Economy, Energy and Tourism Committee, 07 Oct 2009

Meeting date: Wednesday, October 7, 2009

Official Report 221KB pdf

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Draft Budget Scrutiny 2010-11

Item 2 is our continued scrutiny of the Scottish Government's draft budget for 2010-11. I am again pleased to welcome our adviser, Peter Wood.

This morning we will focus on VisitScotland's budget. I am pleased to welcome back to the committee for one of his regular visits Philip Riddle, who is the chief executive of VisitScotland. I invite him to say a few words of introduction, after which we will move on to questions.

Good morning and thank you, convener, for this opportunity to talk with the committee about VisitScotland and tourism in Scotland. We always find the committee's proceedings constructive and useful, and I am sure that that will continue to be the case.

Relative to the general environment, the tourism industry is doing pretty well. We are not exactly booming, but relative to the doom and gloom that is around, tourism a resilient market, which is a great sign for Scotland's future. We have talked in the past about the importance of the tourism industry, and we increasingly see that it can withstand quite heavy external pressures because of its diversity in terms of regional spread, market spread and the spread in businesses. I think that we will come out of 2009-10 pretty well.

The challenge that we face is how to take advantage of coming out of the recession. In VisitScotland, you see an organisation that is robust and is performing very well, and we are looking at our own internal measures to help the industry to take advantage of the upturn. We are full of optimism but also quite aware of the challenges that we face. The path ahead is not an easy one, but we feel that there is real potential.

Thank you. I will start by asking the obvious question. You had additional funding this year to support homecoming 2009, but you will not have that funding next year. What impact might that have on promoting tourism in Scotland in 2010-11?

Homecoming was, overall, very successful in terms of what it set out to do, and I am sure that it will achieve an economic benefit of an extra £44 million. The benefits to our reputation, particularly in respect of tourism and the benefits of the countryside in Scotland, have been great, as have the contacts that we have made with the diaspora.

We will lose almost £3 million from our budget; I think we had £2.7 million in the current year and about the same in the year just past. However, we will be able to build on the lessons of homecoming; we will take forward some positives. The power of the events programme and the collateral that that has given us, and the ability to work together to achieve things have been fantastic during homecoming. We can take those forward into the future. Although we will lose the money, we will not lose all the benefits that we gained.

Looking beyond homecoming, we are also facing a budget cut. Our forecast budget will go down by a total of about £5.5 million. About £1 million of that will be from revenue reduction, rather than from the core grant, and—as I just said—about £2.7 million will be a result of the loss of the homecoming money, which will not be repeated. We also believe that we will be £300,000 down on capital. We have not had confirmation of the numbers yet.

We are still facing a bit of a deficit and we will have to find cuts in activities to meet that. We are confident that we can do that, but the question of how quickly we can do it is significant. At the end of the day, if we cannot improve our overall efficiency and cut our budget that way, we will have to cut activities. Our aim, however, will be to maintain front-line activities, marketing and events programmes, and to try and find efficiencies behind the scenes in order to meet the deficit.

This is not intended as a criticism of VisitScotland, but it is quite difficult for the committee to scrutinise a budget when we do not actually know what it is. You are saying that you do not yet know the details of your final budget. We have requested level 4 figures from the Government, but it has not yet provided them, which makes it a bit difficult for the committee to do its job of scrutinising properly. Given the information that you have, can you give a clear indication of where VisitScotland is likely to make savings and what areas are going to be cut?

We are certainly looking at efficiencies in our network and quality assurance. Both areas have deficits today. We have good sources of income, but there are attendant costs in both areas. In our visitor network across the country, we have a cumulative deficit of around £6 million. Our QA and advice service has a deficit of about £1 million. We will look to cut those deficits through increased efficiencies.

The good news is that VisitScotland.com is now on board and is generating income for us. One of the recent highlights was when VisitScotland.com repaid £250,000 of the initial loan that was put into the company. That is well ahead of any plan; the last time I came before the committee, there was no idea that we would ever get any part of the loan back. That £250,000 will help.

Beyond that, we are considering our support services—where we can share with other agencies, how we can do better procurement, and where we can use common back-office services. We are going to try and save something like £1 million that way. We are already committed to Government efficiency targets for savings, which will be in the region of £1 million. As long as we are pulling those savings in, that will help us.

Naturally, we would prefer to make those savings and redeploy the money into front-line activities, but we recognise that we are in a difficult environment.

I have one final question before I hand over to colleagues. Are the savings to which you refer likely to result in job losses?

We are working in an environment in which we must avoid job losses; we will certainly avoid any compulsory redundancies. There may be some opportunities for voluntary severance, but we are not restructuring in the sense of deliberately trying to eliminate jobs.

