House of Commons - Culture, Media and Sport

Select Committee on Culture, Media and Sport Eighth Report

3 TOURISM INDUSTRY OVERVIEW

17. The latest estimate by VisitBritain places the value of the tourism industry to the UK economy at £85.6 billion per year.[14] This figure breaks down as follows:

spending by inbound visitors from overseas, estimated at £16.0 billion;
fares paid to UK carriers by overseas residents, estimated at £2.9 billion;
spending by domestic residents on overnight domestic trips, estimated at £21.0 billion;
spending by domestic residents on tourism day visits, estimated at £44.8 billion;
imputed rent from second home ownership, estimated at £1.0 billion.[15]

18. However, the tourism industry is notoriously difficult to define and measure (as is discussed further in Chapter 5: Statistics). Indeed, the British Hospitality Association, using a more inclusive definition of the industry than that applied by DCMS, suggested that its real worth exceeds £100 billion per year.[16] This is precisely the target that DCMS is aiming to reach (using the DCMS definition) by 2010. This will require annual growth of over 4%, well beyond current and projected growth trends for the wider economy.[17]

19. In recent historical terms, the UK tourism industry grew on average by over £1 billion a year in real terms between 1998 and 2005.[18] This would appear to indicate a thriving industry, yet the evidence we heard was often to the contrary. In order to make an effective assessment, it is helpful to consider the two main types of tourism in turn: inbound tourism (tourists coming to the UK from overseas), and domestic tourism (those travelling within the UK).

INBOUND TOURISM

20. There has been significant growth in inbound tourism in recent years. Overseas visitor numbers increased from 25.7 million in 2004 to 32.7 million in 2006.[19] Meanwhile, inbound visitor spending increased from £13.0 billion in 2004, to £16.0 billion in 2006—an increase of 23.1%.[20] However, it is worth noting that this growth is a relatively recent phenomenon; inbound visitor numbers were reasonably static from 1997 to 2004, as shown in the table below:

Year	Inbound visitor numbers (millions)
1997	25.5
1998	25.7
1999	25.3
2000	25.2
2001	22.8
2002	24.2
2003	24.7
2004	25.7
2005	30.0
2006	32.7

Source: International Passenger Survey by the Office for National Statistics, quoted in the DCMS written submission to this inquiry.

21. Recently, the worldwide tourism industry has boomed.[21] Despite the UK's growth in 2005 and 2006, the UK has actually under-performed the average global growth rate in inbound tourism in the past decade.[22] Indeed, the UK's global market share of tourism receipts declined from 6.5% in 1980 to 3.8% in 2005. Retaining market share is becoming increasingly difficult, as VisitBritain explained:

22. There are signs that the period of growth that the UK has been experiencing is coming to an end. UKinbound reports a "poor summer for the industry" in 2007, while forward bookings made each month from August 2007 to February 2008 were down on the monthly figures for the previous year.[24] Its Chief Executive, Stephen Dowd, told us in January that he was expecting a "very difficult year" in 2008, due to the strength of the pound over the dollar curtailing the North American market, and the recent doubling of Air Passenger Duty.[25] He predicted that there would be 300,000 fewer visitors in 2008, representing a 4% drop from 2007.[26] In the longer term, it has been suggested that the picture will become no brighter. A World Travel & Tourism Council study has forecast that, over the next ten years, the UK tourism industry will be one of the worst performing in the world.[27] The study predicts that out of 174 countries, the UK will experience the 10th worst level of tourism revenue growth and a 20% decrease in global market share.

23. For every £1 spent in the UK by an overseas visitor, the British spend £2.17 overseas.[28] This helps to explain why the UK had a tourism balance of payments deficit for 2006 of £18.4 billion.[29] This has not always been the case. In 1979 Britain recorded a tourism surplus of more than £2 billion. Nor does this represent a consistent trend throughout Western Europe, where countries with a warmer climate appear to perform better. France and Spain enjoy significant tourism surpluses, whereas Germany has a deficit even larger than that of the UK.[30]

