APPENDIX 18
Memorandum submitted jointly by South
West Tourism, South West Regional Assembly and the South West
of England Regional Development Agency
TOURISM IN THE SOUTH WEST OF ENGLAND: THE
OPPORTUNITY
1. INDUSTRY PERFORMANCE
1.1 Both the Foot and Mouth and September
11 crises, caused severe problems for tourism businesses in the
South West in relation to domestic and overseas visits. 2001 highlighted
many problems, which were inherent in the sector such as fragmentation,
a lack of strategic focus and limited management data. The crises
also showed the need and possible outcome of effective intervention
from the public sector.
1.2 However, despite the problems of 2001,
the UK Tourism Survey showed that the South West region recovered
strongly and quickly in the domestic market, ending the year 5.4
per cent up on tourism spend from UK visitors, when compared to
2000. National data shows that the region was the only one in
England to experience this sort of turnaround in the UK market.
In terms of international visitors, which accounts for approximately
11 per cent of tourism spend in the South West, the region was
unable to claw back lost business, experiencing a downturn of
some 22 per cent on 2000.
1.3 Despite the continued difficulties in
the overseas markets, 2001 can be viewed positively in the South
West. Intervention by the Regional Development Agency (RDA), working
through South West Tourism, enabled a strong recovery campaign
to take place. This capitalised on favourable market conditions
for UK tourism during the summer and autumn of 2001 and continued
the momentum into 2002. The region was also able to successfully
build on the profile generated by new investments such as the
Eden Project.
1.4 In 2002 bed occupancy for January to
July showed a five point increase over the levels for the same
period in both 2001 and 2000. Clearly an element of recovery is
in evidence again here and overall 2002 has been a strong year
for tourism in the South West. The year has been characterised
by a shift to earlier bookings and a strong performance in Spring.
Early indicators suggest that autumn 2002 will also perform well.
1.5 The challenge for South West Tourism
and the South West RDA is to ensure that the region is able to
compete effectively in the global marketplace. There remains much
to do in the areas of marketing, quality and customer service.
2. FACTORS LIKELY
TO AFFECT
THE FUTURE
PERFORMANCE OF
THE INDUSTRY
2.1 The Market
Increasing international competition
2.1.1 While tourism and travel continues
to grow worldwide, new tourism destinations are being created
almost every day (China is widely forecasted to be the world's
No. 1 destination by 2010). Traditionally popular destinations
such as Britain are finding it increasingly difficult to compete
within this fast-changing environment. According to recent research
from the British Tourist Authority, the UK is fifth in the world
rankings for tourism visits. However between 1995 and 2000 it
lost 1.1 per cent of its market share and is forecasted to be
sixth in the world by 2010. Clearly, such trends will have a fundamental
impact on businesses, which currently benefit from inbound and
domestic tourism.
2.1.2 Looking more short term, the strength
of the pound against the Euro and continuing international tensions
are very real concerns for inbound tourism. In view of the current
crisis in the Middle East, the prospect of a "post 9/11"
recovery for the inbound US market is very uncertain.
Increasing fragmentation of the marketplace
2.1.3 As in all consumer markets, customers
are becoming increasingly difficult to categorise and predict.
Traditional gender and socio-economic stereotypes are less relevant
then they used to be as consumers begin to behave more like individuals
rather than one in a crowd. This process of individualisation
is expected to continue and accelerate presenting real challenges
for businesses in terms of communicating effectively with customers
and providing what they want. The need for meaningful and accurate
information about customers has never been more important and
the successful businesses will be those that know their markets
and are flexible in delivering their product.
Growth in the use of Technology
2.1.4 The latest figures show that 45 per
cent of UK households now have access to the Internet and travel
is one of the best-selling on-line products. A huge opportunity
exists for those tourism businesses willing to embrace technology
as a marketing tool. Evidence from around the UK has shown that
some operators are now taking over half of their bookings on line
and making significant savings on their marketing costs. Yet within
England, it is estimated that at least 37 per cent of known tourism
businesses have no connection to the Internet or e-mail.
2.2 Structural
Big industry, small businesses
2.2.1 Tourism accounts for 10 per cent of
GDP in the South West and overall is Britain's fifth-largest industry
in employment terms. Yet unlike other sectors, tourism is dominated
by small businesses, which face severe competitive disadvantages
against larger operators, particularly prevalent in the outbound
market. The performance of the UK tourism industry will therefore
be affected by the level of support/intervention to enable it
to act strategically in terms of both product development and
marketing.
