Back to the Scottish Parliament Economy, Energy and Tourism Committee Report
Archive Home

Business Bulletin 1999-2011

Minutes of Proceedings 1999-2011

Journal of Parliamentary Proceedings Sessions 1 & 2

Committees Sessions 1, 2 & 3

Annual reports

SP Paper 141

EE/S3/08/R6

  Next

6th Report, 2008 (Session 3)

Growing Pains - can we achieve a 50% growth in tourist revenue by 2015?

CONTENTS

Volume 1: Report

Remit and membership

Report

Introduction
Who’s who in tourism?
The 50% revenue ambition

Key issues

The 50% ambition
Decluttering the public/private framework that supports the industry
The investment challenge
Addressing education, training and skills needs
The role of technology, electronic communication and marketing
The role of events
The future relationship between the public and private sector
Transport and connectivity

Conclusions and recommendations

Introduction
Targets and ambitions
Clarity of functions
Education, training and skills
Technology, marketing and communication
Events
The future relationship between the public and private sector in tourism
Transport and better connections

Data provision and collection
One year on

ANNEXE A: EXTRACT FROM THE MINUTES

3rd Meeting, 2007 (Session 3), Wednesday 5 September 2007
5th Meeting, 2007 (Session 3), Wednesday 3 October 2007
6th Meeting, 2007 (Session 3), Wednesday 24 October 2007
7th Meeting, 2007 (Session 3), Wednesday 7 November 2007
9th Meeting, 2007 (Session 3), Wednesday 28 November 2007
11th Meeting, 2007 (Session 3), Wednesday 12 December 2007
1st Meeting, 2008 (Session 3), Wednesday 16 January 2008
2nd Meeting, 2008 (Session 3), Wednesday 30 January 2008
3rd Meeting, 2008 (Session 3), Wednesday 20 February 2008
4th Meeting, 2008 (Session 3), Wednesday 5 March 2008
5th Meeting, 2008 (Session 3), Wednesday 10 March 2008
6th Meeting, 2008 (Session 3), Wednesday 19 March 2008
7th Meeting, 2008 (Session 3), Wednesday 26 March 2008
8th Meeting, 2008 (Session 3), Wednesday 16 April 2008
9th Meeting, 2008 (Session 3), Wednesday 7 May 2008
11th Meeting, 2008 (Session 3), Wednesday 21 May 2008
12th Meeting, 2008 (Session 3), Wednesday 28 May 2008
13th Meeting, 2008 (Session 3), Wednesday 4 June 2008
14th Meeting, 2008 (Session 3), Wednesday 11 June 2008
15th Meeting, 2008 (Session 3), Wednesday 25 June 2008

Volume 2: Evidence

ANNEXE B: ORAL EVIDENCE AND ASSOCIATED WRITTEN EVIDENCE

ANNEXE C: LIST OF WRITTEN EVIDENCE

Remit and membership

Remit:

To consider and report on the Scottish economy, enterprise, energy, tourism and all other matters falling within the responsibility of the Cabinet Secretary for Finance and Sustainable Growth apart from those covered by the remits of the Transport, Infrastructure and Climate Change and the Local Government and Communities Committees.

Membership:

Brian Adam (Deputy Convener)1
Gavin Brown
Rob Gibson2
Christopher Harvie
Marilyn Livingstone
Lewis Macdonald
Tavish Scott (Convener)
Dave Thompson
David Whitton

Committee Clerking Team:

Clerk to the Committee
Stephen Imrie

Senior Assistant Clerk
Katy Orr

Assistant Clerk
Gail Grant

Growing Pains - can we achieve a 50% growth in tourist revenue by 2015? (Volume 1)

The Committee reports to the Parliament as follows—

Introduction

1. According to the national tourist board – VisitScotland – Scottish tourism was worth, in expenditure terms, just over £4.1 billion in the most recent statistics from 2006.3 Furthermore, the industry employed a little over 218,000 people, or about 9% of the total number of people employed in Scotland (in 2006).4 In some parts of Scotland, such as the Highlands and Islands and Perthshire, the proportion of people employed in the industry relative to employment rates generally rises to as much as one-in-eight.5 As such, tourism is a critically important sector of the Scottish economy and more so in certain areas of the country.

2. As a reflection of how important the tourism sector is, it is currently listed as one of the six main priority industries identified by the Scottish Government’s enterprise agencies as key growth sectors. To stimulate growth, the Scottish Government has chosen to continue with the previous administration’s strategy set out in the Tourism Framework for Change document.6 A central component of the strategy is an analysis which indicates that the Scottish Government and the tourism industry should adopt an ‘ambition’ of increasing gross tourism revenues by 50% (in real terms) by 2015, using the revenue figures for 2005 as the baseline.7

3. The question identified by the Committee as the focus of this inquiry was, therefore, one of whether this ‘ambition’ was achievable and, if so, how would it be realised. To address this question, the Committee launched its inquiry in November 2007, culminating in this report.

Remit and terms of reference

4. The remit of the inquiry was as follows—

“… to inquire into the feasibility of meeting the Scottish Government’s ambition for a 50% increase in revenue from tourism by 2015 [and] to identify the key challenges and suggest measures to overcome these.”8

5. The specific questions identified by the Committee to be addressed during the course of the inquiry were—

  • How realistic is the proposed ambition for a 50% increase in revenue in the tourism sector by 2015? How was this ambition set and on what basis can it be reached?
  • How can the amount of revenue taken per tourist be increased by the necessary levels without prejudicing value for money and the experiences of the visitor?
  • How widely known and accepted is the 50% growth ambition amongst all sections of the tourism industry - public and private sector - and how engaged are all with their role in meeting the ambition?
  • What are the specific challenges in Scotland’s tourism industry in relation to skills, training, quality standards, service levels and leadership and how can these be overcome?
  • What are the other challenges in meeting the growth ambition and what can be done by both the public and private sectors to overcome these?
  • What are the implications of the Scottish Government’s plans for VisitScotland, how will its role change, particularly in relation to its relationship with the enterprise network and Scottish Development International, and its increased responsibilities for attracting international visitors?
  • What can be learned from best practice in other parts of the UK and internationally in terms of meeting the challenges, particularly to encourage people to view the tourism industry as an exciting and viable career option?

The inquiry

5. Over the course of the Committee’s ten-month inquiry, over 75 submissions of written evidence were received and over 70 witnesses appeared before the Committee to give oral evidence in person. The Committee also held a formal meeting in Aberdeen in addition to those that took place in Edinburgh, and made informal fact-finding visits to Inverness, Aviemore, the north-west and north-east of England, as well as Iceland and Austria. The Committee is grateful to all those organisations and individuals who gave their time and expertise to participate in these meetings and visits.

Adviser

7. The Committee appointed Professor John Lennon, Director of the Moffat Centre for Travel and Tourism at Glasgow Caledonian University, as its adviser. The Committee wishes to thank him for his expertise and advice during the course of the inquiry.

Who’s who in tourism?

8. There are, of course, a large number of organisations and individuals responsible for, or involved in, tourism in Scotland. However, the main players and their key roles are as follows—

Public sector or joint public-private

  • The Minister for Enterprise, Energy and Tourism in the Scottish Government – has portfolio responsibility for tourism in the Scottish Government, reporting to the Cabinet Secretary for Finance and Sustainable Growth;
  • The Minister for Europe, External Affairs and Culture in the Scottish Government – has portfolio responsibility for culture and heritage in the Scottish Government, reporting to the First Minister;
  • VisitScotland – the national tourist board, with responsibilities for national marketing, quality, information and, latterly, developing interests in investments, product development etc;
  • VisitScotland.com – a joint public-private body with responsibilities for marketing and information provision, chiefly through its website, www.visitscotland.com;
  • VisitBritain – the UK’s national tourist board, responsible to the UK Government but which also promotes Scotland internationally in countries where VisitScotland has no or little representation;
  • Scottish Enterprise and Highlands and Islands Enterprise – the two economic development agencies, with interests in product development, training and development, investment, quality assurance schemes etc;
  • Skills Development Scotland Ltd – the newly established agency for skills and training and responsible to the Scottish Government;
  • People 1st – the sector skills council for the hospitality, leisure, travel and tourism industries and responsible to the UK Government;
  • Scottish Development International – a jointly owned body of the Scottish Government and the two enterprise agencies with a responsibility for attracting inward investment and encouraging Scottish companies to internationalise;
  • EventScotland – a subsidiary of VisitScotland with responsibility for attracting, creating and developing sporting and cultural events throughout the country;
  • Other government bodies and agencies, such as Historic Scotland, the national collections and museums, the Forestry Commission, Scottish Natural Heritage etc;
  • Local authorities – with interests and responsibilities for product development, marketing initiatives, orientation and signage, training, events etc;
  • City marketing bureaux – such as Glasgow City Marketing Bureau, which is engaged in national and international activity comprising of organising conventions, incentives, events, meetings and exhibition sales, conference and event accommodation bookings, development and implementation of the city branding campaign etc;
  • Other city-based public-private partnerships such as the Edinburgh Tourism Action Group (ETAG), which exists to co-ordinate tourism in Edinburgh.

