Economy, Energy and Tourism Committee

Meeting date: Wednesday, April 28, 2010

Official Report 494KB pdf

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Budget Strategy 2011-12

Your observation is correct. It goes without saying that we are not on a trajectory to achieve 50 per cent growth, although the figures hide some recent good news. We have always seen 50 per cent growth as an ambition; it has never been a target that has been fully formulated into an operating plan with all the aspects laid out of who will do what to achieve it. I still believe in that ambition. I still believe that there is significant potential for the industry to grow, but we are undoubtedly not on target to achieve a 50 per cent growth in value by 2015, which was originally how it was articulated. There are many things that we can do about that, and I will mention some recent developments that give us hope for the future as a basis for the necessary step change.

In the past year, we have not seen massive growth, but we have seen some growth against a background of global decline. The value of global tourism went down by 4 per cent in 2009, which is significant because it is the first time in about 15 years that it has not grown. The value of tourism in northern Europe went down by 8 per cent and the value of international tourism in Ireland—which is often regarded as one of our competitors—went down by 19 per cent in 2009. Against that background, our visitor numbers and the value of tourism in Scotland went up, albeit by only 1 per cent, which is very good news.

What went right? Looking back at last year, how did we turn the position around from a poor 2008 to a reasonably good 2009 in the prevailing economic environment? Undoubtedly, we were assisted by the weak pound—the exchange rate is important. People are increasingly looking for value, rather than cheapness, and the exchange rate helped us. We were also helped by the propensity for people, in a nervous economic climate, to stay closer to home and take what has been called a staycation. The year of homecoming also helped us. In a difficult year, it was a great focus in bringing the industry together. In addition, the flexibility that we and the industry showed in our marketing, shifting to new target markets and adapting offers against a background of good-quality products, was beneficial.

There are good signs, but I do not deny the underlying message that we are not on a trajectory to achieve 50 per cent growth.

Your corporate plan, an advance copy of which you have kindly given the committee, highlights the fact that the discounting and promotions that have played a role in maintaining occupancy levels over the past year in particular are not sustainable and that input costs are likely to rise. What action can be taken on that? A specific area of concern is the fact that many tourism businesses face significant increases in their business rates, which is an input cost that will impact on their businesses. Has VisitScotland assessed the likely impact of that on tourism businesses?

We have not specifically assessed the impact of business rates, although we know that it is significant. I have received a lot of information from businesses about how business rates affect them. It is an input cost that, as you say, cannot be recovered, and there is pressure for rates to go down.

On the other side of the equation, the only way out of this is to provide value, although that is easier for me to say than for the industry to deliver. There is a difference between price and value, and I believe that creating more value in the Scottish visitor experience will enable us to keep business rates higher. If we get into a competition to provide a commodity type of experience—a commodity holiday—there will be a continuous downward spiral and we will be sunk, as we just cannot compete. Even without recent increases, our base-load costs tend to be higher than those of many destinations. Therefore, we must promote Scotland as being not the cheapest destination in the world, but offering more value.



Value can often be delivered without increased cost. Value is about the welcome, the skills that we show in treating visitors and the variety that we offer—the joined-up offer that we give. We invite people to our country and we can show them that there is so much to do here, a lot of which costs nothing. Our museums and art galleries are absolutely fantastic and most of them are free. We have the right to roam on our hills and mountains, so we can see and appreciate them. It is about joining that up in the value proposition, as the marketers would say, to convince people to keep the prices up.

You are right that there is a danger, but we are not there yet and there is an opportunity not to get there. As you know, VisitScotland’s remit is not particularly to do with skills and training, but I see encouraging signs. We are looking at an initiative this year—this goes beyond VisitScotland—to see how we can incentivise businesses in tourism to take in more school leavers and graduates, because we expect quite a high number of them to come into the employment market this year. We must not let it become a route of cheap labour, but if we can bring people into the industry to experience it and get some flavour of it, perhaps with some Government incentive, that is one way of energising the industry and preventing the cycle that you described.

How long is a piece of string? We are good and we have multilingual sites. VisitScotland has several Russian and Chinese employees. We are probably the most multilingual and multinational organisation in the country and are probably one of the best in the UK. Is that enough? That comes back to my original comment: is it ever enough? We can always do more to empathise with our visitors by having their language at our fingertips. The only good news is that when people come to Britain their expectations about language ability are generally not high.