Fiscal issues
2.2.2 Over recent years there have been
increasing burdens on tourism businesses from the financial impact
of new/increased employment legislation such as the working time
directive, holiday pay and to a lesser extent the minimum wage.
These additional costs have been accepted as they make the industry
more attractive to new recruits. The more unacceptable additional
burden has come from major increases in business rates, through
revaluation based on the value of property rather than profitability,
coupled with significant rises in property related costs such
as insurance. All these additional costs are making a British
holiday less competitive than an overseas break especially given
the uneven playing field concerning the rate of VAT levied in
this country compared with our European competitors.
Transport/infrastructure
2.2.3 Tourism is an industry, which depends
on the speedy and easy movement of people to the region and within
it once they have arrived. In this context there are a number
of issues facing the industry which will be critical to its performance
including:
— The development of airports in London
and the regions.
— The performance of the rail network
as a realistic option for leisure travel.
— Car borne traffic management schemes
eg congestion charging.
— The efficiency of the road network.
2.2.4 All of these issues are critical to
tourism in England and it could be argued are at the current time
impinging on performance and competitiveness.
Skill shortages
2.2.5 Given that it is very difficult to
compete on price with our major competitors, our main competitive
advantage must be quality. But one major component of quality
is the skill level of those producing and delivering the product.
One aspect of the 2001 crisis was that many SMEs bore considerable
costs in maintaining their skilled workers in order to prevent
a decline in quality.
2.2.6 If the UK is to compete and grow major
initiatives are needed to assist, support and celebrate tourism
operators to introduce good recruitment, training and development
practices. Most of this burden should be borne by business but
assistance from government to pump prime good practice is needed.
Government action is also needed to modernise training within
the sector to increase the quantity and quality of training as
well as a high profile careers initiative to make tourism a first
choice option.
The Quality Challenge
2.2.7 Customer expectations continue to
rise as more people experience greater levels of service and facilities,
often in other parts of the world. Within the UK there are outstanding
examples of quality in terms of cuisine, accommodation, tourist
attractions and customer service. As an industry our challenge
is to continuously improve and raise quality where necessary.
2.3 Support issues
Lack of national tourism marketing strategy and integrated
plans
2.3.1 The Foot and Mouth crisis demonstrated
the need for a national tourism marketing strategy for England.
It is clear that while regional and sub-regional strategies are
partially delivering for tourism, opportunities are being missed
at the national level, thereby limiting the competitiveness of
the industry in England.
Introduction and potential role of RDAs
2.3.2 The introduction of the RDAs presents
a real opportunity to improve the support and intervention mechanisms
for tourism. RDAs are likely to impact on tourism businesses through
business support programmes, skills development, ICT, competitiveness
development and support for regional tourism bodies including
Regional Tourist Boards (RTBs). However it should be noted that
the importance of support for the tourism sector varies from region
to region in line with RDA economic priorities.
3. THE ECONOMIC
CASE FOR
GOVERNMENT INTERVENTION
3.1 Tourism is a key economic driver across
England. In many areas it has been used as a tool for rural and
urban economic regeneration. This is because tourism benefits
percolate throughout the UK economy. In rural communities, towns
and large cities tourism is present supporting not only direct
providers but also a whole raft of suppliers and services. The
Foot and Mouth crisis very clearly demonstrated the extent to
which tourism permeates the economy by the economic draught felt
by so many seemingly unconnected businesses.
3.2 A prosperous industry means a net benefit
to the Treasury in terms of direct and indirect taxation. Recent
estimates suggest that 25 per cent of the revenue generated by
tourism is returned to central government in one form or another.
3.3 Faced with increasing competition, England
now faces a significant balance of payments deficit for tourism.
Spending on travel has increased dramatically in the last ten
years but English tourism has not kept pace with this growth.
The balance of payments (ie spending in England minus spending
by English tourists overseas) has moved from a £3.2 billion
credit in 1990 to a £13.2 billion deficit by 2001.
3.4 Growth in overseas holiday taking is
largely inevitable and a consequence of a more mobile, travel
literate and better off population. However, it is clear that
positive intervention could strengthen England's performance and
help to reduce the deficit.
3.5 There is strong evidence that carefully
targeted and effectively implemented intervention can have dramatic
results. During 2001, the South West of England benefited from
an additional £1million of RDA funds for tourism marketing.
Evaluation shows that for every £1 invested, £34 was
generated in tourism spend, £7 of which went straight back
to the Treasury.
3.6 England's competitors benefit from significant
public funding which is used effectively to win market share.