It is interesting to see the figures relating to the year of homecoming, as we will be able to see what happened last year, what has happened during the year of homecoming and what will have happened the year after that. That will give us a better idea of homecoming's impact. Can you give us a flavour of the amount of money that has been provided to the year of homecoming not from your budget, but from local authorities, events and so on? The actual quantity or a percentage figure would be helpful.

The money that was put in through VisitScotland and EventScotland was about £5.5 million. I am pretty confident that, taking into account the events for which the funding was only partial and the several hundred partner events, the figure will be significant. I will get back to you with an estimate for that figure; I cannot give a good estimate right now, so it would be a bit of a guess.

That would be helpful. Many of us received the brochure for the final weekend of the homecoming, for which events were held throughout the country. It would be good to see which of those events were supported by public money and which were supported by the local people who put them on. If you could give us that information, that would be useful.

Let us be clear. You are asking for a breakdown of the public and private funding. A lot of private money went into many of the events.

Yes. It is important for us to know that, to see the effectiveness of what you do.

In your written submission, you talk about seeking income from European campaigns. You state that the German touring campaign generated additionality totalling £7.5 million in the Highlands, £8.5 million in Edinburgh and £4 million in Glasgow. How did you get that interest from Germany?

Are you asking about the mechanics of the campaign?

Yes.

We concentrate quite a lot on direct access. A main element of our European campaigns has been our focus on the existing air routes and our work with the airlines; for example, we have a £1 million alliance for joint promotion with easyJet. Step 1 has been to consolidate the routes. We then have a quite segmented mailing list for every country and we follow up with direct mail, although that is more likely to be e-mail and e-bulletins. We also have a dedicated website that we use to get the message across. We might use some outdoor advertising as well, including posters, and we use specialist magazine advertising and editorial content. We also organise trips for journalists and place articles in relevant magazines. We always take a multichannel approach and use all the channels, weighting our focus differently and taking cognisance of the different segments that we are trying to attract.

In addition, we try to back up that work with special offers. A feature of recent tourism has been that people are interested in the quality and value balance and in ensuring that they get good value for money. Whenever we can back promotion up with a good offer, that reinforces all the multichannel exposure.

Can you measure the effectiveness of that work in getting German tourists to come here in 2007 and 2009? Did you undertake the same sort of campaigns in those years? In terms of the budget, we need to know whether that work will continue.

We can certainly come up with some estimates. We do not get the figures for every country every year; we tend to do sampling. I cannot remember offhand which countries we have sampled this year, but we sample two or three of our main markets every year and extrapolate from that selection. The cost of getting the figures for every market every year would be enormous. We can give you estimates of progress in our key markets.

I apologise for missing the bulk of your opening statement, although I enjoyed reading your written evidence in advance of today's meeting. I was curious about the figure of £44 million that you provided as the return on homecoming Scotland. Am I right in assuming that that is an optimistic expectation that is not based on a trend that you can demonstrate at this stage in the year?

It is certainly an expectation. It is based on the formula that we will get an £8 return on every £1 that we have spent. The evidence so far suggests that the figure of £44 million is not overly optimistic. One always hesitates to count one's chickens, but the returns that we have received from various events and our monitoring of media coverage, for example, show that we are well on track for that. As we have mentioned previously, we have several means of evaluation, including visitor surveys. An overall evaluation of homecoming will be produced and will be available in spring 2010. That is the moment at which we will be able to say whether we have reached the target. At this point, I feel comfortable with it.

In spring next year, when you assess the success or otherwise of homecoming and whether you have met the target, will the £8 for £1 calculation be made in relation to spending by visitors to Scotland or in relation to income for tourism-related businesses?

The figure relates to tourism spending.

For reasons that are not within VisitScotland's control—although you would hope to influence them—overall spending in the period since the target for increasing spending was set has come down. Since 2005, the figure has reduced by 4 per cent. When assessing the benefit of homecoming, to what extent will you discount or consider any underlying trend towards continuing reduction or a recovery in spending? Is there a technique that you intend to apply to distinguish the homecoming bonus from any wider recovery in tourism spending, or it is impossible to distinguish between the two?

It is not impossible to distinguish between them. We will measure homecoming in the same way that we measure every marketing campaign. The surveys that we carry out are focused on our identifying, to the best of our ability, the incremental spend that is attributable to homecoming, our German campaign and so on. We can identify additional spending, which may be alongside a downward curve or alongside an upward curve. It will be clearly separated.

This morning, I saw for the first time a submission from the Scottish Tourism Forum that reflects concern about the decline in VisitScotland's budget and seeks increased resources for VisitScotland. The forum suggests that VisitScotland be given the powers to provide

"direct intervention, grant support and soft loans"

where that would be helpful. Currently, some of those powers lie with the enterprise networks. Do you have sympathy with the forum's proposal, from the perspective of marketing Scotland and promoting tourism, or would it muddy the waters with regard to the respective responsibilities of VisitScotland and the enterprise networks?

