Economy, Energy and Tourism Committee

Meeting date: Wednesday, September 8, 2010

Official Report 456KB pdf

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Tourism Inquiry

We are fairly tight for time, so we need to resume. I welcome the witnesses for our next item of business, which concerns progress on the results of the committee’s tourism inquiry. I am pleased to welcome to the meeting Richard Arnott, who is the head of the tourism unit at the Scottish Government; Eddie Brogan, who is the head of the Scottish Enterprise tourism team; and Riddell Graham, who is director of partnerships at VisitScotland.

We have a copy of the progress report from the Scottish Government. I propose to go straight to questions unless any of the witnesses wish to make any brief points by way of introduction.

I will start with the first, fundamental question: how likely are we to achieve the overall target of increasing Scotland’s tourism output by 50 per cent by 2015?

Having heard all the discussion about statistics and economics, it is clear that one can ask many questions about tourism statistics. We base our measurements on nationally available statistics from the Office for National Statistics and it is clear that we are not on a trajectory towards achieving a 50 per cent growth in the decade up to 2015, which is the target that was set in 2005. That is probably widely accepted to be because there have been significant changes in world economics and several other events that affected tourism in the period. One never knows what would have happened if we had not done what we have done. That is one of the things that it is always difficult to analyse.

Although 2009 was a difficult year economically, it is accepted that tourism performed better than many other sectors in Scotland. The figures for 2009 showed a 2.6 per cent increase on the previous year in visitors from the UK to Scotland and a 2.1 per cent increase in international visitors to Scotland. There was a 2.7 per cent fall in the spend by UK visitors to Scotland, but a 10.3 per cent increase in the spend by international visitors.

We are not on target for a 50 per cent increase. It is still too early to have complete national figures for 2010, but there seems to be a mixed picture in Scotland. Some areas report good business and that tourism is performing well, but other areas seem to be performing less well.

That is my summary.

Given that it is accepted that we are not on a trajectory for a 50 per cent increase in spend, what is the current trajectory? Where will we get to by 2015? Can we or should we do anything now to get us closer to the 50 per cent?

I am not sure that we can do anything now to project us immediately back on target to 50 per cent growth—£6 billion in revenue—by 2015. We can still make improvements to tourism, but it is difficult to predict the impact that they would have on growth.

Do you have an estimate of where we are on the trajectory?

I have not brought the figures with me, but I think that we are at almost the same level as in 2005.

So, rather than there being a 50 per cent increase, we are on a level trajectory.

Yes, we are.

Before opening up the discussion, I will ask a more specific question on the section on transport. In the progress note, on page 49 of paper 4, you refer to the Norfolkline merger with DFDS and state:

“All Scottish delivery partners remain fully committed to supporting the route and helping it build up its freight and passenger customer base.”

Since that report was written—I guess—DFDS has indicated that it is withdrawing from the passenger service. What response has been made to that, and are we trying to find any other means of getting a passenger ferry service to the continent?

It is obviously unfortunate that DFDS has had to announce that it is ceasing the passenger service by Christmas. My colleagues in transport have been working very closely with DFDS and have been looking at alternative means of running the passenger service, but I am not in a position to report progress on that.

On a related transport matter, there is obviously some concern about the potential withdrawal of direct rail services from north of Edinburgh to London because of the possibility that there will be electric-only services on the East Coast trains route, which obviously cannot go very far north of Edinburgh at the moment. What impact would that have on tourism north of Edinburgh, particularly in Inverness and the north-east?

I agree that there is a need to improve the transport infrastructure to the north. It would be very disappointing if the high-speed rail link does not bring passengers up to Scotland, and I know that there have been discussions with the UK Government about pressing for those improvements to be made.

I was talking specifically about the existing service, rather than the new high-speed service, and the fact that the 125 diesel locomotive services might not be replaced with diesel trains. That would mean that services could not go north of Edinburgh and that passengers from Fife, Dundee, Aberdeen and Inverness would have to change at Edinburgh for services to London. Specifically, do you have any indication of what the impact on tourism in those areas might be if those services are withdrawn?

I do not have that analysis at the moment. I would have to investigate whether it is available, but I can look at that.

I echo the fact that we need action on the direct rail link to London. People from the north and north-east are extremely concerned about it.

