Memorandum submitted by the Department
for Culture, Media and Sport
1. The Committee has posed seven questions
for the enquiry. We have addressed each of them in turn in our
evidence.
What is the current and likely future performance
of the British tourist industry following Foot and Mouth Disease
and the events in New York on September 11?
2. The pattern is not simple. While the
Foot and Mouth outbreak appears to have depressed overseas visitor
numbers by making Britain a less attractive destination for leisure
visits compared with our competitors, the impact on business travel
from overseas to city destinations was less apparent and there
were signs of recovery once the outbreak was coming under control.
The impact of September 11 on the other hand was to depress international
travel generally, and for a period business travel by employees
of major corporations was actively discouraged.
3. Looking at British visitors travelling
within Britain they declined in total immediately after the
Foot and Mouth outbreak, although business travel held up well.
For a longer period, however, visits to the countryside were depressed
most notably in and around those areas where there had been an
outbreak or where footpaths were kept closed for the longest.
Day visits to the countryside in particular appear to have been
depressed. But many resorts and urban destinations reported good
trade. Later in the year, September 11 discouraged British people
from travelling overseas which led to stronger demand for accommodation
and attractions in Britain restoring levels of trade (but not,
of course, making up for business lost in summer months). The
key statistics are summarised in the table below.
| No. of Visitors* millions
| Visitor Expenditure* £ millions | Grant to Tourist Board £ millions
|
| England | 151.22 | 30,200
| 17.5 |
| Scotland | 19.09 | 4,169
| 33.2 |
| Wales | 12.52 | 1,912
| 22.7 |
*These figures are made up of overseas visitors and domestic
visitors with an overnight stay. Domestic day visitors and fares
to UK carriers are not included.
4. Looking at each event in more detail, undoubtedly
the Foot and Mouth outbreak (FMD) had a big impact on the British
tourism industry, particularly smaller and medium size enterprises
in the worst hit areas of Cumbria and Devon, but also in London
(where there was a sharp decline in US visitors).
5. Compared with 2000, there were nine per cent fewer
overseas residents' visits to the UK in 2001 and their visitor
expenditure fell by 12 per cent to £11 billion. Domestic
trips with an overnight stay fell by 7 per cent to 163 million
visits in 2001, although spending remained at around £26
billion. Many resort areas, for instance, had very good results
indeed.
6. The BTA estimated that the value of lost tourism from
overseas as a result of FMD and September 11 were in the region
of £1.5 billion. Overall tourism losses are likely to be
in the region of £3 billion, but these are not net losses
to the economy as a whole.
7. To address the situation, in May 2001 an additional
£3.8 million of government support was provided from the
Reserve to the English Tourism Council (ETC) and £14.2 million
to the British Tourist Authority (BTA). DCMS consulted the industry
and issued prompt guidance on opening visitor attractions (28
March) and staging events (4 April). DCMS worked to implement
a National Tourism Recovery Strategy published after meetings
with the industry in April 2001.
8. Of the ETC's £3.8 million, £2 million was
used by the Regional Tourist Boards for information, research
and regional advertising and PR campaigns. The ETC spent the remainder
on a £1 million advertising and PR campaign targeted at reassuring
and encouraging potential visitors (it also obtained additional
funds from a number of private sector partners). This effort was
supported by promotional literature, a dedicated and very promptly
set up visitor hotline and provision of a new England Getaway
website. The ETC estimates that its marketing activity from the
additional funding generated an additional 766,000 visits and
a return on investment of £27 for each pound spent during
the outbreak.
9. The BTA opened a www.open.visitbritain.com website
in April, generated much positive media coverage from a high profile
visit of 40 travel industry leaders and set up call and visitor
centers abroad. In addition to these basic actions, the BTA's
£14.8 million was used to fund a three stage recovery plan:
— Phase 1—provision of accurate, honest information
and reassurance through PR;
— Phase 2—highly focused, tactical campaigns
in 11 worst affected key markets, with specific trade offers aimed
at regaining some short term business;
— Phase 3—more generic, image-based advertising
and PR to help rebuild positive impressions of Britain in the
minds of potential consumers for the long-term.
