Research Note
RN 00/77 26th September 2000
THE SCOTTISH TOURISM INDUSTRY
The Scottish Conservatives have called for a parliamentary debate on the Scottish tourism industry on Thursday 28th September 2000. This research note examines some recent trends in the sector and provides statistics on Scotland’s performance in developing a successful tourism industry. This note is intended to complement an earlier SPICE research note on tourism, which examined the structure and issues facing the industry in greater detail. Further information on the tourism industry and the Ossian project has been provided by the Scottish Tourist Board and is available in the Reference Centre.
Tourism has been identified as Scotland’s most important industry 1, one that injects £2.5 billion annually into the Scottish economy; an industry that is the country’s fourth largest employer; and one that pays the wages of more people than the oil, gas and whisky industries combined. In February 2000 the Scottish Executive unveiled its Tourism Strategy, which committed an additional £11 million in funding. The Executive’s commitment to tourism is also made clear in ‘The Way Forward – the Framework for Economic Development in Scotland’, which identifies tourism as a key policy area. Promotion of the tourism industry is seen as a means of contributing towards economic development in urban and rural areas, and a means of promoting social justice and the ‘environmental objective’.
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Scotxchange.net – the official website of the Scottish tourism industry.
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A New Strategy for Scottish Tourism The Executive’s strategy on developing tourism as an industry within Scotland is described in ‘A new Strategy for Scottish Tourism’, published in February 2000. The strategy says Scotland has the assets to become a ‘world class tourism destination’, as long as the industry is modern, embraces the culture of lifelong learning, and provides the highest quality of service. The document sets out the responsibilities of some of the main players in Scottish tourism: British Tourist Authority
Generic marketing of Britain as a holiday destination Represents Scotland in 27 overseas offices Consults STB on how Scotland is represented in pan-Britain activity
Scottish Tourist Board
Attracts visitors to Scotland Advises the industry on market trends Operates Quality Assurance Schemes Advises government on tourism development Supports ATB network
Area Tourist Boards
Promote local area Provide visitor services Focus for trade to reach markets Development and implementation of Area Tourism Strategies
Local Enterprise Companies
Business development Skills development Product development Environmental improvement
As well as the bodies outlined above there are other agencies with major roles in the tourism industry. (Comprehensive information on who does what in Scottish tourism is available on the Scotexchange website) Highlands & Islands Enterprise (HIE) aims to develop the ‘quality tourism experience’ to realise the full economic and social potential of the area. Developing tourism in the Highlands and Islands is pursued by HIE through three strategic objectives: growing businesses, developing skills and strengthening communities. The Scottish Enterprise Tourism Network undertakes a range of strategically focussed activities that are delivered via the LEC network. Local authorities supply the main source of funding for visitors ATBs, as well as providing a wide range of services to businesses and the public The Scottish Tourism Forum brings together the many trade associations and bodies, including corporate players, in the tourism and hospitality industry in Scotland. Its key objectives are to represent industry and tourism operator views to government and public agencies, and to add value to investment and policy decisions that will contribute to Scotland's international competitiveness. European funding (particularly through the European Regional Development Fund) has been crucial in enabling millions of pounds worth of tourism projects to
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be implemented in recent years. These range from major capital projects to marketing initiatives. STB liases with Scotland Europa and BTA's Europe Manager on all European issues relating to tourism, including financial issues relating to Euro policy. The Executive is currently carrying out a review of the enterprise network to ensure that it remains ‘appropriate, effective and relevant’. This review will encompass the network’s tourism role. In the Executive’s Interim Conclusions of the Enterprise Network Review, the Enterprise Minister said:
“We will be asking the Chairman of the Tourist Board to undertake a review of the fit between the organisation’s capabilities, its relationships with other organisations and the tasks which we require it to perform, taking into account any relevant information from abroad. I will expect to receive this report by December.”