I turn to the development of skills training and, in particular, I welcome the completion of and activity at the centre for hospitality and tourism, which was opened by North Highland College at Burghfield House hotel in Dornoch. That facility can train 25 to 30 students at a time. Are there examples of similar initiatives from colleges around Scotland that are about to take place?

I am aware of a development in Glasgow. My understanding is that there used to be a catering school at the university and that there are discussions about revitalising it in some form or other, but I am not closely involved in those discussions.

The committee will be aware from discussions earlier in the inquiry that there were proposals for a hotel school—or leadership school, as it developed into. My understanding is that those discussions have continued during the year and are close to reaching fruition, but an announcement is not ready yet.

It is important to recognise the model in Austria, which has given a lead in that country by ensuring that it has the full infrastructure for tourism development. Is there any likelihood of our hearing something concrete from the proposals that have been discussed through the Scottish Government, Scottish Enterprise and Highlands and Islands Enterprise?

11:45

Arising out of the committee’s recommendation about hotel schools, the most substantive project that we are involved in is the industry-led project, which is chaired by an industry steering group led by Peter Lederer of Gleneagles. Since we were last before the committee, Scottish Enterprise has funded the undertaking of a feasibility study and a business plan for that hotel school. The steering group has secured the support of one Scottish and two international academic institutions to take the project forward, and they have recently submitted an application to the Scottish Further and Higher Education Funding Council for support. That application is pending and is subject to discussion and negotiation.

In the meantime, a lot of work has been done on course content, and good progress has been made to date. Obviously, there is still some way to go, particularly with the securing of necessary funding, but the industry group has made a lot of concrete progress with support from Scottish Enterprise and other public agencies.

Is there a tie-up between what is being delivered at Burghfield House hotel in Dornoch and the discussions about what the proposed new course should deliver?

There are close communications between the industry people who are involved in the leadership school proposal and all other hotel school-related projects. A lot of information is being shared. However, the focus is quite different. As its title suggests, the leadership school is focused on what the industry perceives to be the priority issue of the development of leadership skills, particularly for the talent that is coming through to be the industry’s future management and leadership. I understand that the focus of Burghfield is more on practical hotel management and craft skills.

On the achievement of growth, it seems that music festivals—rock and traditional music festivals, such as T in the Park or Blas—are maintaining the audiences that they have had in recent years. Is there a strategy to build on what could be seen as a staycation approach? I suppose that most people come to such festivals from the relatively local area. Is there a strategy to build on our heritage of music of all sorts to help us reach some of the targets that we have talked about?

I can answer that one. At the beginning of the week, we launched VisitScotland’s autumn campaign, which is focused on people who live and work in Scotland. A key aspect of that is promotion of events on our website and, within that, promotion of the musical heritage and traditions of Scotland. We play on that factor quite heavily throughout the year with our sister agency, EventScotland. Events attract visitors from outside the country, but, as Mr Gibson rightly said, they form a key part of the local experience.

Interestingly, our research shows that half of all people who take a holiday in Scotland in the autumn are from Scotland itself, and we are playing to that agenda, too. We recognise that events are an important aspect of the tourism experience, and that they play to a local agenda as well as to the visitor agenda.

The major project in Glasgow is the new concert arena at the Scottish Exhibition and Conference Centre, which is receiving substantial funding from Glasgow City Council and Scottish Enterprise. That is part of an effort that is focused on Glasgow to make more of our musical heritage and the modern music that is, in fairness, associated with Glasgow. That major new facility will help to bring concert business into Scotland and raise Scotland’s profile as a popular music concert venue.

In our earlier evidence session, we heard from George Reid on the review of the National Trust for Scotland. He talked about the need for joined-up government and joined-up working across Government agencies. Page 12 of the review mentions work involving the National Trust for Scotland, Historic Scotland and so on. How well is the tourism sector doing at not working in silos but instead putting together joined-up policies? How far down the road are we with that?

I will attempt to answer that from a VisitScotland perspective. We share our business plans with Scottish Enterprise and HIE, and there are areas in which there is an opportunity for us to work closely together. That cascades down into specific action plans. In fact, later this afternoon, Eddie Brogan and I will give a presentation to the tourism leadership group—a new industry-led body—on destination organisations throughout Scotland. We very much have a joined-up approach to local delivery in that regard.