10. This funding was one element in the Government's
package of recovery assistance that included rural business recovery
funding, hardship business rate relief and interest-free deferral
of tax payments. For example, the Regional Tourist Boards had
access to the £74 million RDA Business Recovery Fund, which
also provided targeted help for rural businesses in the worst
affected areas, including those in the tourism sector. At least
one RDA invested £2 million alone in tourism promotion and
development during the outbreak.
11. Over the summer of 2001 a great deal was said about
business failure and job losses. Undoubtedly many businesses in
rural areas, including businesses which depend on tourists but
are not part of the travel industry, suffered lost business. The
Government helped through Regional Development Agencies and the
Small Business Service and other agencies with the short term
problems, but evidence of significantly higher levels of business
failure, or of workers presenting themselves for work at Job Centres,
did not in fact materialise.
12. The industry appears to have weathered the FMD storm
and both expenditure and overnight stay levels are now returning
towards pre-FMD levels. Indeed, very serious as the experience
was, it also:
— considerably raised the profile of tourism (and
its significant wider impact) across Government, including with
the RDAs; and
— it has increased awareness of the potential of
domestic marketing as an area that can benefit from some public
sector intervention, working with private sector partners.
13. The events of September 11 had a major impact on
inbound tourism to Britain, particularly affecting the important
North American market. In 2000 the North American market accounted
for 19 per cent of visitors to the UK, representing 25 per cent
of all inbound visitor spending. In the immediate aftermath of
the attacks, in the final quarter of 2001, the number of visits
from North America was down 28 per cent compared to the same period
in 2000. The European Commission has reported that the UK appears
to have been disproportionately affected in terms of international
visitors in the months after September 11. This is probably because
a greater share of our foreign visitors are from the USA than
is the case in the rest of Europe. London suffered particularly
badly (as did our main historic cities and towns). Fifty per cent
of incoming visitors spend time there and it is particularly exposed
to changes in numbers of visitors from overseas.
14. The Government announced in February this year that
we were making an additional £20 million available from the
Reserve for the "Million Visitor Campaign", Britain's
largest ever overseas tourism campaign. This funding has been
matched by industry contributions of £5.4 million in cash
and £19.8 million in "collateral" spending. The
BTA established a Partner's Council of 26 industry partners to
oversee the campaign in a unique and unprecedented partnership
between Government and industry.
15. The campaign is a TV-led multi-media campaign in
our top seven markets: the USA, Canada, France, Germany, the Netherlands,
Belgium and the Republic of Ireland. The main television campaign
took place in May and June, supported by tactical print and radio
adverts, on-line advertising, direct marketing and PR through
the rest of the year. £1 million was allocated to the ETC
to fund a "Welcome to Britain" campaign for overseas
visitors once they had arrived, including a focus on the Golden
Jubilee celebrations.
16. The BTA is conducting a full evaluation of the Million
Visitor Campaign with an interim report expected in March
2003 and a final report in October 2003. In the four months of
April (when the campaign began) to July, the number of visits
was up by 567,000 on the same period last year. We are now seeing
a slow but steady recovery in inbound passenger numbers. The International
Passenger Survey shows that in the four months to July 2002 compared
to the same period in 2001, the number of visits from Western
Europe was 11 per cent higher and the number of visits from North
America was only one per cent lower.
17. Overall, the impact of external events has been dramatic
for certain sections of the industry and for certain periods of
time. It was essential for the Government to support the industry
in addressing that impact. Lessons have been learned in the process
of giving that support. But it would be wrong to dwell unduly
on these impacts in assessing the performance of the industry
in 2002 and looking to how to encourage success for the future.
18. Our assessment is that the impacts on different types
of businesses varied between the two events, that some businesses
suffered a serious but temporary loss of trade (in some cases
for a considerable period) but that ultimately the underlying
strengths and weaknesses of the tourism industry were little changed.
Does the Government have a role in promoting and/or supporting
the industry?
19. When the Secretary of State brought industry leaders
together on 11 October 2001, the impact of the events of that
year was obviously on the agenda. Clearly Government and industry
needed strategies for responding to future major dislocation of
this kind. But the meeting was also forward looking and addressed
the underlying capacity of the industry to organise joint action
with government and to respond to changing customer expectations
and global competition.