I was thinking about selling Scotland as a tourist destination, but the point is that you are making that effort.

Your business plan refers to how you measure success and to

“developing new KPI reporting tools”

and so on. I presume that that might help us to measure more accurately who is coming here. Is that a big investment or is it something that can be achieved fairly cheaply? We are talking about budget savings. Can you put it in perspective? Is it a tool, a means to help you, that comes at a reasonable price or is it expensive?

What we are looking at is not expensive, but I am not sure that it is the tool that you are necessarily looking for for the analysis of visitors.

We want a much greater focus on the generation of economic impact. We hope to have in place, within a couple of years, an aggregation of economic impact that means that for everything that we do throughout the organisation, whether it is the provision of information through a visitor information centre, delivery of quality assurance or marketing into Russia, we should be able to at least estimate the consequential additionality in the economy and put a number on it. We should be able to come to one number for the organisation. We have never done that before; it will give us a fantastic focus and it will help us to ask, overall, whether we are getting better or worse.

We will have a single number that sums up the efforts of the organisation, aggregated all the way down. The dissection of that number is where it could get more expensive. It is relatively easy to get the building bricks—although it is more difficult than anything that we have done before—and it is not massively expensive. To dissect that, however, and to say who is coming from where, for how long and why they are coming is still expensive and difficult. We are looking at a new visitor survey that will help us and at better analytics. We are looking at all sorts of things on the internet side, which we may come on to. Better analytics on the internet side will also help us to track what is going on more cheaply.

Usually, we do that by introducing a coefficient that is an estimate, because double counting undoubtedly happens. For example, we have not done it before so we are very keen to measure the impact of giving people information through a visitor information centre because we want to understand the economics. We may get information that says that somebody received information about a hotel from a visitor information centre and then booked into it, but they may also have looked at the website. The chances are that they have done that, because people get information from several sources: they may get information from the visitor information centre and the website, and they may also have been sent a brochure in the post.

We have to make a call on that, because we get three numbers for additionality. If we ask the person how they learned about the hotel, they may have had information from all three sources but choose to tell us about only one or two. We recognise that risk, so we have to make an assessment through the surveys and say, for example, that the visitor information centres have generated £20 million and the brochures £30 million but that each must be discounted by 10 per cent. That is a coefficient that we have to learn and take into account.

After the event or beforehand?

After the event.

Yes.

Did that feedback reflect representations that have been made to you by hotel businesses that you deal with, or issues raised by members of the board and staff?

I would have to have the permission of the businesses to do that. I would have no problem, but I would have to find out from the businesses involved.

I understand that. From my point of view as a constituency member, I am confident—in the worst sense—that every hotel in my constituency has been ill affected by the decision. Have you had any representations from hotels anywhere in Scotland that the decision not to have transitional relief was the right one?

But the overwhelming majority would say that the decision has had a negative impact on the sector.

Relative to the economic environment, investment in the sector has held up quite well, and there have been quite a few new developments. Judging from our quality assurance system, the number of bed spaces under the QA scheme has gone up over the past few years. There have been some great iconic developments, such as the hotel Missoni in Edinburgh, and at Blythswood Square in Glasgow. There are also golf resorts. There has been some good investment.

The missing link is that we need to build on individual spots of investment and ensure that we have clusters of investment, so that where we have new accommodation we have new activities that are linked to new catering, new restaurants and so on. Overall, the level of investment has been quite good.

There is indeed an issue there. Returning to the convener’s earlier comments, I am reasonably comfortable about new investment, but there is an issue around investment in refurbishment and expansion, which relates to bed rates. As people look for more value, bed rates go down, value is more difficult for hoteliers to achieve and there is a great temptation to put off the redecoration, the new carpeting, the extension, the conservatory or the refurbished restaurant. Even if there is a little bit of money available, people might think, “Now is not the time.”

In this industry, without continuous investment it is possible to lose the fabric of the product quite quickly. That is where we need to encourage and help people to put money back into their businesses continually. That is difficult if the bed rates are going down, however.