A good example of our work with bodies such as Historic Scotland and the National Trust for Scotland is the historic properties group, which meets four or five times a year and on which I sit as a representative of VisitScotland. It is chaired by Historic Scotland or the National Trust and includes the independent Historic Houses Association Scotland. One of Eddie Brogan’s team sits on the group, too, so Scottish Enterprise and VisitScotland are at the table. One idea behind that is to improve co-ordination and joined-up working. An initiative that has been developed as a direct result of that group is a joint ticket for access to properties throughout Scotland.

More widely, we have a strong relationship with Scottish Natural Heritage and we have just launched new joint initiatives with it on marketing its national nature reserves. We work hard on joint initiatives and we have tapped into opportunities already, but we recognise that we can always do more. For instance, we have been discussing with the National Trust and Historic Scotland the provision of information at the local level. It does not always have to be VisitScotland that runs the information centre network. We are discussing closely with those bodies the opportunities in that area. A range of initiatives exist at the local level that involve working with those agencies, but more can be done in future.

I am glad to hear that—I read quite a bit about that in our update paper. However, I am thinking about the big picture for tourism. On transportation, we need to get the message out that cutting train links and direct services to Fife, which the convener and others have mentioned, will do nothing to help tourism, certainly in Fife, which is the area that I represent.

I am also concerned about skills and training, because we still do not have the right approach, particularly for adult returners. Another issue is planning. One big recommendation in our report was about the need for more planners. However, the Scottish funding council has suggested cutbacks to training subsidies in that area. At the local government level in my area, there is huge concern about cutbacks in our planning department. We are calling for a joined-up approach, yet other agencies are taking decisions that will harm the tourism industry in Scotland. What influence do or can you three have to try to get a joined-up strategic approach to tourism?

The best answer that I can give is that there are difficulties in trying to grow tourism because it is affected by many other aspects of life in Scotland that will not necessarily be improved merely to support tourism. We must understand that tourism is an important spin-off and will gain from improvements to those aspects. We work as closely as possible with our transport colleagues and we emphasise to them that the transport strategy acknowledges that tourism is important. However, I must say that a ministerial influence is more likely to be brought to bear than that of officials, although we work closely with our colleagues.

One encouraging thing is the leadership of the industry through the tourism leadership group, which is in the process of refreshing the tourism framework for change—the national tourism strategy that has been in existence for several years.

Interestingly, the group wants to pick up on the three issues that Marilyn Livingstone identifies. Transport is right at the top of the agenda—the group has identified it as something that must be tackled more holistically, rather than have people work in silos. The skills and training agenda is right up there, too, as something that the group sees as important, and at every meeting that I attend with tourism businesses, planning comes on to the agenda. I want to reassure you that that is at the front of the minds of the industry people who are leading the refresh of the strategy. That is absolutely right. There should not be a public sector—Scottish Government—strategy for tourism; there should be an industry-led tourism strategy with public sector support.

Your concern about cutbacks in other areas simply identifies the interrelationship with what happens locally in other agencies and the impact that that can have. We are acutely aware of that. From an influencing point of view, our new chairman has made it very clear that he wants to ensure that such issues are brought to the attention of bodies that can make a difference. For instance, I think that we will be asking the transport department to look at a separate tourism transport strategy that identifies the importance of tourism within the overall strategy for transport in Scotland. I reassure you that that is very much at the front of our minds as part of the refresh.

Two specific things are relevant to the question that Marilyn Livingstone asked. We have a new tourism leadership group, which is about bringing the industry and the public sector together. It is very much industry led and it aims to deliver by the end of January a refresh of the industry strategy, with a focus on a more limited number of priorities that will drive some step change in the industry. The Scottish Government is keen to see sitting behind that a sector delivery plan, not just for tourism but for each of our key sectors, that pulls together the public sector response to the industry demands and opportunities that are set out in the strategy. That will bring together not just the main agencies involved in tourism—ourselves, VisitScotland and Highlands and Islands Enterprise—but the likes of Skills Development Scotland, for its contribution on skills, and Transport Scotland.

The other significant aspect is the partnerships that are evolving locally, which are bringing together businesses, public sector agencies and local authorities as major players. When the industry and the councils get round the table and understand better the economic development opportunities that are associated with tourism and the issues that inform the planning process, that common understanding fosters an attitude and approach that are more conducive to tourism development. That brings together not just the agencies that we have just mentioned but, where important, other Government agencies such as the Forestry Commission Scotland, Scottish Natural Heritage and other local bodies—in relation to supporting mountain biking and access to the countryside, for example.