20. A new Tourism Alliance was established to bring together
the industry better in its dealings with Government and to address
a perception that during the Foot and Mouth outbreak they had
been less well organised to make their case than the farming sector,
for example. Tourism policy, it was concluded, should continue
to focus on those areas which were first identified comprehensively
in the 1999 strategy "Tomorrow's Tourism" and which
have been refined since, in continuing discussion with the industry
and taking account of the events of 2001. As tourism is essentially
an area for commercial endeavour where the demands of the customer
must be paramount, the key areas for attention are:
— destination marketing, including e-tourism;
— improved data and communication; and
— structures which give effective support.
21. Tourism is above all a free enterprise activity relying
for its success on satisfying the aspirations of visitors for
an enjoyable holiday, short break or business meeting. Tastes
change, new attractions are created, new styles of hotel are developed,
and in many cases it is a fast moving market where success depends
on constant innovation. In other cases successful businesses are
founded on providing reliable and familiar comfort in a way repeat
customers have come to enjoy. It is essentially a free market
activity which thrives where regulation is limited to what is
needed to keep the visitor safe and the environment protected.
But there are some limited areas where the market can fail to
operate perfectly. These areas of market failure do mean that
the Government can play a useful role.
They are, briefly, problems of:
Imperfect Information
To operate most efficiently, all market participants require
perfect information regarding the goods and services being traded.
A topical example of imperfect information in the tourism context,
was the public's knowledge about the state of Foot-and-Mouth Disease,
and in particular, the constraints the disease placed on tourist
access and mobility. Public bodies including Government can help
improve the quality and consistency of information available.
EXTERNALITIES
Externalities (otherwise known as spillover or indirect effects)
occur when the activities of a firm or individual have a spillover
effect on other firms or individuals, in ways for which no compensation
is paid. They can be both positive and negative. An example of
a positive externality would be the employment generated in a
local community by a new hotel development, while a negative externality
would be the pressure placed on local infrastructure (such as
roads) caused by the same hotel development.
PUBLIC GOODS
Public goods have two main features—no one person has
exclusive rights to their consumption (ie they are non-excludable),
and their consumption by one person does not affect their consumption
by another (ie non-rivalrous). Under these circumstances it is
difficult to limit a good exclusively to the person who is paying
for it, or to avoid the "free rider" problem. Examples
in the tourism context include border control services (ie immigration,
Customs & Excise) and defence/law and order services.
"TRANSFERABLE
SKILLS" TRAINING
In a sector composed of numerous small enterprises with high
labour-turnover rates, there is likely to be under-provision of
training by individual employers. In other words, if employers
are unlikely to recover all the benefits of employee training,
they will tend to under-invest in such training as there is little
incentive to improve the skills levels in the industry. Examples
include the training given to hotel receptionists or chefs, both
of which involve skills readily transferable to other firms within
the tourism sector and firms outside the tourism sector.
22. This analysis is one starting point for defining
where Government should intervene, another is an assessment of
strengths and weaknesses of the industry which was set out in
detail in Tomorrow's Tourism and was reviewed with the industry
at the seminar in October 2001. The areas in which we are concentrating
are summarised in response to the Committee's final question,
at the end of this memorandum. It is a shared agenda for government
at all levels but also for industry itself, and success in future
will depend on mobilising industry efforts more effectively rather
than stepping in to replace the efforts of industry.
Do current arrangements for supporting and/or regulating the
industry meet the need adequately?
23. We believe that the current arrangements need to
be refocused. The first stage of reform was announced by the Secretary
of State to Parliament on 13 May. Three main elements were announced—a
radical change to the English Tourism Council, the creation of
a public-private coalition that will market England to the UK
market and develop e-tourism, and that Regional Development Agencies
will in future play a stronger part in the strategic leadership
of tourism. Since then a framework for England marketing has been
developed by a group drawn from the public and private sectors.
The responsibilities of the English Tourism Council have been
reviewed and the way prepared for a further announcement shortly
about the structures through which assistance is given to the
industry in future. The EnglandNet e-tourism proposals have been
nearly finalised under the leadership of the ETC, and the arrangements
for the work of the Regional Development Agencies and Regional
Tourist Boards have been made.
Do current arrangements for supporting and/or regulating the
industry reflect the devolution settlement appropriately?