The Executive has, for the time being, rejected a call for Area Tourist Boards to be centrally funded by the Scottish Tourist Board. At present ATBs are part-funded by the STB, and the Executive has provided a guarantee of this funding for a further three years. Local authorities are also partly responsible for funding ATBS, although the level of funding they provide has dropped off since 1996. New arrangements have been devised to try and ensure a more consistent supply of funds from local authorities to ATBs. The Executive will look again at the funding structure and, if the position of the ATBs has not improved, the case for central funding will be reviewed. The tourism strategy identifies a number of other agencies with an input into tourism in Scotland: Historic Scotland, Scottish Natural Heritage, sportscotland, Scottish Arts Council and the Scottish Museums Council The strategy also identifies the key areas where the tourism industry must improve if the full potential of the sector is to be realised: • • Keeping up to date with the latest technology as a means of understanding the demands of customers and communicating with them effectively. Improving the marketing of Scotland, to persuade Scots to holiday in their own country and to develop niche markets to encourage more foreign visitors to Scotland. Improve quality in the industry by displaying charges and prices clearly; creating quality advisers through the Scottish Tourist Board; producing a national transport timetable. Improving skills and service quality through the establishment of an industryled Tourism Skills Body, and by increasing the number of tourism workers with Modern Apprenticeships. Improving the structure of tourism funding in Scotland to promote collaboration and avoid duplication.
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•
•
To measure the success of these measures, and all the other initiatives contained in the tourism strategy, the Executive has set a number of identifiable targets to establish whether the industry is improving:
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Headline indicators Total number of tourist trips
The value of tourism expenditure in 1999 prices The value of tourism expenditure in Scotland by English visitors The value of tourism expenditure in Scotland by Scots The value of tourism expenditure in Scotland by USA visitors The value of tourism expenditure in Scotland by German visitors The value of tourism expenditure in Scotland by French visitors The volume of tourism in all ATB areas The average Scheme score Quality Assurance
Target by 2005 Will be 14.3 million, which represents a 3.0% annual growth rate since 1999. Will be £3.1 billion, a 3.3% annual growth rate since 1999. Will be £1,275 million, a 2.5% annual growth rate since 1999. Will be £490 million, a 3.0% annual growth rate since 1999. Will be £331 million, a 5.0% annual growth rate since 1999. Will be £110 million, a 4.0% annual growth rate since 1999. Will be £44 million, a 2.0% annual growth rate since 1999. Will grow by at least 50% of the national average. Will increase from 2.8 to 3.0. Will increase from 75% to 78%
The % of visitors who would definitely recommend Scotland for a holiday or short break The satisfaction rating* for those visitors whose experience exceeded their expectations
Will increase from 3.88 (1999) to 4.00.
* Satisfaction rating expressed as a scale of: 1 (much worse than expected) to 5 (much better than expected). Industry indicators are to be seen as the collective responsibility of the industry and not of any one agency. Activity indicators are to be checked by the agencies given responsibility for them in the strategy. To ensure that targets are being met a number of initiatives have been proposed by the Executive: • The Scottish Tourism Co-ordinating Group will be replaced with a review workshop chaired by the Minister. This will bring the various public sector agencies together with industry representatives. • A new group will monitor the implementation of the Scottish tourism strategy. • A new Scottish Tourism Research Liaison Group will be established. • Area Tourism Strategies will be reviewed in 2001 by ATBs, LECs, local authorities and other local partners. • An annual report will be presented by the Scottish Executive to allow the industry to monitor progress.