Private sector groups

  • Various trade bodies, such as the Scottish Tourist Forum (STF), Association of Scottish Visitor Attractions, Tourism Innovation Group, Association of Scotland's Self-Caterers, Historic Houses Association, The Scottish Tourist Guides Association etc;
  • The various area/regionally-based private industry groupings set up broadly as destination marketing organisations (DMOs), such as Destination Loch Ness, Aviemore and Cairngorms Destination Management Ltd etc.

9. From a cursory glance at the above list, it is immediately obvious that the institutional landscape is complex and often, seemingly, with overlapping spheres of interest and responsibility. This is an issue we will return to later in this report.

The 50% revenue ambition

10. At the core of this inquiry is the question of how achievable is the ambition of increasing revenue from tourism by 50% by 2015, using 2005 as the base year. This has been variously described to the Committee as the Scottish Government’s target, the industry’s target, a joint target or an ambition, and also as easily achievable or, alternatively, challenging or even unrealistic.

11. The genesis of the 50% figure is the research and analysis conducted by the working party that drew up the then Scottish Executive’s Tourism Framework for Change strategy document. Achieving the target was predicated on a number of scenarios and assumptions, including the following—

  • It is thought likely that the biggest market increase will continue to come from the strongly growing overseas leisure market, including VFR (visiting friends and relatives), predominantly from Europe and the eastern US and Canada but also from further afield. Current trends support the view that revenue could more than double.
  • Business tourism revenues could almost double. The UK business tourism market will probably grow more strongly than the overseas market.
  • It is likely that the UK leisure market will continue to grow but fierce competition will mean that it will probably do so more slowly than the overseas market.9

12. According to the analysis, revenue growth of around 50% over the next decade does not mean an increase in visitor numbers of 50%. It is more likely to be driven by an increase in visitor numbers of perhaps 20% by 2015, with the rest of the growth coming from increased spend per head as the industry gets better at offering a wider variety of experiences and products to meet our visitors’ expectations10.

13. The ambition of a 50% revenue growth over the decade between 2005 and 2015 requires an average annual growth rate of around 4%. In real terms then, the 50% target should not be an immense challenge. To date, however, the reality of achieving the objective is much more problematic.

14. In the most recent figures available, VisitScotland indicated that the total value of tourism to Scotland actually decreased by around 2% in 2006 to £4.1 billion from a little over £4.2 billion in the baseline year of 200511. This represented a significant fall off from the previous growth years of 2001 onwards.

15. According to Jim Mather MSP, Minister for Tourism, the as yet unpublished figures for subsequent years (2007) show an improved situation. In evidence to the Committee, he stated that “we have improved marginally, but not materially, on the 2005 position”.12 This view is not supported by VisitScotland, which told the Committee in additional written evidence that a comparison of 2007 with 2006 still shows further marginal decline. Its submission stated—

“In summary, the 2006 vs. 2007 data for Scots overnight stays in Scotland does show declines in Trips, Nights and Spend, but these are being driven by the business and VFR [visits to friends and relatives] markets. The holiday market (i.e. the target for VisitScotland’s consumer activities) bucks the trend; showing increased trips, nights and expenditure (historic prices). If adjusted for inflation, expenditure shows a marginal decline.”13

16. The Committee will return to the issue of the 50% revenue growth ambition in subsequent sections of this report. However, it is worth pointing out at this stage that building up an accurate and timely picture of what is happening in the industry in terms of visitor numbers, expenditure and other trends is not straightforward.

key issues

17. During the course of the inquiry, a number of key issues were identified by the Committee. These were—

  • The value of the 50% revenue growth ambition;
  • Decluttering the public/private framework that supports the industry;
  • The investment challenge;
  • Addressing education, training and skills needs;
  • The role of technology, electronic communication and marketing;
  • The role of events;
  • The future relationship between the public and private sectors;
  • Transport and connectivity.

18. Each of these key issues is discussed in turn below.

The 50% ambition

19. The origin of the ambition to increase the revenue from tourism by 50% by 2015 has been covered in preceding sections of this report. In summary, this objective was identified by the then Scottish Executive’s in the Tourism Framework for Change report, the main elements of which have been carried forward as the policy of the new Scottish Government following the May 2007 elections.

20. In evidence to the Committee, Peter Lederer, Chairman of VisitScotland, describes the 50% figure as “an ambition that was based on good thinking”.14 He also indicated that “although the statistics say that we are not on the right trajectory to meet the target at the moment […] many individual businesses are on that trajectory.”15

21. The Scottish Tourist Forum (STF) is similarly supportive of the 50% figure stating that it “believes the figure of 50% growth is still achievable given an integrated agency and industry approach to assist in strengthening and expanding the offer.”16 Furthermore, the STF commented that “this figure was set by industry itself as an ambition to focus attention and effort on a clear way forward.”17

22. Based on the evidence received by the Committee, the reality of industry awareness of the target and buy-in is more of a mixed picture. For example, the Scottish Chambers of Commerce told the Committee that—

“There is widespread awareness of the 50% growth ambition across the industry. However, commitment to, and engagement with, delivery is distinctly split. On the one hand, the larger organisations and consortia have been fully engaged with achieving growth. On the other, small- and medium-sized enterprises (SMEs) have been detached from the process, lacking the direction and encouragement fully to participate in the process.”18

23. Similarly, one leading hotel chain – Travelodge – told the Committee in its written submission that—

“In regards to awareness of the target there seems to be total lack of engagement, any public/private attempts to work together and a noticeable absence of momentum in all quarters. It is not good enough to just print documents with fanciful targets, the industry bodies need to engage and lead the tourism businesses – these are the people that are going to deliver the growth.”19

24. Likewise, Smart City Hostels told the Committee in its written evidence that—

“We don’t believe that the 50% growth target is well known or understood by businesses, nor what they need to do to contribute/be involved. Businesses just “get on with their job”, without reference to the target.

We’re a £10m invested business and have not been engaged or communicated with on the target, and what we need to do to be involved, by VisitScotland. With some limited exceptions, we don’t find industry communication by VisitScotland coherent or consistent.”20

25. Outwith the national picture, key local authorities, such as the City of Edinburgh Council, are confident of performance relative to the 50% figure. In its evidence, the Council told the Committee that—

“Achievement of the ambition target will be challenging to achieve uniformly across all sections of the industry and geographies of Scotland. Edinburgh, with the appropriate continued levels of investment in infrastructure (product in business and leisure tourism), should exceed targets.”21

26. Similar views on achievability were expressed by other local authorities, such as Aberdeenshire Council, Glasgow City Council (which considers a figure of 80% may even be possible) and Highland Council. However, other local bodies, such as the Edinburgh Chamber of Commerce were less sure. This organisation told the Committee that the “high level growth ambition is looking increasingly difficult to achieve.”22 Similarly, North Lanarkshire Council indicated that the 50% figure “may be too ambitious”,23 and Argyll and Bute Council which said that there “is little evidence that there is the capacity within the industry for such a significant growth target.”24

27. In terms of the Scottish Government, the new administration has adopted the Tourism Framework for Change strategy and, in relation to the 50% target, has indicated its support. In evidence to the Committee on this matter, the Tourism Minister said, “I am absolutely four-square behind it [the 50% ambition] although, again, I am not naively saying that it is perfect”.25

28. It is clear to the Committee that meeting the target/ambition will be a challenge. This was the case at the very outset when the target was set in 2006 and since that date, the economic circumstances facing the tourism industry have changed markedly and the operating environment has toughened significantly. Recent exchange rates changes, especially the US dollar against Sterling, as well as rising fuel prices, closure of the Rosyth to Zeebrugge ferry, problems with the west coast rail line with England etc., will all contribute to the difficulties of attracting visitors to Scotland in the first place, let alone the challenge of increasing the revenue take.

29. Increasing the amount of money that tourists spend when they visit Scotland is not about increasing prices. Rather it is a delicate balance between quality and affordability. If the quality is right and the price not excessive, then tourists are likely to spend more, especially if there is also more to see and do which in turn also encourages in longer stays. However, if the product is not of sufficiently high quality then Scotland will not be perceived as a value for money destination and the visitor numbers, as well as expenditure, will fall.