DOMESTIC TOURISM

24. Despite the concerns over the prospects for inbound tourism, it is important to note that it typically only accounts for 20% of the value of the industry in the UK.[31] The remaining 80% is accounted for by the domestic market. Almost all witnesses in the inquiry agreed that there has been little growth in domestic tourism in recent years. In fact, the Tourism Alliance went as far as to say "the story of domestic tourism over the [last ten years] is one of gradual decline".[32] This is partly due to the increasing propensity for the British to holiday abroad, with the growth in low cost flights identified as a significant factor.[33] Indeed, UK residents now come second only to the Swiss in taking foreign holidays.[34]

25. The nature of domestic tourism is also changing. Day visits are replacing traditional overnight breaks, and stays of longer than a few days are becoming increasingly rare. In fact, domestic day visits now constitute more than half of the total value of tourism.[35] As the British Resorts and Destination Association told us, the "single long, sharp summer holiday season[…]has been replaced by a much bigger, all year round, dynamic mix of local leisure taking, day trips, short breaks and first or second and subsequent holidays".[36] However, it is clear from the lack of growth in the domestic sector that this has had only a neutral effect on the UK industry.

REGIONAL AND SECTORAL VARIATION

26. The above discussion offers a very broad analysis of the situation. In reality, there are wide variations in how the industry is performing. For example, the large cities, in particular London, are enjoying strong tourism growth,[37] while many of the traditional seaside resorts are struggling to continue to attract visitors (this latter point is discussed in more detail in Chapter 4: Sea Change Fund).[38] Our inquiry found evidence of particular sectors of the industry that are also enjoying successful periods; budget hotels, farm tourism and the heritage sector are noteworthy examples. There are other examples, we are sure, but there are two particular success stories we wish to highlight: the devolved administrations of Scotland, Wales and London, and business tourism.

Devolved Administrations

27. There has been strong growth in Scotland, Wales and London, and the tourism agencies for these areas told the Committee that they were optimistic about future prospects.[39] Responsibility for tourism in Scotland, Wales and London is a devolved matter, a distinction not lost on VisitLondon. It told the Committee about the transformation of the city's tourism economy since the devolution of statutory responsibility for tourism to the London Development Agency (LDA) in 2000:

The Mayor's Office reports that since the devolution of responsibility to the LDA, resourcing for the industry has increased in order to adequately reflect the value of the sector to the London economy.[41]

Business Tourism

28. It cannot be said that all sectors of the UK tourism industry are under-achieving. For instance, the number of business trips to UK destinations has increased by 53% in the last decade.[42] International business visitors now contribute more than £4 billion to the British economy each year. Indeed, the business tourism sector generates 27% of all expenditure by overseas visitors, despite accounting for less than 5% of VisitBritain's international marketing budget. Moreover, 40% of business visitors subsequently return to the UK with their families as leisure visitors.[43] We heard about the growing success of the sector first hand when we visited the Riviera International Conference Centre during our visit to Torbay. The Centre estimates that it currently generates over £9 million for the local economy and it believes that there are "great opportunities for further growth".[44]

29. Business tourism is also expected to be one of the major beneficiaries of the London 2012 Games. DCMS's tourism strategy for 2012, Winning, states that:

To this end, the Business Tourism Partnership is calling for an international convention facility capable of holding 5,000 delegates to be built in Central London, in time for the 2012 Games.[46]

14 VisitBritain, http://www.tourismtrade.org.uk/MarketIntelligenceResearch/KeyTourismFacts.asp. Figures quoted for 2006 Back

15 VisitBritain, http://www.tourismtrade.org.uk/MarketIntelligenceResearch/KeyTourismFacts.asp. Figures quoted for 2006 Back

16 Q 288. The British Hospitality Association's definition includes "all catering activity", i.e. service and self-catering activity for the accommodation sector, all restaurant activity in terms of eating out of the home, food and beverage, pub activity, gambling and domestic air travel Back

17 Ev 198 Back

18 Ev 196 Back

19 http://www.tourismtrade.org.uk/MarketIntelligenceResearch/KeyTourismFacts.asp Back

20 http://www.tourismtrade.org.uk/MarketIntelligenceResearch/KeyTourismFacts.asp Back

21 Q 430 Back

22 Ev 52 Back

23 Q 430 Back

24 UKinbound press releases 12 December 2007 and 23 April 2008 Back

25 Q 357 Back