24. Inevitably working together in devolved arrangements
is a little more complicated than in a unitary state, but the
arrangements in place do reflect devolution appropriately and
work fairly well. The BTA is a cross-border body responsible for
promoting Britain overseas as a tourist destination. VisitScotland
and the Wales Tourist Board promote Scotland and Wales within
the UK and overseas. The English Tourism Council was established
in 1999 as a strategic body. The main issue is how best to ensure
that English tourism is not disadvantaged by the lack of a central
marketing body, and to devolve more responsibility to London and
to the English regions for developing and promoting tourism.
25. The Regional Tourist Boards in England promote their
regions primarily to the domestic market but also work overseas.
The Greater London Authority has a duty to encourage people from
outside the United Kingdom to visit the UK by way of Greater London
and receives funding from DCMS for this purpose. Following the
Belfast Agreement, Tourism Ireland promotes the whole island of
Ireland overseas. The Northern Ireland Tourist Board promotes
Northern Ireland domestically and in the Republic of Ireland.
Officials are currently drafting an Overseas Marking Agreement
between the BTA and the Northern Ireland Tourist Board.
26. The relationships between the Department for Culture,
Media and Sport, the Scottish Executive, the Welsh Assembly Government
are set out in concordats and there are regular meetings between
officials from those bodies. The Chairs of the national tourist
boards are ex-officio members of the BTA Board. The BTA Board
meets regularly in Scotland and Wales and uses these opportunities
to meet with the Boards of the Wales Tourist Board and VisitScotland.
The BTA Board receives regular reports from the chief executives
of the national tourist boards and the London Tourist Board. There
are regular meetings of the chief executives of BTA and the national
tourist boards and of specialist staff in fields such as marketing,
new media, public relations and research. Twice a year, VisitScotland
and WTB staff meet BTA's directors, senior marketing managers
and overseas staff as part of the BTA's business planning process
to discuss marketing priorities.
27. The relationship between the national tourist boards
and the BTA is set out in an Overseas Marketing Agreement which
is overseen by a steering group at director level. The BTA works
closely with the national tourist boards at all levels in order
to allow for flexibility between markets, to maximise the effectiveness
of limited resources, to avoid duplication and to ensure that
potential overseas visitors receive consistent and complementary
messages. In addition to its own campaigns, the BTA supports overseas
work by national and regional tourist boards and local authorities.
The BTA offers its overseas infrastructure and resources, marketing
expertise and its knowledge of particular markets to provide a
platform to these bodies overseas.
Do current arrangements for supporting and/or regulating the
industry promote the quality of provision effectively?
28. The voluntary national quality schemes, all new in
the last three years, cover almost all types of accommodation.
Satisfactory accommodation is graded on a scale from one (lowest)
to five; and a "Stepping Stones" scheme exists (eg in
resorts) to encourage properties that do not meet basic requirements
to raise them to minimum acceptable quality. The schemes play
an important role in driving-up quality standards but, for maximum
effect, increased participation is needed. Accommodation quality
is a key feature of Ministers' tourism reform Agenda, and we propose
to conduct a full review of the schemes which are in place to
promote quality. It will cover issues such as:
— Improving participation: the current 30,000
members represent less than one third of known accommodation providers;
— Improving promotion to consumers: budgetary
restrictions have prevented this up to date and so consumer awareness
remains low;
— Closer cooperation with Scotland / Wales: the
quality schemes are similar but not always identical to England's;
— Participation by leading hotel chains:
although less likely to disappoint consumers, reliance on their
own brand reputation has limited business take up, and so consumer
awareness, of national schemes;
— Proliferation of signage: consumers can
be confused as hotels often display various symbols eg if they
are members of both AA and RAC or have not removed old "Crown
scheme" signs.
Do current arrangements for supporting and/or regulating the
industry encourage productivity within the industry?
29. As one part of the drive for better overall quality
in the tourism and hospitality industry, DCMS, in partnership
with the Local Government Association, other relevant regulatory
departments, the English Tourism Council and key players in the
tourism and hospitality industry, have been exploring options
for a "Fitness for Purpose" approach to the regulation
of hotels and the restaurants within them. The initiative aims
to create a framework within which to provide customers with a
firmer assurance that the premises they use in England will at
the very least be fit for trading. We seek to develop a more robust
approach towards those businesses that consistently fail to comply
with basic regulatory standards by providing them with help to
improve, and at the same time a lighter regulatory enforcement
touch to well-run businesses that are already complying with the
necessary regulations. Fitness for Purpose will formalise and
promote sharing of existing best practice to ensure a more risk-based
approach to inspection and enforcement, targeting resources towards
those premises that do not meet the minimum standards, and creating
greater links between tourism and enforcement specialists within
local authorities.