Thank you.

Colleagues, we are very much against the wire time wise, so I ask that all other questions and answers be as brief as possible.

The committee recommended that the Austrian and Swiss models for a tourism investment bank be looked at. Scottish Enterprise conducted a detailed review of the Austrian investment bank, which concluded that the model was not replicable in Scotland. Why did you reach that conclusion?

There are a number of reasons. One of the main issues is that the Austrian investment bank built up its capital on the foundation of a post-war economic recovery programme. It is therefore sitting with a huge fund—I cannot remember the exact amount—that has become a revolving fund as it makes loans and, to some extent, grants and investments to businesses and then recovers that money. We could not readily see where the funds for that level of investment could come from—either in the private or the public sector—at this time.

The second issue is that state aid regulations would make it difficult to replicate such a scheme in Scotland.

We also felt that it was important to take a step back from the mechanism and try to understand what the fundamental challenges are in terms of finance for investment in the industry. It transpired that a lot of the issues are not to do with the fact that the money is not there, but with the perceived risk of investment in the sector, particularly now.

12:00

Traditionally, much investment in the tourism sector has come from the banks and has been secured on assumptions about increasing property values. VisitScotland organised some discussions with the banks, in which concerns were raised about the leadership and management skills of many people who were seeking finance for investment and about the quality of investment proposals. Such concerns reinforced the perceived and, to some extent, the real risk of investment in the sector.

Those were the main conclusions that emerged from our work on the Austrian investment bank. They have led us down the path of focusing our efforts more on supporting initiatives such as the tourism leadership school, to build leadership skills in the industry, and on doing what we can to support the companies with which we are working to develop stronger, more effective investment proposals in the future.

In summary, is the Austrian model not replicable at this time or not replicable full stop?

Most things are doable, but we could see no practicable means at this time of establishing a fund on the scale of that which the Austrian investment bank currently has. Another issue is whether it would be acceptable to have a fund specifically for the tourism sector and not for other sectors. One of the issues when we considered the idea—I guess that it still applies—was that tourism is not alone in facing difficulties in raising finance for investment. That is another factor that was taken into consideration.

I begin with an observation. After the banks’ performance over the past two years, it is interesting to find them regarding other people as not being capable of formulating adequate investment policies.

One general problem with rail is that many people who come north to Scotland are travelling on concessionary first-class fares from the continent—something that I used to do during my professorial days in Germany. They will be distressed, to say the least, when they have to change at Edinburgh to one of the Turbostars to continue their journey to Inverness.

My second point relates to bicycles. Whenever anyone suggests moving from one form of transport to another—for example, from boat to train—we should always add in the three words “bicycles, prams, wheelchairs”. How do you see those fitting into the new arrangements at Stranraer, which will mean that people will have to decant into a bus at Cairnryan and then into a train at Stranraer?

There seems to be a certain ambiguity relating to the abandonment of the passenger service on the ferry. In 2007, we were told that passenger figures were good but freight figures were disappointing. This time around, we have been told that freight figures are good, after a considerable slump, but passenger figures are disappointing. Is any further investigation of the issue being undertaken?

I will address the questions in reverse order. I am afraid that I am not aware of further investigation being undertaken into the reasons for the slump in passenger numbers, but I undertake to ask my transport colleagues to look at the issue. You mentioned Stranraer, in particular in relation to transfers. I hear what you say, but people’s concerns are not confined to Stranraer. Provision of facilities for bicycles, prams and so on is often a concern in all areas of public transport. As I mentioned earlier, it is not a problem only for tourists. My transport colleagues are aware of the issue and are trying to improve integrated travel arrangements, but the problem is not easily tackled in a short time when funding is likely to be short.

You mentioned that first-class passengers are disappointed when they travel north of Edinburgh. That is a concern, but the regular service is more important than the first-class service, and the transport people should consider that in the main.

I mentioned earlier that Mervyn King told us when we met him in London that the events of the past two years were not only worse than 1929, but on a level with 1914. Has there been any investigation into the impact of the financial earthquake not only on the general tourism market, but in relation to the withdrawal from Edinburgh of high-end banking and the various tourism operations that depended on that flow of activity?

We are now seeing, in a broad sense, the effects of the removal of headquarters to London. More jobs have been promised, but they will probably be call-centre or back-end-of-business jobs. What impact will that have on the basic tourism facilities at that level of hospitality during the next few years?