Decisions about our overall remit are beyond us—those are judgments for the Government. However, there are opportunities for consolidation, both vertically and horizontally. I cannot judge whether that would require structural change, but there are opportunities for us to use our marketing expertise more broadly for Scotland, which is horizontal integration of activities.

There are also opportunities for us to use our expertise in tourism in a more vertically integrated way, for example by helping at least with advice about tourism investment. In the future, it will be extremely important that we align investment with customer needs. We tend to be a bit introverted and to look at investment potential from the point of view of what we want or would like to do. I hope that we can be seen as a major contributor by identifying what the market is doing, what it wants and what customers want. That should be a major driver of investment decisions. The potential exists for us to help out in different ways.

If your budget was going up rather than down, would you be in a position to make a more effective intervention on tourism spend and providing what the customer needs?

Absolutely.

Good morning. I have a few wee introductory questions. In relation to the European touring campaign, do you work collaboratively with the university sector in Scotland, given that many Scots students study abroad and many foreign students come to Scotland to study? There will be greater awareness of Scotland in countries where there are Scots students.

Absolutely. It is a market that has grown particularly strongly and has a lot of potential. Although you mentioned it in the context of the European campaign, there is probably more potential outside Europe. There are undoubtedly opportunities to work more effectively with universities in Europe, but I think that the real potential for the education sector lies in the emerging markets. We have a fantastic product in our education system, for which we know there is great demand in, for example, China, India and South America. We have worked in such places, so that is where great potential exists for us to work in conjunction with the universities and other educational establishments. Together, we must probe the potential in those markets.

My next question is for clarification and again relates to the European touring campaign. An extra £10 million has been generated for Glasgow, but does that include the rest of the west of Scotland?

It relates just to the Glasgow area. Glasgow and the Clyde valley is the area that we usually measure; it does not cover the whole of the west of Scotland.

Okay. I do not know many people from Paisley or Greenock who would consider themselves to come from Glasgow. I, too, would see such places as being different markets from Glasgow.

Your submission contains a number of interesting quotations. I will not go through them all, but the first is that you want to maximise

"the economic value of the brand".

Scotland has several brands, including whisky, golf, and bagpipes, tartan and kilts. Another potential brand that Scotland could have relates to sailing and recreational boating. I am aware that in recent months VisitScotland gave Sail Scotland £65,000 to take part in boat shows to help to market the industry and Scotland abroad. Are there more opportunities for collaborative work involving VisitScotland and other bodies to promote Scotland's sailing and recreational boating industry and sea angling?

The answer to the more general part of the question, which was about whether we think there are other opportunities to exploit, is, "Absolutely." It is interesting that the more research one does on the branding of Scotland, the more commonality one finds on the core values. The core values that we have identified for tourism for the brand of Scotland are pride, proficiency, integrity and innovation. Those values are manifest in all sorts of different ways, but they lie at the heart of the brand. Although the external perception of our values might have taken a bit of a knock in some sectors, they hold true for practically everything, whether one is talking about golf, whisky or sailing. That gives us a great common platform for projecting a Scotland united message. We intend to use that.

Sailing is pretty exciting. I am a relatively recent convert—I was sailing this summer. I have been impressed by the investment, which is a great thing. If one is a marketer, one of the things that one really wants is great new product to sell all the time. Scotland is fantastic and it is great to have that new product. The investment that has been made and the developments that have taken place in marinas—there are new marinas and there have been extensions of existing ones—give us a fantastic platform for marketing sailing even more in the future.

There are more marinas and more berths. A third of berths in Scotland are taken up by people who stay in the south-east of England and fly up on cheap flights—they sail primarily on the west coast. Some companies in the charter business that I have spoken to have told me that this year has been their busiest year for a number of years. It is probably not unkind to say that there has been a dearth of public investment in the sector over a number of years, but it is an industry that has tremendous potential: with that potential comes the possibility of more jobs and more economic benefits.

Yes. The sector is also generally environmentally sound. We would like to encourage people to come from relatively close to Scotland, so that they are not travelling too far. Also, if they do not use the engine too much it can be a very environmentally sound holiday.

In your opening comments you mentioned where you would like to see efficiencies, and your submission refers to the collaboration that is taking place. Sailing and recreational boating is not a new industry, but it is now on the public sector's horizon, and previously it was not. I urge VisitScotland to ensure that, where possible, moneys get put into the industry, because the return on investment will be tremendous for Scotland and, in particular, for communities.

Absolutely.