Analysis by the Committee’s adviser

30. According to our adviser, the tourism industry in Scotland can defined as the hospitality (accommodation, food and beverage), attraction and activity sectors. Of these, the most significant in terms of employment and economic impact is the hospitality sector. There is little doubt that within this sub-sector, accommodation is the key creator of revenues and herein the first evidence of a supply issue emerges. Unlike some competitors, Scotland has accommodation supply that is dominated by small- and medium-sized enterprises (SMEs). The majority of these SMEs are positioned in the mid-market quality sector. According to recent research, there are somewhere between 17,000-19,000 businesses in this sector. The vast majority of such operations have less than 20 bedrooms and a significant majority have less than 10 bedrooms.

31. In our adviser’s view, the absence of branded hotel chains is also important in the context of a sector dominated by independently-owned operations. The presence of an international or national hotel brand is a primary indicator that a location can support a recognisable operator of a comparable size to elsewhere in the tourism marketplace. In examination of the presence of branded hotels in the Scottish market it is apparent that there is a clear concentration in the urban economies of Edinburgh and Glasgow. After that, provision is very patchy with no significant clusters elsewhere. Apart from cities and key centres of population branded properties become relatively scarce. The Westin Turnberry, Gleneagles, The Fairmont St. Andrews and to a lesser extent the Aviemore complex offer the most significant resort style properties of consequence.

32. Worth highlighting too is the importance of seasonal demand and the impact that this has on SME stock. Furthermore, business and conference tourism tends to be concentrated in the urban centres further polarising the demand levels of urban and rural/coastal/island locations.

33. The result of the above is that the accommodation sector in Scotland – key to achieving the 50% target – is characterised by a small number of large-scale providers and a very high number of small-scale, independently-owned businesses. Encouraging each and every one of these to buy-in to the revenue ambition and to reach this target in terms of their own operations will be an immense challenge.

Our view

34. Subsequent sections of this report will return to the issue of how to work towards meeting the 50% revenue growth ambition and what needs to be done. However, at this stage, the Committee believes that ultimately the revenue target/ambition provides clarity of vision in terms of where the public sector and the industry needs to aim.

35. As the owner of Boots ‘n’ Paddles, a small tourism firm based in the Highlands and Islands, told the Committee, “there is an argument that achieving the target is irrelevant and that simply setting the target has galvanized the industry into collaboration and action.”26

36. We agree that awareness of the ambition is still patchy and that there is a vast difference between a private company being aware of the target and actually being prepared to invest in its own business and its employees to achieve such revenue growth itself. It is important that both the public and private sectors work in partnership towards meeting the ambition.

37. The Committee also believes that in addition to setting a target/ambition, it is important to keep progress under review and to be able to respond flexibly as different conditions are faced. This means being able to take remedial action and also respond tactically to changing economic circumstances or trends in tourism over the coming decade.

Decluttering the public/private framework that supports the industry

38. In a preceding section of this report - who’s who in tourism – the Committee has identified some of the main public and private sector organisations involved in supporting the tourism industry and their key roles. From this simple analysis, it is already clear that there is significant potential for overlap, duplication and confusion.

39. For example, the Local Government (Scotland) Act 1973 prohibits local authorities from marketing their area for tourism purposes and from being involved in the booking and provision of information relating to accommodation. However, many local authorities are actively involved in activities not dissimilar to this. In fact, in its evidence to the Committee, the local authority umbrella group, COSLA, stated that—

“Local Authorities have the legitimacy to lead on destination promotion for their own locales as a result of these new arrangements [transfer of local economic development functions from the enterprise agencies] – drawing on their roles the links in promoting investment and talent promotion and local accountability/local business connections.”27

40. Much of the evidence supplied to the Committee stresses the importance of a partnership approach between the many different organisations involved. In evidence to the Committee, VisitScotland stated that “collaborative action is required if the 50% growth ambition is to be realised and this must be two way.”28 To assist, the new Scottish Government has proposed a closer working arrangement between VisitScotland, Scottish Enterprise, Highlands and Islands Enterprise and the jointly-owned Scottish Development International.

41. Similarly, at a local or regional level, VisitScotland created 18 area tourism partnerships (ATPs) following the demise of the area tourist boards. These partnerships are reputedly action orientated, bringing together local players from across the private and public sectors, such as tourism operators, local tourism groups, Chambers of Commerce, Local Authorities, local enterprise companies29 and VisitScotland. Each partnership is tasked with agreeing the priorities for action at a local level and for producing a local tourism action plan.

42. However, despite these area tourism partnerships, seperate local networks are springing up, which also appear to be involved in developing and marketing tourism at a local and/or regional level. One such example are the destination management/marketing organisations such as Destination Loch Ness, which is a group of some of Loch Ness’ biggest private businesses who are working together to take a proactive approach in improving the area’s economy.30

43. According to evidence submitted by one of the leading trade bodies, the Scottish Tourism Forum, it is “only through a co-ordinated approach from both public and private sectors over the next few years” that opportunities can be provided for sustainable growth within the industry, spreading economic benefit across the entire country.31 Furthermore, the STF notes that “a collaborative approach to destination management should be encouraged with clear areas of responsibility to ensure objectives are met and reduce the risk of a cluttered landscape.”32

44. Views from the business community on the current public sector institutional framework are mixed. Most of the evidence points to a welcoming of efforts to encourage public bodies to work closer together and align strategies. However, as the CBI Scotland questions in its evidence, there “certainly remains a plethora of public and quasi-public agencies involved in the tourism sector, but do they effectively and efficiently work together and demonstrate value for money?”33

45. One example cited by the CBI is the new ‘Welcome to Scotland’ advertising slogan and signage that greets visitors to Scotland’s major airports. As the CBI notes, the web address contained within the advertisements directs visitors to the devolved government’s website and not, more logically, to the VisitScotland website. In its view, “this appears to be an example of a lack of joined-up government.”34

46. According to Smart City Hostels, the Scottish tourism industry “remains fragmented, with smaller businesses finding it difficult to contribute to industry leadership.”35 The company believes that “industry leadership needs to be strengthened but so too must the public agencies and government listen to operators.”36 Its submission further notes that “in a fragmented industry, larger businesses inevitably are better resourced to put management time into leadership, networking and engagement with policy makers, government and public agencies. But that leaves smaller businesses with a limited voice. Local collaboration, private sector led marketing and promotion and other forms of industry initiative need to be genuinely supported to encourage leadership and innovation.”37

47. This view is supported by the Federation of Small Business (FSB) in Scotland which indicated that it “essential that VisitScotland and the enterprise networks focus more strongly on fully engaging with small businesses, rather than treating them as a mass market, and develop much better communication processes to ensure that the small business voice is taken into account.”38

48. Furthermore, the FSB believes that having VisitScotland “working more closely with the enterprise networks is desirable, if it allows a clearer focus and more joined-up approach to the development and marketing of the tourism product. However, there will continue to be conflicts if the role and responsibilities of each agency are not clearly demarcated and agreed on both sides, with a clear national lead and co-ordination of work which can then be carried out at a local level.”39 The organisation also believes that “there must be a strong relationship established with the new skills agency [Skills Development Scotland Ltd] to ensure that the training and skill needs of tourism businesses are better understood and integrated with the development of training programmes, particularly for smaller businesses.”40

49. In his evidence to the Committee, when questioned specifically on the issue of skills and training provision, the Tourism Minister himself indicated a willingness to consider the public sector framework that supports the industry. He told the Committee that “having taken on board the decluttering message ourselves, I am always susceptible to having further decluttering.”41 He also stated, more generally, that—

“In the landscape of Scotland, each and every agency that is out there is perhaps motivated to optimise its position in isolation. The key activity is to generate as much dialogue as possible in the sector, to see how agencies might work together better to optimise the whole system. We have a north star of a 50 per cent increase in revenues as a target. I want agencies to talk to one another in more open dialogue, so that the chemistry of their individual self-interest in working towards that goal leads them to be more collaborative.”42

Our view

50. The Committee welcomes the efforts by the Scottish Government to bring together key public sector bodies to work closer together. In particular, the closer alignment, if delivered, of the strategies and operating plans of the national tourist board, the two enterprise agencies and Scottish Development International is to be encouraged.

51. The Committee also applauds the efforts of other regional, local and city-based initiatives that have brought together these public bodies, local government, the private sector and other key statutory bodies, for example, Scottish Natural Heritage, SEPA, Scottish Water, Transport Scotland etc. However, the Committee is concerned that these types of partnerships are still too thin on the ground or are not operating as effectively as they should be.

