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Destination new normal – Scotland’s tourism and hospitality industry in the summer of COVID-19

Jane Walker explores some of the points raised by tourism and hospitality industry professionals during the recent ICAEW Scotland online panel session on what recovery looks like for the industry in Scotland.

The tourism and hospitality industry is worth more than £11.5 billion to the Scottish economy, and supports one in twelve Scottish jobs. We are in an unprecedented period of uncertainty for the sector; the last few months have been filled with changes and challenges – and it’s likely that there are more on the horizon.

On Friday 14 August – when Edinburgh’s Festivals should have been in full swing, and hotels from Hawick to the Highlands should have been full of visitors from around the world – ICAEW Scotland held an online panel session; “What does recovery look like for Scotland’s tourism and hospitality industry?” which explored the reality for an industry experiencing a summer like no other.

Chaired by ICAEW Scotland Director, David Bond, the panel – Clare Beck, Finance Specialist at Heineken; Riddell Graham, Director of Industry and Destination Development, VisitScotland; and David Kemp, Non-Executive Director at Gleneagles Hotel – explored the issues that had affected them since lockdown, the associated changes and challenges, and their thoughts about the future.

The scale of the impact

Tourism plays a key role in Scotland’s economy – tourist spending is worth around 5% of GDP. It’s the biggest industry in the Highlands, attracting around 6 million annual visitors and supporting 20,000 jobs in that region alone. It’s estimated that the loss of Edinburgh’s August Festivals could see the economy take a £360 million hit and cost 7,000 jobs in the short term (Edinburgh City Council is braced for over 18,000 wider tourism jobs to be lost by the end of the year).

Given the scale of the sector in Scotland, it’s no surprise that the scale of the issues arising from the impact of Covid-19 have been significant.

“I’ve described it several times as a tsunami” says VisitScotland’s Riddell Graham, whose team has spent the last few months dealing with enquiries from a range of tourism business of all sizes from all across Scotland. “We did a quick and dirty analysis of the negative impact and we reckon, based on figures from last year and the year before, that the Scottish tourism industry has lost somewhere in the region of £2.5 billion as a result of the virus.”

It’s a sobering figure, highlighting the fact that the industry has faced unprecedented challenges since late March and, even as businesses begin to reopen as part of Scotland’s lockdown route map, the sector is facing a journey that no one could have anticipated just a few months ago.

The day the tills stopped ringing

“Looking back, in January no one was really concerned about the virus, it was something that was happening somewhere else… bookings were going on as normal. In February and March, individual customers were still booking as normal, (although) our groups were getting a little bit tentative. Then on 23 March we closed… the tills suddenly stopped ringing” David Kemp (Gleneagles) recalls the day that everything changed.

For a sector where cash flow relies on bookings and customers being able to physically use premises (be they bars, hotels or tourist attractions), a sudden lack of people meant a sudden lack of income. A problem further compounded by the fact that not only were the standard operating costs still ongoing, but many suppliers chased payment of outstanding invoices and customers sought refunds on bookings which could no longer be honored. “We were suddenly in the midst of managing real problems with cash-flow,” explains David.

Despite having seen what was happening in places such as Wuhan and Lombardy, Heineken’s Clare Beck admits that the speed of the shut down for bars and restaurants still came as a shock. The company’s pub operators were suddenly without income and also facing the huge challenges involved in putting bars into hibernation. As well as Heineken offering support to its pubs including rent suspensions and reductions and  free replacement of out of date stock for reopening, Clare and the team helped JAT operators deal with the accounting issues involved in putting  bars into hibernation. “One thing we had to manage was cash and stock. We had to do managers’ stock takes – which we’d never done on such a scale  before –  the team  spent a lot of time on the phone with operators helping them put in fractions of barrels of beer”.

But, having dealt with the immediate practicalities – from beer that would go out of date during lockdown, to communicating with guests and members – of shutting up shop, the next challenge was how to cope with the financial fall out.

Invaluable support

“Our biggest cost was our staff,” says David whose team was drawing up plans just as the Job Retention Scheme was announced – the initiative enabled them to furlough almost a thousand members of staff. It wasn’t the only scheme that proved invaluable to Gleneagles, “we were too large for CBIL and too small the Commercial Paper scheme, thankfully, Rishi Sunak announced the CLBILS scheme – we were the first company to borrow money from our bank under that scheme”.

Clare agrees that whilst often presenting challenges of their own, the support schemes available to businesses have been a lifeline, especially as businesses began to reopen. “The punches have kept coming, but (there were) good ones from Rishi Sunak! The VAT change – changing VAT on many products from twenty percent to five percent, was unheard of at such speed, no one would ever normally do that” says Clare. “Then he announced the Eat Out To Help Out discount scheme, which would go live in around fourteen days. That was a very challenging time scale – but we did it.”

Adapting to the new normal

An agile approach, and the willingness to adapt and try new ideas seems to be key going forward. Currently facilities such as pools (a big tick box for many people choosing a resort hotel), gyms and spas are currently unable to open, and even some out-door activities such as shooting are off the table (shooting instructors need to be with a metre of participating guests) – all of which impacts on what Gleneagles can offer guests.

As David explains, offering alternative activities and making the most of available resources has been vital “we have lochs on the estate so we’re doing kayaking and paddle boarding… we have summerhouses on our front lawn that we’ve converted into private dining spaces. Businesses have to be creative, we’ve found that although guests are disappointed that we don’t have a pool, they are fully accepting of it and they’re embracing what we’ve sought to offer.”

Agility doesn’t just pay off front of house - getting things right behind the scenes has been crucial to reopening. From taking staff training online to implementing Swifty (a Heineken payment and loyalty app for bars, pubs and restaurants which also offered the order and pay functionality  which is so essential for contactless service), Heineken has embraced both the need for change and the opportunities afforded by modern technology “necessity is the mother of invention!” says Clare.

Riddell agrees that innovative ideas are paying off and that collaboration is key “The Cairngorms Business Partnership launched a test and protect app, which they’ve shared with all of the Scottish Chambers of Commerce – it’s working really, really well.”

What next?

All of the panel admit that there’s still a lot of uncertainty in the industry, ranging from concerns such as whether food sales will continue to be as strong once the Eat Out To Help Out scheme ends, to the unavoidable issue of what will happen if there’s a second wave.

Despite the changes, challenges and concerns, Riddell remains optimistic “I have to believe that Scottish Tourism will return, and return – although not right away – to what it was before. But I think that a lot of the lessons (that this panel) have been talking about need to be put in place, and we need to make sure that we don’t miss the opportunities that we’ve talked about.”

Watch the panel