Enterprise and Lifelong Learning Committee, 18 Sep 2002

Meeting date: Wednesday, September 18, 2002

Official Report 306KB pdf

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Tourism Inquiry

We will now return to agenda item 2. I welcome Paul Murray-Smith and his team from the Scottish Tourism Forum. We have received your written evidence. Before you introduce the team and make supplementary remarks, I inform members that we have a tight timetable. I am working to the idea that each set of witnesses on tourism should take about half an hour. I will be flexible when essential, but to get through the business I will try to cut questions after about half an hour. I am sorry if every member cannot speak to each set of witnesses, but that is the only way in which we will get through the business.

Good morning, convener and ladies and gentlemen. The convener's comments sounded like a whip—I will take note of them in my introduction, which I will keep brief.

I am the chairman of the Scottish Tourism Forum and the chief executive of two companies in the private sector—Dreamhouse Apartments and Euro Hostels Ltd. On my left is Peter Taylor, who owns the Town House Company Ltd, which has three hotels in Edinburgh. He is adviser to eTourism Ltd's board, which was recently established. He is also the national chairman of the British Hospitality Association. On my right is Ivan Broussine, whom members will know. He is the chief executive of the Scottish Tourism Forum and is probably the key member who is responsible for articulating the industry's views on tourism issues.

I thank the committee for inviting us to provide evidence. We broadly welcome the committee's inquiry into the level and effectiveness of Government intervention in tourism. We have submitted a detailed paper. I will not go through that, but I will emphasise three key elements. The tourism industry is dominated by the private sector. I do not mean by that that it is not important to work with all the interested parties in tourism. The Government is important because it sets the fiscal and regulatory environment. It can make an enormous contribution to marketing Scotland.

In its work, the committee recognises the importance of tourism to Scotland's economy and the challenges that we face in relation to a declining number of visitors and to competitiveness with other destinations, which we need to address. Our paper contains a series of recommendations on how the Government can focus its contribution and aid more effectively, to sustain jobs and create jobs and businesses.

I will ask two quick questions. What is the Scottish Tourism Forum's attitude to a tourism bed tax? Under the heading "The Role of the Private Sector" in your paper, you criticise the fact that annual public sector investment in the tourism product is only £300 million when tourism revenues are £4.1 billion. According to your figures, public subsidy represents about 7.5 per cent of total revenue. If any other industry outwith agriculture received such a subsidy, it would be thoroughly delighted.

What about the nuclear industry?

We will come to that.

I will answer the convener's first question and ask Ivan Broussine to answer the fiscal question. It is dangerous to take matters such as the bed tax in isolation, because huge questions must be asked and there must be a debate on fiscal policy—on business rates, other methods of attracting tax, VAT issues and our uncompetitiveness in relation to other countries in Europe. That is a huge matter; it needs a separate debate, in which we would like to participate. Ivan Broussine will comment on the figures in our paper.

The reference to the £300 million was not intended to be a criticism. It is a shame that the convener read it that way. The reference was intended to reflect the scale of investment. I disagree with the convener's interpretation that 7.5 per cent of turnover is a subsidy from the public purse.

The COSLA presentation highlighted the impact of local government's investment in product and support for area tourist boards. The product is of value to the visitor—it is sometimes essential for the visitor's experience—and it is also an investment for residents.

When considering direct subsidy, I would rather look at the amount of money that goes from the public purse into marketing. That is real subsidy. We must also consider what is paid for through tax by the tourism and hospitality industry, whether through VAT or national insurance, for example.

Do you agree that many of the visitor attractions that local authorities run operate on a loss-making basis and that, if those visitor attractions did not exist, that would have a major impact on the ability of private accommodation providers, for example, to attract visitors?

Yes.

Your evidence was helpful and thought provoking. I will ask two questions. First, paragraph 20 of the forum's submission refers to the British Tourist Authority's accountability for delivering Scottish and other regional targets. What is your perspective on its accountability?

Secondly, paragraph 27 of the submission relates to the cost of flying in the Highlands and Islands—in other words, internal air routes. Do you agree that the real difficulty about internal air routes, for example in the Highlands and Islands, is cynical marketing exercises, in particular by British Airways? On 28 August, BA withdrew its old fare structure and introduced a new one, which supposedly provided cheaper seats. However, it also withdrew, without telling anyone, a percentage reduction for children, so it is now more expensive than ever to fly in the Highlands and Islands if you are unfortunate enough to have kids and want to move them around. We need co-operation; responsibility must be taken in relation to our internal air links. Is that why your submission refers to public service obligations? I presume that you share my view that BA is trying to con the public in areas such as the one that I represent and that we need a much more vigorous and positive public sector role.

I will take the question about the BTA first—Ivan Broussine might comment on the second question. The point that we are trying to get across is that, if one is to market any country effectively, the various elements of the marketing must be integrated and accountable. The BTA has an important role to play in marketing Scotland. From an industry perspective, the BTA provides a lot of research that is not duplicated by any other source. It also provides a mechanism for marketing in some countries—it has about 27 offices throughout the world.

That is complementary to what VisitScotland does in international marketing and marketing competitiveness, but it must filter down to the area tourist board or to the local marketing delivery. We want a much more integrated plan—plans for each section must be integrated, accountable and have set targets. It is hardly useful if a big company in the commercial sector has a big marketing plan and each individual unit does its own thing without reference to the company's central marketing plan. We would like improvements in accountability, consistency and communication. We are participating in the debate and are encouraging the authorities to take that integrated approach forward.

The BTA has a new chief executive and we see some encouraging signs that it is working more closely with VisitScotland. The process is a two-way one. VisitScotland must communicate its intentions and the BTA must cascade out into the regions. The Scottish Executive can help by agreeing some regional targets for which the BTA can be held accountable.

I take it that you are concerned that the existing targets are insufficiently exacting or are not worked out using a methodology that takes account of input from the private sector as well as from VisitScotland. Is VisitScotland demanding enough of the BTA?

There is insufficient clarity.

The issue of PSOs for internal flights was raised. We will make a submission to the air consultation that is under way. I cannot comment on BA's fares structure, as I do not have the facts. However, commercial operators must work commercially and make their own decisions.

The public sector and Government must consider again their relationship—through PSOs—with commercial operators regarding internal flights, especially those that are difficult to sustain commercially. The tourism industry, especially in the Highlands and Islands, feels that it is significantly disadvantaged by distance, price structures and low frequency of flights. People feel passionately that there is a need for Highlands and Islands Airports Ltd to deliver services more effectively.

Only £9.39 of the price of each ticket relates to Highlands and Islands Airports Ltd charges. Lengthening operating hours in the network would help, but that is a different issue. The airport charge is an insignificant part of the £300 that it costs me to fly between Edinburgh and Shetland every week.

The charge is marginal in that context. It is not marginal for a budget airline that is attempting to provide flights to the Highlands and Islands and to improve frequency of service. Eighteen pounds for a return flight for two passengers—one flying in and one flying out—is a significant charge. Budget airlines have made that point.

