Memorandum submitted by the Wales Tourist
Board
The attached provides a detailed response to
the key areas of interest which have been identified by the Committee.
In more general terms, however, the Wales Tourist
Board, exercising its statutory duty to advise Government on issues
which have a bearing on tourism in Wales, makes the following
points:
— Government at central, devolved and
local level should acknowledge the fact that tourism is now the
largest industry in the world and that if Britain and its constituent
countries are to compete in a world market then our marketing,
product development, research, service levels and price competitiveness
all have to improve at a faster rate than that of the competition.
The fact that Britain has been displaced by China from the 5th
position in the international arrivals tables clearly indicates
that this is not happening.
— Whilst Government is striving to
develop the best economic climate in which the private sector
tourism businesses can prosper, the private sector without considerable
government support, will never deliver the required infrastructure
without which tourism cannot prosper and grow.
— Britain needs an integrated public
and private sector transport system to rival the world's best.
— Britain needs a network of regional
airports which will at the same time reduce the overcrowding in
the South East and spread the economic benefits of tourism and
business in general throughout Britain. Low cost airlines have
clearly shown that lesser known destinations can be opened up
in this way.
— The Wales Tourist Board, as chair
of the recently formed alliance Tourism UK hosted the first UK
Tourism Summit at the Celtic Manor Resort on the 7 and 8 October.
Delegates included the Chairs of the Tourist Boards for Wales,
Scotland, England and the British Tourist Authority. They were
joined by ten senior representatives of the tourism industry in
Britain and Europe. Specialist insight was provided by Henley
Forecasting, Deloitte & Touche and Stevens Associates. The
summit will produce a 10 point five-year requirement which will
be presented shortly to central and devolved governments.
INQUIRY INTO TOURISM AFTER SEPTEMBER 11
1. INTRODUCTION
1.1 The inquiry seeks to examine the current
state of the British tourism industry and current government policy
towards the sector, including the administration and supportive
infrastructure and any relevant initiatives or proposals for change.
1.2 The Wales Tourist Board (WTB) was established
under the Development of Tourism Act 1969 which gave WTB statutory
responsibility:
— to encourage people to visit Wales
and people living in Wales to holiday there;
— to encourage the provision and improvement
of tourist amenities and facilities in Wales.
The Tourism (Overseas Promotion) (Wales) Act
1992 subsequently gave WTB increased independence to market Wales
overseas.
1.3 WTB is an Assembly-Sponsored Public
Body which is funded primarily by direct grant in aid from the
Welsh Assembly Government. WTB's grant in aid budget provision
for 2002-03 is £22.648 million. WTB also seeks to maximise
income from other sources, including the European Union and the
private sector to fund an extended range of activities on behalf
of the tourism industry in Wales. WTB's total budget provision
for 2002-03 from all sources is £39.038 million.
1.4 WTB's activities seek, wherever possible,
to address and overcome the existence of market failure. WTB intervenes
on behalf of the Welsh Assembly Government where there is a clear
need to do so and where its intervention will generate net economic
gains for Wales. The overall strategic aim of WTB is to improve
the economic and social prosperity of Wales through the effective
marketing and development of tourism. The strategic growth target
for tourism in Wales is to achieve an annual increase of 6% in
total tourism spending. We acknowledge the need for growth in
tourism to be achieved in a sustainable way so that it benefits
our environment, culture and way of life.
1.5 WTB's evidence to the inquiry will be
based on the key areas of interest which have been identified
by the Committee.
2. CURRENT AND
LIKELY FUTURE
PERFORMANCE OF
THE TOURISM
INDUSTRY FOLLOWING
FOOT AND
MOUTH DISEASE
AND THE
EVENTS ON
SEPTEMBER 11
The importance of Tourism
2.1 Tourism is an important component of
the Welsh economy. In recent years, annual spending from overnight
and day visits has been in excess of £2.6 billion, which
is equivalent to approximately 7% of Welsh GDP. In coastal and
rural areas the relative contribution of tourism to the economy
is even greater.
