House of Commons - Culture, Media and Sport

Select Committee on Culture, Media and Sport Fourth Report

SUPPORTING TOURISM

15. At present there is a complex array of tourism support providers within Britain. The 1969 Development of Tourism Act created the British Tourism Authority (BTA), with a primary duty of promoting Britain to overseas visitors, and the Scottish (now known as VisitScotland), Welsh (WTB), and English (ETB) Tourist Boards each of which had a primary duty of promoting their respective home nation in the domestic UK market. The Act lays down the responsibility of each Board for providing advice to government, conducting research, improving quality and standards, encouraging best practice and promoting tourism domestically and overseas. In 1998 responsibility for tourism was devolved following passage of the Scotland and Wales Acts so that VisitScotland and WTB are now wholly responsible to their respective executives for all aspects of tourism including overseas marketing. In 1999 the ETB was effectively replaced by the English Tourism Council (ETC) which was given responsibility for funding the regional Tourist Boards and the coordination of strategy but which is specifically excluded from marketing England either domestically or internationally. These functions are performed by the BTA. The BTA has also been designated a cross border authority for the purpose of marketing the devolved nations overseas. Within England, responsibility for tourism is further split, with Regional Development Agencies (RDAs), local authorities, Regional Tourist Boards (RTBs) and local tourist information centres all involved in helping tourists and promoting the industry in their areas.

Reasons why the Government supports tourism

16. The UK's greatest cultural assets are also its most attractive tourist magnets, and tourism, both domestic and international, is a major source of income for all our significant cultural institutions. One of the primary reasons for encouraging tourism is, far from utilitarian, developing a greater depth of appreciation and understanding of the UK's culture and heritage.

FRAGMENTATION OF THE SECTOR

17. The Government supports all major industries in Britain to increase their contribution to the economy. Tourism should be no different. Of the 127,800 tourism businesses, 77% are classified as small firms which were argued to require a larger amount of support to generate business and income.[22] This high proportion of small firms and the wide range of activities within the sector led many of our witnesses to describe the industry as fragmented or diffuse.[23]

18. The Country Land and Business Association were one of these identifying fragmentation as "the major problem" facing the tourism sector.[24] This fragmentation was shown as a weakness during the FMD outbreak. Little coordinated help available for the small rural businesses meant that many were unable to survive the crisis. The media exposure of these problems stirred the Government into action. Much of the industry felt that lack of effective representation to Government caused support to be tardy in arrival and not on the scale offered, for example, to the better organised farming sector.[25]

19. Many firms are too small to be able to afford actively to promote themselves overseas and even in the wider UK market. This means that many businesses are reliant on broader brands such as 'London', 'England' and 'UK / Britain' for marketing purposes.[26] Much of our written evidence, including that from three Southern England tourism representatives,[27] identified the link between Government support and intervention enabling the industry to act strategically and achieve success in attracting visitors.

ECONOMIC IMPORTANCE

20. As a creator of wealth and jobs for Britain the industry is of great importance to the economy. England's Regional Tourist Boards (RTBs) identified the industry's potential as a stimulus for the regeneration of urban and rural areas.[28] The ETC informed the Committee that the tax revenues the Government received from the industry are around £12.6 billion a year (compared to the total spend of £74 billion).[29]

21. This is probably the most compelling reason for the Government to support the industry. The Scottish Tourism Forum described the tourism industry as dominated by the value and contribution of the private sector, yet it is dependent upon government and public agencies to help deliver the customer to the product.[30] This illustrates the need for Government to support the sector in order to gain maximum returns to the economy of the UK.

FOOT AND MOUTH DISEASE/11 SEPTEMBER 2001

22. The crises of 2001 were a stimulus for Government assistance to the sector and raised awareness of the needs of tourism both within Government and amongst the public. These events adversely affected many areas of national life, but tourism was one of the worst hit economic activities both in Britain and throughout the world. Visitor numbers to this country fell by 9% on 2000 figures and spending decreased by 12% from 2000.[31]

23. According to the British Resorts Association, FMD seriously disrupted domestic tourism patterns and the terrorist attacks of 11 September had severe effects on the inbound tourist figures.[32] British Airways submitted evidence to us that after 11 September there was a decrease in premium air traffic by 15.7% and in non-premium travel by 11.4%. British Airways also had severely to reduce their workforce and cut 13,000 jobs due to the crisis.[33]The ETC research highlighted that "the impact of the September 11^th terrorist attacks had a disproportionate effect on London and the historic cities, while the Foot and Mouth Disease principally affected domestic rural tourism".[34]