I accept that. However, a future air strategy for the Highlands and Islands cannot be based solely on budget airlines.

It is important that Government and the public sector re-examine cost structures. HIAL is one element of those structures. PSOs and development are others.

In your submission, you say that the first priority of the tourism industry is international marketing of the brand "Scotland". I am trying to reconcile in my mind some of the other statements that you make. You say that there is

"frustration about the slow speed of involvement of the private sector".

You also say:

"A small number of large companies of international or national stature market their facilities without the need to link to destination marketing priorities."

I take that to mean that, to some extent, big companies are doing their own thing.

You call on the public sector to invest a minimum of £50 million in marketing. I have the impression that you want a great deal more public sector finance to be invested in the marketing of Scotland. The big players are complaining that they are not involved in that exercise, but at the same time they are doing their own thing. How can we integrate public and private marketing? Is there a structural problem?

Over the past five years, the nature of the tourism industry in Scotland has changed rapidly. There are a huge number of small and very small tourism businesses that could not afford to market themselves abroad without a support mechanism.

The big companies are important because, through their direct marketing activities abroad, they are saving public money. Other businesses can link into those activities in their destination marketing. However, when we consider competitiveness and the amount of money that other countries are prepared to invest, we see that we are falling short. What we can spend in the United States pales almost into insignificance against what other countries spend.

I take the point that was made about accountability. We have to justify our requests. We cannot simply say that we want £50 million; we have to prove that spending that £50 million will bring in tourists and therefore contribute greatly to the economy of Scotland.

I want to come back to an idea that I may not have understood. How do we integrate the work of the big companies into public spending? Your submission complains that the work of the private sector is not properly integrated, but at the same time you tell us that the private sector is off doing its own thing. How can we have more effective integration?

Historically, the large companies—the big boys—did their own thing, perhaps because of frustration with the previous Scottish Tourist Board. That is now changing. We see many positive things coming out of the VisitScotland marketing team, which is more focused. Large companies have many skills to offer and VisitScotland should tap into that resource, dealing with the companies one to one. Two and two can make five.

As has been mentioned, 90 per cent of our industry is made up of AWEs. That is a term I heard recently—it stands for awfy wee enterprises. They can perhaps ride piggyback on the larger companies.

Would such co-operation be an improvement?

I think so, yes.

What would be the forum for that co-operation? Would it be yourselves? I am sorry to be so pernickety, but I want to be practical. What would be the forum for getting integration between the public sector and the big private players, to ensure that people are not doing their own thing when that is not helpful?

I am glad that you have asked that question. It is important to acknowledge the leadership role that the private sector can have. Big companies—such as Marriott, Hilton and others—are closely associated with the Scottish Tourism Forum and the trade associations. An exchange of information and business methodology takes place, and that helps. At some levels, marketing advisory groups within VisitScotland and the area tourist boards are involved. That may not be as well developed as we would like. It could be improved.

Where does the figure of £50 million come from? I read such figures and sometimes it seems that someone has just sat down and come up with them. Has the figure been calculated, following research?

It is still lower than the Bord Fáilte marketing budget.

I am sure that it is, but what does the £50 million represent?

It represents a 40 per cent increase on VisitScotland's present marketing expenditure. Its present budget is £32.85 million.

But the question is, how do you reach the figure of £50 million? We know that it is 40 per cent up on the existing figure, and we know that it is less than the Irish figure, but is there a calculation?

No, there is not.

A methodology?

No, there is a—

So, it is finger-in-the-air stuff, is it?

Well, it is slightly finger-in-the-air stuff. We have to consider the presence and profile of Scotland in overseas markets and Scotland's ability to deliver a product and to bring in customers.

I was hoping to hear that the £50 million had been calculated by saying that £5 million would be allocated for this, £5 million for that and so on. That would help us to know what the money would be spent on. You seem to be simply asking for more money.

I have not done a business plan. However, I could write something down on the back of an envelope and get that to the committee by next week.

If we had taken the other view and said that we needed more money, you would have asked us to tell you how much more. We were trying to impart the fact that there is a need for further investment not in order to stand still, but to aid recovery. The Exchequer will benefit greatly from the improvement in visitor numbers to Scotland. That is a key issue.

That said, I accept your challenge about the £50 million. The figure might be £40 million or £60 million. The situation needs to be evaluated. As a businessman, I would not say to someone, "Give me £50 million and then I'll think about how I'll spend it." Strings and conditions are attached to any such amount. As a result, although the figure of £50 million can be challenged, it can be justified given the marketing activity that the country needs to push it forward.

Paragraph 13 of your submission refers to

"frustrations in the industry that agencies established by statute do not listen to and act enough to meet industry needs".

Are you referring specifically to agencies that operate within the tourism structure, or are you including other agencies such as enterprise networks?

One of the difficulties with the tourism sector is that there are 22 local enterprise companies, 14 area tourist boards, 32 local authorities and about eight, nine or 10 national agencies or non-governmental organisations with responsibility for tourism. As some of those are membership organisations, they should have stronger accountability to their members. Others are not necessarily membership organisations, but perhaps they should listen to the marketplace's commercial perspective if they are to respond more effectively to the needs of Scotland and the business community. I am happy to be more specific about that.

The general question is how we sustain and develop partnership between the public and private sectors. Furthermore, we must find out how public and Government investment meet marketplace challenges of commerciality and relevance of investment in order to sustain competitive positioning and new product development and ensure that the quality of the product is effective and that regulation and some of the issues that our COSLA colleagues discussed earlier support the industry effectively.

You recommend the retention of an ATB network, but in a "pared down" form. Will you expand on that?

Together with various other organisations, we are making a submission on this issue. As one would expect in such a wide industry, there is a huge range of opinion. We believe that a local delivery mechanism is fundamental to the marketing exercise. If that means restructuring an ATB that will work to deliver the goods, we will help with that process. What the COSLA representatives said earlier is very true. One of the keys to the whole issue is how the funding works. For years, the ATB network has lurched from one mainly financial crisis to another and our ability to continue to deliver and market effectively continues to suffer. That is not an adverse comment on all ATBs—quite the reverse. Some very effective ATBs exist. I am simply saying that we should learn from the good ones and ensure that that good practice is applied throughout the appropriate network. If that means changing the network to make it more effective, we should have the courage to do so.

Are ATBs really membership organisations?

They are at present.

Directed by whom? I pose the question merely because it seems to me that there must be an irreconcilable conflict of interests if an area tourist board that is directed largely by VisitScotland and funded by various mechanisms, but significantly by local authorities, has a membership that would normally control the whole operation of the organisation but which does not, in reality, do so. In your view, is that a sustainable structure?

We made some comments in our submission about the requirement for membership organisations to be accountable to members. We also identified frustrations with the variety and range of institutions and organisations that are involved in tourism. Some of that is about partnership and some of it is about accountability. As Paul Murray-Smith said, there are examples of good practice in some ATBs with regard to accountability, involvement and participation. In other ATBs, there are significant weaknesses.