TABLE 1:
THE VALUE
OF TOURISM
TO WALES
| 2000
| 2001 |
| £m | %
| £m | % |
| UK tourism spend | 1,654 |
61 | 1,664 | 62
|
| Overseas tourism spend | 267
| 10 | 248 | 9
|
| Day visitor spend1 | 775 |
29 | 775 | 29 |
| Total | 2,696 | 100
| 2,687 | 100 |
1 Based on 1998 UK Day Visits Survey.
Impact of Foot and Mouth/September 11 on Tourism in Wales
2.2 Forecasts for tourism performance in Wales during
2001 were suggesting only subdued growth even in advance of the
outbreak of FMD. A number of external factors were viewed as constraints
to growth including the strength of the pound against the euro
which was expected to dampen growth from European markets and
the strengthening dollar against the euro which meant that Europe
represented better value than the UK to the important US market.
The relative strength of the pound was also expected to increase
the propensity for UK residents to holiday overseas rather than
in the UK. There were also clear signs that the US economy was
slowing down and growth in consumer spending throughout Europe
remained sluggish.
Overseas tourism
Despite the existence of constraining external factors, the
British Tourist Authority (BTA) were forecasting, before the outbreak
of FMD, that spending by overseas visitors would rise by around
2% in Britain during 2001 from £12.8 million to just over
£13 million. Spending by overseas visitors to Wales represents
approximately 14% of total spending by all overnight visitors
to Wales. At the UK level, the overseas share is closer to 33%.
As Wales attracts only 2% of all overseas tourism spending to
the UK there was an expectation that Wales would match the 2%
growth forecast for the UK overall in 2001.
Domestic tourism
Demand from Wales' core domestic market was not forecast
to grow significantly during 2001. The major structural change
in recent years has been the growth of short break holidays in
Wales and a steady decline in the traditional peak season long
holiday market. Against the backdrop of a strong pound and static
consumer spending, these general trends were forecast to continue
in 2001. Domestic tourism spending to Wales was expected to match
the general inflation rate and at best grow by 3% in 2001.
Actual against expected performance in 2001
2.3 Immediately following the outbreak of FMD in late
February 2001, there was an immediate impact on tourism performance
in Wales with significantly lower levels of tourism spending reported,
particularly in rural areas. WTB consulted widely with the industry
to understand their immediate problems and to identify the appropriate
measures that needed to be put in place to help the rural economy
recover. With the support of additional resources from the Welsh
Assembly Government, WTB put in place a range of support activities
which were designed to combat the effect of FMD in Wales. In total,
WTB were able to allocate £4.5 million of additional funding
during 2001-02 to support the tourism industry and overall, tourism
performance in Wales showed clear signs of recovery by the summer
of 2001, although there was evidence to suggest a switching of
demand from rural to urban and coastal areas. The events of September
11 had a significant short term impact on tourism demand for Wales
and prolonged uncertainty particularly among potential visitors
from the USA which gave rise to a more lasting impact.
TABLE 2: ACTUAL
AGAINST EXPECTED
PERFORMANCE 2001
| Expected | Actual
| Estimated loss |
| £m | £m
| £m |
| UK tourism spend | 1,703 |
1,664 | 39 |
| Overseas tourism spend | 272
| 248 | 24 |
| Total | 1,975 | 1,912
| 63 |
2.4 It is difficult to draw any definitive conclusions
about the impact of FMD and September 11 on tourism in Wales in
2001. When the actual performance of overnight tourism is compared
with the anticipated performance based on 2 to 3% growth rates,
it is reasonable to suggest that overnight tourism to Wales decreased
by £63 million in value terms. Estimating the impact on tourism
day visits is more problematic. The most recent national UK survey
measuring day visits was conducted in 1998 and in the absence
of any more rigorous yardstick it is only possible to attempt
an informed estimate. On the basis that the 1998 survey reported
that one quarter of all tourism day visits took place in the countryside
and resulted in approximately £135 million in visitor spending,
it is reasonable to suggest that the effect of FMD, in particular,
would have reduced spending significantly. We estimate that tourism
day visitor spending in Wales during 2001 would have decreased
by between 50-75% on the levels reported in 1998. This would be
equivalent to a loss in spending of between £67-£100
million. Total losses, therefore, for overnight and day visit
spending in 2001 as a result of the combined effects of FMD and
September 11 are estimated at between £130-£163 million.