52. We are also concerned that there is still too much evidence of institutional reluctance to change and, on occasion, in-fighting between public bodies, all to the disadvantage of improving support to the tourism industry. Examples of this include the reluctance of Historic Scotland to be more involved in the general marketing of Scottish tourism.43 We also wish to see the wider heritage sector (i.e. Historic Scotland, National Trust for Scotland, Historic Houses Association etc) working more closely with VisitScotland to lever increased marketing impacts through joint campaigns and actions.

53. The Committee is uneasy about the potential for ‘mission creep’ that seems to be setting in with regard to the roles of different public bodies. For example, in relation to skills and training, support is being already being offered by the two enterprise agencies, the newly established Skills Development Scotland Ltd, VisitScotland.com (in relation to e-marketing), the higher and further education sector, People 1st etc. Similarly, in terms of the investment agenda, the two enterprises agencies along with Scottish Development International have traditionally seen this as their responsibility, yet there is now evidence of increasing interests within VisitScotland itself to be involved in attracting investment as well as the initiatives by local authorities, city marketing bureaux etc.

54. The Committee believes that the Scottish Government should give serious consideration to a closer alignment of tourism product development and investment within the national tourist board, which has the expertise and capacity in both such areas. The separation of related functions such as inward investment, quality/product improvement and marketing is simply not a good example of joined up thinking or integrated operations.

55. We also consider that there needs to be clear direction and buy-in from all public bodies towards a ‘Team Scotland’ approach. Tourism and selling Scotland has to be a national approach that enjoys unified support and proactive behaviour. Greater synergies in joint marketing at VisitScotland, Historic Scotland and other heritage bodies and at the local level offer the best option for maximising impacts at national and international levels.

56. Subsequent sections of this report will deal the specific areas of investment, technology and marketing, and skills, training and education, as well as our conclusions and recommendations on the need, and scope, for decluttering and improving the clarity of function.

The investment challenge

Analysis by the Committee’s adviser

57. According to Professor Lennon, the Committee’s adviser, the Scottish tourism industry will struggle to meet the ambitions of the Tourism Framework for Change document because many parts of the industry as currently constituted will be unable to meet the economic targets. In his view, the tourism industry is dominated by accommodation businesses that provide the majority of employment and generate the greatest amount of wealth. The other sectors of the industry; attractions, activity providers, tour operators and on-ground transportation agents are limited in employment generation and economic impact. He believes that the attraction sector lacks major private sector operators because of Scottish demographics and the low level of disposable income available in Scotland.

58. In briefing provided to the Committee, Professor Lennon notes that accommodation, particularly in the form of hotels, in the majority of cases has successfully combined food and beverage and some other ancillary services such as meetings. These elements will generate additional revenues and catalyse wider economic impacts at a local level. The self catering accommodation supply is, he notes, somewhat less significant as an employer and the large number of small-scale units widely distributed throughout rural Scotland has struggled to transform rural economies. The bed and breakfast sector presents a similar profile of limited employment generation and low economic impact. Furthermore, both of these sectors have a strong mid or lower market orientation that, in his view, needs to move into the upper quartile quality threshold.

59. The investment environment (planning, licensing, incentives, building controls and regulations present) is, in Professor Lennon’s opinion, a less than encouraging landscape to a potential investor. Communication and liaison is far from straightforward with an investor facing a range of bodies including local authorities, enterprise networks, government regulation, planning and building and other regulatory authorities. For many commercial operators there is confusion in terms of points of contact. He believes that there does not appear to be an obvious champion to build and guide the relationship and help drive the decision to invest. He notes that such problems are not unique to Scotland but are compounded in an increasingly regulated and litigious environment.

Evidence received

60. Much of the evidence provided to the Committee, particularly, if not unsurprisingly, from the business community and developers bears out these views. For example, in its evidence to the Committee, the Edinburgh Chamber of Commerce stated that it was its view that the—

“current economic development strategy and tourism strategy is denying the cities, notably Edinburgh and Glasgow, the level of investment in infrastructure, product development and marketing commensurate with achieving the high level growth ambition. There is a disjoint, for example, between the Edinburgh Tourism Action Plan’s growth ambition for accommodation, which requires some 4,000 new hotel rooms by 2015 in order to achieve the high level ambition, and the lack of flexibility and understanding in the planning process to permit this to happen. Since our growth objective is revenue driven, it should lead us towards a planning system and product development strategy geared towards high-value brands and consumers.”44

61. Similarly, in another area of Scotland, Charles Skene – a leading developer – noted that “over the past 30 years, we have had developments in Elgin, Forres, Aberdeen and Banchory, and some of the planning difficulties that we have experienced have been diabolical. Indeed, the regular impression that is given by planning officers is that they are against economic development.”45 Likewise, Sandy Orr – a leading hotelier – said that the “approach of Scottish cities has been slightly disappointing in contrast with that of other cities in the United Kingdom. Scottish cities have tended not to be proactive in helping to identify the necessary opportunities.”46

62. The challenge, as identified by Eddie Brogan of Scottish Enterprise is how to address the feedback from investors that they are looking for “certainty, reassurance about the time that the planning process will take and consistency throughout Scotland”.47 Similarly, Stewart Selbie of the Westin Turnberry Resort stated that “we need to be ready for inward investors and we need to be out there encouraging such investment—both are required—but we also need to ensure that we can deliver when people show an interest.”48

63. According to VisitScotland, “Scotland is seeing strong levels of new investment” and that “more investment is needed in hotel stock – particularly in the context of business tourism”49. In the agency’s view, the full potential of the Aberdeen and Perth conference centres cannot currently be realised due to the lack of appropriate accommodation in those two cities. It also notes that, in Glasgow, while the hotel stock has grown by 40% in the last six years to 12,000 rooms within a 10-mile radius, there is still insufficient 5-star accommodation, and larger conferences lead to an overspill of accommodation requirements throughout the central belt which the transport infrastructure cannot always support.

64. Furthermore, VisitScotland has indicated that there is also potential for new resort developments, such as the much publicised Trump International Golf Links, which will appeal to the key target markets of international tourism and business tourism. Such ventures can, in its view, also contribute significantly to raising Scotland’s international profile, especially with the lucrative North American incentive market.50

65. In further written evidence to the Committee, VisitScotland stated that we must “ensure that the right environment is in place to encourage this growth” and that “the public sector has to encourage investment through ensuring the necessary regulatory support and offering incentives, where appropriate.”51 There is, in the view of Dr Maurice Taylor of Chardon Leisure, still a long way to go given that he told the Committee that “the planning process in Scotland needs serious tender, loving care. It is a tragic joke.”52

66. Other witnesses did have some positive news stories to tell the Committee about in terms of the ease of investment. Jerome Mayhew of Go Ape! indicated that the company’s “Aberfoyle experience has been excellent. We have a brilliant partnership with Forestry Commission Scotland. I cannot be nice enough about that governmental organisation. It has been great. In addition, we were invited in by Glasgow City Council—a governmental organisation taking a proactive stance to improve facilities in its area. We would not have thought of coming in unless the council had approached us.”53 However, the further indicated that—

“Where do you get it wrong? I will sound like a broken record saying this, but it is in the planning process. I have not yet mentioned the two bites of the cherry, which describes how the system here operates. First, there is the local planning process. Once that has been gone through, an application might get called in. I am not an expert—I am just passing on my experience—but it seems that, with that second bite of the cherry, we all have to start all over again. That means added delay, expense and uncertainty. Other things being equal, we do not want that.”54

International comparisons on ease of investment

67. As part of our evidence taking, the Committee looked at some of Scotland’s competitors in terms of ease of investment. Although caution needs to be exercised in terms of making direct comparisons, some interesting issues emerged, as set out below.

Ireland55

68. As one of our close competitors sharing many of our characteristics, the policy shift and approach of the Irish Government has been instructive. Ireland, like Scotland is a tourism destination dominated by the success of an urban destination. Like Scotland much of the rest of Ireland enjoys more limited benefits from tourism. The industry outside of the capital is characterised by SME provision and seasonality remains a major concern. The development agency, Failte Ireland, recognises it has a major problem with product and service quality outside of the capital.

69. Expenditure on tourism related capital projects increased substantially during the 1990s. It is clear that much of this funding was via EU regional development assistance often in partnership with central and local government funding. The real private sector investment success has been located in Dublin where most particularly hotel investment, has been extensive.

70. Ireland has also benefited from significant cross border funding with Northern Ireland which (along with various peace dividends) would appear to have helped fuel the boom in the Northern Irish economy currently being experienced.