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Progress so far Since the launch of ‘A New Strategy for Scottish Tourism’ a number of proposed measures have been developed further. A key feature of the Executive’s strategy to boost tourism in Scotland has been the launch of the ‘Ossian’ website. The Scottish Executive estimates that some £6million of public funding will have been put into the project by spring 2001. This includes some £2m spent by the Scottish Tourist Board, followed by a further investment of £4m announced at the time of the launch of the Strategy in February 2000. The service will allow tourists to use credit cards to book accommodation in Scotland through the Internet. Launching the project in July, Enterprise Minister Henry McLeish described the Internet as the ‘most powerful marketing tool in the world’ and said the value of world-wide on-line bookings would rise by $30 billion in the next three years – which could amount to a £360 million increase in revenue for Scotland. To ensure Scotland’s share of this lucrative market, Mr McLeish set a target of 90% of all accommodation in Scotland trading on-line by 2005. There have been 17 bookings to the 48 ‘turned on’ businesses on visitscotland.com since the launch of on-line booking in July this year. However, newspaper reports have painted an unflattering picture of the success of Ossian so far. One report 2 quoted the Federation of Small Businesses in Scotland as saying that Ossian “is incapable of delivering on-line bookings” with “major inconsistencies in how the site is laid out”. An accommodation provider in the Borders is quoted as saying: “Ossian is a long way behind private sector sites” and “The technology is already out of date...I wouldn’t be surprised if they eventually …write the whole thing off”. The project was also criticised by an e-commerce entrepreneur giving evidence to the Enterprise and Lifelong Learning Committee’s inquiry into the New Economy. Richard Irwin, who provides online booking for hotels across the world, said the project had extravagantly used up public money:
“We (all-hotels.com) built up a business from a relatively small base, but now around 60,000 properties are bookable online through our site. The investment that was required to get to that position was around £200,000. Investment in the Ossian project has been many times more than that, and still nothing has been delivered. We could have provided the project with that technology for a small proportion of what has been spent so far. I am rather angry about the Ossian project.”
A recent study by the Moffat Centre for Tourism3 at Glasgow Caledonian University provided some information on the importance of the Internet to the tourism industry, in terms of how significant on-line purchasing of travel products would become. The study claimed that some of the headline projections on Internet use were correct - namely that over a third of the travel buying population will purchase travel products on-line in the future. However this does not mean that a third of travel industry sales will come from the Internet, rather that this third of the population will buy some of their travel on-line and some of it off-line. The optimistic estimates for on-line travel sales are probably based on this third of the
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Sunday Herald Business, page 5, 13/9/00 UK SURVEY OF TRAVEL PURCHASING ON-LINE, MOFFAT CENTRE FOR TRAVEL & TOURISM BUSINESS DEVELOPMENT, 1999.
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travel population buying all or at least a significant part of its travel from the Internet. The results showed that personal service is still a high consideration for many people and the complexity of travel arrangements meant there will always be a place for knowledgeable intermediaries. This is because there will always be complex products - the Internet does not change the nature of the product only its distribution. The authors concluded that the UK is significantly behind the USA in terms of both the volume and value of Internet sales to travel firms. UK markets – both buyers and suppliers – have traditionally been behind the likes of the USA in the uptake of new technologies and there is little evidence to suggest that Internet usage is any different. Overall, however, the Internet and related technologies will no doubt have a significant impact on the travel industry but not to the extent of significant disintermediation – that is, the bypassing of the travel agent to the extent that this intermediary will no longer be economically viable. It is more likely that the Internet will become an extra channel for both buyers and sellers to use – some to a greater or lesser extent than others. The STB state 4 in relation to Ossian that:
“Visitscotland.com, the customer facing portal, and the ‘back room’ ‘ossian’ development team is much more than a website. Ossian comprises of a central database system with on-line bookable capability which now holds detailed and dynamic information on over 16,000 tourism products and services in Scotland which is accessed by 10 000 potential visitors to Scotland every day. These Scottish products and services on line and searchable within www.visitscotland.com have been put there at NO COST to tourism businesses. Businesses also have the opportunity to ‘enhance’ their prominence on the site with additional information and imagery through promotional opportunities offered by ATBs. As part of the PPP initiative, six consortia have now been selected from 45 original enquiries to the OJEC (Official Journal of the European Commission) procurement process, to present proposals on the development of the Ossian project within a PPP. This shows how visionary STB and its stakeholders have been in developing the project over two and a half years ago - there are now private sector partners willing to invest in its future.”
A second element of the tourism strategy has been the attempt to create or develop niche tourism markets by capitalising on Scotland’s major assets. ‘A New Strategy for Scottish Golf Tourism’ was launched in July aimed at increasing the annual spend on golf tourism by over 4% and securing more internationally prestigious international golf tournaments – including the 2009 Ryder Cup. At present the golf tourism market is estimated at being worth £100 million a year to Scotland. The aims of the golf strategy are as follows: • Develop new marketing campaigns for Scottish golf involving spending of up to £500,000 by the Scottish Tourist Board
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Personal communication with the STB.