Peter Taylor and I would like to say something on that point. One of the issues that the industry faces concerns businesses that are scattered around Scotland. We have talked for a long time about a pan-Scotland approach for national and local marketing delivery, but so far it has not happened. One could be in one area tourist board but be unable to do anything in other parts of Scotland, because they are separate areas, unless one physically became a member. That answers your question about membership, and that is an issue that we must address. It is a question of getting the best delivery mechanisms for appropriate businesses that are scattered throughout Scotland and not just in the local area.

I am here today wearing a Scottish Tourism Forum hat, but the view of the Scotland committee of the BHA is fairly radical. That committee believes that the whole structure should be dismantled and, if you like, re-mantled. If you say that it should be pared down, you get into a debate on which bits should stay and which should go, and there are lots of areas of discussion and argument. People who visit this country from overseas do not buy by region. They buy Scotland or they buy a product, be it golf or genealogy, and we must respond to what the customer wants.

There are area tourist boards that are working well, but there are others that are not. The key ones are the gateway locations, and I do not say that only because I am involved in the Edinburgh board. The gateway locations must be supported centrally with funding, so that they can play a dispersal role. Other ATBs may be leading in a specific product. For example, Fife might be doing well for golf, and we could perhaps create a group around that region. There are structures involving whole pyramids of costs, which could at the very least be shared centrally by one network organisation. Scotland should be marketed by VisitScotland, and the regions should be marketed in a national sense, not an international sense, by the regions.

I ask witnesses to keep their answers a wee bit tighter, otherwise we will not get through all our questions.

I was interested in your response to what I think will be a recurring theme of this inquiry: the silver bullet that is a bed tax. I would be interested in your views on any data from your counterparts in the Balearics about the effects of the bed tax there, notwithstanding the weakness of the euro. I shall park that question, if I may.

I was not convinced by what was said on the more philosophical issue that Gordon Jackson raised about the relationship between the public sector and the private sector. Through public investment, we can help to create a framework and, to some extent, hold the jackets. Thereafter, however, your submission seems to say, "Give us £50 million and we will get a marketing strategy going, but otherwise the industry should dictate the pace of what we do and where we do it." Is that a right prejudice in respect of your position?

I will give a response that relates to the role of VisitScotland, which is a non-departmental public body that receives public funding. The industry has bought in to the branding framework that has been established by VisitScotland's new management team. That framework has much support inside the industry and people like it—it is fresh and attuned to the marketplace. My counter-argument is that the industry is buying in to that framework, which was established by Government resource and investment.

I have questions on several different topics. We undermarket ourselves in respect of the effectiveness of the cash that goes into the budget. We are not good at direct transport links, but there is marketing on a larger scale through the BTA. In the future, can a more substantial case be made for more marketing, so that we can make the case to the Executive in the Parliament? How important is the link between marketing and visitor numbers in the competitive marketplace?

On intra-UK dispersal, Mr Taylor said that there were signs of closer working between VisitScotland and the BTA. Will you say more about that? What are the signs of closer working? Currently, what is done in respect of intra-UK dispersal when people are persuaded to show up somewhere on these islands? How do we get people to come to Scotland?

I will fire out all my questions first. On the transport question—

I will give you time to ask your questions, provided that answers are kept fairly tight. Two other members have questions to ask.

Mr Wilson has asked many questions. On the gateway problem, London is a huge gateway for people who come to Scotland and is likely to be so for the forseeable future, unless something mega happens in respect of direct flights into Scotland. Some things are happening, but London will always be a gateway. However, in a Scottish context, Edinburgh, as a result of its tourism links, is the gateway for Scotland.

I harp back to the pan-Scotland approach when people come to Edinburgh. We have considered mechanisms. The private sector and individual companies apply mechanisms. If one has a hotel in Edinburgh or Inverness, it is quite easy to say, "Go and stay up there," but a wider issue exists on Edinburgh's gateway approach in particular. There should be an attempt to distribute visitors further and make it easy for them to reach places.

Whatever network is in place for area tourist board delivery, it is extremely important for people to work together. One tourist board should not be allowed to decide to go it alone—that would be unacceptable and would fragment the whole network.

Perhaps Peter Taylor would like to comment on the gateway approach.

More than 50 per cent of visitors to the Edinburgh TIC come in for information about the rest of Scotland—unfortunately, I have forgotten the exact figure. Most funding for tourist boards is local. It is understandable that a local council should say that it provided funding to help to support Edinburgh and Lothian, for example. A central resource is needed, therefore, to push business out to outlying regions.

How do we square that with evidence of people coming to Scotland with fixed budgets and schedules and for fixed periods of time? Perhaps dispersal should aim at return visits. In the UK, what evidence is there that we are winning proper dispersal from the BTA's marketing effort? What dispersal constraints are there within Scotland, assuming that people are here and can be dispersed?

We will never get different area tourist boards to agree that one should take priority. Healthy internal competition is not necessarily a bad thing as long as it is not counterproductive. Are there issues around the transport infrastructure and are other constraints causing a blockage?

We make the point in our submission that transport and marketing are key areas. Transport is key, because it is the delivery mechanism for tourists. Although we might be going for pie in the sky with this, our having a more integrated transport system is important. By making it easy for the tourist, Scotland could steal a march on many countries throughout the world as a tourist destination. We have to move towards asking what guests who are coming to Scotland are looking for and what they need, rather than considering what we think they need. We have to see the situation through their eyes. We are trying to address that, because that is where the solutions will come from.

I agree that return visits are about dispersal. We do not have effective mechanisms for pooling on databases the information on people who come for conferences or leisure visits in order to remarket to those people. Remarketing is often done by an area tourist board rather than nationally. Return visits are crucial.

We addressed the BTA's role in helping to bring people to Scotland, because we believe that the BTA should have stronger targets and there should be stronger obligations on it to deliver tourists to Scotland, Wales and the English regions.

What is happening at present? How are we underperforming in terms of realising the potential of return visits?

My understanding is that the prior options review of the BTA, which was held in private, did not set regional or Scottish targets. There is increasing debate, which has been stimulated by similar feelings in Wales, about the BTA's need to turn its thinking on its head. The BTA's obligation to deliver to Scotland or Wales will make it think about the content of its marketing programmes. However, we have to balance that with the strong gateway role of London and the south-east of England—the order is London, Shakespeare country then Edinburgh. The targets are crucial and the Executive should contribute to the setting of them.

I am not comfortable with the idea that we should drive tourism on the basis of healthy local competition, because geographical fragmentation detracts from the priority, which is bringing visitors to Scotland. That is about getting the brand and the national marketing right. Once people are here, we can find ways of dispersing them.

That was my point.

You make it clear that both VisitScotland and the BTA should make marketing Scotland abroad the priority. Are you suggesting that more of VisitScotland's budget should be spent on marketing Scotland abroad than is spent on marketing Scotland within the UK?

Yes, but we acknowledge that we have a huge domestic market as well.

By domestic do you mean the UK?

Yes.

You say in your submission that the 50:50 public and private sector funding that the BTA's one million visitor campaign attracted is not achievable here. What would be an achievable model here? Are you talking about getting match funding from the small number of large companies in Scotland or are you trying to get what Peter Taylor called the awfy wee companies involved?