Performance in 2002
2.5 There is good evidence to indicate that tourism in
Wales has recovered well in the first half of 2002. Domestic (UK)
tourism spending between January and June inclusive has increased
by 12% compared with the previous year. More pertinently perhaps,
spending performance in 2002 during January-June still lags behind
the first six months of 2000 by 4% or £32 million. On the
basis of previous experience, WTB expected the domestic (UK) market
to show earlier signs of recovery. As a consequence, WTB concentrated
its efforts on targeting the UK market in the aftermath of FMD
and September 11.
2.6 It is not possible to estimate the performance of
overseas tourism in Wales during 2002. Statistics available from
the International Passenger Survey indicates that, at the UK level,
expenditure from overseas visitors decreased by 2% from £6.56
billion to £6.4 billion during January-July 2002 compared
with the previous year—the period leading up to the events
of September 11. This decrease is even more marked when January-July
spending in 2002 is compared with the performance during the same
period in 2000-a 10% decrease at the UK level. The continued strength
of the pound and the extended effects of September 11 on international
travel is still taking its toll and there are clear signs that
consumer confidence remains a barrier to travel, particularly
in some key markets such as the USA. WTB has been a partner to
BTA's One Million Visitor campaign during 2002 but additional
funding from the Welsh Assembly Government has enabled WTB to
run its first ever "Wales only" overseas campaign. This
£5 million campaign focuses on key markets—Holland,
Belgium and the USA.
Outlook for 2002 and beyond
2.7 Recent research by WTB suggests that the tourism
industry is recovering well from the events of 2001 with current
and future business levels exceeding those achieved during 2001.
Over three quarters of businesses who participated in the late
August survey felt confident about the future. The most up-to-date
statistics, however, show that even in the less volatile domestic
market, spending levels have yet to return to those experienced
in 2000, pre-FMD and September 11. Although there are good signs
that tourism in Wales during 2002 will perform at or near the
levels achieved for 2000, we will not be able to make up for the
direct losses in tourism spending incurred over the period since
March 2001 and the indirect losses resulting form a consequential
slowing down in investment by tourism businesses.
3. THE ROLE
OF GOVERNMENT
IN PROMOTING/SUPPORTING
THE INDUSTRY
3.1 Despite the considerable benefits which tourism brings
to Wales, the industry on its own would not be able to secure
them. Government intervention is needed to enable the tourism
industry to achieve its full potential and to manage its environmental
and socio-cultural impacts. Tourism remains a fragmented industry,
made up of predominantly small-scale business units which are
economically vulnerable and do not have a strong or cohesive marketing
voice. WTB seeks to ensure that its activities compliment, support
and add value to those undertaken by individual businesses.
3.2 It is not the responsibility of WTB or any other
part of government to promote individual tourism businesses in
Wales. The proper role of the public sector is to provide an appropriate
strategic framework within which the tourism industry can effectively
market itself. WTB is best placed to lead the task of developing
a strong tourism brand for Wales as the tourism industry is not
a cohesive agent to undertake this essential task. The marketing
of destinations and products within Wales should be done as part
of an integrated marketing strategy which targets markets with
most growth potential for Wales: WTB provides the industry with
a strategic framework for co-ordinated action. The tourism industry
is constrained by imperfect information to identify the key growth
markets for the future. WTB's role is to undertake the necessary
market research to inform the industry of structural growth trends
in tourism and the requirements, opinions and motivations of the
customers of tomorrow.
3.3 The holiday product comprises a mix of different
components or experiences supplied independently by various providers.
The challenge facing the industry is to deliver the right mix
of components at the right time and in the right place to satisfy
the expectations and needs of the market. It is essential, therefore,
for the industry to adopt a customer-focused approach which understands
and responds to changing market needs. WTB's role, on behalf of
Government, is to supply tourism businesses with the necessary
information and advice to support wise investment in service standards
and product improvement. Financial constraints, however, limit
the ability of the private sector to invest regularly with confidence.
The provision of public sector intervention in the form of financial
assistance is justified on the grounds of market failure and seeks
to hasten quality improvements in the industry to meet current
and forecast consumer needs to improve Wales' competitive standing.
3.4 In summary, there is a strong and continued need
for Government to promote and support tourism. In order to enhance
its benefits and to minimise its adverse effects, central and
local government need to participate in tourism at all levels,
to support, guide and regulate tourism growth and development.