What you have just described chimes with the experience of hotels in Aberdeen, where very good turnover in 2008 has been followed by relatively low turnover in more recent months. New bed space is coming in now, and there is concern among existing hoteliers about the impact of that. Is there a role for VisitScotland or for the enterprise networks in supporting the investment decisions that people must make if they are to maintain their position in the market?

As far as I can see, there is nothing in your corporate plan about the tourism bank. Do you have an indicative timeline of when you hope to make progress, or when someone will come back to VisitScotland with an indication of what is required?

Rob Gibson has a supplementary question about one of Lewis Macdonald’s points.

There is an indication that bed nights in hotels have held up quite well in the past year. Do you expect that to continue? Will we see hotels closing down?

The table on page 45 of your most recent corporate plan “VisitScotland Corporate Plan 2010/2013: Maximising the Economic Benefit of Tourism to Scotland”, shows that you have two broad income streams for your expected income this year and next, the first of which is described as “Commercial and Stakeholder”, and the other as “Scottish Government Funding”. From the “Commercial and Stakeholder” stream, you anticipate getting £19.2 million in 2010-11 and £19 million in 2011-12. First, what is that stream made up of? Secondly, are you confident that those figures will be reached, given potential downturn dangers and so on?

We have made conservative estimates to allow for the downturn. Commercial and stakeholder income includes money from local authorities under service agreements, money from businesses for marketing opportunities and for our quality assurance scheme, European grant money from schemes that we are involved in and some money for partnerships. There is quite a wide range. All those areas, for reasons that we have touched on already, are under pressure. The public sector side and local authority funding are under pressure, and businesses’ ability to buy marketing opportunities is under pressure. That pressure has existed for a couple of years now, but we have done quite well in estimating and managing it, although it has been a managed decline. Overall, as you will see from the numbers, we anticipate that our expenditure will go down by £7.5 million this year, of which £1.2 million will be a reduction in commercial sector income. Our aspiration is to try to get it growing, but we estimate conservatively that that will not happen this year or next year.

We certainly see opportunities for crossover activity. It is important to think about who we are trying to reach in the target market and what they want, rather than about what we want. In general, mainstream trade missions do not reach the same people whom we try to reach. That can be seen in tartan week, which is a very mixed and effective Scottish event at which we can share a buzz about Scotland that we can create, then go off and do the different and more specific market-centred activities. We hope to do something similar in India this year around the handover for the Commonwealth games, when there will be trade missions and tourism missions that will, to a degree, work independently, and then come together to make a Scottish impact.

The first element is what is euphemistically called the efficiency programme. In the main, that is about prioritisation. We have been very successful. Over the past three or four years, we have exceeded all targets for efficiencies. This year, we are on target for another £800,000 of continuing reductions in costs. Over the period, we have achieved reductions of about £3.8 million, which is well ahead of our target of £2.8 million.

We have achieved reductions in different areas. For example, we have found the central Government procurement initiative enormously helpful and have managed to cut our procurement costs significantly. We have also done a lot of work on rationalising our property, not so much through closures as through sharing property. We have done good work on that with South Ayrshire Council and we have moved to shared offices with Highlands and Islands Enterprise in Inverness. We also now share several visitor information centres with Caledonian MacBrayne. Our putting those things together has been effective and we will continue to do that.

12:30

Although deeper cuts may well come, that is how we will manage the current outlook. As I said, we face reductions of something like £7.5 million, although part of that will be for the year of homecoming. We can manage that through the initiatives that I have outlined; it is a question of prioritisation. Efficiency might also mean cutting hours. In Edinburgh and Glasgow, we have cut the opening hours of our visitor information centres. Certain periods represent a lower economic value, so they are a lower priority and we cut them.

Deeper cuts will require more radical solutions, in which respect we have been considering options. We have not developed them particularly far yet, as all our funding indications are confidently on the line, as I said to Gavin Brown, and we have not yet been told that there is any need for that. Nevertheless, there are options. One of the best options for us is to increase our revenue generation and see whether we can become more self-sustaining.

On the original point, I think that the industry has potential and is one of the industries that will help Scotland to grow. I am optimistic that we are entering a period in which tourism will become more important, that there will be more opportunities, and that VisitScotland could position itself to take more support funding in some way or other from the private sector environment in which we work. We have not looked into that in great detail, but that is where we will go after we have exhausted the efficiency savings that we are currently making.