I am not sure that I can answer the question directly. Most of the information that we have on the impact on tourism around the world comes from the United Nations World Tourism Organization, which produces data that allow us to compare the performance of tourism in Scotland and the UK with the situation in the rest of the world. It is clear that the economic difficulties have had a severe impact everywhere. I am not aware of any studies that have been carried out here on the impact of—as you describe it—banking jobs no longer being in Edinburgh.

The straightforward answer is that the biggest impact is undoubtedly on the corporate market. Hotels that rely on business tourism—conferences, meetings and incentives—have taken a hit, which can be directly attributed to the economic downturn. We have clear evidence of that, which we are happy to share with the committee.

I am delighted to say that that is changing, and the sector is moving in the right direction, although we do not know whether it will ever recover enough to reach previous levels. In the cities—particularly Edinburgh and Glasgow—that relied heavily on business tourists, there was a clear relationship between the downturn and the amount of business that they were receiving.

To return to the possibility of a tourism investment bank, I note that there has been no mention of the planned Scottish investment bank, which will be lending by the turn of the year. Is it anticipated that tourism businesses will or will not be significant beneficiaries of the Scottish investment bank?

My understanding is that tourism businesses will be eligible for funding from the bank. The main challenge is that the form of funding that I understand the bank will offer is not currently used to a high degree by tourism businesses.

I understand that the bank aims to bridge a gap in the finance market between loan and equity funding. In the tourism sector the vast majority of small to medium-size businesses are orientated towards traditional bank finance. Many are family businesses, which are traditionally reluctant to take on equity funding, but that is one of the routes that we need to go down to address some of the finance-for-investment challenges in the sector. We need to encourage tourism businesses to be a wee bit more open to considering the need to attract equity finance.

It must be said that a great deal of equity finance venture capital seeks opportunities that are harder to deliver in the tourism sector. It seeks scaleability, monopoly positions and high-risk, high-return operations, which are not always possible in relation to tourism.

I have a question for Richard Arnott, as the head of the sponsoring department for VisitScotland. Is there a timetable for the appointment of a new chief executive? Does the sponsoring department have any concerns about the prolonged delay?

There is a timetable, and we hope that movement will be fairly swift in the next month or so. We are not unduly concerned at present about the time that is being taken. The acting chief executive has been taking things forward quite successfully in the meantime.

It has historically been the case that the sponsoring department has been represented—either in a full capacity or an observer capacity—on the panel to appoint the chief executive of VisitScotland. Will the department be represented on the appointment panel on this occasion?

I am not in a position to confirm or not to confirm that at the moment.

It might be helpful if you could write to the committee to confirm whether ministers have sought to be represented on the appointment panel, either in a full capacity or an observer capacity, with reference to precedent.

I will do that.

Mr Graham, I will be interested to hear your comments on what I have to say. Last week I had family from England staying with me and they came through to Edinburgh for a day trip. They visited the Parliament and afterwards we tried to get some food somewhere within a stone’s throw of it. One place said that the kitchen had closed early; one said that the kitchen was closed at that time, even though it advertised that food was served between 12 o’clock and 7 o’clock; and the third place would accept only cash and not cards.

How can any Government—it does not matter who is in power—attempt even to get close to the 50 per cent growth target that has been mentioned when venues operate in such a manner?

Sadly, your experience is not isolated. One of the biggest challenges that we face in the industry is getting consistency in service delivery and the recognition of customer needs. To return to what I said earlier about the tourism leadership group, we as public agencies are challenging the industry to take a long, hard look at those issues.

As public agencies, we do not deliver the visitor experience directly—although local authorities certainly do at a local level—but there is a lot that can be learned from the bad as well as the good. In the 30-odd years in which I have been involved in tourism, the only thing that I would say in its defence is that the quality of the experience is an awful lot better than it used to be. However, there is still a long way to go, and your experience reflects the challenges that we face.

I thank Riddell Graham, Richard Arnott and Eddie Brogan for coming along this afternoon and updating us on certain aspects of the tourism industry. The committee will continue to keep those matters under review.

At our next meeting we will consider approach papers to our enterprise network inquiry and to the Protection of Workers (Scotland) Bill, and the issues that have arisen in relation to the financial services reforms since the committee published its report on the banking industry.

12:13 Meeting continued in private until 12:28.