Good morning. I will come back to the figures in the budget—certainly the ones that we have. Tourism was part of the Government's six-point plan for economic recovery, yet it faces a budget cut of about 11.7 per cent, some of which can be explained away by homecoming but some of which cannot. I do not ask you to comment on that political statement, but I want to go through your income and expenditure forecast, which has been provided to the committee, and find out what that means on the ground in the areas in which you are having to make cuts. When we hear that the budget for business engagement is being cut, it looks like just a budget line, but I am keen to explore what that means for your organisation and for Scottish tourism. I will start with the budget for business engagement, which goes down by £600,000—an 8 per cent drop. What does that mean on the ground?

My response will have to be slightly broad brush, because we have not yet put our operating plans in place.

Essentially, business engagement covers the promotion of VisitScotland products to the industry and, importantly, it also covers our QA. We certainly see efficiencies to be gained in the way that we promote VisitScotland products and invite the industry to buy them. One aspect, for example, is repeat purchase. Rather than having to go to people every year and say, "Here is what we have: would you like to purchase this?" we have found that most of our business customers tend to take something year in, year out, so we can cut a lot of our sales effort by rolling that over.

I have already mentioned the quality side and I will not go into great detail unless the committee would like me to, but we are carrying out a major review of how we do our quality assurance. We believe that that will produce efficiencies. As I said, the deficit between what we charge for quality assurance and what we spend is around £1 million. We hope to take away a considerable part of that deficit through our quality review.

Changing the selling method and undertaking the quality review will therefore be the biggest moves in the business engagement sector.

Are corporate services your human resources and administration functions?

Yes, that is all the back office. We have done well there, in areas such as procurement. We took out about £1.8 million in the first year after our most recent restructure. We are on target for Government efficiency savings, which will be mostly in that area as well—efficiency, shared services and procurement. There is more to come there.

The biggest cut in cash terms is in visitor engagement, with a cut of £1 million. What will the consequences of that be on the ground?

As I have said, our aspiration is to maintain the front-line marketing service. Visitor engagement is by far the biggest service, using £40 million of our budget. It covers all our marketing and all our visitor services—the network of information centres throughout the country. We hope that the biggest part of our savings will come from efficiencies in the network. We want to maintain the spend on marketing, while getting better at it and more efficient. We also want to maintain the service through the network; there will not be a slash-and-burn approach. We have made considerable progress with, for example, partnerships in visitor information centres. Two examples of that are in Tarbert and in Tobermory, where we will close our existing information centre and move in with CalMac. That sort of thing will release good savings.

In the course of this year, we have also managed to reduce staff hours by 10,000, from a total of about 250,000. That was done by better use of the integrated network and staff, and by having staff who are very flexible and are prepared to move around. We can move people between VICs more at different times, including peak periods. Largely by having better rostering, we have therefore managed to cut hours, which is a big saving in itself.

We hope to get improvements on the income side as well. Our retail income just now is above target and unit spend per visitor to VICs is slightly above target. We are doing very well indeed in commission on ticket sales. I think that that is an underexploited area. Therefore we hope to close the deficit a bit on the income side, too. If we get all those in, we should make the savings. Obviously, we would like to make the savings anyway and release extra money to marketing, but at least we will protect the marketing. If we are not successful, though, we will have to cut some marketing.

I suppose the other two areas are capital partners and strategic partners, each of which faces, I think, a £300,000 cut. What are the implications on the ground of each of those cuts?

The strategic partnerships area is largely about communication, creating partnerships and building on our relationships with local authorities, tourism organisations and the wider industry. It perhaps sounds platitudinous, but we will just have to do more for less. We will just have to find ways of making our communication better but less expensive. We can do many small things in that regard. For example, we have stopped printing our annual report and it is now only available online, which saves several thousand pounds in itself. Doing such things will help us to make the cuts.

We will be able to manage the cut on the capital side. It is money that we need for our estate, which is the network, but the cut will not present any major obstacle to the way in which we operate the network.

I have a final question. A large proportion of your income comes from the Government, and you also have commercial and stakeholder income, which you predict will be slightly reduced in the next budget round. The table in appendix 1 of your paper predicted that that income would be £21.3 million for 2009-10. We are only six months into that budget year, but do you think that you are roughly in line with where you hoped to be at this point in the year? Are you slightly behind or ahead of the forecast?

The 2009-10 figure that you have been given is a reforecast. We are a little bit behind in income and have already had to cut the figure a bit. There has been a downward trend for some time, but that is built into the current estimate. However, I am pretty comfortable with the current estimate. The environment is volatile, of course, so we cannot be too confident, but we should be all right with that figure.

I want to make three general points. The first is to do with our partners in Europe in particular. France and Germany together are our biggest single market. The second point is that many of us became concerned about the bad weather this summer. People were getting almost pathological in articles for the southern papers. The third point is that high-speed communications with the south have again come on to the agenda.

You and I were at the homecoming gathering, which was splendid and worked brilliantly. Would it have worked as well if there had been a total downpour on the day?