VisitScotland has indicated that it is keen to move down the road of match funding. There is no limit to that. If large companies know that it is available, they will avail themselves of it. It can double our effectiveness and, in effect, double our budget. Small companies have to follow on the coat tails of the large companies and of VisitScotland.

Are you saying that the huge number of small companies will, in effect, never be able to contribute in that area, so we should concentrate our efforts on the large companies that have a budget for marketing?

That is certainly a challenge in Scotland, as opposed to in England. Because of the high level of involvement of large companies in Scotland, there is a difficulty in that regard, but I cannot answer the question whether we could encourage small businesses to contribute to the costs at a given level. It is about cost and effect. If businesses see a vibrant marketing plan, there will be participation. Many groups of like-minded businesses in the tourism sector already get together and market themselves separately. There is a willingness to do that, but the extent to which that pervades the industry is yet to be proven.

I would like to tease out some of your thoughts on the role of area tourist boards in relation to small businesses, which are beginning to develop quite independent marketing strategies, for example via the worldwide web. I stayed in a small hotel in Skye that markets itself via the internet very successfully and has high bed occupancy rates. How can area tourist boards help support such businesses? Perhaps they do not need support.

On the relationship with local enterprise companies, you state in your document that more partnership working is being undertaken, which is to be welcomed. There is concern, however, about the role of small business gateways in providing the service that you think necessary.

Yes. Peter Taylor is our expert on the internet, so I invite him to comment on the business that you mentioned, which I know.

The small self-help groups that are forming are doing a brilliant job. Some of them have had match funding either from VisitScotland or from local enterprise companies. It is great to see that. It is not that the businesses in question do not need help; VisitScotland can learn from them and can transport such models to other regions or areas. We need to work at spreading best practice.

The report from Stevens and Associates was prosaic about the need to drive tourism strategies not on the basis of the large proportion of smaller businesses. Those businesses have a role, however. Unlike in many other sectors, smaller businesses in the tourism sector are crucial in the supply chain. If someone's experience in Scotland has been generally very positive—for example, they may have got their car as soon as they arrived at the airport and may have gone to a hotel such as the one that Rhona Brankin described—but they have gone into a cafe or a bed and breakfast and have had a poor experience there, that only demonstrates how important it is to raise quality standards throughout the industry.

Many smaller operators like their area tourist board: at least they have an organisation that speaks their language. As far as the worldwide web is concerned, it is being demonstrated that the focus on e-tourism is changing the way in which the consumer finds information and makes purchases, which is making the geographical structures redundant.

Aside from my past experience with the hotel in Skye that I mentioned, I now go on to the web when planning a holiday and mix and match. We are working in a fast-changing environment and, in some ways, there are now opportunities to transcend the local. I very much accept the need for a local buy-in, however. The hotel that I referred to does its marketing very effectively, but if the transport infrastructure were to change, that business would be dead in the water overnight.

I thank the witnesses—their evidence was very helpful.

Our next set of witnesses is from the Federation of Small Businesses—whose evidence you can read in this morning's Business a.m. I welcome John Downie, who is the FSB's Scottish parliamentary officer, and John Millward, the managing partner of Fraser Trading. John Downie will give the introductory comments.

Thank you for the opportunity to give evidence. The committee has our written response to the inquiry, so my introductory comments will be brief. I introduce John Millward, who owns and runs a tourism business. He also represents the Federation of Small Businesses on the Borders local economic forum and is an ex-director of the area tourist board.

In Scottish tourism we have a fantastic product, whether you want to see beautiful scenery, play golf, walk or examine our history and culture. Unfortunately, we have been poor at product development and focusing on customers' needs. Changes at VisitScotland over the past two years have resulted in productive changes nationally. Unfortunately, we have not delivered change locally.

I have spoken to FSB members throughout the tourism industry and there is momentum for radical change, but for change in which the private sector takes the lead and the public sector is more of a facilitator. Our written evidence highlights the fact that we must clarify the roles and responsibilities of the private sector and public sector agencies. I am happy that the research that the committee commissioned seems to reflect the views in our submission. That adds to the debate and gives us a way forward.

How many members does the FSB have and how many of them are involved in the tourism sector?

We have 16,000 members in Scotland. Around 4,000 of our members are involved in tourism through hotels and guest houses, but 23 per cent of our membership are retailers, including retailers from such places as Inverness, Ullapool and the Borders. Therefore, in most areas, the majority of our members are involved in some way in the tourism industry.

The tourism industry pervades the whole of Scotland. For example, the number of visitors to Glasgow and Edinburgh means that taxi drivers are in the tourism industry. It is difficult to define a tourism business, but probably 33 per cent of our membership is directly involved in the tourism industry.

One of your recommendations is to do away with the area tourist board network, whether by dismantling it or otherwise. What would you put in its place?

In clarifying roles, we must consider the private sector. I referred earlier to industry-led groups. In Ullapool, Jedburgh and other areas, small groups of tourism businesses are getting together in clusters to form marketing strategies and deliver their services. John Millward will speak about that with regard to his area, which is the Borders.

The question is why we need area tourist boards. If they went, we would not need anything to replace them. We have the internet and new technology, and visitor information should be available in garages, shops, hotels and guest houses. The issue is the provision of information to visitors.

VisitScotland's core activity is to market Scotland, but local enterprise companies should be involved in the business development side. Our written submission clearly states that VisitScotland should market Scotland, business development should be the LECs' job and product development should be the job of the industry, which must take the lead.

I agree with John Downie. I come from the Scottish Borders, which has no large tourism businesses, only small ones. A high proportion of the revenue of most Borders businesses is generated from tourism. Therefore, everyone in a small community of, for example, 4,000 people benefits from tourism somewhere along the line.

A grouping of businesses from all sectors has been formed in our area. We would like a much more hands-on approach to marketing the particular attributes of our area and perhaps a link with the central belt gateway of Scotland, if we think that that would be beneficial to us. Earlier witnesses referred to that.

If I may, I will add to what John Millward has said. I am not sure whether the committee received the British Hospitality Association response, but it was clear about the roles and responsibilities. I agree almost entirely with its proposal on area tourist boards.

Six members want to ask questions, so please keep the questions tight and the answers fairly tight.

I want to explore the skills gap, which the witnesses say is due to poor labour market fit. What is your experience of that and how can we change the situation?

The experience of skills gaps in a wide range of sectors in Scotland has been well documented in the committee's inquiry. Tourism has suffered particular difficulties, because of its poor image due to the low pay in the industry and the fact that many jobs are seasonal. However, changes are taking place. The creation of future skills Scotland should improve the labour market information. A couple of years ago, the Executive formed Tourism People—of which I am a board member—which seems to be getting its act together in putting skills issues at the top of the tourism agenda. The skills that people have are our key asset in tourism.

What role should partnership play? In my local community of Fife, partnership has been crucial in delivering many tourism initiatives. What is your view on that?

Sorry, I did not hear the question?