I think that we are getting into a bit of danger here. One politician has already talked about overpromising; now another one is talking about lunatic ideas.

What Mr Harvie suggests is perhaps a bit beyond my remit. However, on my recent trip to Switzerland, I found the Swiss to be very open to co-operation. They are not sufficiently complacent or confident to think that they have all the answers, which was quite refreshing, and they are also quite interested in learning from us.



Although the high level of technical efficiency in Switzerland is well known, the Swiss are not quite so good at using other elements of their culture and history for tourism. There is, therefore, fertile ground for exchanges with the Swiss. Whether that could extend to transport is interesting, but I could not comment on that.

In a general sense, that illustrates one of the issues that we will face as we try to put numbers on everything that we do. The numbers are important, as they help our prioritisation, but we must always go beyond the individual numbers. Some things that we do will produce lower rates of return. The homecoming’s objectives were much wider than just the economic impact. It was undoubtedly the highlight campaign, and I am confident that we will get more than £44 million in added value to the economy from it. It was measured purely incrementally according to the number of people who came to the events from outside Scotland, which was not exactly the same way in which the winter white campaign was measured. In addition, the other achievements in engaging the diaspora and building pride in Scotland must be taken into account in measuring the homecoming’s success. These things work off each other, too, and we do some things because they cross over into something else. Part of the knock-on success of a campaign such as the winter white campaign was having a great events programme in the country that was not specifically linked to a campaign but which was an added attraction. The two campaigns probably compare pretty well against each other.

Again, it is wish against reality. VisitBritain’s budget has gone down below ours—not that I am suggesting that we consider it as a parallel. It has had to cut back its overseas representation considerably. We now work more effectively with VisitBritain than we used to, but with a reduced presence. We would all be delighted to build up the overseas presence, whether jointly or individually. VisitBritain now has a good model, in that it recognises that it is representing not Britain but a collection of brands that make up Britain. That is healthy. If it could build up its overseas presence with better funding from Westminster and we could feed into that, that would be great.



12:45

Coming back to the earlier discussions around prioritisation, we would love to have overseas representation, but it is relatively low down the list. The economic impact of the money that could be spent on having people overseas does not stack up against the economic impact of the money that could be spent on winter white or even homecoming. It would be nice to do it if we could, though.

Earlier, you mentioned the income that you receive from other stakeholders, key among which are local authorities, in terms of the partnership agreements. However, many local authorities are working on destination partnerships—Edinburgh is the classic example. Does the fact that local authorities’ funding is likely to be constricted during the coming years mean that there is a danger that they will divert money that currently comes to VisitScotland into their own destination partnership arrangements, to the detriment of the overall tourism budget?

We had an evidence session earlier for our trade inquiry. A witness in the first panel made a suggestion about trade missions, which was that whenever an MSP, a minister, an MP or whoever goes elsewhere for an inquiry or whatever, the visit should tie in with trade missions. Would VisitScotland support that and participate in such activity in order to aid the promotion and selling of Scotland?

Is there already a budget in VisitScotland to allow that type of activity to increase, if VisitScotland wants to undertake more of it in conjunction with politicians?

The comment relates to our role, which is interesting. We are a marketing organisation that has no control over the product that it sells. We have a link, through our quality assurance scheme, but we must be careful. Our marketing is tailored to what consumers are seeking—what the market wants—but we must be extremely careful not to market according to what the customer wants when we may not be able to deliver that. We must always have a reality check. In the main, there is not a big problem, because what we have to sell in Scotland is fantastic—we have great variety and quality. However, the worst possible thing is for visitors to come to this country and say, “I saw those adverts, which were fantastic, but where is it? I can’t see it here.” We do not have that problem, but everyone in VisitScotland must remain mindful of the need to ensure that what we deliver in marketing can be backed up in reality.

I am glad that we have touched on the public spending environment. You will be aware of the paper that was published by Andrew Goudie last week, which suggests that we are looking at 3 per cent real-terms reductions for the coming four financial years. Were anything like that to transpire, incremental efficiency savings would be likely to fit the bill. In that context, what current or new activities must be protected? The story of Scottish tourism over the past four years has been one of steady progress in international markets and some underperformance in domestic markets.

