Memorandum submitted by the Tourism Alliance
EXECUTIVE SUMMARY
The Tourism Alliance was established in 2001
as the voice of the UK tourism industry. It comprises 49 Tourism
Industry Associations that together represent some 200,000 business
of all sizes throughout the UK. The Tourism Alliance's mandate
is to work with government on issues relevant to the growth and
development of tourism and its contribution to the economy. It
is therefore responding to this inquiry in that capacity.
The UK has under-performed the average world
growth rate in inbound tourism over the last 10 years and the
story of domestic tourism over the same period is one of gradual
decline. Further, the WTTC predicts that over the next 10 years
the UK tourism industry will be one of the worst performing in
the world.
Much of the reason for this is due to a decline
in the competitive position of the UK tourism industry in the
international market due to the increased fiscal and regulatory
burden and under-investment by DCMS. This decline in competitiveness
is graphically illustrated by the ballooning of the tourism deficit
from £4 billion to £18 billion in the space of just
10 years.
We are, therefore, at a crucial stage where
the decisions that the Government makes this year will define
the future of the industry. The development and implementation
of the 2012 tourism strategy, the outcome of the 2007 Comprehensive
Spending Review and the Government's response to the challenge
of climate change will determine whether the tourism industry
will grow and deliver social and economic benefits for the UK
or whether it will stagnate.
The industry requires just two things from DCMS—to
resolve the market failure problem by providing adequate funding
for the UK to compete in the global tourism market and to work
with other Departments to help ensure that new legislation does
not adversely affect the industry. Unfortunately, over the last
10 years, it has not committed the necessary resources to achieve
either of these requirements.
It is therefore imperative that DCMS takes tourism
seriously.
CHALLENGES AND
OPPORTUNITIES
1. In 2006, total UK tourism expenditure
was £85 billion: £17 billion from inbound, £24
billion from inbound tourism, and £44 billion from day-trips.
2. Over the last two years, inbound tourism
has increased by around 8% per annum. However, these gains mask
the sector's longer-term underperformance. As can be seen in the
following graph, if the UK's growth in inbound tourism had matched
the global average over the past 10 years, there would now be
5.7 million more overseas visitors to the UK. These visitors would
have generated £3.2 billion a year more for the UK economy
and 75,000 additional jobs.
3. UKTS figures suggest that domestic tourism
expenditure decreased by around 5% during 2006. The long-term
trend is slow decline. As domestic tourism accounts for £24
billion of tourism expenditure, this is of considerable concern.
4. Day visitor expenditure has increased
significantly over the past 10 years. This, along with the sharp
rise in the tourism deficit over the last 10 years, suggests that
people are substituting overseas travel and domestic daytrips
for domestic holidays.
5. The poor long-term performance of UK
tourism was substantiated by WTTC's 2006 study of 174 countries,
undertaken by Oxford Economic Forecasting. This predicted that,
over the next 10 years, UK tourism would:
— Experience the 10th worst level of
tourism revenue growth.
— Experience a 20% decrease in global
market share, making it the 13th worst performing country for
tourism's contribution to GDP growth.
— Experience 0.1% fall in tourism employment,
making it the 6th worst country for tourism employment growth.
6. The Tourism Alliance believes that there
are opportunities to offset these predictions. The 2012 Olympics
provide an opportunity to showcase the UK on the global stage,
there is significant growth in a number of important emerging
markets (eg, India, China, Russia and the accession states) and
UK tourism products and services continue to increase in number
and quality.
7. However, realising the full potential
of these opportunities will require improvement on all levels,
from the industry through to the Government.
EFFECTIVENESS OF
DCMS AND VISITBRITAIN
IN SUPPORTING
THE INDUSTRY
a. DCMS
8. Tourism is the UK's seventh largest industry,
generates £17 billion per annum in export earnings and employs
some 2.1 million people. Yet despite the size and value of the
industry to the UK economy, DCMS allocates just 18 staff (2.9%
of the total) to tourism—none of whom is an economist. This
obviously limits the effectiveness of DCMS in supporting the industry.
9. The UK tourism industry requires DCMS
to ensure that the policies and initiatives of the UK, EU and
other Governments do not adversely impact on the international
competitiveness of the UK sector. But too often DCMS is not involved
or consulted at all, or only as an afterthought.
10. This is particularly concerning as some
80% of tourism businesses are SMEs. Changes in the regulatory
regime distract their attention from customer service innovation
and productivity.
11. Despite undertakings from Government
for smarter regulation and better partnerships between enforcement
officers and industry, tourism businesses perceive an increasing
regulatory burden and hardening attitudes from enforcement officers.