Under the heading "Enterprise Network", your submission states:

"All business development issues relating to tourism business should be carried out by Local Enterprise Companies."

How do you see partnership with communities sitting alongside some of your other comments?

The situation would not be any different from what is happening now in relation to other businesses. Whether a business deals with tourism or manufacturing, the business development issues relating to skills are exactly the same. People need to work together with the private sector to find out the needs of businesses and address the skills gaps. Whether the deliverer is a private sector company or a local college does not matter. The partnership role is the role that the LECs play just now in identifying needs and providing solutions to the skills issues. Whether the deliverer is private or public is, in a sense, immaterial.

I did not like the tone of John Downie's written response to question 3. It is not helpful to get tourism and agriculture in dispute. One of the lessons from foot-and-mouth was the fact that tourism and agriculture are interlinked. People come to the countryside because of what it looks like, which is partly a product of the way in which it is managed. Promoting a debate about why agriculture gets more than tourism is not helpful. How can rural tourism develop to allow the sectors to be integrated rather than at loggerheads over resources?

I do not think that the sectors are at loggerheads over resources, but to take the example of the foot-and-mouth crisis, I think that the Executive's focus was basically on solving the problem for agriculture. The impact upon other sectors was forgotten. As I said in my submission, agriculture accounts for 3 per cent of our GDP, but the figure for tourism is much higher than that. Tourism produces many more jobs—[Interruption.]

I hear a pager. I think Brian Fitzpatrick is on fire.

I am always alight.

We need to prioritise according to which industries are generating economic growth. It is not a matter of choosing between tourism and agriculture, but there is a sense in which we must consider which is more important to the Scottish economy. Frankly, tourism is more important than agriculture. I do not say that we should ignore agriculture, but agriculture must change and diversify. The Federation of Small Businesses has members on the agricultural side that have diversified to become tourism businesses. I could give numerous examples of businesses from David Mundell's area that have got out of agriculture and have moved into tourism. It is not a matter of if or when. Tourism is more important to our economy.

I do not think that that is a helpful approach. [Interruption.] Your members are already phoning in to give their views.

I am interested in your clear opposition to compulsory registration. I understand your point but, during the visit to Dumfries and Galloway, small tourism businesses argued for compulsory registration. Such businesses feel that they are damaged because people can go into premises down the street that do not have any quality control. How will the quality issue be tackled if we do not have compulsory registration? There are no barriers to entry to the tourism business. Someone can sell a property in Slough, buy a small hotel in rural Scotland—for example in the Borders—and start to operate it without any qualifications. That is a significant issue.

I agree that that was the case, but the tourism industry is changing; it is becoming too competitive for people simply to play at being in tourism.

There are still issues. For example, the rules mean that bed and breakfasts with fewer than six bed spaces do not have to comply with health and safety and other regulations. If people are in business, they should be in business from when they have their first bed space, without exception. Everyone should have to comply with fire and environmental health regulations.

Changes are required. Many people in the industry see competitors coming in, but we cannot stop people competing. We need new ideas and new people in the industry. Barriers to entry allow poor tourism businesses to remain in business. The customer is the best judge of quality control.

The industry will find the level that customers require and poor businesses will fall by the wayside. Compulsory registration would go against accommodation providers, but, as I have said, many businesses that are not classified or graded benefit from tourism. All tourism businesses, not only accommodation providers, should have access to public sector support.

I am pleased to hear a robust defence of the consumer against some people's corporatism. There is an issue of quality and standards. If I have a bad experience in the Borders, there is a good chance that I will not go back. We have considered proposals for better classification. I assume that those proposals do not contribute to your anxiety about people trying to exclude competitors through compulsory registration.

Not at all. I run a self-catering business and provide what my customers say they want. I gear my successful business to my customers' needs.

I agree that better classification is an issue and that the present situation is confusing for visitors.

Seasonality has been mentioned. On work force development, it strikes me that one problem with getting investment from the work force—never mind employers—relates to some of the facts of tourism. Tourism offers opportunities for people to do seasonal work and then to move on to something else. The surly student is probably the best example of that. That is a difficult nut to crack. We can have all the modern apprenticeships that we want, but sometimes the wage rates support only seasonal work and the market does not support anything other than those rates. That strikes me as one of the imponderables. We all mutter that we would like to do something about the problem, but it is not immediately clear what the answer is, apart from everyone smiling a bit more.

There are particular problems in areas where tourism is seasonal and involves students from the cities coming to work in different areas. However, there are also core staff who live in the communities who need to improve and upskill. More online training and training in the workplace is now available, but we must establish somewhere where all small businesses can send their staff for training in the close season. One advantage of that would be that staff would be upgraded and would come back better prepared for the next season. Upskilling would force an increase in wages. However, in seasonal tourism businesses on the periphery of Scotland, profitability is a big issue, and a lot of tourism operators have more than one business.

Would the FSB support the statutory granting of time off for paid study, provided that that was negotiated with employers?

Our members would probably not support that during the tourism season. There has been talk of establishing tourism centres of excellence for owner-managers and training centres for staff. In a rural area, for example, one hotel might be designated as the core training centre for staff over the winter. The granting of time off is a tricky issue.

We will come back to it.

In contrast to what my colleague David Mundell said, I must say that I think that your evidence is excellent. I might not agree with all of it, but the points that you make are very clear and cut straight to the point. That approach is helpful for any committee.

I have two questions. First, do you view the removal of tourism from the enterprise ministerial portfolio as a good thing or a bad thing? Secondly, you may have heard the evidence that we heard moments ago, on the need to reform the British Tourist Authority. In the sixth bullet point under question 4, your submission states clearly that you see no role for the BTA. Will you elaborate on that?

We always argued that the best place for tourism was in the enterprise portfolio, as tourism is a core part of our economy, but the industry argued long and hard for a tourism minister. I disagreed with our members on that. Where would it stop? Would we have ministers for manufacturing and electronics? That approach is too sectoral. Taking tourism out of its economic relationships with transport and enterprise is a mistake. The people who have clout in the economy operate in the field of enterprise. Tourism is clearly linked with Scottish Enterprise, business development issues and transport issues, as the Scottish Tourism Forum said earlier. I would have preferred the link to remain in the ministerial portfolio. The industry has got what it wanted, but the proof of the pudding will be in the eating. In two or three years, we will have to make a judgment on whether the move has been effective. We disagreed with some of our membership, some of whom wanted the change and some of whom did not.

The feedback that we get from the BTA suggests that it is not delivering visitors to Scotland by dispersal. We would prefer VisitScotland to get its message across directly to tourism operators and travel agents in other countries, instead of relying on the BTA. We must stand on our own two feet in tourism. The BTA has not been effective in delivering. Having London as a gateway is a clear issue—visitors come from there to Scotland, but not in a number that justifies letting the BTA take control.

I agree with that statement. Scotland has a characteristic product to offer the international community and it must take a much stronger role in marketing itself abroad. Overseas visitors account for a relatively small proportion of the overall number of visitors who come to Scotland, but they are the highest spenders.