It is inevitable that the turnout would have been smaller if there had been a total downpour. We were blessed. I cannot claim that we organised the weather, but it was superb for ensuring that people turned up on the day.

The clan events were at heart of the gathering, and they would have happened with the same number of people, because advance bookings were made and people had come from around the world. However, it was undoubtedly a great bonus that so many people said, "It's a nice day, so let's go along and give it a try."

Despite what Mr Salmond might think, none of us can control the weather. In any event, it is a reserved matter.

I think that the event drew predominantly on North American elements. However, we were told at the reception for the German consul yesterday that there are no fewer than 300 Highland games in Germany every year. We should consider that in the next few years.

The 450th anniversary of the reformation will be next year, and the 450th anniversary of the return to Scotland of one of our most photogenic historical characters, Mary Stuart, will be the year after that. I think that that creates a disposition in France and Germany to follow in the footsteps. There is a lot of religious tourism involving Catholics and Protestants from Germany and a lot of cultural tourism. Do you have any projects in view in that context that could do with financing but which might be disadvantaged by cuts in finance?

We have not picked up on those two specific examples for any projects. However, we have established good networks for events, especially in the cultural sector. That is a great legacy of the year of homecoming. Our contacts and planning for sporting events have been much better than our contacts and planning for cultural events in the past, because it is quite difficult to network as effectively in the cultural area, but things are now much better in that area. I expect that people will be attuned to the opportunities that are presented in culture and heritage and that they will see the potential in tourism, because everybody has been a bit more sensitised as a result of the year of homecoming. I am sure that proposals will be made, and we will consider how we can best use those proposals in our promotions.

The Irish run an interesting cultural periodical called irland journal in Germany. It introduces books and various means of travel and includes offers, for example. It seems to me that the type of tourism that it promotes often has connections with universities, schools, community groups and twin towns. Would it not be worth experimenting with that approach, even though that is only one issue? Such an approach could be aimed at drawing in writers and so on from Scotland and could act as much as possible as an advert for Scottish cultural offerings, which can increase returns.

I think that that approach has potential. We are also quite excited about the creation of creative Scotland. We would look to it and the Scottish Government to signpost such things. I mentioned the opportunities to leverage our marketing through the one-Scotland approach. The Government is committed to that, as are we. The links into the cultural sector through creative Scotland will help us to do that in future.

Good. My second point is linked to that. In general, the weather this summer was dreadful. The fact that we did really quite well out of it is a plus. Given the long-term statistics on heavier rainfall in summer—apparently, summer rainfall increased by 70 per cent during the 20th century—would it not be worth while for us to plan specifically to ensure that our utilities can cope and that the attractions that we offer will attract people in bad weather as well as in good?

The classic example that the committee saw of that was the blue lagoon in Iceland, which we saw in the middle of a storm, with pouring rain, in November, yet there were all these Icelanders and some members of the committee splashing around in liquid that looked like dilute Horlicks to the accompaniment of a smell of rotten eggs. That was a tremendous triumph of man over nature.

Should we be looking at similar things in Scotland and finding ways in which to turn potentially evil weather to our advantage? I think that it can be done. I will give one example. It seems to me that our swimming facilities in ordinary country towns are utilitarian to say the least. The swimming bath is there for swimming practice and nothing more. We can compare that with what we find in many continental towns, even where their baths are indoors.

You have not completely sold me on that particular outdoor experience, but I am sure that there is potential. [Laughter.]

You are right. It is a good point and something that we encourage, although I would not underrate too much what we have. One of the big advantages of our network throughout the country is that, when it is wet, people can come in and say, "What can we do today?" There are usually lots of things that people can do. The issue is partly about information. It would also be good to think about having more facilities, but the responsibility for that goes beyond us to include the entire industry. People should be thinking ahead, looking at the weather and advising guests.

Underneath all that, though, most people know what Scotland is like. They are not surprised, when they get here, to find that they might get some rain. In fact, some people come here because of that. People who come from Texas or Spain probably come to play golf in the rain and the damp. There is a significant point behind that. We are asking ourselves whether we are seeing some fundamental shifts in consumer drivers and people's reasons for going on holiday, especially in relation to the United Kingdom market. The dominance of the package holiday and going away for two weeks in the sun has definitely faded.

That is partly because the value has gone—the quality-value equation has changed because of the strength of the euro, for example—but there are other trends beneath that. People are looking at holidays more in terms of what they can learn, what they can do and what is life enhancing. That stands us in good stead and we should build on it. We have a window of opportunity to do that. The economic trends might continue for 15 or 18 months—who knows?—and we should consider the pound's weakness and the propensity for people to stay at home. At present, the staycation effect is largely built on a value proposition, but we can exploit the fundamental change of attitude about what people get out of a holiday in Scotland. That brings us back to our culture and heritage. The weather is becoming less important.