12. The priority for DCMS in meeting its
productivity targets should be to remove or reduce the regulatory
barriers to business development through representing tourism
effectively across Government in the UK and internationally.
13. DCMS can be successful in this role
on occasion. In 2005-06 DCMS was crucial in modifying the ODPM's
planning guidance for tourism to facilitate appropriate, sustainable
development and the adaptation of existing building stock to meet
a changing market.
14. DCMS's priority should, therefore, be
to ensure the particular needs of tourism SMEs are taken into
account in the development and review of legislation introduced
by other agencies to achieve a regulatory climate that fosters
tourism growth. Specifically, DCMS should aim to:
— reduce the time taken by tourism
business to complete regulatory requirements (for SMEs this is
an average 6% of the time available);
— reduce the costs of advisers required
to interpret regulatory requirements (for SMEs this is an average
4% of turnover);
— improve the timeliness and quality
of guidance published by Government to assist tourism business
in regulatory compliance;
— provide resources and tourism sector
training to enforcement officers.
15. DCMS should champion a policy that ensures
that all Governmental travel uses only accommodation that is part
of the Quality Assurance Scheme. This would help considerably
to improve the standard of UK accommodation.
b. VisitBritain
16. VisitBritain continues to market the
UK and England cost-effectively and efficiently. It has the confidence
and support of the industry and its ability through winning international
awards for its campaigns, websites and effectiveness. A 2004 National
Audit Office report verified that VisitBritain produces over £1
billion in additional spend for the UK economy each year despite
a reduction in funding in real terms.
17. In real terms, VisitBritain's funding
for overseas marketing has been cut by 22% since 1997. Given the
revenue generated by tourism, this is inexplicable and unacceptable.
STRUCTURE AND
FUNDING OF
SPONSORED BODIES
18. Over the past eight years the Government
has produced two tourism strategies ("Tomorrow's Tourism"
and "Tomorrow's Tourism Today") and restructured the
national tourist board twice in the aim of raising the value of
tourism to the UK economy to £100 billion by 2010.
19. However, this target will probably not
be reached as total tourism receipts have only increased by about
£11 billion from £74 billion to £85 billion over
the last seven years. There are three main reasons for this underperformance:
1. There is no co-ordination of the devolved
tourism responsibilities of the nations and regions of Britain.
2. The strategies do not address key challenges
faced by the tourism industry.
3. The resources to implementing the strategies
have been inadequate.
a. Devolution
20. The devolution of responsibility for
tourism to the Scottish Parliament and the Welsh assembly, followed
by the devolution of regional responsibility for tourism in England
to the RDAs has changed tourism in the UK. The logical structure
of the Development of Tourism Act 1969 has been replaced by an
overlapping structure.
21. The two restructurings of BTA and the
English Tourist Board have been ineffective. There is no requirement
made for RDAs and RDPs to work with VisitBritain on national programmes
and initiatives. Because VisitBritain is inadequately funded for
both domestic and international marketing, there is no real economic
incentive for the regions and nations to work with VisitBritain
on national and international campaigns.
b. Tourism Strategies not Reflective of Industry
Need
22. The tourism industry relies on Government
for just two things—solving the market failure aspect of
gathering funds for marketing and providing a fiscal and regulatory
environment in which the industry is internationally competitive.
23. Successive tourism strategies have failed
to address these issues. DCMS's core responsibilities are to provide
social and cultural benefits, but tourism is a business activity
and strategies for its growth require strong economic analysis
and industry development skills that DCMS does not have.
c. Lack of Funding
24. Funding for the overseas marketing of
Britain has been frozen at £35.5 million since 1997 and funding
for the marketing of England stands at only £12.4 million.
This is in stark contrast to the large increases in funding over
the same period in Scotland, Wales and Ireland.
25. DCMS claims that over £300 million
of Government funding is spent on tourism. But this includes funding
allocated by the National Parliaments of Scotland Wales and Ireland
to their National Boards, DTI funding that RDAs allocate to tourism
and Local Authority expenditure. In fact, DCMS is now the second
lowest funder of tourism in the UK.
26. VisitBritain's international marketing
budget is now paltry in global terms. It is rivalled by the marketing
budgets of some Caribbean islands, is only the 26th largest NTB
budget in America (our most important market) and is less than
half the £72 million that Tourism Australia spent on just
one campaign.
27. It hardly surprising, therefore, that
the average length-of-stay, the average spend per trip and Britain's
share of the global tourism market have all declined markedly
over the last 10 years, while the tourism deficit has risen from
£4.7 billion to £18.0 billion per annum.
