Business

Sharan Pasricha: Charting the way ahead for Scottish tourism

In the tourism sector, the pattern of customer demand will be difficult to predict over the coming years. Until Covid, Scotland enjoyed a balance of demand between local, UK and international customers, and between individual leisure customers and events (including conferences, incentive, associations, corporate events).

In the immediate recovery period, the balance will shift towards UK individuals. There might be an opportunity in the short term to benefit from a spike in the staycation demand, however, there is a threat in the medium term if British customers begin to travel overseas quicker than we see a return of demand from overseas and corporate customers. There is also be a degree of uncertainty over the extent to which large scale events do return to similar pre Covid levels.

With this considerable uncertainty, the industry must be flexible in its approach to its product and marketing. Simple continuation of pre-Covid activity is unlikely to be relevant and businesses in the tourism sector should closely monitor how demand returns and allocate marketing resource to the stronger channels of demand as these emerge.

With extremely efficient third-party distribution channels there is a tendency for prices to be driven down for the short-term benefit of the consumer but leaving only marginal profits to the industry, which can constrain investment and growth.

Industry participants should make every effort to differentiate their product and positioning to enable firmer pricing, still providing great customer value, to ultimately support investment and sector growth.

The industry also relies on support from industry bodies such as Visit Scotland to promote the country as a destination. Rightly, these bodies have recently diverted their resources from marketing to provision of grants. However, the emphasis does need to shift quickly back to marketing support, at levels commensurate with competing destinations, as recovery gains momentum.

Scotland should benefit from being seen as a safer destination with its vast open spaces and from the success of the UK vaccination roll-out, and industry marketing should lean heavily on these factors to encourage return.

It’s important to have continued focus and investment in transport and technology infrastructure, which is vital to underpinning growth in the economy generally and, in particular, tourism. 

Direct air routes into Scotland from other parts of the UK and from overseas are critical.

The airline  industry will not re-emerge in the same shape as before the pandemic. Airport operators, airlines and Government should work together to encourage resumption and growth in direct routes into Scotland. 
The Government is already supporting investment in the roads network, which must continue with an emphasis into more remote locations, to capitalise on the likely demand to access these spaces.

Long-term investment in a fast and reliable rail network will also support growth in tourism particularly, as customers switch their travel preferences to more environmentally sustainable means.

Access to fast and reliable digital technology must also continue to be promoted as both consumers and businesses’ expectations and reliance on technology and internet communication grows increasingly.

Taxation has become an increasingly significant burden on the tourism sector. Employers and employees National Insurance levels have increased and  represent a growing cost where jobs are created.
The Apprenticeship Levy is in effect a tax on jobs with little direct benefit provided back to businesses in Scotland. We would encourage reform of these taxes with the aim of reducing the burden for targeted roles. Combining these taxes with income tax would also improve the transparency of the tax burden on employment.

Capital allowances on investments in buildings are at minimal levels, whilst profits derived from these investments are taxed at the standard corporation tax rate.
Investment in buildings assets would be encouraged with a fairer corporation tax capital allowance regime.

Business rates are calculated as percentages (which recently have risen for some hospitality firms) on income streams. It costs are borne by businesses that are building-heavy and can discourage investment. We support the reform of business rates to reference levels of profits and to include more asset-light business in its scope. Schemes that provide relief to small business, for example  the Small Business Bonus Scheme, should be continued.

A more permanent reduction in VAT levels would support the sector and improve  its position. The tourism sector relies heavily on flexible access to labour markets.
Following the UK’s exit from the EU, the sector no longer benefits from freedom of movement of labour,  reducing the pool of talent we have access to. Our sector would be greatly be supported by flexible, promoted visa schemes.

Sharan Pasricha is the founder and chief executive of Ennismore, owner of Gleneagles in Perthshire

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