24. The effects of the crises on the industry were seen by the Government and the media and significant steps were taken to support and promote it through this time of need. In March 2001 the Government provided £2.2 million for the implementation of the first stage of the BTA's recovery plan for inbound tourism, with another £3.8 million to the ETC for short-term recovery measures.[35]

25. The British Resorts Association highlighted the fact that the dual crises of 2001 raised political and public awareness of tourism much more effectively than many years of lobbying by the industry.[36] The increased funding and publicity greatly aided the sector and reduced the negative effects predicted. The Tourism Alliance, in the course of this inquiry, told us that, even after further help during 2001, "the real challenges for the sector now are further successful recovery and keeping tourism very high on the Government's agenda",[37] we endorse this view.

26. Another concern was raised by the Regional Development Agencies who told the Committee that "worryingly, the industry remains a fragile one despite the high profile accorded to it" during this time.[38] The exposure of all these weaknesses by the dual crises of 2001 succeeded in waking up the Government to the needs of the industry. The Department for Culture, Media and Sport is now trying to restructure the support for tourism.

27. Three tourism representatives from southern England also identified lack of a national tourism strategy for England as shown up through the FMD crisis.[39] When compared with the farming industry, which had one voice in the NFU (National Farmers Union) and was able to get its views across to Government, the tourist industry lacked effective representation. The farming industry "is estimated to receive £898 million (DEFRA) from the public purse in compensation for slaughter alone".[40] This compares with the £3.8 million received by the ETC when £35.5 million was requested, despite the relative contributions to GDP (2001) of 4.5% from tourism and 1% from agriculture.[41]

Current/previous arrangements and levels and sources of funding

ROLES OF GOVERNMENT AGENCIES

28. The English Tourism Council (ETC) was created in 1999 to replace the English Tourist Board (ETB) which had been established in 1969 under the Development of Tourism Act. The role of the ETC was to provide strategic advice on tourism policy for Government, carry out research, promote best practice, improve standards of quality and support the development and promotion of tourism throughout England. The ETC did not have any responsibility for marketing England as a destination in any form. The ETC received £11.6 million grantinaid in 2002-2003, of which £5.5 million was disbursed to the nine English Regional Tourist Boards (RTBs), who did have a marketing role.

29. The British Tourist Authority (BTA) was also created by the Development of Tourism Act 1969 with the prime responsibility for marketing Britain overseas as a tourist destination. When the BTA was established the boards for Scotland and Wales were responsible for promoting their nations domestically only. More recently, the Scottish and Welsh boards have worked with the BTA to promote their nations overseas in order to avoid duplication of effort. The BTA is receiving £35.5 million core grantinaid in 2002-2003 through DCMS.[42]

30. The Scottish Tourist Board (VisitScotland) received a core grant-in-aid from the Scottish Assembly for 2002-03 of £28 million of which, they told us, over 70% is invested in marketing and promotional activities. For every £1 spent on promotional activities about £12 is generated in return for the Scottish economy.[43] The Scottish Minister for Tourism informed the Committee, however, that there had been a decline in tourism figures for some years before 2001 and that it "does need to be seen against a continuing growth in international tourism and has happened despite significant increases in investment in Scottish tourism; the VisitScotland budget has more than doubled over the last decade".[44] 90% of visitors to Scotland were from UK domestic markets in 2001; 1.6 million visitors were from overseas and to improve this figure VisitScotland are working closely with the BTA.[45] The BTA discussed with us the use of their services by VisitScotland since devolution, with Scotland able to "choose their primary markets...and they can piggyback all our infrastructure and resources and focus all their marketing investment on adding value very specifically to Scotland".[46]

31. The strategic aim of Wales Tourist Board is to improve the economic and social prosperity of Wales through the effective marketing and development of tourism including the power and resources to give grants.[47] It is funded primarily by direct grantinaid from the National Assembly for Wales. For 200203 this grantinaid was £22.6 million. WTB also gained funding from the EU and the private sector (an added £16.4 million) giving a total budget of £39 million.[48] It claims to be more commercially driven than VisitScotland and the ETC, since tourism constitutes 7% of the Welsh GDP, more than for any other part of the UK.[49] This difference was highlighted by Mr Evans, Chairman of the WTB, who told the Committee that "probably the most important aspect of difference is that we do have grant-giving powers, so we do get very involved in the development of the tourism product as well".[50]

ACTIVITY OF REGIONAL DEVELOPMENT AGENCIES AND LOCAL AUTHORITIES (ROLE OF GREATER LONDON AUTHORITY)

32. Regional Development Agencies (RDAs) were set up in 1998 under the Regional Development Act.[51] Eight regional bodies were established (nine including London) to develop a strategic vision for each of the English regions.[52] The introduction of responsibilities for tourism for Regional Development Agencies within England was intended to give a regional perspective to tourism strategy and its support, with the aim of enabling the appropriate investment into tourism to be made depending on the importance of the industry to the economy of the region. Whether it has succeeded in doing so is a different matter.