A number of competitive European destinations such as Ireland,
France and Spain are able to marshal greater resources in the
marketplace in the battle for increased visitors. While money
is not the only answer in terms of marketing, there is little
doubt that when invested in a strong campaign it provides a competitive
advantage.
4. HOW SHOULD
GOVERNMENT INTERVENE?
4.1 The public sector should establish clear
criteria for when intervention becomes appropriate. The premise
for intervention is essentially market failure—ie a fragmented,
disparate industry unable to act strategically to improve its
overall performance. Therefore intervention should be closely
aimed at redressing that failure by adding true value to the industry
and showing meaningful additional economic benefits. Some suggestions
could include:
— Investment in the "public product"
eg infrastructure.
— Research and intelligence, in particular
the provision of robust data.
— Development of effective ICT networks
as demonstrated by the Englandnet project.
— Tourist Information Centres.
— Brand development and marketing to
attract new business.
4.2 Government can take a leading role in
ensuring that the mechanisms for tourism support, many of which
are partially publicly funded, are effectively organised to clearly
establish complementary roles and objectives. A lack of national
leadership in this area has resulted the development of structures
without a strategic framework, other than that offered by the
Development of Tourism Act of 1969. The world has changed a lot
since 1969 and there are now many "public" players in
tourism with differing agendas.
4.3 This lack of co-ordination has resulted
in duplication of effort (one destination can be promoted by up
to five organisations), wasteage and missed opportunities. Therefore,
alongside greater intervention the authors of this paper strongly
advocate that tourism structures are modernised to ensure resources
are spent effectively.
4.4 The RDAs are now key in terms of tourism
support. RDAs should take the strategic lead on tourism within
a regional context, using the expertise of RTBs to deliver agreed
programmes. This will enable a responsive, industry focused support
mechanism working within the strategic framework provided by the
Regional Economic Strategy.
5. HOW CAN
WE IMPROVE
THE CURRENT
ARRANGEMENTS?
— Greater profile for tourism within
government (with clear performance and economic targets) to reflect
its economic importance to the UK.
— Establishing a clear support structure
for the industry. Organise the resources of local authorities,
RTBs, RDAs and national bodies more effectively. Establish clear
functional roles at each level thereby eliminating duplication
and wastage.
— Increased funding for the marketing
of England and its regions in parallel with the above.
— Build on the methods used to collect
data on the industry to provide a clearer picture of performance
and market forecasts.
— Expand the quality agenda to include
programmes for continuous improvement coupled with national promotion
of the harmonised schemes which will increase participation.
6. SOUTH WEST
TOURISM/SOUTH
WEST RDA PARTNERSHIP—A
REGIONAL MODEL
6.1 Over the last 12 months, the South West
RDA and South West Tourism have developed a close working relationship
on strategic issues which are now beginning to deliver for the
industry of the region. Both organisations are committed to working
with the industry, local authorities and emerging sub-regional
partnerships and have engaged all of these organisations in decision
making across a range of tourism issues including:
— A comprehensive Foot and Mouth Recovery
campaign.
— The development of a regional marketing
campaign and branding strategy, which is due to be rolled out
this autumn.
— The employment of a regional tourism
co-ordinator working for both organisations.
— A Ten Year Strategy for Tourism which
will guide future investment priorities and look closely at the
organisation of tourism support within the region.
— Market Intelligence and Research.
— Joint working at national level.
6.2 The RDA also has put forward two members
to sit on the board of South West Tourism which will foster a
closer working relationship in the future.
6.3 While the RDA and SWT are the key agencies
in the south west involved in supporting and promoting tourism
in the region, they and the Regional Assembly believe that more
effective co-ordination across a number of other support agencies,
including LSCs and the SBS is required to ensure the needs of
tourism businesses are met. Tourism is an important business sector
in the south west contributing significantly to the local economy
in many parts of the region. It has the potential to assist the
achievement of regeneration objectives for the region's coastal
and rural areas and can support the development and growth of
locally important cultural facilities and events. Any support
measures developed should reflect this regeneration role. The
co-ordination of support for tourism, must take place within the
context of co-ordinated strategic policy, which recognises fully
the role and impact of tourism and the need to assist the industry
to develop sustainably.
7. CONCLUSION
7.1 Tourism is a key industry for the UK
and a major generator of wealth. In line with its competitors,
the industry needs greater government intervention to overcome
the many of the structural and demand problems, which surfaced
during the Foot and Mouth and September 11 crises. The national
review of tourism and the establishment of the RDAs offer real
opportunities to bring a strategic framework to the industry.
2 October 2002
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