My final point is about the ambiguities of ease of access. Intriguingly, partly because of an earlier meeting of the committee, I have found myself advising the tenants and residents association of Lockerbie about how to improve the attractions there. That is rather ironic, given the airing that the matter got in the tabloid press, but the people there are concerned about the matter. Lockerbie is remarkably well connected. It is on the M74 and has a station on the main railway line. However, that means that people from that little town tend to shop in Carlisle or Glasgow if they need big-ticket items. The economy of Moffat, which is relatively withdrawn from the railway and the main road, is far livelier, because Moffat is a centre and it is difficult to get out of.

That is a paradox of access that we must consider in the context of faster rail links with England, for example. If it is easier to get to a place in Scotland, it is also easier for people in that place to get out. There is a need to hold and attract people. A factor that came up in Lockerbie was the absence of a swimming pool and other facilities that would keep kids and tourists in the town, such as shops and outlet centres.

We could do with more in-depth studies of how communities are affected by access and how access can be made to work positively for them. It is intriguing that, although Lockerbie can prosper from having good access, the issue also brings problems. For example, is it handy to have a motorway near a town if it deafens people when they visit and makes them reluctant to stay? Moffat does not have that problem. I would like studies of towns to consider how to retain and increase inward traffic rather than just assume that improving access will automatically improve the economy.

I think that the Government has done research on that. It is about getting the name on the map so that people recognise it as a centre. Events have an important role in that regard and have a powerful legacy.

I read about a town in the United States where an innovative approach was taken. The town enlisted the police force to stop cars that had out-of-state plates and say, "Why don't you come and stay in our town? Here's a voucher." I do not know that we could encourage such an approach on our motorways, but the example demonstrates that the issue is not specific to Scotland. As transport gets better and links get faster, communities are bypassed. Such places need to find ways to encourage people to stop for a minute and enjoy the amenities.

The principal point is that there are many areas in which VisitScotland can profitably co-operate with universities and culture providers and so on. Strategies for particular areas can be drawn up. If there are financial cuts in one direction, there are ways in which the voluntary sector and organisations such as the National Trust for Scotland can get into new working relationships to pursue ideas.

Yes, absolutely.

We have talked about what VisitScotland might do in the context of an increase in funding and how you might collaborate with the enterprise networks on issues that you have in common. A year ago, when we were conducting our inquiry into tourism, you said that you were working with Scottish Enterprise and Highlands and Islands Enterprise on a national investment plan. In particular, you were considering transformational new investment. The intervening period has brought difficult times for the wider economy. Is the plan still on track? What progress do you hope to make?

I think that we copied the plan to the committee after that meeting. I am pleased that we did that. The plan is still there. You are right to suggest that the current environment has knocked off the smooth development of the plan, but it is still very much in sight.

The plan is probably more important in the current environment. Its whole aim is to allocate resources to where we can get the biggest bang for our buck and give the biggest impetus to the economy, so if there are fewer resources, it is even more important to have such a road map. The approach is still very much under development. In the current environment, we realise that the big areas on which we should focus are the top-end new developments that we need to attract. Work by Scottish Development International on that is progressing well. However, another strong theme that is emerging is that we must also encourage smaller scale investment and development in the middle tier to ensure that the fabric of our smaller three and four-star hotels, guest houses and visitor attractions does not deteriorate in this environment.

It is about investing in the existing stock as well as attracting new investment, which is what you highlighted a year ago.

Exactly.

You have kept us up to date with work in progress, but are you able to update us on what has happened with the tourism investment bank, which the committee was interested in last year? I realise that the circumstances might not have been ideal for taking that forward.

After our previous meeting, the convener joined us in a discussion of the subject with banks and a number of invited Austrian guests. The idea still has great potential, but we think that establishing a bank might be inappropriate and simply a bit too much just now. However, we are certainly thinking along the lines of a tourism investment vehicle that, instead of taking in lots of money itself, would be more of a catalyst for bringing together investment and investment need. I can see the potential in that.

I was interested to note that you discussed this issue with Peter Taylor at last week's meeting. The fact is that the industry in general does not uniformly need such a measure, which is good. There are many big businesses out there that, despite the conditions, are fine, have good relationships with the banks and can secure financing for good projects. However, we still believe that there are several big pockets of smaller to medium-sized businesses, in particular, that will require some assistance not necessarily to find the money—I do not want to generalise too much, but there is quite a lot of money available as well as quite a few projects to invest in—but to take risk out of the equation. At the moment, there is a feeling of risk, and the financial community wants to reduce such risk.

We can add to the equation by helping to take out risk, particularly by analysing and kite-marking investment proposals and showing how they might fit with market requirements and so on. The success of a marina, for example, often depends on ancillary investment; in other words, what brings in the money is not the berths but the restaurants, the pubs, the access and the other activities that are available to people, and introducing something that helps in that respect might allow us to reduce the risk. Of course, some kind of guarantee mechanism would also take out risk.