30. A comprehensive paper setting out Fitness for Purpose
research, discussion, and recommendations was endorsed by the
second "Hartwell" seminar between government and industry,
chaired by the Secretary of State, Tessa Jowell, on 31 July 2002.
The intention is now to develop and carry out pilots in a range
of areas around the country, prior to an England-wide policy being
drawn up and implemented if the pilots are successful.
31. The Secretary of State has set the Tourism and Hospitality
Industry the challenge of formulating proposals for key structural
reform and modernisation, and the Government are working in partnership
with the industry to achieve those aims. For example, we have
worked closely with the industry on the employer-led bid for a
new Sector Skills Council for tourism and hospitality, and are
represented on the executive board for the industry-led and government
pump-primed Best Practice Forum, to encourage the transfer of
best practice and increased in productivity in the tourism and
leisure industry. The industry have also been a key partner in
drawing up proposals for new marketing arrangements in England
and for the Fitness for Purpose initiative. We have and continue
to maintain close and regular links with our industry partners
though such fora as the DCMS-led Hotel and Restaurant Regulatory
Monitoring Group; the annual (possibly to become bi-annual) Tourism
Summit at which Ministers from across government discuss issues
of common interest; the Tourism Forum run by the English Tourism
Council for the Secretary of State; and at the "Hartwell"
series of seminars between industry and Government. Through those
and less formal routes, the views of the many and varied industry
trade associations on topical tourism issues can be aired and
discussed between them and government.
32. A key development has been the setting up by the
industry in 2001 of the Tourism Alliance, which is a grouping
of major trade bodies reflecting the diversity of the industry's
main core industries, and chaired by the Director General of the
Confederation of British Industry. A key aim for the Alliance
is to ensure that the industry speak with one voice and give a
coherent view to Government on issues of common concern. As well
as working with Ministers on the proposals for industry modernisation
and reform, on 23 April 2002 the Alliance published their Tourism
Spending Priorities recommendations which the Government have
taken into account in developing the modernisation programme for
the tourism and hospitality industry, especially in the areas
of marketing, quality, skills, modernised communication and structural
reform.
33. The training and skills agenda is a key strand of
the modernisation programme for the industry that they, in partnership
with Government, are taking forward to boost competitiveness and
productivity. The Department for Education and Skills (DfES) have
developed a new sectoral approach to training and skills which
has involved National Training Organisations being dissolved,
and the introduction of wider-focused Sector Skills Councils (SSCs).
SSCs will be owned and led by the sectoral employers but will
receive up to £1 million per year core funding from DfES.
34. DCMS have been working closely with employer leaders
in the tourism and hospitality industry and the Sector Skills
Development Agency (SSDA) to establish a strong bid for an SSC
for the sector. In particular, DCMS worked with the industry to
establish a wide-ranging and inclusive "footprint" for
the SSC, and with DfES to ensure that tourism was not grouped
together with unrelated sectors. The employer consortium submitted
a formal expression of interest to the SSDA on 25 June, and employers
were subsequently delighted to learn that on 22 August the SSDA
had approved the tourism bid to go forward to the development
phase. DCMS will continue to work proactively on this important
project in partnership with the industry. It is expected that
they will submit a full business plan proposal to the SSDA early
in 2003, and current projections are that a tourism and hospitality
SSC should be established by 1 April.
35. DCMS work with the industry to look at ways in which
productivity and competitiveness on the world stage can be improved.
The Best Practice Forum for the tourism, hospitality and leisure
industry is one of ten fora set up under the auspices of the Department
for Trade and Industry (DTI) Industry Forum Adaptation Initiative.
The Forum is a national programme of business and enterprise support
for the whole of the tourism, hospitality and leisure industry
which aims to encourage the transfer of best practice and ultimately
to increase competitiveness and productivity. DTI have provided
£1.26 million to part-fund the Best Practice Forum's four
year programme "Profit through Productivity". This money
is administered by DCMS who are represented on the Best Practice
Forum Executive Board and closely monitor the programme. The University
of Surrey have been carrying out research for the Forum and regional
seminars have been held to identify 150 employers to participate
in pilot projects. Earlier in the year, a pilot programme was
launched, promoted and delivered in partnership with the Regional
Tourist Boards in Cumbria, the West Country and London. DCMS will
continue to work in partnership with the industry on this initiative
as it develops.