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• • • • • • • • •
Invest in business development through a further £400,000 from Scottish Enterprise and £250,000 from Highlands and Islands Enterprise Appoint a new National Golf Tourism Development Manager to lead the implementation of the Strategy Focus on attracting more women and children to the courses in Scotland; Implement training packages to assist golf clubs with marketing, business planning and service Establish regional golf development groups to improve the service to visiting golfers throughout Scotland Develop the network of 'golf classic' events to improve access for visitors to attractive golf packages Provide support for the development of infrastructure and facilities for visitors in Scotland's golf clubs Improve the industry's market intelligence by researching golf markets and golf consumer Identify new channels through which to promote Scottish golf to consumers, including its two main websites www.visitscotland.com and www.scottishgolf.com Introduce new research methods to monitor the way golf tourism is measured and therefore the progress of the Strategy.
Alasdair Morrison, Deputy Minister for Tourism, has identified genealogy as a second key niche market and has called for the exploitation of a ‘world-leading genealogy Internet database.’ Like golf, this sector is one that particularly appeals to American tourists, with 400,000 coming over to Scotland each year. Mr Morrison has asked the Scottish Tourist Board to make the development of genealogical tourism a priority. The Tourism Strategy identified a range of other potential niche markets at the local level: culture, sailing, fishing, cruising, bird watching, archaeology, and winter sports including skiing. In March, Nicol Stephen, Deputy Minister for Enterprise and Lifelong Learning, said that Scotland should be aiming to capitalise on the £235 million activity holiday sector. Alisdair Morrison launched Scotexchange.net, a website providing up to date market information for the tourism industry, on 26 June 2000. The site contains details of the main groups involved in tourism, and a range of information about target audiences and what they are looking for when they visit Scotland. On September 19th 2000, Henry McLeish announced the membership of the new Tourism Skills Group. The Group has been charged with ‘putting Scotland first for quality of service by developing workers’ skills and training.’ The 14 people on the group will consult with the industry and education sectors to devise a remit and timetable for a new training and skills programme. The Group will also help the industry to achieve the Executive’s target of 1,000 Modern Apprenticeships by 2003 and 5,000 Individual Learning Accounts by 2002. 5
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Target identified by Deputy Tourism Minister Alasdair Morrison, press release SE0417/2000
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Criticism of the Tourism Industry While the Executive has been keen to stress the importance of tourism to the Scottish economy and has announced a series of policy initiatives, criticism of its approach endures. The recent petrol demonstrations demonstrated the high cost of fuel in Scotland compared with the rest of the UK, a factor which is felt disproportionately acutely in the remote highlands. The Scottish Tourism Forum 6 which represents private sector interests, has voiced its concern about the state of the tourism industry in Scotland: • This is the third summer in succession where tourism revenue and numbers are disappointing and fail to meet expectations – leading to the flattening out of growth trends in Scotland, against the world trend of continuous growth. Edinburgh’s and Glasgow’s product and visits are in growth – implying that tourism in the rest of Scotland is in sharp decline. Government (Scottish Executive) and the public agencies have failed to demonstrate their commitment to the industry and to finding solutions
• •
The Forum claims that:
“There is increasing intolerance and cynicism about the commitment of politicians and the capability of public agencies to take the lead in marketing Scotland and to make infrastructure investments to create a positive environment for business. Some issues are the remit of Westminster and Gordon Brown, but the failure of the Executive to press Scotland and tourism’s case is considered by many in the industry as a failure of the Scottish system. Industry was heartened to see tourism move to centre stage in the debate about the economy. But not enough action has taken place to demonstrate the Executive’s commitment to back up the words of the strategy. Industry now knows that there was no new money committed.”