In short, our thinking is moving away from the idea of a bank into which lots of money would be poured and towards some means of bringing together projects and money by reducing risk.

What do you think would be the appropriate relationship between you and the enterprise companies in those plans? Given the circumstances affecting their budgets and the difficulties that they are facing in deciding their priorities, how do you think that those ideas will develop? For example, how might certain guarantees be affected by changing relationships between the different players?

At this point, the biggest thing that we can offer is the market perspective. After all, a good, solid view of how investment might fit market potential is key to reducing risk.

As for administering guarantees of funding, that is not an area for us, and neither are we equipped to lay out all the different elements that might be needed in an investment proposal. That could be the job of a separate body or the enterprise companies.

So a body could be created for that purpose.

There could be a joint body involving our organisation that would bring in expertise in different areas.

That was very helpful.

In its submission, the Scottish Tourism Forum has suggested the creation of a single body with total responsibility for driving forward the ambition with regard to growth in tourism. In other words, VisitScotland should take back the powers over investment and business development in tourism from the enterprise agencies. Would that help to drive forward the tourism investment and tourism bank plans, or do you think that such a move is unnecessary?

As I said to Lewis Macdonald earlier, it is not for us to judge what should be done with regard to the allocation of the remits of various agencies; that is very much the Government's role. However, there is room for us to converge efforts—not only those of the public sector but those of the private sector as well—and create a better vertical integration within the industry and a better horizontal integration around marketing.

If the decision about remits is for ministers, are the ministers driving the issue forward sufficiently? For example, when did you last meet John Swinney or the First Minister to discuss the development of tourism?

We met Jim Mather—our minister—on Monday, when we talked quite extensively about the development of tourism, industry engagement and priorities. I have had good access to John Swinney, and I have met the First Minister through the year of homecoming, but we have not sat down at that level to talk specifically about tourism issues recently.

VisitScotland has helpfully provided a 2008 tourism summary, which contains information that the committee asked for in the recommendations that arose from its tourism inquiry. The regular reports from VisitScotland will be helpful in placing in a longer-term perspective the discussions that we inevitably tend to have on a six-monthly basis. That is where, I think, Parliament could add some value.

I have a couple of suggestions for VisitScotland. I note that it is not possible to adduce from the 2008 visitor summary the total spend in real terms over the past four years. It says that the nominal reduction in spend was more than 1 per cent and, in fairness, it also gives the total spend for domestic trips and international trips. I note that there has been a 2 per cent real-terms decline in the value of international spend and a real-terms decline in domestic spend of 5 per cent a year. In 2005, none of us sitting here today would have expected to see a 5 per cent real-terms reduction in spend over the five-year period, notwithstanding the fact that there have been many international vagaries and events that we might not have anticipated. However, if we look at the contribution of tourism to Scotland's gross value added in the period from 2004 to the present day, using the data that we have, we see that there is a less than 0.1 per cent increase.

In subsequent versions of this report, VisitScotland should think about ensuring that there are trend data on the total spend in real terms over, perhaps, a 10-year time horizon, if that is possible, and that there are similar data for international spend and domestic spend. There should also be a little bit more comparative data. I see that the UK figure for domestic spend is also down 5 per cent, which is fractionally more than the decline in Scotland, but it is difficult to tell whether a 0.1 per cent greater contribution by tourism to Scotland's GVA, a 5 per cent reduction in domestic spend year on year or a 2 per cent reduction in international spend represents a good or a bad performance when compared with the performance of other well-developed western European tourism markets or the tourism markets of the other nations of the UK.

Basically, I thank you for the annual summary, which was helpful. However, with regard to the committee's attempt to track the state of tourism, it would be helpful if the data that we receive on an annual basis were standardised. That would mean that, from Administration to Administration, we could gain a sense of whether tourism is meeting the objectives that we hope that it should, and it might enable us to better address issues such as quality, which the Scottish Tourism Forum raised in its submission but which we do not have time to pursue today.

The annual summary is helpful, but if there were more in the way of standardisation, real-terms figures and international data, that would make for a better-informed debate about the place of tourism in the wider Scottish economy.

I am happy to do that.

We read in The Press and Journal on Tuesday that, for summer breaks, the Scottish Highlands and the Western Isles were seventh and eighth in the top 10 in Britain this year. That is obviously rather good news about this year, but do you have any way of measuring whether it is an improved performance for those areas?

We know from an accumulation of data from various sources, including occupancy and visitor attraction data, that in general the Highlands and Islands have done extremely well this year. We do not yet have all the UK and international visitor data, but I am pretty sure that they will follow the trend and confirm that the Highlands and Islands have done well.