What should the Government's role be in promoting and/or supporting
the industry?
36. Before the events of 2001, the main aspects of support
were set out in the Government's 1999 tourism strategy Tomorrow's
Tourism and are central to current plans for reform. The issues
set out below were highlighted at the Secretary of State's Tourism
Seminar in October 2001, when the Ministers and representatives
of the industry identified priorities for reform within England.
While work in a number of areas including promoting sustainable
development will continue, sponsorship of the industry will in
future focus on these key areas:
— Training and Skills—High staff turnover
often leads to small businesses not investing in training and
skills development and so their staff do not always possess transferable
skills nor provide the increasingly high quality service that
customers require. This is even more important as the industry
employs 2.1 million people (seven per cent of GB workforce). A
dedicated Sector Skills Council for the industry and ongoing ETC
measures will support this area of development.
— Quality Improvement—The ETC's accommodation
quality assurance schemes (and similar ones in Scotland and Wales)
aim: to ensure customer confidence in quality standards, to maintain
diversity and choice and to drive up standards and avoid a situation
where price competition dominates to the detriment of quality
accommodation providers. The voluntary national quality schemes,
all new in the last three years, cover almost all types of accommodation.
Satisfactory accommodation is graded on a scale from one (lowest)
to five; and a "Stepping Stones" scheme exists (eg in
resorts) to encourage properties that do not meet basic requirements
to raise them to minimum acceptable quality. The schemes play
an important role in driving-up quality standards but, for maximum
effect, increased participation is needed.. The Fitness for Purpose
proposals set out the minimum standards at which a tourism business
should operate and aim to improve the relevant regulatory situation.
— Marketing—Promoting the tourism industry
has a positive effect on a diverse range of other sectors, including
employment, transport and regeneration as well as cultural and
leisure sectors. Overseas promotion also helps to reduce the tourism
balance of payments deficit. Domestic marketing is currently undertaken
at regional level and we announced outline plans in May for future
Government support for national marketing strategies and the further
development of e-tourism.
— Improved Data and Communication—Investment
and marketing rely on good quality data and research. As the industry
is mainly made up of small businesses (about 80 per cent) it is
unlikely that the wider industry would invest in such long term
research as individual enterprises would only invest if they could
see a direct benefit. The ETC undertake much of the strategic
analysis work for the industry, including surveys (some are mandatory
EU requirements), policy development and market intelligence work.
The need to support SMEs is also clear in the area of e-tourism.
The Internet can enable the industry to overcome its fragmented
nature by bringing businesses, consumers and information together
but small and micro businesses do not have the resources or expertise
to exploit fully this potential on their own. In March this year,
the Government announced an award to the ETC of £3.6 million
over two years from the Invest to Save Budget for the EnglandNet
project. EnglandNet will provide a framework within which tourism
businesses will be able to exploit these benefits. Its aim is
to enable the public to access comprehensive and quality assured
holiday information via the Internet and other linked services.
In time, it will make possible holiday bookings on-line with a
wide range of different providers; and to enable tourism providers
to be linked together as a unified product, access business information
resources and take bookings on-line. Work is also under way to
link up Tourism Information Centres to an extranet funded with
a Capital Modernisation Fund grant of £900,000.
37. In terms of Britain as a whole, the Government has
a clear role in marketing British tourism overseas: tourism is
a composite product made up of many different services and it
is not cost effective for any one company to do this. The BTA
receives £35.5 million grant in aid a year to promote Britain
using advertising, marketing and direct mail, press and public
relations, new media and public information services and to provide
market intelligence and advice to the tourism trade. It also runs
the Britain Visitor Centre in London for overseas visitors. The
BTA works closely with commercial partners overseas, often running
joint campaigns, through which its raises an average of £14-16
million non-government funding every year.
38. The BTA also has an important role to play in providing
a route to market for the many SMEs and micro-businesses in the
tourism industry, who do not have the resources to market themselves
overseas. The Million Visitor Campaign website, for example,
included 2,600 special offers from tourism businesses throughout
Britain.
24 October 2002
| 