It identified the following areas as ‘current challenges’: • Government fiscal policy; • The value of the Pound; • Increased costs within the industry; • Increased costs for the visitor, especially petrol prices; • Failure to deliver Ossian and effective web/e-commerce strategy; • Inadequate level of funding for marketing of Scotland overseas and in rest of UK; • The status and recognition of the importance of the industry; • Political commitment to tourism • Dedicated champion for tourism at political level • Need for industry to demonstrate its commitment and willingness to adapt to the marketplace The Moffat Centre for Tourism at Glasgow Caledonian University has also identified a number of issues facing the industry in Scotland:
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Private correspondence with the Scottish Tourism Forum
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The marketing budget for tourism in Scotland, through the Scottish Tourist Board, is significantly lower than in Ireland. Private sector development of the Ossian project may be more flexible and dynamic than the current model. There is a need to bring in call centre technology, for example the ability to provide interactive responses, to Scotland’s Tourism Information Centres. In some parts of the country, tourists may have to make several phone calls to find out basic holiday information, rather than be able to rely on a ‘one stop shop’. There is no real geographical connection between the local enterprise companies, local authorities and Area Tourist Boards. There is a danger that this could lead to a duplication of services and a lack of awareness of what other agencies are doing.
The Cost of Holidaying in Scotland Although there is a lack of specific research looking at the effects of the high cost of the pound on the Scottish tourism industry, there is some information available. The Scottish Tourism Forum 7notes that:
“Industry associations and individual owners/managers are consistently suggesting that visitors, from overseas as well as from within Scotland and the rest of the UK, find costs high and value for money harder to achieve. This impacts upon the domestic market, where the attraction of holidaying abroad is in part about value for money and the relative low cost compared to holidaying at home. The pound must have a role to play in this equation. Overseas visitors consistently complain of costs, where exchange rates make costs in the UK appear high. Added to this is the cost of petrol and ferry costs that has the impact of discouraging visitors to visit more rural and remote areas. An indication of the strength of industry feeling about the value of the pound lies in the number of submissions to the Scottish Minister for Enterprise and Lifelong Learning, in his consultation exercise in resulting in the publication of the new tourism strategy for Scotland, mid February 2000. In the consultation, 586 written submissions were made, of which • 137 commented on the need to reduce fuel prices • 112 commented that Scotland was an expensive destination for visitors • 99 commented on the importance of fiscal issues on tourism performance.”
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Highlands of Scotland Tourist Board conduct a twice-yearly “barometer” of 150 accommodation providers. The latest survey has just been completed (September 2000) and according to HOST returns indicate that the strength of the pound is the single most important factor identified by the trade. This is a factor that has been quoted consistently over recent surveys. The Tourism Attitudes Survey 1999, Final report, prepared by System Three for STB and SNH, and published February 2000, (579 questionnaires returned from visitors to Scotland) included the following conclusion:
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Letter to House of Commons Library
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“Overseas visitors did not expect Scotland to be a low cost destination before their visit and after their visit, if anything the perceptions were of prices being higher than expected and significantly higher than they would expect to pay in their own country for certain goods and services”
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At a Scottish level the Moffat Centre for Travel and Tourism, at Glasgow Caledonian University conducts a monthly Visitor Attraction Barometer (a representative sample of 227 attractions). The 1999 annual Visitor Attraction Monitor asked visitor attraction operators to name the factors that affected the number of tourists. The most common negative factors quoted were the weather (22% of respondents) and the strength of pound (28% of respondents). The Monitor also states that:
“For many operators the relative strength of Sterling in comparison to ECU currencies was seen as having the dual effect of discouraging European visitors and encouraging the domestic market to consider European markets ass opposed to Scotland. “The related area of high fuel costs was a concern for many. Both national and international visitors reported concern in respect of the high proportion of the holiday budget being allocated to transport.”
Figures comparing Scotland’s tourism structure with the rest of the UK are available in the House of Commons report, ‘The Tourism Industry’ Research Paper 00/66. The PQ below compares the levels of funding for 1999/2000, and expresses them in terms of expenditure per head. The English Tourism Council receives significantly less per head than the Scottish and Welsh Boards. It has been argued by previous Governments that this is because the tourist industry in England is well established and so does not need the same level of assistance as the industry in Wales, Scotland and Northern Ireland.