The committee has invested a lot of time in thinking about the future direction of Scottish tourism. Some initiatives have come to fruition and some are still in development. I seek guidance from you not on how you will make efficiency savings of 3 per cent year on year for the next four years, but on what current or mooted new activities will be essential in growing our market share. In the context of our consideration of the budget at stage 1, that information would be helpful to the committee.

I do not want to risk suggesting what might not be a high priority or that we would welcome cuts anywhere. Nevertheless, our raison d’être is marketing Scotland and everything in Scotland—that is essential for Scotland. Tourism is a competitive business on a national basis, and having national brand identity and national marketing is essential. It is not essential in every area of business, but for tourism that is how consumers make decisions and it is how our world works. We need national marketing. Beyond that, our key activities are events; it is crucial that we draw international events to Scotland and foster the events industry here.



More questions could be asked about our quality assurance. I believe that the quality assurance in this country is fantastic. It is world class; in fact, it could be the best in the world. I have never seen better. Nowadays, however, there is more peer review and I think that there has been slightly less effort in that respect. We are already adapting, but we could adapt even more.

Our biggest cost is probably in information provision, which is also a sensitive issue because it is integral to Scotland. Although an information network throughout the country might not give as big a bang for the buck as other provision, many people see it as being crucial to supporting the industry. However, the hard facts and figures show that it is expensive and, if we were really under pressure, we would keep the brand, themed and product marketing, move everything mostly online and reduce the physical presence across the country. I stress that we are not aiming to do that, but that is where we would go if we were under real pressure.

You mentioned that Swiss citizens account for 50 per cent of bed nights in Swiss tourism. What is the comparable statistic in Scotland?

I found that interesting, because I lived very close to Switzerland and spent quite a lot of weekends in the country with my family—I always enjoyed my visits enormously. The attraction of Switzerland for the middle-aged family—parents with teenage children and so on—has been the enormous and subtle variety of things on offer, coupled with the awareness, for example, that the weather is not always perfect and that the side of the mountain where you are can get very dark at certain times of the day.

Someone in the late 19th century described Switzerland as a railway system in search of a country, but it has made an enormous success of that feature. In the 1980s and 1990s, I would go down to the Engadin valley, where at the time three trains a day went over the Pontresina pass into Italy. These days, there are roughly 600 tourists on each of the 10 trains a day that now go over the pass. When we contrast that with the west Highland railway, the scenery along which is judged as perhaps the best in the world, let alone in western Europe, one has the enormous feeling of a chance lost. Although we have that kind of material, the passengers who use the west Highland railway would not fill six Glasgow buses.

I have met Mr Renggli, the Swiss consul general, and I wonder whether, given the enormous expansion in cruise liners and the possibility of integrating our internal transportation links—including centres such as Perth, Wemyss Bay, Gleneagles with its large and very derelict station, and Stirling—it would be worth while pursuing a partnership with the Swiss to see whether they could do what I have no doubt Deutsche Bahn will do with the Welsh railway system now that it has taken it over. In other words, can we develop transportation as an all-weather means of opening up an extremely attractive country? I do not think that we can do that on our own; we need people who understand something about a kind of engineering that, alas, we can no longer do. How does that project grab you? Is it a lunatic idea or do you think that there is something at the end of that rainbow?

For better or worse, recent developments mean that there will undoubtedly be a renewed emphasis on rail travel. We talk to the rail companies about the situation regularly to ensure that we jointly seize the opportunities that exist.

That concludes our questions. I thank Philip Riddle for his presence today—no doubt we will see him again in the not-too-distant future.

12:47 Meeting suspended.

12:48 On resuming—

Good morning. Thank you very much for this opportunity to address the committee. Such discussion is always useful for us, so I am pleased to be here. My only opening remark is to ask everybody to think of a hill or a loch and try to make the transition from chemicals to tourism. I was present for the last 15 minutes of the previous panel, which was fascinating, and it got me thinking about chemical issues. Now, we must get back to tourism and the beauty of Scotland. I hope that you can all make that transition. I am happy to take members’ questions.

Good morning—it is still morning by three minutes, although it feels like the afternoon already.

