Tourism is one of the most important sectors for the Scottish economy, accounting for more than 7% of employment in Scotland. In 2019, visitor spending totalled £11.5 billion, but during 2020, visits declined by 78% and spending dropped 85%.
Last year, the sector faced a summer like no other, this year, whilst events such as the Edinburgh Festival Fringe are going ahead, they are on a smaller scale and look very different compared to previous years. (For context, it’s estimated there are 428 live shows at this year’s Fringe; in 2019 there were almost 4,000 live shows.)
On 29 July, almost one year on from our first such discussion (and several days before the First Minister’s announcement that most remaining restrictions would be lifted on 9 August), ICAEW Scotland held an online panel session; “What does recovery look like now for Scotland’s tourism and hospitality industry?” which explored the realities facing an industry experiencing a second summer of uncertainty.
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 Averil Wilson; Managing Director, Apex Hotels – explored how the tourism and hospitality landscape has changed since last year’s discussion and the ever-evolving challenges of the past eighteen months and the issues they face going forward.
Not so picture perfect
Anyone scanning newspaper headlines of the last few weeks could be forgiven for thinking that things were looking good for the tourism sector. Stories of fully booked accommodation (and even of certain parts of the West-coast of Scotland being overwhelmed with visitors), give the impression that a staycation boom is in full effect.
But, as VisitScotland’s Riddell Graham points out, this is far from being the case; “It’s a pretty mixed pictures to be honest, not the much vaunted Scottish tourism boom that’s being reported widely in the media. The self-catering, caravanning and camping sectors are doing the best by a long chalk. Rural parts of Scotland are faring better than the cities. It’s very mixed for serviced accommodation – some hotels are performing well, others are reporting poor occupancy levels… Forward demand is looking a bit patchy as well. It’s a similar picture for bed and breakfasts and guesthouses.”
“The cities, notably Glasgow and Edinburgh are much worse than the rural parts of Scotland – we’re seeing occupancy levels of less than twenty per-cent in Glasgow, it’s slightly better in Edinburgh, but it’s really challenging in terms of revenue per available room,” he adds.
Averil Wilson (Apex Hotels) believes that the challenges facing city centre sites may be linked to the lack of business travel and the fact that people have moved meetings online, and conferences and other events are largely off the agenda. Whilst Apex’s ten UK hotels are all in city centre locations, she says the sites that traditionally cater for business travellers are far quieter than normal.
“We are seeing that the hotels that were previously strong in leisure are the better performing hotels at the minute and the hotels that are more business focussed are the ones that are struggling – it’s not uncommon to have ten or fifteen per-cent occupancy through the course of the week,” she says.
No such thing as business as usual
It’s been estimated that in Glasgow alone around 30,000 workers depend on others commuting to city-centre workplaces for trade; the switch to homeworking has hit many of those businesses hard.
Restaurants, hotels, coffee shops and retailers are affected by this loss of footfall, as are city-centre pubs, as Heineken’s Clare Beck explains, “Some of our pubs are city-based and we have seen declines, as people are not coming in because they’re not working in the city-centre any more”.
Whilst this is clearly an issue, Averil believes that it’s possible that people opting to work from home, or adopting a hybrid approach may create unexpected opportunities; “Going forward, if there are more people working from home, I think that there will be more inclination to have weekends away and little treats throughout the course of the year... Both for the hotel industry and pub industry, I think there will be pent up demand to do a little bit more, to focus on your leisure time and to try and make sure that there’s little treats, little spot of enjoyment on the horizon throughout the year as well as your big two-week holiday in the sun,” she says.
And it’s not just leisure visitors who could bring new opportunities; Averil believes that new working patterns could actually present an opportunity for venues that can accommodate meetings. “I suspect that what we’ll see is a bit of a transition as a number of businesses are moving away from having everyone in one big head-office and to having more remote workers, I think it will then become more important to get your workers together and that face-to-face engagement will become a little bit more routine – so rather than having a conference or a get together once or twice a year, you might have to do it once a month, and – if businesses have downsized their primary offices, then that’s an opportunity for the hospitality sector, and the hotel sector in particular,” says Averil.
Reflecting on a challenging year
Whilst there may be scope for a degree of cautious optimism moving forward, there’s no doubt that the industry has faced a challenging time and that there are still challenges ahead.
Along with Riddell, Clare, was one of the experts who took part in last year’s discussion and, as she explains, things since then have been something of a rollercoaster.