33. The Greater London Authority is responsible for the support of tourism in London as part of the Greater London Authority Act 1999. The funding for this is provided by the Secretary of State for Culture, Media and Sport and in return the GLA is required to give advice to Ministers, the BTA and the ETC.[53] London is the only region to receive direct funding from DCMS. The Mayor has delegated most of the tourist functions to the London Development Agency (LDA) and the London Tourist Board.[54] A full strategic review of tourism in London is being carried out. Mr Winterbottom, Director of strategy implementation and project development, LDA, informed the Committee that "it will be finished by the end of April but we expect the first evidence of changes to take place before the end of January".[55]

THE PRIVATE SECTOR: TOURISM ALLIANCE AND SCOTTISH TOURISM FORUM

34. The Tourism Alliance was created at the suggestion of the Secretary of State in October 2001. Industry and Government came together to create "a more powerful voice to talk to DCMS",[56] tackling the need for the effective representation identified during the Foot and Mouth crisis. The Alliance represents "between 60 and 70 of the trade bodies"[57] within the industry, amounting to approximately 250,000 tourismrelated businesses in total.[58] It also seeks to identify and develop policies and strategies to increase standards within tourism. The Alliance's vision for the industry is the creation of 30,000 new jobs and increasing the sector's contribution to GDP to 6% of the total over the next five years. It feels that the Government has an essential role in enabling the sector to reach these targets.[59]

35. The Scottish Tourism Forum is the equivalent of the Tourism Alliance in England.[60] It represents operators and the private sector in tourism, including trade associations, companies, marketing groups and the many other bodies dependent upon tourism for income.[61] Their role is to represent the views of the Scottish industry to the Executive in a clear and coordinated manner. The coherent approach to tourism issues was evident to the Committee when questioning the Scottish Tourism Forum. Such an approach seemed to be lacking with the comparatively recently formed Tourism Alliance for English businesses.

Summary diagram[62]

Previous support structure and funding for British tourism2002/03
DCMS	British Tourist Authority (BTA)	£35.5million¹
	English Tourism Council (ETC) allocation channelled through regional tourist boards	£11.6 million £5.5 million
	Total	£47.1 million
Scottish Executive	VisitScotland	£28 million
NAW	Wales Tourist Board	£22.6 million²
Reform to support for tourism in England2003/04 (arrangements in Scotland and Wales remain the same)
DCMS: relaunched national organisation for tourism⁴	Promotion of Britain overseas	£35.5 million
	Domestic marketing in England, of which: allocation to be channelled through RDAs	£14.1 million³at least £3.6 million
	Total	£49.6 million

1.  BTA benefited from a further £13 million from private sector sources. In addition the DCMS Annual Report shows additional funding from the Treasury Reserve, of up to £19 million, available to take forward recovery following FMD and 9/11 (the Million Visitor Campaign), see Cm 5423, Vol. II, p19, Ev 21, paragraph 9, Ev 23, paragraph 24 and Ev 56, paragraph 37.
2.  WTB benefited from a further £16.4 million from EU and private sector sources.
3.  £2 million of this funding is dependent on completion of an implementation plan by February 2003.
4.  Efficiency savings of up to £3 million are expected from the new organisation.