I want to pick up a point raised in the previous evidence session, which was about the ability to sell Scotland abroad being aided by a global network of Scots. The image of Scotland is a great player in developing that business. How do we use that to encourage people here to do the same job for Scotland? You talked about tourism not moving down the ladder to being a cheap employment area. How do people feel about the business that they are selling?

I will concentrate on the domestic angle of your question first. This is not just about tourism, but the population of Scotland. We quite rightly believe that we have more than 5 million ambassadors for Scotland.

Tourism promotion has been a bit remiss in ignoring the Scottish market. We have taken Scotland for granted and put all our effort into England and overseas. We have changed that. Homecoming was a very good example of mobilising people in Scotland. This is partly affected by exchange rates and the staycation, but more and more people are interested in coming to Scotland on holiday.

For the first time, we have set up a Scotland product unit—a marketing unit—that is focused just on selling Scotland in Scotland. Our visitor information centre network is there to provide information to visitors, but we are now using it to take bookings from Scots taking holidays in Scotland. That is a new thing. Generally, we are seeing a greater interest in holidaying in Scotland, which is the first step. Scots generally love the country, but often do not get out and investigate it. Their love of the country is founded on myth and lore and talking about it in a bar in Renfrew. We are seeing more of them wanting to get out and experience it. That is how to win people over.

I went to see my opposite number in Switzerland last year. I was very interested to find that more than 50 per cent of the bed nights in Swiss tourism are from Swiss people—I always assumed that the tourists there were mostly Germans. He said that that was their greatest asset, because the Swiss are the most demanding consumers he knows and they set high standards. If Scots who love the country go out and offer constructive and positive criticism, we will mobilise people. If we mobilise people here, we will believe in what we offer and in the welcome that we give to visitors. If our own people do not believe in that, that is a bad start.



12:00

We all know that there is a big opportunity to mobilise Scots around the world. I am not sure that we have ever quite got our arms around how to do it, but we are getting better. Homecoming was good at doing that, as we mobilised the diaspora. There was a lot of interest and a lot of people were spreading the word about Scotland. That was not just for last year—it will continue.

The future has to be about using the internet more than anything else. Resources are difficult. It would be good to be out talking face to face with the diaspora, and we are getting better at joining up the efforts. For example, VisitScotland does things jointly with SDI and the Government. That is always good, but we must sharpen up our global presence on the internet and allow people who are interested in Scotland to engage with us more through online communities. We are treating that as a priority.

I want to follow up on one specific point. How do you avoid double counting when you are looking at the value added by campaign A and campaign B? How do you ensure that you do not count the same figures twice?

We have had the opportunity to give feedback—

Is that quantitative information that you can or will put into the public domain at some point?

Just to be precise, I believe that we made them through Mr Mather.

That is helpful. It is interesting in itself, but it is also interesting in the context of the bigger picture. Clearly, in the public spending climate that we are looking at, you will look to private investors and businesses to take on some of the initiatives that need to be taken to grow the sector. Is there a lesson for us about the relationship between the private sector and Government and about joining up Government?

Have you had a positive response?

I hope that it will be within the next three months. It is now out of our hands. The response will not come to VisitScotland; it will go to the public sector partnership as represented by the strategic forum. The idea was taken into the strategic forum working group and went from there out to the industry.

Would it be a good idea for smaller businesses and other types of business to subsidise hotels in a transitional rates relief scheme?

I have not surveyed that. As you can imagine, when information is sent to us, it is about what is not working and not often about things that might be going well.

So, the commercial and stakeholder income is a conservative estimate. For “Scottish Government Funding”, the table shows £43.6 million for this financial year and £43.2 million for 2011-12. Has the Scottish Government indicated whether the £43.2 million figure is likely, or whether there is a danger that the sum will drop below that? Where does the £43.2 million figure come from?

That amount is the indication that we have had. We have not had a grant letter yet, but that indication came from our sponsor unit in the Government. There has been no suggestion that the figure is questionable. Obviously, until it is confirmed, there must be a bit of a question about it, but nothing leads us to believe that there is significant doubt about it.

The next item is a resumption of our inquiry into the budget strategy 2011-12. I welcome Philip Riddle, who is well known to the committee as the chief executive of VisitScotland. I invite you to make some opening remarks, after which we will ask questions.