Mr. Hoyle: To ask the Secretary of State for Culture, Media and Sport how much per head of population was spent on the promotion of tourism in (a) England, (b) Scotland, (c) Wales and (d) the UK in the last year for which figures is available. Janet Anderson: In 1999-2000, the National Tourist Boards are receiving grant-in-aid as follows:
Board Grant-in-aid (£ million) Population (million) Grant-in-aid per head of population (£) 0.24
English Tourist Board (Now English Tourism Council) Scottish Tourist Board Welsh Tourist Board British Tourist Authority
11.8
49.59
19.3 15.4 36
5.11 2.94 57.64
3.78 5.24 0.62
Note: The population figures used to calculate the BTA's grant-in-aid per head exclude Northern Ireland
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Statistical Indicators of Scotland’s tourist industry
The following charts indicate some of the general trends affecting Scotland’s tourist industry.
Visitors to Scotland from UK (millions)
(source United Kingdom Travel Survey) 12 11.1 10.5 10 8.9 8.2 8 7.7 9 8.5 9.7 9.8 10.5
6
4
2
0 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
Visitors to Scotland from Overseas
(source International Passenger Survey) 2,500 2,090 2,000 1,800 1,708 1,600 1,500 1,620 1,760 1,920 2,000 2,140 1,937
1,000
500
0
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
The two graphs above indicate numbers of visitors to Scotland from the UK and from overseas. These show a drop in numbers of UK visitors between 1997 and 1998 and a drop in numbers of overseas visitors between 1998 and 1999.
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Expenditure in Scotland by UK Visitors(£m, unadjusted)
source UK Travel Survey £1,800 £1,600
£1,422
£1,690 £1,493 £1,300 £1,192 £1,036 £1,222 £1,194 £1,536
£1,667
£1,400 £1,200 £1,000 £m £800 £600 £400 £200 £0 1990 1991 1992 1993 1994
1995
1996
1997
1998
1999
Overseas visitors estimated spend in Scotland (£m unadjusted)
source International Passenger Survey and STB 1200
1000 837 800 660 618 600 556 501 400 768
965 923
940 845
200
0 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
The picture for expenditure patterns shows a broadly similar picture to that for the visitor numbers. However it should be noted that spending totals for overseas visitors decline from 1997 onwards, whilst the visitor numbers declined a year later.
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Comparisons for the the first six months of 2000 - January to June Occupancy Rates (source System Three for STB)
70
60
58 51
56
57
56 53
hotel room occupancy self catering
50
40
%
40
43 41
43 41 37
42 40 36 28
42 39 37 29
hotel bed occupancy B&B room occupancy
30
30
B&B bed occupancy
20
10
0
1996
1997
1998
1999
2000
Occupancy levels amongst accommodation providers provide a measure of capacity useage, though the degree of seasonality should also be remembered in interpreting the overall figures. The figures are also produced relatively quickly, and this allows a degree of comparison for the first half of 2000 with the same period in previous years. Occupancy levels in some sectors have been reasonably consistent, whilst hotel room occupancy rates for example have seen a slow decline between 1996 and 2000.
Changes in Business Optimism in the Scottish Tourism Industry
(compares to previous three months, source Scottish Tourism Business Monitor,q2 2000, Frraser of Allander Institute) 50 45 40 35 30 25 20 15 10 5 0
19 % 23 21 21 18 34 34 32 32 27
47 43
47
47
47 44 39
26
more optimistic same less optimistic
99/q1
99/q2
99/q3
99/q4
00/q1
00/q2
The Fraser of Allander Institute conducts a quarterly survey of tourism businesses asking a variety of questions. On general optimism (compared to the previous three month period) sometimes seen as a useful lead indicator the above graph
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provides the headline figures. This indicates that for the latest reported quarter (2nd quarter 2000) the numbers feeling more optimistic declined from 27% to 18% of respondents, whilst the numbers reporting less optimism increased from 26% to 39%. These figures should be set in the context of a relatively consistent 40-50% of respondents each month of the survey since the first quarter of 1999 who have neither felt more nor less optimistic.
Research Notes are compiled for the benefit of Members of the Scottish Parliament and their personal staff. Authors are available to discuss the contents of these papers with Members and their staff but cannot advise members of the general public.
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