Mr Downie said that the feedback from members was that the BTA is not delivering. I do not expect you to substantiate that charge today, but it would be useful if you could provide the committee with evidence to support it. I take the point that Andrew Wilson makes about cutting to the chase, but it would be helpful if we could have facts and figures to support some of the contentions in the FSB submission.

My question relates to the point that you make about TICs. You say:

"TICs are becoming obsolete, especially in light of the development of eTourism Ltd."

Will you clarify that suggestion? The other week, Adam Ingram, Rhona Brankin and I were in St Andrews to investigate golf tourism, and I took the opportunity to examine the St Andrews TIC. In St Andrews, the TIC has a range of functions, including a bookshop. That is one way in which TICs can develop. I do not think that they are obsolete; they still have a role to play. What evidence is there to support your claim that TICs are obsolete?

We have long complained about TICs competing with our members—including members who run bookshops in St Andrews. It is a problem if a public sector agency is competing with private sector providers in the same small town.

We believe that TICs should be private sector led. It is fine to have them in an area as long as their existence can be justified and they are run by the industry. They should not receive public sector funding to enable them to compete with other businesses. The role of TICs must change and their operations should not be subsidised. There should be a linked network of tourism businesses that provides information on events such as ceilidhs in Ullapool. If the uptake of information technology increases, it will be possible for visitors to pick up such information regardless of where they are.

We can provide further evidence if the committee wishes.

You have an interesting perspective on the issue. If the TIC in St Andrews were private sector led, presumably it would be run by a couple of hoteliers who would not see it as being in their interests to pass on information about other accommodation in St Andrews. Surely the free market approach that you advocate would not improve the availability of information to tourists.

We see TICs as taking on a different role. They could act as focal points for businesses and provide access to means of promoting those businesses. Enterprise companies could make use of TICs to assist small clusters of businesses. TICs would continue to provide hands-on assistance to arriving visitors. However, e-tourism is taking over as the means of drawing people into an area. It gives businesses the ability to promote their area and to reach the point of sale—people's homes.

I do not underestimate the importance of e-tourism, but I am unclear about the role that you envisage TICs playing. If a TIC is run by a small number of accommodation businesses, I do not see how it can provide information on a level playing field for all the accommodation providers in an area.

I offer the committee an example from John Millward's area. The Jedburgh Alliance has been formed by local businesses and the local community to provide a focal point for the development of products and services, such as local festivals, that will attract people to Jedburgh. If the alliance has an information centre, it will be run by the people for the people, in conjunction with businesses. It will not be run by one or two businesses.

It is VisitScotland's task to provide a national network of tourism information. People in Shetland should be able to access information about Dumfries and Galloway.

Remember that the TICs promote only the businesses that are members of the ATB. The TICs do not promote all businesses. We want the TICs to be focal points for promoting all businesses.

Given our time scale, it would be useful if you could provide us with supplementary written evidence on that issue for clarification, because in your submission you say:

"TICs are becoming obsolete".

When I examined your response, I struggled to find the overall strategy that the FSB seeks. In the evidence that we have had, great emphasis has been placed on getting visitors to Scotland. The FSB did not identify that as a starting point, although you make an oblique reference to visitors. Let us assume that we have a national strategy to get visitors to Scotland and let us assume that they come here and have to go through a national gateway for redirection to regional areas. I am not clear about the federation's attitude to how one would redirect those visitors within regional areas. You are suggesting the abolition of ATBs, but I am not clear about what would happen to people who were redistributed to a regional area. What would happen to them?

People do not come to Scotland to go to regional areas. People come to Scotland to play golf, to walk and to enjoy our food, our music and our heritage. The change in VisitScotland's strategy is that it is product based not area based. Consumer needs are based on what they want to see. They might want to see a castle, visit a museum in Glasgow or go clubbing in Edinburgh. It is not a question of regional areas. That kind of thinking has held Scottish tourism back. For example, people do not just go to the Borders. They might go to visit a castle or Walter Scott's house, but they no longer just go to a particular area. We must focus on that change in why people come to Scotland.

Customers do not recognise the boundaries of the present ATBs. As John Downie said, they recognise products. Someone who comes from England or Germany does not recognise the area of the Scottish Borders or the Lothians or Edinburgh or Fife—such labels are fairly meaningless to them. VisitScotland needs to provide a consistent message about overall strategy. Local areas target the aspects in which they think they are strong. That brings us back to the function of the local TIC. As it stands, the ATB network is more or less redundant—it is not recognised by the customer.

Surely there is still a need for a local delivery mechanism. Some tourists who come to Scotland are signposted to an area, perhaps by virtue of a particular product. When they get to that area, they might want to do more than look at one castle or go to Walter Scott's house. What would happen to them?

If we had a tourism information network through new technology, tourists would be able to access the information that they needed in a variety of tourism and business outlets. The people that VisitScotland brings to Scotland come here for a reason. They might have planned their visit directly, through the internet, or they might have planned it through a travel agent. They know where they want to go. If they want to go elsewhere when they get here, they should be able to get that information at the touch of a button. The needs of the customer are such that they will go where they want to go and will see what they want to see. To that extent, the redirection issue is not relevant. The VisitScotland strategy, which is based largely on the five product areas, is the way in which we must go.

Annabel Goldie has a quick final question on that point.

I am not aware of too many tourists who rush around with laptops, but perhaps I am missing something.

The laptops will be in tourism businesses.

Or the information will be on their phones.

Training has been mentioned, although it was not specifically referred to in the FSB submission. It emerged that some FSB members are considering the close season as an opportunity for increased training. The impression that I received from the case study in which I took part was that the operators were trying to extend seasonality and to find ways of broadening accessibility for customers. What is the federation's view on that? I assume that members on the operational side of tourism are anxious to broaden their trading period.

Close-season training is probably more intensive, but even during the busy season most tourism businesses have on-going training of one sort or another, whether through their LEC, or through old staff teaching new entrants or through online methods. There is no single answer. I was not saying that businesses will train only during the close season. Efforts to extend the season are welcome and might lead to a refocusing of needs, but online training is becoming more and more important to tourism businesses.

Is extending the season an issue for the members of the FSB?

Every business has peaks and troughs. Tourism is perceived to have a high peak and a low trough, but the gap is narrowing all the time. Through local initiatives that are operated by clusters of businesses, we are able to stage a festival or a specific event to draw people in during what are perceived to be low-season periods. However, there are periods during the low season when it would be appropriate to train people.

Thank you for your attendance. We look forward to receiving further information from you in writing.

I welcome Graeme Munro, the chairman and chief executive of Historic Scotland, and Owen Kelly, Historic Scotland's director of properties in care.

We welcome this opportunity to give evidence this morning. We are slightly different from the other witnesses you have heard from this morning in that we are an agency of the Scottish Executive. We are placed within the education department and report directly to the Minister for Tourism, Culture and Sport. Our mission is to safeguard the nation's built heritage and to promote understanding and enjoyment of it.