The research briefing that we received from you on the current level of tourism compared with the 50 per cent growth target that was set in “Scottish Tourism: The Next Decade—A Tourism Framework for Change” suggests that, rather than going in the right direction, we were going in the wrong direction even before the recession. Between 2005 and 2008, the total spend went down from £4,214 million to £4,047 million, and it declined again last year because of the impact of the recession. Indeed, the number of trips declined over that period, too. Given that, even before the recession kicked in, we were struggling to move in the right direction, how confident are you that the industry can recover and move towards that growth target?

Our hotels are having to discount their room rates heavily. They want to invest in the product and the staff, but if they face big increases in cost, the only thing that they can do is either reduce their investment or their staffing levels, which will reduce the quality of the product. Are we in danger of getting into that sort of vicious circle if things do not change soon?

I have to follow that up. It is interesting, because I am thinking about some Russian investigations that are going on about coming to Scotland. The language issue is important in relation to the internet. How well are we geared up to sell our messages in different languages?

I want first to pick up on the point that the convener raised on the impact of business rates rises on the hotel sector and, specifically, the Scottish Government’s decision not to introduce transitional relief. I asked John Swinney in the Parliament a couple of weeks ago whether he consulted business organisations before reaching that decision. Did he consult VisitScotland, given the significance of the decision for the hotel sector?

And have you taken that opportunity?

The most comprehensive aspect has been feedback from the hotel industry. Obviously, there has been other discussion of the issue, but some quantitative information on the effects has been given to us.

We have had one or two.

Yes, that has been the view.

Am I right that you made the representations to Mr Swinney when the opportunity was offered after the decision was made?

The Government has been very good with tourism—that has been true for many years. It has had a good open-door policy and has invited businesses to make representations and give information. I do not think that that relationship has changed over one issue, and there is still a constructive dialogue between businesses and the Government. There will always be one or two things that not everybody agrees on, but in the main I do not think that the relationship has changed. We are still well placed for constructive working.

As you will know, one of the issues in the past around growing the tourism sector in the Aberdeen area was the lack of hotel beds, especially the lack of higher-quality accommodation in the city. That has been changing over recent months, which is good news. Is that a picture that you recognise more widely across Scotland? Are private businesses investing in the sort of infrastructure that we need in order to grow the tourism sector?

I guess that the decisions that a private investor makes about whether to put money into establishing a new hotel, or converting or expanding an existing business, will depend on an equation based on whether they are able to access funding and on the ability of the market to provide growth—in other words, whether they can attract the numbers that they require. Given that the level of spend in the domestic tourism sector is on a fairly consistent downward trend, are you concerned about any potential imbalance between the trend of spending by visitors to Scotland and the challenge of investing the money that is required to enable further growth?

I believe that there is. That brings us to a topic that we have discussed before: the investment plan and the development bank. I am a strong believer in this—there is something very good here. The convener joined us when we had discussions with our Austrian counterparts last year. We have now formulated what should be done and what the possibilities are. We very much need the industry to engage in that, and we have now put what we have come up with back to the industry. A revision of the tourism framework for change, the industry strategy, is now under way, and there is a leadership group involved in that.

We have done as much as we can in the public sector. We have now put it to people in the industry, asking them how they think that the strategy could work. We all feel what is going on out there, but we need a bit of organisation, structure and dimension around the idea. Someone needs to show us the scale of the issue and say what is really needed. We do not have that. The industry must come to us now and tell us exactly what it needs.



12:15

We have had a positive response, but we have not yet got the information that will let us move forward.

I have difficulty commenting on that. I am not sure why some businesses should subsidise others. That is beyond my understanding of how businesses would fare in the current environment.

Have you had follow-up from the smaller tourism businesses, like bed and breakfasts, for which the small business bonus could kick in and give them the kind of support that such businesses have not had in any other part of the United Kingdom?

Undoubtedly, we expect last year’s trends to run on through. I do not know whether we will talk about the most recent developments, but the flight disruption was a setback. If that were to be repeated, it could be difficult, but the underlying trends—the weaker pound, the staycation, the flexibility of businesses—are still there. Visitor numbers should hold up.