The principal areas where government intervention is justified
are outlined below:
— Strategic leadership: the tourism industry
is fragmented and made up of predominantly small-scale business
units which are economically vulnerable and do not have a strong
or cohesive marketing voice. Government has a key role in setting
a strategic direction for the industry. The strategic approach
is the most efficient way to identify the most effective responses
to the main issues which confront the tourism industry by identifying
priorities for co-ordinated action;
— Policy intervention: the Government must
ensure that the impact of its policies on the tourism industry
are positive and supportive to future success and prosperity.
Tourism activities are affected by the activities of many government
departments. It is vital that the interests of the industry are
taken into account when government policy decisions are being
prepared and implemented. There are particular areas of policy
which most obviously impact upon the performance of tourism:
— Planning policies need to be flexible and
made more straightforward so that they do not act as a constraint
to new tourism investment which can be shown to be sustainable
and able to attract new and growing markets;
— Transport policies need to support tourism
businesses by bringing them closer to potential markets. Good
and efficient road links, integrated public transport provision
and a high performing international airport serving Wales are
the basic requirements to help the tourism industry in Wales fulfil
its potential;
— Taxation policies need to be simple, fair
and equitable to encourage investment, entrepreneurship and enterprise.
Specifically, the current rate of VAT on tourism services in the
UK puts the industry at some price disadvantage compared with
its competitors in mainland Europe;
— Regional policies need to ensure that under-performing
areas of the UK are provided with supplementary support from Government
to assist better than average growth;
— Deregulation policies need to be implemented
to minimise the burden of bureaucracy on small businesses which
dominate the tourism industry;
— Employment policies need to support equal
opportunities and flexible working patterns in the tourism industry;
— Education policies need to produce a more
flexible, adoptable and highly qualified workforce.
— Market failure: Imperfections in the tourism
market lead to problems affecting both supply and demand. No individual
business can be sure how it will benefit from investment in marketing
as some of its spend may benefit others. The tourism industry,
therefore, tends to spend less on marketing than would be necessary
to achieve maximum benefits. The problem is compounded by the
fragmented nature of the industry which is predominantly made
up of small businesses. It is not straightforward for the industry
to work together in a co-ordinated way. The Government seeks to
address the problem of market failure through its sponsorship
of the national UK tourist boards who undertake a range of marketing,
development and related activities to support the achievements
of the industry and to maximise tourism's economic and social
benefits.
4. ARE GOVERNMENT
ARRANGEMENTS FOR
SUPPORTING, PROMOTING
AND REGULATING
THE INDUSTRY
ADEQUATE?
4.1 There are numerous areas of Government policy, as
noted previously, which impinge upon the performance of the industry
and more care is needed to ensure that the needs of tourism are
taken into account within the macro-economic and policy agenda
of Government. The shape of Government, the service it provides,
the structure of organisations in the public sector and relationships
with the private sector are constantly under review. The relationship
between Government and the governed will continue to evolve particularly
in response to the demands of information technology, devolution
and globalisation where the events in one part of the world may
typically effect prosperity in another. The tourism industry would
benefit from Government's continued acknowledgement of its growing
importance to the economy and would want this to be reflected
through the setting of an effective policy framework which supports
enterprise and investment. Government structures and responsibilities
for tourism have regularly changed through re-shuffles and reviews.
While accepting that the dynamic environment of tourism will rarely
lend itself to extensive periods of stability, in the light of
FMD and the events of September 11 it is perhaps even more important
for Government structures to be seen to have permanence and relevance
to support the activities of the tourism industry. In this context
the need for effective co-ordination between the industry and
all public sector bodies involved in the organisation of tourism
becomes even more important. For this to happen, roles and responsibilities
need to be clearly defined.
5. DO GOVERNMENT
ARRANGEMENTS FOR
SUPPORTING, PROMOTING
AND REGULATING
THE INDUSTRY
REFLECT THE
DEVOLUTION SETTLEMENT
APPROPRIATELY?
5.1 A new democratic voice for Wales has raised the expectations
of creating a stronger, vibrant and more diverse economy while
also developing a more distinctive national identity for Wales.
Tourism has an important role to play in securing future economic
growth for Wales and it will also help to shape a distinctive
and attractive national identity which is based more on reality
than myth.