All surveys show that historic buildings, those that we care for as well as those in the hands of other people, are high on the list of Scottish sites visited by overseas tourists. We are now the largest operator of paid visitor attractions in Scotland. We conserve, manage and interpret more than 300 sites throughout Scotland, from Galloway to Shetland. We are conscious of our national role and are well able to encourage geographic and seasonal spread throughout the country. We welcome between 2.6 million and 2.7 million visitors annually to the 70 sites for which we charge admission.

In the early 1990s, we received about 2.3 million visitors. The number rose to a peak of around 2.8 million or 2.9 million in the late 1990s. In the past couple of years, the numbers slid back a little to 2.6 million or 2.7 million, but they still represent a significant increase on the position in the early 1990s. Of course, the figures do not include all visitors to the 250 or so free, open access sites that we look after throughout the country, some of which, such as the Clava cairns, the Calanais stones and Glasgow, Dunblane and Dunkeld cathedrals, are rather well visited.

We work closely with VisitScotland on marketing, for example on overseas trade missions, and with area tourist boards throughout the country. We fit well into a number of the niche markets that VisitScotland is developing, such as cities, culture and family history and roots. However, where VisitScotland is focused on marketing, we are primarily focused on product. We aim for quality in all that we do and we hope to match public expectations, which are, quite rightly, always rising.

We put particular emphasis on customer care training for our staff. We seek to spread out the economic benefit of our operations by sourcing goods for our shops in Scotland, as far as possible. We have made something of a feature of local crafts in Orkney, Iona and Urquhart Castle. We also work closely with the conference business sector to help assemble packages to attract visitors to Scotland.

Our events programme has expanded rapidly in recent years: our events and publications have helped to stimulate interest in day and weekend visits in Scotland. That is a useful way of combating the loss of visitors from overseas.

I hope that the paper we have given you is helpful. It concentrates on our direct involvement in tourism through the properties we manage. We also have a strong indirect interest through our historic building grants system, through which we fund the National Trust for Scotland, local trusts, local authorities and private individuals to repair historic buildings, many of which are visitor attractions.

I am happy to try to answer members' questions and to supply any more detailed information in writing.

I have a specific question on what you are doing about receipt of the euro at your various outlets. It would be helpful to have information beyond that from Edinburgh Castle about the scale of receipt of euros, how many you are taking and what the transaction cost of providing that service is. You will not be able to give me that information now, but it would be good to get it when you can provide it.

Generally speaking, how is it working? Does it need to be expanded to other outlets?

We provide that service throughout the estate. I will dig out some figures on how many euros have been taken since we introduced the system a few weeks ago.

As our submission points out, we approach this as a service issue. From our staff's observations, we could see that there were people who might take advantage of the facility if it was available.

It is probably worth making clear what we do. We take euros in notes but we give change in sterling. The administrative costs for us are therefore relatively low because we are not giving change in euros. We are not running a thoroughly dual system. I will certainly get that information about the uptake of the facility outside Edinburgh.

I have a question about what you say in paragraph 20 of your submission. We all agree that if someone comes to Fife, for example, to play golf, they are not going to play golf all the time: they might have their partner with them, or other family or children, so they need to get information about the region or area they are visiting. How is that working? What can we do to improve it?

We approach that in a number of ways. Our website gives information about all of our sites. We produce a lot of leaflets about properties. In the current year, we have three leaflets—one for the north of Scotland, one for mid-Scotland and one for the south of Scotland. They have been built around Fort George, Stirling and Edinburgh.

We place leaflets widely in TICs, which will always have a role to play. It will not be an exclusive role because we have to use all the media that are available to us. We also advertise our events on local radio and in the press. Those are all ways in which we try to get across to people who are here for one purpose the message that there are other things they can do.

My supplementary question was going to be about the role of tourist information centres, but you have already answered it.

How do you develop and keep the product fresh? What scope do you have to do that? One of the pieces of evidence we have heard was about somebody constructing a new visitor attraction. One of the difficulties with a new attraction is that, after three years, everyone has been and it is stale. The environment is more demanding and most people do not want to turn up just to look at something. How are you dealing with that? As you are a Government agency, do you have the scope to do what you need to do?

I will pick up your point about visitor attractions becoming stale after a year or two. One of our great strengths is the intrinsic value of the properties we are presenting.

Edinburgh Castle will always have an intrinsic value, as will Calanais, Jarlshof or any other such site in our care. We have to build on that intrinsic value and provide good-quality interpretation. You are right: we have to keep refreshing and updating that interpretation. What was fashionable 10 years ago will not be fashionable now. We have to move on from the fibreglass figure approach of a decade ago to more interactive presentation where it can be used effectively.

We aim to reinvest in our properties. In the past few years we have concentrated fairly heavily on two major new visitor centres: Skara Brae in Orkney and Urquhart Castle on Loch Ness. That reinvestment was made in response to the shortcomings that we were aware of in our presentation of those sites. I think that, in years to come, we will put more of an interpretation effort into refreshing what we have at some of the smaller sites.

It might also be worth mentioning that visitor facilities have changed an awful lot in the past 10 years. We have a far greater variety of cafes, shops and so on that really enhance the visitor experience. Not only are the sites great, there is more to do when people get there.

I certainly believe that we need local area strategies in Scotland. For example, we might learn that the target market in an area is older people who have a lot of disposable income. Do you co-ordinate with those strategies to ensure that you are not creating a visitor attraction with a lot of children's facilities when in fact the local pitch is to older people? Similarly, if an area is being targeted at the family sector, are you creating children's facilities?

We aim to cater for all our visitors as far as possible. Breaking the visiting public down into sectors is perhaps more relevant to those who run advertising and marketing campaigns. For example, if you believe that over-50 empty-nesters are most likely to visit an attraction, you might concentrate your marketing efforts on those people, but we have a duty to provide as good a service as we can to all people who visit our sites and to balance their interests.

That is absolutely right. I should also add that, because of the nature of our properties, there is a limit to what we can do. For example, we cannot put in a child's playground everywhere—or indeed anywhere, although I think that there is one at Caerlaverock Castle. Such constraints exist. Indeed, one of the things that makes this business so interesting is that we are always trying to balance up different factors, of which conservation is one of the most material.

My kids love castles, actually.

What is your marketing budget? Is it all spent within the UK, or is some of it spent abroad?

We spend £467,000 on above-the-line marketing—advertising—mostly within Scotland. That reflects our budget. We advertise mainly to Scots, people who are resident in Scotland and visitors who are in Scotland at any given time, and use press and radio advertising. We have used television in the past, but we are not doing so at the moment.

We also spend £390,000 on below-the-line marketing, which means visits to travel trade fairs, working generally with the travel trade and calling on operators to sell them product such as advance tickets to our properties and explorer tickets that allow people access to any of our properties over a certain period. That also helps us to spread visitors throughout the country.

I see that you are engaging in joint marketing with VisitScotland. You have said that it is difficult to measure how effective that approach has been. Is that because it is relatively new? I imagine that joint initiatives would be very successful. Will you be able to assess the effectiveness of that approach at some point?

