Therefore, architecturally rich buildings fall into decay or are poorly renovated. One of the possible renovations of traditional settlements and socio-economic development of rural areas is to establish a scattered hotel (albergo diffuso) model. This model is based on a linear layout of activities in each decaying building in a settlement to focus on recovery and development of the settlement. Degraded and abandoned buildings are renovated for the purpose of the scattered hotel, using local resources, cooperating with locals and offering tourist development with an emphasis on learning about the natural environment, cultural heritage, tradition and the people. Settlements in Slovenian Istria were analysed by using spatial analysis and fieldwork, and then we specified certain criteria for selecting settlements that are suitable for establishing the model. We decided to set up the pilot model in settlement Padna in municipality Piran, where locals have already committed to the rural tourism development. Because almost half of the buildings in the settlement are abandoned, we designed a concept for a scattered hotel. We also warned about the potential problems before starting the first project in Slovenia and tried to indicate solutions by using examples of good practice from Italy, where for decades scattered hotels have been the leading tourist product as a niche in sustainable rural tourism.