71. Tourism has undoubtedly been recognised by the Irish government as a major sector of the economy which has been responsible for a growth in employment of 70% between 1990-2002 (a rate of growth considerably above the 50% enjoyed elsewhere in the Irish economy). The structure of the industry however remains characterised by SME accommodation operators, small restaurants, licensed premises and small-scale attraction and activity providers. It is this highly dispersed, small-scale industry that has to compete against a sophisticated international service sector.

72. Recent public sector intervention had been very much focused on regional development agendas and seasonal extension. Market failure (i.e. the likely returns not justifying private sector investment) has also been used as a justification for state funding in the form of development grants which now carry increasing numbers of caveats prior to release. However, it is the approach to centralising and simplifying structure that is perhaps most interesting. The fundamental components of policy encompass:

  • A government department which represents tourism with a minister who is at the forefront of any decision making process on investment;
  • The restructuring of the state agencies to centralise development assistance at a national level through Failte Ireland;
  • An increasingly evident set of private public sector partnerships occurring at regional and national level around key themes such as: business tourism, seasonality, marketing etc;
  • A range of state fiscal, financial and advisory support (both government and EU funded) for the promotion of tourism operating generally via the department of Arts, Sport and Tourism and the key development agency; Failte Ireland.

73. Other elements of infrastructure have not been overlooked and there is a Regional Airports Capital grant of 86 million Euros to help attract more direct international services. Similarly the new National Conference centre is to benefit from a major state funded marketing campaign to drive conference and convention tourism to Dublin over the next decade. Interestingly, the feasibility of a regional conference centre in the Shannon/Limerick area is also being explored. In terms of human resource development some 149 million Euro has been budgeted for training under the National Development Plan 2007-2013.

74. In addition, Failte Ireland has just launched details a 100 million Euro fund to help stimulate capital investment by the private and public sector. Some 50 million Euro is targeted at the upgrade of existing visitor attractions with other element of the fund designated for new attraction development, outdoor and activity pursuits in order to extend dwell time and disperse tourists more widely throughout the nation.

75. Ireland clearly appears to be creating an environment that allows tourism to grow and facilitates the economic impacts that will be forthcoming. In terms of the climate for inward investment recent appraisal by the World Economic Forum (2007) reviewed aspects of the Irish business environment and infrastructure very positively. Ireland is seen as highly competitive as an environment for business, ranked first and second respectively for the absence of restrictions on foreign ownership and having rules that facilitate foreign direct investment.

76. In Ireland, the fiscal incentives for indigenous investment in tourism also merit a mention. The other major source of funding for Irish Tourism over the period 1989-1999, arose from financial incentives which were successfully introduced to stimulate investment in the industry. It is interesting to note that these measures were not originally introduced for tourism, but rather, for the manufacturing sector. They were however later extended to cover the tourism industry. These are interesting to consider from a comparative investment stand point since they constitute the key measure that stimulated predominantly Irish investment in the Irish tourism sector. Two principal measures were introduced: Accelerated Capital Allowances and the Business Expansion Scheme—

Accelerated Capital Allowances

These were a highly effective method of reducing the cost of capital or the cost of capital necessary to establish and grow a tourism business. This liberated entry to the sector and in particular helped stimulate indigenous hotel investments. Hotel investments which qualified could secure an immediate write-off against corporation tax of up to 100% (during the period 1977-88) of qualifying capital expenditure such as the construction costs of premises. Accelerated capital allowances applied to hotel investments up to 1988 but were reduced and ultimately eliminated in 2007. This was a very important catalyst in the encouragement of development of the sector which at this time merited significant supply side growth and qualitative improvement. In reality the upgrade in Irish tourism was invariably led by the public sector and EU funds however tourism became an acceptable investment option for the private sector as a result of a combination of tax incentives, increased visitation and state / EU investment.

Accelerated Capital Allowances was not without its critics, not least from the Irish Commission on Taxation, who argued that such a blanket approach failed to take account of the type and location of tourist accommodation provided. Their preference was for more planned and systematic approaches to sector and to specific locations where need was greatest. The Commission on Taxation argued that direct financial transfer (in the form of Tourism Grants) would be more appropriate. However the relative delivery costs of such an approach is generally accepted to be greater than the ‘tax break’ offered by accelerated capital allowances. Direct financial transfer requires elaborate project evaluation, monitoring and reportage with no guarantee that such an approach will in the end produce a better result.

The Urban Renewal Scheme (URS)

This was another example of an incentive scheme utilising accelerated capital allowances and other relief such as property rates’ exemptions and double rent reliefs for tenant firms, which indirectly benefited tourism. The key objective of URS was to regenerate inner city areas in Dublin, Cork and Limerick. A range of trades qualified for relief as long as their location was in a designated area. This included a number of tourism related businesses such as; restaurants, retail, cinema and theatre etc. although ‘industrial’ buildings such as hotels were not included (since they qualified for accelerated capital allowances regardless of location). Such incentives encouraged developers with a ‘guarantee’ for any risks undertaken and accordingly many of these urban locations saw a positive inflow of funds. Such locations had limited tourist appeal at the outset of the scheme. However, in a number of locations, over time, they were to generate significant tourism benefits for urban locations. The Temple Bar area of Dublin would be one of the most successful such areas though Limerick’s urban regeneration struggled over a number of years. Thus URS provided a counterpoint to the blanket coverage of the accelerated capital allowance scheme yet it remains difficult to determine what proportion of the investments catalysed were simply diverted from other parts of the urban location merely to take advantage of the tax relief available. Furthermore, it is difficult to ascertain the extent to which such investment would have been realised without the foundation of EU structural fund investment and growing tourism demand.

The URS was also extended to a number of traditional seaside resorts which had seen decline in traditional demand for domestic coastal holidays. This extension to the scheme was introduced in 1995 and included hotels and self catering properties in designated destinations. The primary financial measure was the tax expenditure represented in the accelerated capital allowance, the double rent relief and tax-free rental incomes available on the construction and refurbishment costs of holiday homes. Evaluation of the relative success of URS in declining Irish coastal destinations has been harder to judge. The Irish government has had to forego significant tax income and until relatively recently land values would appear to have been driven up in a number of areas. Furthermore, it is by no means clear that such resorts have stimulated overseas or domestic appeal through the provision of cultural attractions, accommodation and other commercial elements. The Irish product remains dominated by the urban success of Dublin and the other key cities with proximity to low cost air access.

77. A number of other benefits to tourism through tax incentives were also made possible throughout the late 1980s and well into the 1990s in Ireland. Incentives were offered to maintain and promote Ireland’s culture and heritage. Examples include; capital acquisitions, tax exemptions for objects of national interest, stately homes, and gardens. Other tax reliefs were available for the donation of heritage items to national collections and for repairs and maintenance of ‘significant’ buildings however the level of such tax expenditure involved was generally small.

78. The Business Expansion Scheme was one of the other major incentives to stimulate the flow of equity capital to new ventures in tourism. The Irish scheme was modelled on the UK scheme that enabled either direct investment by individuals or investment through a designated fund in qualifying companies. Such enterprises included: hotels, guest houses, and self catering accommodation until 1992. Individuals who invested in BES ventures could reduce their taxable income by the amount invested thus securing tax relief at the then top marginal rate (48%). Investment had to be maintained in a company for five years minimum, and 90% of the tourism BES investments were located in property backed assets which were regarded as relatively low risk. Total tourism BES is detailed below with relative tax foregone by the Irish Government over the period.

BES Investments in Irish Tourism 1987-199556

Tax Year Total BES
Investment IR
£ Million
Tourism BES
Investment IR
£ Million
Tourism
% Total
Estimated Tax
Foregone IR
£ Million
1987-8 10.3 0.5 4.9 0.2
1988-9 25.6 6.5 25.4 3.1
1989-90 79 24 30.4 11.5
1990-1 61 27.1 44.4 13
1991-2 61.5 27 43.9 13
1992-3 21.6 2.6 12 1.2
1993-4 25.3 3.1 12.3 1.5
1994-5 52.3 5.8 11.1 2.8

79. The BES did help improve the quality of tourism accommodation stock whilst the EU funded Operational Programmes were directed predominantly at other major product developments in the sector. The proportion of private sector investment to EU/Irish public sector investment was in the region of 1:10. Whilst this is not a significant leverage, private sector investments were targeted in key areas and followed the strategic direction of the Operational Programmes 1988-1993 and 1994-1999. Thus there was a level of coherence to the overall strategic framework which directed EU and Irish Government expenditure. However when the relative tax concessions ended in 1992 there was a substantial drop in investment to the tourism sector, suggesting tax avoidance rather than strategic investment was at the core of the decision of investors to focus on the tourism sector. Yet a legacy was created which saw highly significant improvement to accommodation stock across Ireland the majority of which remained in Irish ownership.