5.2 The setting up of a devolved Welsh Assembly Government
has, in a relatively short space of time, resulted in a higher
profile for tourism and increased funding support. Devolution
also provided the impetus for the preparation of a national tourism
strategy for Wales "Achieving our Potential" which
seeks to set a framework for co-ordinated action through partnership
working. Organisational structures have also changed in response
to the industry's need to have a more inclusive involvement in
the marketing and development of tourism. WTB has, over the last
year, established four Regional Tourism Partnerships in Wales,
coterminous with the four economic fora areas. In the spirit of
supporting more localised partnership activity, WTB is developing
a greater degree of funding to the regional level to ensure that
a range of strategically based activities can be undertaken on
behalf of the industry. Each Regional Tourism Partnership has
an equal balance of public and private sector membership to ensure
an inclusive and transparent approach to the setting and implementation
of realistic strategic action plans.
5.3 Devolution has also led to a re-assessment of the
roles and responsibilities of the UK national Tourist Boards and
BTA. In September 2002, Tourism UK—a Federation for British
Tourism was launched, comprising the national tourist boards
of Wales, Scotland and England. The remit of this new partnership
body is to provide the UK government with a new strategic and
unified voice on the key political and economic issues facing
the UK. FMD, in particular, highlighted the need for a coherent
and collective voice to be in place for the UK tourism industry
to communicate effectively with various arms of Government. While
WTB acknowledges the fundamental need to continue to work closely
with the BTA in areas of mutual benefit in overseas marketing,
there will increasingly be rising expectations to promote Wales
as a specific tourism destination in its own right in certain
key overseas markets. In these instances the respective roles
and responsibilities of WTB and BTA will need to be reviewed and
amended to ensure that the message is unequivocally and distinctly
"Welsh".
6. DO CURRENT
ARRANGEMENTS FOR
SUPPORTING, PROMOTING
AND REGULATING
THE INDUSTRY
PROMOTE THE
QUALITY OF
PROVISION EFFECTIVELY?
6.1 The tourism industry in Wales is probably better
equipped, better trained and better managed than ever before.
As tourism becomes more competitive, however, it is even more
important to ensure that Wales is providing the right mix and
quality of facilities and service delivery to meet the needs of
the market. Improving quality at all levels of the industry is
a key to success. Every industry must adapt its product to meet
the needs and expectations of its existing and potential customers.
WTB has led the way in the introduction and administration of
quality grading schemes which are designed to give greater reassurance
to the consumer and improved standards of service through a system
of regular, independent inspections. These schemes are effective
and continue to evolve in response to consumer needs and tourism
industry advice. A good level of harmony now exists across the
UK in the application of these grading schemes to different sectors
of the industry.
6.2 WTB believes that the introduction of a statutory
registration scheme for tourist accommodation in Wales, backed
by independent inspection and at a charge which does not represent
a barrier to entry, will be in the long-term interests of tourism
in Wales. Such a scheme would make it compulsory for tourism accommodation
businesses to achieve minimum standards of quality and facilities
before they were able to operate commercially. WTB has recommended
the introduction of a statutory registration scheme to the Welsh
Assembly Government who will now consider WTB's detailed recommendations
in full.
7. DO CURRENT
ARRANGEMENTS FOR
SUPPORTING, PROMOTING
AND REGULATING
THE INDUSTRY
ENCOURAGE PRODUCTIVITY?
7.1 Productivity is not a term that has been easily applied
to the tourism industry. Many internal and external factors will
influence productivity within the industry and not all of these
factors will be under the control of Government. Many small tourism
businesses may have entered the industry for reasons of quality
of life and will not be driven by considerations of productivity
and growth. The industry, however, faces many competitive threats
and must seek to overcome them through investment in improving
quality, training and more effective marketing.
7.2 With only limited resources available from the public
sector to support the activities of the tourism industry, hard
choices will be inevitable. If the economic benefits of tourism
are to be maximised it follows that attention would be most profitably
concentrated on those professionally run tourism businesses who
have already achieved some success and who demonstrate a commitment
to improving their competitive position by achieving higher standards
of quality, service and value for money. Funding and business
advice, therefore, needs to be directed towards those businesses
which are most likely to benefit from such support.
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