The example you mention refers to an exercise that we carried out in relation to the foot-and-mouth outbreak. It was difficult to measure because of its execution, if you see what I mean; the principle itself was not the problem. We engage in joint marketing with VisitScotland and other organisations such as the National Trust for Scotland where that makes sense for a particular market or a particular event. In fact, the example you mention also involved the NTS. It was a three-day package in which people bought a ticket that gave them access to all Historic Scotland and NTS properties, and was promoted by VisitScotland to the south-east of England.

Do you carry out marketing nationally rather than locally?

We do both. We advertise nationally and locally. We place adverts, say for an event, in local newspapers, as well as in the national press. The main brochures that we use for marketing overseas cover all our staffed properties.

I am tempted to ask about the rail that you put round the top of the broch on Mousa, but I will not.

Go on.

No, that would be unfair on our witnesses.

We heard evidence that 14 per cent of the time a delegate spends at a conference in Scotland is spent in the conference listening to the learned presentations and that the rest of the time is spent elsewhere in Scotland. You mentioned business conventions. Will you describe how you link up with the Scottish Exhibition and Conference Centre in Glasgow, the Edinburgh International Conference Centre and Aberdeen? That is a tremendous growth area for you and Scottish tourism as a whole.

Absolutely. In recent years, we have worked closely with the EICC and the SECC to help them when they put together packages to attract conferences to Edinburgh or Glasgow. We are happy to lay on visits for them to Edinburgh Castle or Stirling Castle, perhaps in the evening, when groups may have exclusive use of a castle after normal opening hours. Occasionally, some conferences have purchased for delegates souvenirs or presents that are associated with those monuments. That is the principal way in which we work with the centres. We also make information available through visitor packs. Most conferences produce visitor packs and we always try to put our leaflets in them.

I will ask about a wider point. Do you research the people who visit your attractions? Let us take Edinburgh Castle for the sake of argument. Do you research the people who visit Edinburgh Castle and track whether they came to Scotland for business conventions? Is your analysis sophisticated enough to show where things are moving in the right direction and where analysis and increased investment are needed in conjunction with VisitScotland and the business convention people?

We do a couple of things. We conduct an annual survey of visitors, which gives us much information about where people are from and why they are in Scotland. I am not sure whether we include business conferences as a category. We ask whether people are in Scotland for business or a holiday, for example, but I am not sure whether the category is as precise as "business conference".

We also have a programme of mystery visits, which helps us to identify the perceived strengths and weaknesses of our operation. That relates to Mr Mundell's question about refreshing facilities. The surveys give us valuable pointers on improvements or enhancements that are needed to the service we provide. They also reinforce what we do well, which is good to feed back to staff and helps us identify good practice that we can spread across the agency.

I am not sure whether you will be able to answer my question—perhaps it should be addressed to the Minister for Tourism, Culture and Sport. Historic Scotland's core purpose is to protect the built heritage, to educate the public on it and to provide public access to it. Do those roles conflict with your role in implementing the national cultural strategy? Do they conflict with development of the business side, which is successful in many cases? I am thinking of developments such as Rod Stewart concerts at Edinburgh Castle and your rapidly developing weddings business in historic buildings.

We are conscious of that potential conflict and we keep it under careful examination. We would not let our properties be used for something that we thought might damage them. In terms of footfall—visitor numbers—most of our properties are fairly sturdy. The two that are probably the most sensitive are Skara Brae and Maes Howe. At Skara Brae, we still allow visitors on to the wall heads, but as part of the new visitor centre we have built a replica house, which people can visit and which may discourage some people from walking on the wall heads.

At Maes Howe, also on Orkney, the number of people visiting the cairn is causing damage to the internal Norse graffiti, which is sensitive to the effect of breath in a confined area.

On the point about potential conflict, it might also be worth mentioning that the more visitors we get, the greater is the number of people who see those sites as real, living and valuable. We are building support for Scotland's heritage. There is a positive side to those activities as well as the risk that Graeme Munro mentioned.

I am keen to explore the extent to which you feel that you have an opportunity to develop the business side, as that is a relatively new role for Historic Scotland.

I do not feel that we are inhibited in that respect. Over the past 10 years, we have built up from a position where our income was quite negligible to one in which it accounts for well over a third of our total budget. Our income has grown as a result of our admission charges being brought into line with the normal practice of other operators of tourist attractions. Our prices are now comparable and one of the factors that we take into account each year when we set our charges is the normal pricing practice of other operators. Our income from retail sales has gone up spectacularly; our income from selling advance products to the travel trade has increased; and our friends membership has gone up from the mid 40,000s to the mid 50,000s. We have seen a lot of growth in all those areas.

That said, the scope for rapid growth has now largely evaporated. We hope to move forward on a rising trend, but it is more likely that growth will represent an upwardly sloping plateau rather than the steep side of a mountain.

Four members have questions to ask.

I can help—Rhona Brankin has covered my question.

Right. We now have three members who have a question to ask. We are running very short of time, as we still have to hear from the Office of Gas and Electricity Markets. I suggest that we take the three members' questions together and ask the witnesses to answer them collectively.

I have a general question about how we are handling our international marketing. Historic Scotland's attractions are an important factor in that. You mentioned that you are involved in international marketing with VisitScotland. How can we improve international marketing? What are we doing wrong in that respect? I get the impression that the big private-sector players are not integrated into our international marketing systems. In general terms, what changes would you like to see in our international marketing?

My question follows on from Gordon Jackson's. You have a robust marketing budget. Is your product so sellable that you can stand alone? If not, do you link with other agencies in terms of marketing? If so, to what extent?

I have a short question. In paragraph 165 of your submission, I was fascinated to see that you attribute a pick-up in visitor numbers

"to increased short-break visits generated by low-cost flights into Scotland."

Will you expand on that statement? Will you give us your thoughts on that aspect of your business?

I will take the first two questions together. The single thing that I would most like to see improved in our international marketing is its packaging. I want people to be able readily to purchase a holiday in Scotland that combines travel, accommodation, information and tickets for visitor attractions. The web is key to that. However, a role also exists for the private and public sectors to work more closely together to develop packages.

We do not try to stand alone on marketing: we try to fit in with the trends that VisitScotland establishes. We welcome its approach to niche marketing and we want to fit in with it. Our staff meet VisitScotland staff regularly to discuss how best we can align our marketing programmes. We work closely at the local level with area tourist boards and other providers in the areas where we operate. We do not see ourselves as standing alone, although we have a strong product and strong contribution to make to Scotland as a whole and to Scotland the Brand.

In common with many other operators, particularly in the Edinburgh area but to some extent in other parts of Scotland, we experienced an encouraging increase in visitor numbers last November, December and January. Largely anecdotally, we all put the increase down to the advent of low-cost flights into Scotland from the south of England, Ireland and continental Europe. People were taking short breaks, perhaps long weekends, often on impulse. That will be a key market for us in the future. I hope that it will continue.

There was evidence of a sharp increase in visitors from Ireland at that time. That is one of the reasons why we made the connection.

As I live in Ayr, I can vouch for that.

Thank you very much. Your evidence has been very helpful.