80. More recently, the Irish budget in 2007 introduced relief in relation to the reclaim of VAT on certain conference related business (i.e. deduction of VAT on business accommodation costs in connection with attendance at conferences. Furthermore the VAT threshold was raised for small tourism business services such as bed and breakfast accommodation.

Dubai57

81. The growth and development of Dubai is one of the tourism phenomena of this century. In an effort to strategically shift dependence in their economy away from declining oil reserves, this member of the United Arab Emirates has developed a model of economic transformation that is an admired blueprint not just in the Middle East but also globally.

82. Non-oil industries now account for 94% of total state income and the transformation from being oil dependent is now complete. Much of the credit for this radical success has been credited to the visionary rule of the Maktoum Royal family. Dubai evidences clear strategic direction for development with an exacting but achievable growth plan. The willingness to engage in world trade and drive tourism has been a function of an environment that encourages inward investment and has become a global player in a range of industries. In tourism specifically the transformation has been phenomenal with significant growth in visitation and hotel operation since 1996 as the highlights below indicate—

1996 1.9m Visitors to Dubai with 93 hotels operating

2006 6.5m Visitors to Dubai with 456 hotels operating

2010 15m Visitors have been targeted

83. Demand for the Dubai product is shared between Europe the Middle East, Asia and Africa. It is notable that the UK is currently the leading European generator of tourists to Dubai. Over this period the role of air transport and air infrastructure has been crucial. Dubai has become a key hub in international travel and is an excellent destination to connect the key markets of Europe, South East Asia, South Asia and Africa. Over 120 airlines use Dubai international airport which has shown exponential growth in recent years in handling destination and transit traffic as the highlights below indicate—

2005 Dubai International Airport handled 25m visitors

2008 Dubai International Airport estimated to handle 75m visitors

2010 Dubai scheduled to open the new six runways Al Maktoum International at Jebel Ali making this the busiest airport in the world handling 120m passengers per annum

84. The national airline, Emirates, offers a similarly staggering growth record. It commenced operations in 1985 and currently has a fleet of 100 wide-bodied aircraft. It is growing at 20% per year and has recently placed the largest ever order for new aircraft which will take its fleet to 599 planes by 2019 making it the largest airline ever. Tourism now accounts for 20% of GDP of Dubai although there are huge ambitions for growth. The major hotels report a year round occupancy rate of 83% with no major seasonality problems. Revenue per available room (the test of the real price yield per bedroom) is third in the world which suggests limited discounting in order to fill rooms. Business and MICE (Meetings, Incentives, Conferences, and Exhibitions) tourism has been heavily targeted in the last five years to reduce reliance on the dominant leisure sector. The offer is essentially three elements: desert, beach and city. There are in addition a range of created attractions including; marinas, theme parks, retail malls, and world class conference centres. The food provision is unashamedly international promoting cuisine from over 100 countries combined with a wealth of outdoor experiences. Retail is a similarly large part of the offer promoted through a range of purpose built destination malls and via events and shopping festivals.

85. Events are seen as key promotional occasions for the nation and the destination is described in its marketing materials as a city of festivals ranging from the Dubai Sailing World Cup, to the Formula 1 Grand Prix, Tennis Championships, Horse Racing, Desert Golf Tournament, Dubai International World Class Rugby Sevens, and the Dubai Air Show. A large part of the country’s marketing budget is used for such showcase events. This has been accompanied by a period of massive development of the coastline which now offers 800 miles of extended waterfront through the large-scale development of the Palm-Deira, the Palm-Jumeirah and the World (mixed use development incorporating luxury housing, condominiums, hotels and leisure facilities).

86. Investment is welcomed and conditions for repatriation of profits are amongst the most favourable in the Free Zones where development is encouraged. However inward investment and development in this small nation is flexible, responsive to market requirements and facilitated at all levels. Bureaucracy and inefficient administration are absent and all government and state organisation have strict key performance indicators which are measured in their responsiveness to market demand and investors.

Austria

87. As part of the Committee’s inquiry, four members visited Austria and specifically Vienna as part of a fact-finding trip. There were many aspects of the visit that were to prove interesting and valuable in terms of lessons learnt, but the key investment issues relating to the skills/training/education agenda and to product development through loans to SMEs via and public/private investment fund were paramount. Further details are set out below:

  • Modul hotel school58 – this is one of a series of privately-owned (by the local Chamber of Commerce) hotel schools throughout the regions in Austria. It operates as a 4* hotel with associated learning facilities. It takes in pupils from as young as 15 years of age and trains them in a range of courses, spanning up to five years. It offers a highly practical-based learning experience, coupled with compulsory work placements. All courses are nationally certified. Modul has 3 applicants for every place and some 75-80% of its graduates join the hotel and hospitality trade. Modul has about 6,000 graduates around the world which is uses for fund raising and placements for a new generation of pupils. The hotel school is privately funded, but most of the teaching staff are federal employees.
  • Austrian Bank for Tourism Development (ÖHT)59– the ÖHT is a public-private partnership between the federal government and the main lending banks. It offers loans, guarantees to SMEs against a number of government-defined objectives such as product development, quality/scale improvement, staff facilities etc. The ÖHT offers finance at a lower-than-commercial rate with the federal government meeting the difference between the rate it offers and those of commercial banks. In 2007, ÖHT provided about €200 million in direct loans, with an average loan of €1.5 million. ÖHT does not fund projects of value lower than €1 million. The volume of investments by ÖHT in 2007 reached €750 million (approximately 80% of which was paid to accommodation providers), with 35% for improvements to scale, 20% on quality issues, 20% on new spas/health tourism and 15% on new hotels. The total cost to the federal government is about €35 million per year.

Planning, building regulations and enforcement

88. Intrinsic to the debate on the relative ease of investment in Scotland for tourism developments is the issue of planning, building regulations and enforcement. It is fair to say that this has been one of the dominant issues raised during the course of this inquiry.

89. In its evidence to the Committee, the CBI states that “the problems that beset Scotland’s sclerotic planning system affect tourism.”60 In its view, reforms are needed to the planning system which would “make it encourage and facilitate, rather than discourage, economic growth.”61 Its view is shared by the Glasgow Chamber of Commerce which indicates that “quick and easy planning consents is [sic] essential to attracting hotel investment”.62 Similarly, the Scottish Council for Development and Industry stated that—

“If the tourism product is to improve quality developments must be encouraged by the planning system and authorities. Any undue hindrance to such projects may risk deterring investment in Scotland. The current controversy surrounding the Trump development in the North-East of Scotland is a case in point.”63

90. Likewise, one of the leading trade associations for the tourism sector, the Scottish Tourism Forum, believes that “increasing consistency is also required regarding service levels across local authorities. At the moment there is disparity on important issues for the industry, such as planning application timelines.”64

91. Central to the planning system and tourism developments are Scotland’s 32 local authorities. It is clear from the evidence provided by this tier of government that there are very real challenges facing local government. For example, Mick Stewart of the Scottish Society of Directors of Planning told the Committee that “it is true to say that we have a shortage of experienced, skilled planners. Like many local government functions, planning is not—or was not until recently—an attractive university subject for school leavers to train in.”65 Likewise, Andrew Holmes, former Director of City Development at the City of Edinburgh Council told the Committee that “Edinburgh has issues relating to recruiting and retaining planning staff.”66 Similar views were expressed to the Committee in relation also to building standards staff, environmental health officers and other groups of staff central to the planning and development process.

92. As a consequence, many believe this is one of the main reasons why, according to a Scottish Government official, only “45 per cent of major applications meet the performance target of being processed within four months”.67 He also indicated that this “figure has been dropping over the past three to four years, which is not good.”68 Other problems, such as the site availability as cited by Dr Bochel of Aberdeen City Council were also highlighted.69

93. Asked what can be done to tackle shortages of key staff such as planners, the Scottish Government’s Assistant Chief Planner in the Directorate for the Built Environment highlighted the short term options such as “sharing the use of specialist staff” and longer-term issues such as tackling relative rates of pay in the public sector relative to the private sector for planners, and more e-planning.70 As Andrew Holmes noted, local government—

“…loses its better staff at middle manager level. Typically, people go for 20 or 25 per cent more. I am afraid that public sector pay scales have difficulty coping with that, especially as we are all in the throes of the modernising pay exercise.”71

94. The relative performance of local authorities in turning around planning applications for major developments was also a feature in much of the evidence received. Some of the evidence cited appeared to indicate that certain councils, and Glasgow City Council in particular, had a better track-record than others. Other evidence received contradicted this view or at least stressed the importance of comparing like-with-like. Table 1 below sets out the key performance indicators provided by Audit Scotland in relation to a selection of local authorities and the percentage of non-householder applications dealt with within two months. Note that these figures are for planning applications from all sectors, not just those from tourism.