One gap, which we have mentioned previously to the committee and which we are still seeking to fill, is on day-trip data. We have to separate that out. Day trips are good for tourism—although of course they do not help the accommodation sector—but we have tended not to focus too much on them in the past. The reason for much of the resilience is that Scots have been staying in Scotland—they have been discovering Scotland, going from the central belt to the Highlands and Islands and going to attractions. Some of that has been day-trip traffic, which is of less value but in no sense less welcome.

As day trips are becoming more important, will you find a way of measuring them?

Yes. We are investigating how we can best assess day trips.

Next year, would it be possible for us to get a picture of the sort of data that we have seen reported in the newspapers, so that we can compare like with like?

I hope to have an estimate, but we will not have the trends that Ms Alexander asked for, because we have not been measuring for them. We can get a picture, but I am not sure that we will be able to draw many conclusions from it, because it will be a starting point rather than a picture of on-going movement.

Will you give a little more information about VisitScotland.com, which has been brought in-house? You said that you are making a bit of money from VisitScotland.com, but will you outline for the committee your long-term plans for it? In a report last year, the committee argued that the previous business model for VisitScotland.com had failed, and we recommended a model that is based on enabling individual businesses to improve their services and offering them free software and assistance with their websites.

As an overview of the vision for VisitScotland.com, I describe it as broad and shallow. If I used those terms about you, convener, you would not think that they were particularly complimentary, but they capture the idea that we want to extend VisitScotland.com across the industry, with a much wider catchment.

We want people to come to VisitScotland.com by the website, the contact centre or by e-mail, but we want to make it shallow in the sense that we refer them on quickly to businesses. The vision that we are developing is consistent with the committee's discussions. The original concept for VisitScotland.com was that it reached out to a narrower base but held people in the website until they bought something or moved on. That concept has had its day and the approach has changed.

In practice, that means that we will put a lot less emphasis on bookings by VisitScotland.com and we will open up to more booking engines. In the past, booking has been focused exclusively on VisitScotland.com's booking engine but, in future, we will not mind where the booking is made. People will come through the website and we will pass them on to the booking. We will put the emphasis on listing more products on the site that we can show to people and to which we can pass them on.

That approach has an implication for our quality assurance system. We are doing a quality review, under which we will introduce a new entry level to our quality schemes. It is called "working with VisitScotland", and it will be a statutory minimum, comprising a self-verified entry level. It will enable a lot more businesses to come to the site. At present, it is necessary to be in the QA system. Businesses will still have to be in the QA system, but it is changing and will now reach out to a much bigger envelope of businesses.

As far as channels are concerned, we will be increasing the focus on the website and decreasing the focus on the contact centre. We will be developing more in other areas: we will consider our mobile presence and also look into social networking.

Commercialisation will change. In future, revenue will depend more on the effectiveness of people's listing on the site. We will probably charge by click-throughs or page views—in other words, by the performance of the site—rather than try to gain revenue from the bookings made at the end. Those are significant changes.

The technology that goes with that is not all straightforward, and it will have to be introduced over time.

Once a business has qualified through having a QA certification of some sort, will it have to pay anything additional to be listed on the site? Will the actual listing be free? You will obviously charge further down the system.

We have not worked out the detail. There will be various options. We could either offer all the options or just ask the industry which option it would like. One possibility would be for a business to have a flat fee for the QA assessment coupled with a listing on the site—and perhaps also coupled with a listing in the VisitScotland information centre. A further option might be simply to pay for the quality assessment and get a free listing on the site but then to pay by performance. In other words, we would put a business on the site, and it would pay a few pence, say, towards the costs every time someone clicked on its entry.

The technology gives us different options to tailor how we charge to what people want. Some people prefer to pay a flat fee up front—they might just say, "I want everything; don't bother me again." Other people prefer to make payment on a performance-and-return basis. We can offer that. We have not yet decided whether to segment that to every customer or to offer one or two options.

How are you going to ensure that the costs of the project do not run away? Information technology projects of this sort can often get out of hand very quickly. How will you ensure that it stays within budget—and even becomes a profitable item for VisitScotland?

I look at the burn marks from past experiences with other projects. You are right to say that technology and new media can be difficult.

One of the successes of VisitScotland.com so far has been to protect the public purse from the risk that is associated with such projects. The arrangement that we put in place gave us risk protection. We are very conscious of that, and we are bearing it in mind for the future.

We now have a good handle on the numbers involved, as well as on the operation, which we are keeping much closer to us. We are aware of the dangers, and we will keep those factors very much in focus.

That concludes our evidence session on the budget with VisitScotland. I thank Philip Riddle for his attendance. Our next evidence session on the budget will be at our next meeting, on 28 October, when we will take evidence from Scottish Enterprise, Highlands and Islands Enterprise and John Swinney.

Meeting suspended.

On resuming—