Regional Development Agencies	Local Authorities
RDAs have spent about £14 million per year promoting and developing tourism as part of their overall economic responsibilities.	Local authorities spend about £114 million per year promoting their areas as tourist destinations to both domestic and overseas markets

Arguments for change

MARKETING ROLE FOR ENGLAND

36. A marketing function for England was called for almost unanimously in the evidence submitted to the inquiry. Some of these calls came from the ETC themselves, England's RDAs and RTBs, the British Resorts Association, the National Trust and the Business Tourism Partnership.[63] Marketing was made the responsibility of the RTBs in 1999 with the creation of the ETC, which is essentially responsible for the strategic elements of tourism without any promotional ability.[64] The previous Committee recommended the reinstatement of a marketing function as essential to an English national tourist body. The ETC argued that the Government should re-introduce domestic marketing at a national level in England and "resource the national body so that it can maximise value for money by leveraging private sector investment in jointly funding campaigns that convert the home market potential".[65]

FMD AND 11 SEPTEMBER 2001

37. The ETC estimate that the combined effects of the two 2001 crises "created a direct loss of £5 billion to UK tourism and a further loss of £3 billion in terms of opportunity cost".[66] During the FMD outbreak many tourism businesses, especially in rural areas, were severely affected and some were unable to survive the dramatic fall-off of business experienced during this period.[67]

38. The industry did not have one clearly identifiable representative to talk to Government, which many felt a hindrance when help to businesses was allocated. The previous Committee identified the lack of internet access available to many of the local tourist information centres, together with the lack of coherent and reliable information during the crisis and also afterwards quantifying the effect on the sector of some of the problems brought to the surface during the crises.[68]

39. The events of 11 September 2001 were described by the ETC as having "led to losses in the short-term ... harmed growth in the medium term". The tourism industry was not performing to its maximum potential and government support and investment "would provide an important boost to recovery"[69].

MARKET FAILURE

40. In such a fragmented industry Government support is essential. It is evident that Britain is failing in some areas to provide for the customer's diverse and changing desires/needs. The evidence received by the Committee in many cases highlighted the need for more information about customers, to be given to the industry on a regular basis, in a clear and digestible form. The Countryside Agency identifies "research, intelligence and monitoring functions" as a central task of the Government bodies supporting tourism.[70] The ETC identified to us that there is no 'VisitEngland' web site, arguing that e-tourism and the development of the EnglandNet[71] are a vital service because "If you are Hilton you can do it for yourself but if you are one of 128,000 small businesses, you actually need the tools so that you have something to link into".[72]

41. The Regional Development Agencies of England felt that "The current arrangements for supporting, promoting and regulating the industry are inadequate"[73]. The tourism industry in 2001had the largest balance of payments deficit ever of £13.6 billion.[74] More needs to be done on many fronts to ensure Britain keeps its place as one of the top ten destinations in the world. We set out in detail the areas that need action later in the report. The Secretary of State herself identified the sector as "characteristically fragmented, unmodernised, with a very low skills base, offering a highly variable product and without the benefit of modern technology in order to make it more consumer-friendly"[75] The evidence presented to the Committee indicates that at present the Government is not providing an adequate support structure for the tourist industry. The Tourism Alliance told us that "the Department takes too much of a laissez faire approach to tourism" and we agree.[76]

DEVOLUTION

42. Tourism is a wholly devolved issue and so the accountability of the WTB and VisitScotland now rests with the Parliament and Assembly. This has given a higher profile for tourism within Scotland and Wales and transformed promotion overseas of the individual countries.[77] British Airways felt that devolution led to a "disparate approach to tourism, with a number of separate bodies ... These fragmented organisations have separate funding and differing objectives", diluting resources and reducing return on investment.[78]

43. There are serious disparities in the funding received by the three tourist boards, with the WTB receiving a £22.6 million grant-in-aid from the Welsh Assembly for 2002-03[79], VisitScotland receiving a core grant-in-aid of £28 million for 2002-03[80] and the ETC receiving only £11.6 million for the same year of which less than half is passed onto the RTBs for marketing purposes.[81]The ETC commented to us that their funding per capita (24 pence per head of population compared to £8.1 in Wales and £5.5 in Scotland[82]) was "clearly not enough" and that funding throughout Britain was "completely out of whack".[83] Dr Kim Howells, Minister for Tourism, justified this disparity by arguing that the funding in England had no correlation to the numbers of visitors or spend. Of last year's spending by overseas visitors in GB "England accounted for £9.9 billion worth of it, Wales £250 million and Scotland £760 million".[84] He suggested that the disparity in funding is due to the need "to correct market failure".[85] When previously investigating tourism the Committee was stunned by the levels of funding available to single states within the USA; for example "the State of Virginia spends $1 million overseas from a tourism budget of $17 million, the State of Massachusetts spends $2 million on overseas marketing from a budget of $9.8 million".[86] We are concerned at the serious under-funding for tourism in England, and believe there is a need to make increased funding available, especially with the adoption of the additional marketing of England proposed for the new body.