Table 1: Selected local authority key performance indicator (Percentage of non-householder applications dealt with within two months)

 

2004-2005 2005-2006 2006-2007
Aberdeen City 54 49 44
Aberdeenshire 47 38 34
Angus 47 39 45
Argyll & Bute 51 51 53
Clackmannanshire 67 65 76
Dumfries & Galloway 41 48 47
Dundee City 49 42 39
East Ayrshire 40 33 38
East Dunbartonshire 46 31 49
East Lothian 48 47 43
East Renfrewshire 47 36 46
Edinburgh, City of 49 47 50
Eilean Siar 68 64 63
Falkirk 30 34 41
Fife 46 31 32
Glasgow City 49 51 53
Highland 44 45 47
Inverclyde 65 63 68
Midlothian 40 46 40
Moray 41 36 31
North Ayrshire 49 53 63
North Lanarkshire 47 40 60
Orkney Islands 45 35 37
Perth & Kinross 37 46 36
Renfrewshire 52 46 41
Scottish Borders 43 37 33
Shetland Islands 50 66 28
South Ayrshire 47 42 40
South Lanarkshire 47 42 56
Stirling 51 59 50
West Dunbartonshire 40 50 74
West Lothian 75 71 60
Scotland average 47 45 45

SOURCE: Audit Scotland

95. It is clear from the above that there is wide variation between local authorities in performance in relation to relative turn-around times for planning applications between local authorities. Some of this may be down to factors such as the relative volume of applications received and their complexity, and some may be down to staffing problems etc.

96. In the view of one observer, however, other factors were key. In his evidence to the Committee, the former Director of City Development in Edinburgh said that “it is a matter of record that the majority of applications in Edinburgh are objected to. Other issues are the presence of a world heritage site and the fact that most of the areas of prime development interest are conservation areas. There is a particular set of factors that inevitably mean that any application within a mile of where we are sitting will raise issues that are not necessarily raised in other parts of Scotland. That affects the speed of the planning process.”72

97. It is important to note, however, that the figures in Table 1 above are for all planning applications from non-domestic applicants and not simply those relating to major tourism developments. In certain cities, it has been suggested that the priority placed on this type of application means that turn around times of eight weeks are not uncommon.

98. Examples cited by Steve Inch of Glasgow City Council have been part of this authority’s 12-point fast-track planning system. This system identifies a project on application as to whether it is strategic or not, with the onus on major tourism projects to be identified thus. This allows specialist teams to focus on these projects, with emphasis on early engagement with the developer and with localised agreements in place with key statutory bodies such as Scottish Natural Heritage, the Scottish Government and Transport Scotland, to fast track the application through their systems.73 It is not clear whether the system adopted by Glasgow has, or could be, replicated by other local authorities.

Our view

99. Planning problems, building control issues and the difficult environment for inward investment in such a relatively small country all impact on our ability to raise our game in terms of quality, capacity and new products. This simply has to change. To drive this vital sector of the economy we must work to catalyse indigenous as well as international investment. The Committee believes that the current situation is confused by the lack of a lead organisation in this area and by too little co-operation between the existing agencies. In this respect, we welcome the recent efforts by the Scottish Government to bring bodies together but believe further streamlining must be achieved.

100. It is of vital importance that, subject to an appropriate and flexible system of checks and balances (such as environmental concerns), we send out a clear signal that Scotland is ‘open for business’ in terms of tourism developments. We welcome the examples of good practice in Scotland where authorities have afforded major tourism projects ‘fast-track status’ and have designed their systems and procedures accordingly, particularly in relation to pre-approval discussions with developers. We want to see this replicated across Scotland.

A national tourism investment plan

101. The final issue covered in this section on ease of investment is the proposal by VisitScotland and Scottish Development International to produce a National Tourism Investment Plan (NTIP).74 According to the tourism agency—

“The key elements of the approach that we must develop around investment are: proactively determining what we want – and where we want it – rather than as at present reacting to opportunities that arise; involving all key stakeholders e.g. environmental agencies as well as developers, so that we have “internal” agreement in Scotland – at least in principle - before we approach the market for investment; a general presumption in favour of development for tourism; internal “bidding” rather than “begging” for new projects and a mechanism for “account managing” potential investors and developers, so that they are not passed from pillar to post.”75

102. VisitScotland then intends for the opportunities identified to be offered to appropriate local authorities and city councils. If there is a willingness to host such investments in their area that destination should receive accelerated clearance from the regulatory and conservation bodies to ensure no protracted issues relating to development emerge at a later stage. In this way, a short list of products and tangible/realistic sites can be created. This will form the basis of the NTIP.76

103. The need for work by the public sector bodies to develop a national tourism investment plan is supported by some of the bodies that gave evidence to the Committee. However, the Tourism Minister himself seemed less supportive of the concept of a national tourism investment plan that identifies what gaps there are in the national tourism product and what opportunities there are for international investors. In his evidence to the Committee, the Minister stated that “to impose from the centre a particular strand of tourism in one area would hardly be likely to succeed.”77

104. Furthermore, in relation to the potential of using the national planning framework as a vehicle for highlighting specific locations for key tourism developments, for example a marina or golf resort, the Minister’s view was that “the national planning framework operates at too high a level. Those decisions need to be made more locally”.78

105. It is apparent, therefore, that whilst potentially welcome, a centrally led, national tourism investment plan of the type envisaged by VisitScotland and Scottish Development International may not actually be supported by the Tourism Minister and/or could be at odds with other locally developed plans such as those of the Glasgow City Marketing Bureau and elsewhere.

Our view

106. The Committee is generally supportive of the principle of a national tourism investment plan along the lines suggested by VisitScotland and see this as a matter of some urgency. However, we consider that such a national plan will be far more effective if it is compatible with the work done in key local authorities and cities to identify their own investment priorities.

107. We may return to the issue of the national tourism investment plan during our consideration of the Scottish Government’s national planning framework in the autumn.

Addressing education, training and skills needs

108. At the outset of this inquiry, the Committee recognised that it will be near impossible to increase the revenue take in the sector without driving up standards and quality. Not to do so will simply result in Scotland being perceived as a destination that is overpriced and one that offers little value for money.

109. The ‘quality agenda’ is inextricably linked to the experience that the tourist has during his/her visit and that in turn is dependent in part on the quality of the hotel, café, visitor attraction and the welcome and services offered by people working in the industry.

110. This is why one of the key questions identified by the Committee as part of the terms of reference focused on the specific challenges in Scotland’s tourism industry in relation to skills, training, quality standards, service levels and leadership and how can these be overcome.

Analysis by the Committee’s adviser

111. In recent years, the dominant model in Scotland has been growth of further and higher education accompanied by significant growth in supply-led training provision. It is also very apparent that in Scotland tourism and hospitality provision was initially championed by the further education colleges, former Scottish central institutions and vocational universities. Such education and training for the hospitality sector has developed historically over a number of years with the majority of investment and costs being covered by the public sector via colleges, training centres, universities and training agencies.

112. Traditionally, the focus has been on the development of technical skills in hospitality areas usually complemented with generic skills. It is notable that as the further and higher education sectors have come under financial pressure the extent of practical training, (particularly in expensive areas such as food production), has diminished. Accordingly, former qualifications under SCOTVEC and more recently SVQ have seen reductions in practical training. This in turn has led to much criticism of qualified students practical ability and competence. In response some celebrated chefs such as Andrew Fairley at Gleneagles, (Scotland’s only 2 Michelin Star Restaurant) insist on the former City and Guilds qualification as an essential for entry into his operation. At a UK level, Gordon Ramsay has indicated that he will set up a private training school under the auspices of his restaurant and pub chain, such is his level of frustration and disenchantment with the capabilities of students emerging from UK colleges.

113. At a university level, undergraduate and post graduate courses in Hotel and Catering/Hospitality/Tourism management have also been criticised from industry on the basis of the competence, skills and unrealistic expectations of students (upon graduation).

114. There has also been some discussion in Scotland of the development of hotel or restaurant schools based on realistic work environments (in the mode of ‘15’, the Jamie Oliver inspired restaurant that featured in a TV series). Such proposals have usually floundered on the lack of private/public sector support to realistically develop and operate such a facility.