“When I spoke at this event last about where we were, we were quite optimistic – we’d come through a really harrowing time, but it looked like we were on the road to recovery. When we reopened in July (2020), the mood was one of exhilaration – the public were delighted to see us. There was still some nervousness, but the Government was supporting us – it was a very different world, with a variety of restrictions, but we had Eat Out To Help Out and here at Heineken we’d implemented our order and pay app, which enabled us to serve people in a safe way – there was a real mood of buoyancy as we looked forward to the rest of the year,” says Clare.
“We had Christmas coming, which is always our busiest time and in 2021, we had the Euros to come. It felt like we’d survived, it felt like the worst was over, it felt like we were in a good place, but in the background there was always the rumble of COVID daily totals and then, slowly but surely, we started to see more restrictions come in,” she adds.
Clare recalls the regulations that came in over the months that followed, and the challenges that they brought with them (“who will ever forget that a Scotch egg counts as a substantial meal?”). But these were restrictions that the industry accepted and adopted in the hope of saving Christmas and New Year trading.
“We got to New Year’s Eve and there weren’t any pubs open and it was just brutal, because this is one of our busiest days, but everybody accepted it, everybody knew what was happening, we knew what to do – there was no argument, publicans just got on with it” says Clare, recalling the stoicism of the pub operators she deals with. “We than had three months of silence, without really knowing when we would re-open and then, slowly, the signs of opening started in March with the schools going back… then we started to hear that mid-April would be when we would be able to go back, so we geared ourselves up towards that, but we never actually knew if it was really going to happen until it did.”
Confusion across the board
This uncertainty and lack of clarity – and the planning problems associated with often not having a definite timeline to follow – has presented its own challenges across the sector.
“It’s often been unclear what the rules are and more unclear on what they are going to be – it’s a constant challenge to interpret them,” says Clare.
Riddell agrees, highlighting the challenges and confusion arising from Scotland having different restrictions to England, and citing the example of people travelling to Edinburgh from London by train after the lifting of restrictions in England on 19 July and the fact that passengers would not be required to wear a mask until they crossed the border into Scotland, “that’s the kind of farcical situation that arises because things are not joined up” he says.
Closer to home, and even when businesses are all operating under the same guidelines, there’s still room for confusion, as Riddell explains, “that lack of clarity, consistency and interpretation is certainly an issue – I’ve been on holiday in Scotland this year, in three different self-catering properties, and found there was a totally different approach in each of them; now the guidelines are clear but the interpretation was totally different, so there is a bit of inconsistency that still exists and that is a real challenge, trying to get it (consistency) in twenty thousand businesses across Scotland.”
Staffing issues shake the sector
As Clare explains, uncertainty isn’t the only challenge associated with re-opening, “Not only were we still under restrictions, but all sorts of additional problems hit us – including the supply of beer! Not only were people getting ill in the breweries, but then we started to get ‘ping-gate’ and we didn’t have enough delivery drivers – we’re apparently some 66,000 delivery drivers short and supermarkets such as Tesco are offering some pretty generous signing on fees for drivers, which gives an indication of the challenges, and oh boy, are we seeing the challenges.”
Staffing challenges are a huge issue for the sector, as a recent report from CGA and UKHospitality highlights – 96% of hospitality businesses anticipate staff shortages by the end of 2021. CGA’s May Business Confidence survey found that 51% of business leaders in the sector had already found staff shortages a greater challenge than expected.
“The staffing issue is the one that’s come right to the fore, and I don’t think it’s one that’s going to go away any time soon… It wasn’t really on the agenda until six or eight weeks ago, when we stated to properly re-open and now it’s the number one issue that the industry is facing,” say Riddell.
This shortage of staff has a wide-reaching impact, as Averil explains, “We’re seeing a push on wages – recruitment is a challenge – I’ve read that there are two hundred thousand vacancies in hospitality across the UK at the moment – that’s nine per-cent of the hospitality workforce, so I would expect that there’s going to be more wage inflation to come – and that’s a key challenge for the industry”.
It’s a view shared by many in the industry – a survey of 200 hiring mangers by specialist recruitment website, caterer.com, found that 44% of respondents said that they would be offering better pay and benefits than they had in 2019.
Where now?
There’s no doubt that even as restrictions ease, the impact of the pandemic on tourism and hospitality will continue for some time to come. Whether things will ever look the same as they did just two years ago is hard to say, and many things need to fall into place for that to even begin to happen.
Averil sums it all up, “At the current time we’ve only got eight out of our ten hotels open, so we’re not quite fully back and fighting fit – to get back there I think we need to see the return of international travel, we’ll need to see the return of big ticket sporting events and festivals, and the things that really drive people to travel, even on a domestic basis throughout the UK, which I’m sure will come, but it’s not there yet.”