We have talked about whether we can make sure that the visit rate stays up, and that will be more difficult. The environment is getting very competitive. A lot of support is being given to tourism in other countries. However, for this year, I am confident that we will achieve more or less the same as we did last year. We will not see a step change, nor will we see a decline. I cannot guarantee that there will not be hotel closures. The environment is difficult for all sorts of reasons, and there are bound to be business changes.

Thank you.

What is the effect on VisitScotland’s finances of VisitScotland.com? Roughly how much do you spend on VisitScotland.com per year, and how much income do you get from it per year?

Since we took over VisitScotland.com, it has all been good news. In the past year, VisitScotland.com paid back £500,000 to VisitScotland, so we have got it into a position of financial stability. In fact, it is more than that. Using the same criteria that were in place when it was a public-private venture, VisitScotland.com is putting money back into the coffers.

Our aspiration is for that to continue. Obviously we are not in the business of seeking to maximise profit but, at the very minimum, we see VisitScotland.com paying for itself for the foreseeable future.

It all comes down to prioritisation. Overall, we see the undoubted value of retaining a commitment to emerging and long-haul overseas markets, which are primarily the markets in which joint efforts produce a great bang for the buck. However, there will be difficult decisions for us. If, in the short term, we centre on UK tourism and the recent flight disruptions have a more fundamental impact, there will be more pressure for us to put in more resource closer to home. We must be flexible and we must consider such matters.

At the risk of repeating myself, I make the point that, fundamentally, we should have a spread of investment: we will not put all our eggs in one basket. We will retain a presence in China, India, Canada and other parts of North America, and we will retain interest in reaching other long-haul markets, even if that is done through VisitBritain. It would be folly not to do that. However, in the short term, the pendulum will swing towards our concentrating on western Europe and the UK, just because market forces indicate that that will produce the greatest bang for the buck.

On page 18 of your corporate plan you highlight your values, the third of which is integrity. You say that that involves

“not over-promising and enforcing quality levels”.

The point about “not over-promising” is interesting. Can you provide us with more information about what you mean?

My next question follows a question that Gavin Brown put to you. It is no secret that the UK’s national debt is in a horrendous state and that, over the next five or 10 years, we will receive some savage cuts—even worse than Thatcher’s cuts of the early 1980s, some would say. What work is VisitScotland undertaking to deal with the situation that may affect the organisation over the next few years?

Thank you.

That is very helpful.

It is 40 per cent. I think that the figure for Switzerland was actually 55, but I will not split hairs. It was higher than I had expected.

Within 20 years, we might well face the $300 barrel of oil, and that will feed its way back into our potential. In those circumstances, a Victorian transportation system has a lot to be said for it as a unique national environment.

I want to pick up a couple of other points from your draft corporate plan. On page 21, you talk about building on the success of 2009-10 and refer to the homecoming creating “worldwide interest” and being expected

“to bring in at least £44 million extra spend”.

You then say that

“the 2009 Winter White campaign ... generated £63.5m additional income”.

If that campaign, which cost about £1.5 million, could generate so much additional income, why were our ambitions for the homecoming so limited?

You talked earlier about your current marketing strategy being more focused on the internal UK market and western Europe. However, your draft corporate plan refers to developing new markets in China, India and Russia, where I assume that partnership with VisitBritain will be crucial. When I was in China in October, I met the VisitBritain representation there and was surprised that, in a country of China’s size, only two people were working for VisitBritain. Does that surprise you? Should we work with VisitBritain to expand our UK presence in some of the emerging markets, perhaps not for immediate benefit but to develop those markets in the long term?

That is undoubtedly a danger. The fact that we have managed to retain income from local authorities at reasonably high levels is testament to the fact that we are not working on that in a rushed way. However, we can see the situation that you describe happening with smaller amounts of money in various areas.

The challenge for us is twofold. First, we must ensure that any money that is going into local initiatives is still linked to what we do, so that we get the biggest overall impact. I think that we are doing quite well in that regard. Secondly, we must refine the measures around economic impact, which we discussed earlier. We have to ensure that we are persuasive with local authorities and businesses. We are confident that what we do produces the best bang for the buck, but we do not always get that message across. We have spent quite a lot of time producing information about the returns that people get from investment with us. I believe that the more open and transparent we are, the more evident it will be that any money that is available should be converged into one effort.