115. In Scotland, as long ago as 2003, it was stated that there were over 30 organisations in the private and public sector who were attempting to deal with issues related to human resources in tourism and hospitality. Recent estimates have put this figure as 40. Some of the identified problems are all too familiar—

  • Poor image of the industry amongst school leavers
  • Reputation for poor wages and working conditions
  • Low record of recruitment and retention
  • Problems associated with quality of service
  • Problems associated with quality of product
  • Perceptions of poor value for money for visitors.
  • Leakage of Hospitality/Tourism graduates on qualification to other sectors of the economy

116. Responsibility for dealing with these issues was, and is split, between a number of organisations, most importantly and influentially these were:

  • The Sector Skills Council (People 1st) for Tourism and Hospitality
  • Springboard Scotland
  • Pride and Passion
  • Local Enterprise Companies79 – Skills Development Divisions
  • Local Authorities – various departments and initiatives on training and employment
  • Employers in the private and public sector

Footnotes:

1 Resigned from the Committee as of 26 June 2008.

2 Appointed to the Committee as of 26 June 2008.

3 VisitScotland (2006), Tourism in Scotland 2006. VisitScotland. Available at: http://www.visitscotland.org/research_and_statistics/national_facts_and_figures/tourism_in_scotland_2006.htm

4 VisitScotland (2006), Tourism-related Employment in Scotland 2006. VisitScotland. Available at: http://www.visitscotland.org/research_and_statistics/national_facts_and_figures.htm

5 Ibid.

6 Scottish Executive (March 2006), Tourism Framework for Change. Scottish Executive. Available at: http://www.scotland.gov.uk/Publications/2006/03/03145848/0

7 Scottish Executive (March 2006), Tourism Framework for Change, p15.

8 Scottish Parliament Economy, Energy and Tourism Committee (November 2007), Terms of reference and call for evidence. Available at ../inquiries/tourism/inquiryhomepage.htm

9 Scottish Executive (March 2006), Tourism Framework for Change. p12.

10 Scottish Executive (March 2006), Tourism Framework for Change. p12.

11 VisitScotland (June 2007), Media Release, Scottish tourism statistics 2006.

12 Scottish Parliament Economy, Energy and Tourism Committee. Official Report, 28 May 2008, Col 867.

13 VisitScotland. Supplementary written evidence to the Economy, Energy and Tourism Committee.

14 Scottish Parliament Economy, Energy and Tourism Committee. Official Report, 7 May 2008, Col 699.

15 Scottish Parliament Economy, Energy and Tourism Committee. Official Report, 7 May 2008, Col 699.

16 Scottish Tourism Forum. Written submission to the Economy, Energy and Tourism Committee.

17 Scottish Tourism Forum. Written submission to the Economy, Energy and Tourism Committee.

18 Scottish Chambers of Commerce. Written submission to the Economy, Energy and Tourism Committee.

19 Travelodge. Written submission to the Economy, Energy and Tourism Committee.

20 Smart City Hostels. Written submission to the Economy, Energy and Tourism Committee.

21 City of Edinburgh Council. Written submission to the Economy, Energy and Tourism Committee.

22 Edinburgh Chamber of Commerce. Written submission to the Economy, Energy and Tourism Committee.

23 North Lanarkshire Council. Written submission to the Economy, Energy and Tourism Committee.

24 Argyll and Bute Council. Written submission to the Economy, Energy and Tourism Committee.

25 Scottish Parliament Economy, Energy and Tourism Committee. Official Report, 28 May 2008, Col 867.

26 Boots ‘n Paddles. Written submission to the Economy, Energy and Tourism Committee.

27 COSLA. Written submission to the Economy, Energy and Tourism Committee.

28 VisitScotland. Supplementary written evidence to the Economy, Energy and Tourism Committee.

29 As a result of recent reforms, local enterprise companies have ceased to exist.

30 Destination Loch Ness. News Release issued on 31 May 2007. Available at http://www.visitlochness.com/

31 Scottish Tourism Forum. Written submission to the Economy, Energy and Tourism Committee.

32 Scottish Tourism Forum. Written submission to the Economy, Energy and Tourism Committee.

33 CBI Scotland. Written submission to the Economy, Energy and Tourism Committee.

34 CBI Scotland. Written submission to the Economy, Energy and Tourism Committee.

35 Smart City Hostels. Written evidence submitted to the Economy, Energy and Tourism Committee.

36 Smart City Hostels. Written evidence submitted to the Economy, Energy and Tourism Committee.

37 Smart City Hostels. Written evidence submitted to the Economy, Energy and Tourism Committee.

38 Federation of Small Business (Scotland). Written submission to the Economy, Energy and Tourism Committee.

39 Federation of Small Business (Scotland). Written submission to the Economy, Energy and Tourism Committee.

40 Federation of Small Business (Scotland). Written submission to the Economy, Energy and Tourism Committee.

41 Scottish Parliament Economy, Energy and Tourism Committee. Official Report, 28 May 2008, Col 866.

42 Scottish Parliament Economy, Energy and Tourism Committee. Official Report, 28 May 2008, Col 884.

43 Scottish Parliament Economy, Energy and Tourism Committee. Official Report, 26 March 2008, Col 612.

44 Edinburgh Chambers of Commerce. Written submission to the Economy, Energy and Tourism Committee.

45 Scottish Parliament Economy, Energy and Tourism Committee. Official Report, 10 March 2008, Col 525.

46 Scottish Parliament Economy, Energy and Tourism Committee. Official Report, 5 March 2008, Col 473.

47 Scottish Parliament Economy, Energy and Tourism Committee. Official Report, 16 April 2008, Col 679.

48 Scottish Parliament Economy, Energy and Tourism Committee. Official Report, 5 March 2008, Col 476.

49 VisitScotland. Supplementary written evidence to the Economy, Energy and Tourism Committee.

50 VisitScotland. Supplementary written evidence to the Economy, Energy and Tourism Committee.

51 VisitScotland. Supplementary written evidence to the Economy, Energy and Tourism Committee.

52 Scottish Parliament Economy, Energy and Tourism Committee. Official Report, 5 March 2008, Col 477.

53 Scottish Parliament Economy, Energy and Tourism Committee. Official Report, 5 March 2008, Col 484.

54 Scottish Parliament Economy, Energy and Tourism Committee. Official Report, 5 March 2008, Col 484.

55 The analysis and research included in this section was provided by the Committee’s adviser.

56 Tourism Policy Review Group (2003), Irish Tourism Responding to Change, http://www.arts-sport-tourism.gov.ie/pdfs/Tourism_Review_Interim.pdf and Department Arts Sports Tourism, Irish Government (2005), Press Release http://www.arts-sport-tourism.gov.ie/publications/release.asp?ID=1145

57 The analysis and research included in this section was provided by the Committee’s advisor.

58 Modul hotel school. Available at http://www.modul.ac.at/

59 Austrian Bank for Tourism Development. Available at http://www.oeht.at/page/index.html

60 CBI Scotland. Written submission to the Economy, Energy and Tourism Committee.

61 CBI Scotland. Written submission to the Economy, Energy and Tourism Committee.

62 Glasgow Chamber of Commerce. Written submission to the Economy, Energy and Tourism Committee.

63 Scottish Council for Development and Industry. Written submission to the Economy, Energy and Tourism Committee.

64 Scottish Tourism Forum. Written submission to the Economy, Energy and Tourism Committee.

65 Scottish Parliament Economy, Energy and Tourism Committee. Official Report, 7 May 2008, Col 732.

66 Scottish Parliament Economy, Energy and Tourism Committee. Official Report, 7 May 2008, Col 727.

67 Scottish Parliament Economy, Energy and Tourism Committee. Official Report, 7 May 2008, Col 734.

68 Scottish Parliament Economy, Energy and Tourism Committee. Official Report, 7 May 2008, Col 734.

69 Scottish Parliament Economy, Energy and Tourism Committee. Official Report, 7 May 2008, Col 737.

70 Scottish Parliament Economy, Energy and Tourism Committee. Official Report, 7 May 2008, Col 740.

71 Scottish Parliament Economy, Energy and Tourism Committee. Official Report, 7 May 2008, Col 741.

72 Scottish Parliament Economy, Energy and Tourism Committee. Official Report, 7 May 2008, Col 742ff.

73 Scottish Parliament Economy, Energy and Tourism Committee. Official Report, 7 May 2008, Col 722ff.

74 VisitScotland. Supplementary written evidence to the Economy, Energy and Tourism Committee.

75 VisitScotland. Supplementary written evidence to the Economy, Energy and Tourism Committee.

76 VisitScotland. Supplementary written evidence to the Economy, Energy and Tourism Committee.

77 Scottish Parliament Economy, Energy and Tourism Committee. Official Report, 28 May 2008, Col 869.

78 Scottish Parliament Economy, Energy and Tourism Committee. Official Report, 28 May 2008, Col 874.

79 Local enterprise companies no longer exist due to recent changes to the enterprise network.