28. DCMS has asked VisitBritain to indicate
where it would cut up to 7% from its present budget as part of
the 2007 Comprehensive Spending Review. Any cut in funding will
apply from 2008-09 through to 2010-11, making it almost impossible
for VisitBritain to maintain routine overseas marketing activity
in the lead-up to the 2012 Olympic Games, let alone undertake
the additional marketing activity required to achieve the Government's
target of generating £1.6 billion in tourism revenue as a
result of staging the Games. This is perverse in the extreme.
29. Tourism has been the poor relation among
DCMS responsibilities over the last nine years. While total DCMS
funding has increasing by 61% over this period, VisitBritain has
fared the worst of all DCMS sponsored bodies with only a 9% increase
in its funding. Sport England and the Arts Council have had funding
increases of, respectively, 114% and 111% over the same period
and DCMS's own costs have increased by 133%.
30. If VisitBritain's funding is cut by
7% and inflation averages 3% over the next four years, by the
time of the London Olympics, their budget will have declined almost
45% in real terms. To do this to a body that generates over £1
billion a year for the UK economy lacks sense. To do it to a successful
international marketing body in the lead-up to the Olympic Games
is simply madness.
31. The Tourism Alliance would like to see
a fundamental review of the Development of Tourism Act 1969 to:
1. Establish a coherent structure for tourism
marketing and support.
2. Examine how (with private and public sector
involvement) to deliver authoritative leadership for tourism in
England and Britain.
3. Explore models for tourism investment
and the level of investment required.
4. Determine the correct location of tourism
support functions such as statistics and research, quality standards
and product development, and resources required for these functions.
5. Determine where in Government tourism
policy making and sponsorship should sit.
EFFECT OF
THE TAX
REGIME UPON
THE INDUSTRY'S
COMPETITIVENESS
32. A 2002 study by WTTC indicated that
visitors to the UK paid the second highest amount of tax in the
world. Since then, there have been further increases in tax and
charges. These include the cost of visas increasing by between
37% and 140% in 2005, a £15 out-sourcing charge being applied
to visas in 2006 and air passenger duty doubling in 2007.
33. The tax burden on visitors has now reached
a level where it is adversely affecting the UK travel industry's
ability to compete in the international market. For example, it
now costs a family of four from India £420 in Government
charges just to get on a plane to the UK.
34. A recent study by the Council for Travel
and Transport found that the amount of tax and fees paid by European
visitors to the UK is now 65% higher than the average level of
tax and fees they would pay to visit such key competitor destinations
as France, Spain, Italy, USA and Australia. For visitors from
long-haul destinations the amount of tax and fees imposed on visitors
to the UK is now 91% higher than the average of the other destinations.
For visitors from the 109 countries who need a visa to enter the
UK, the total cost of taxes and charges now stands at £207
per person.
35. This puts the UK at a considerable competitive
disadvantage. Over the last 10 years inbound visitor expenditure
has only increased by 15% to £14 billion.
36. A recent study by the Council for Travel
and Transport found that the amount of tax and fees paid by European
visitors to the UK is now 65% higher than the average of tax and
fees they would pay to visit key competitor destinations such
as France, Spain, Italy, USA and Australia. For visitors from
long-haul destinations the amount of tax and fees imposed on visitors
to the UK is now 91% higher than the average of the other destinations.
For visitors from 109 countries who need a visa to enter the UK,
the total cost of taxes and charges now stands at £207 per
person.
37. This puts the UK at a considerable competitive
disadvantage. Over the last 10 years inbound visitor expenditure
has only increased by 15% to £14 billion.
a. Impact of increased visa charges
38. The cost of a standard visa is now £63.
This is particularly unfavourable in comparison to a Schengen
visa which costs 60 euros and allows the visitor to enter 15 European
countries. Of particular concern is that the countries that require
visas include some of the worlds fastest growing source markets
(eg, India, China and Russia), which are worth over £1 billion
a year to the UK now.
39. The price sensitive nature of touism
is shown by the fact that when visa prices increased in 2005,
expenditure in the UK from visa markets fell by 11.1% while expenditure
from non-visa markets increased by 9.2%.
40. Such losses in visitor expenditure were
not experienced by key competitors. For example, spending by the
Chinese in Australia increased by 9.1% in 2005 and in Germany
by 18.6%.
|
| Visitor spend in the UK | 2004 (£m)
| 2005 (£m) |
% change |
|
| India | 238
| 226 | -5.0%
|
| Russia | 151
| 136 | -9.9%
|
| UAE | 179 |
160 | -10.6%
|
| China | 131
| 114 | -13.0%
|
| Saudi Arabia | 98
| 116 | +18.4%
|
| Thailand | 101
| 45 | -55.4%
|
| Taiwan | 45
| 41 | -8.9%
|
| Visa Requiring Countries | 943
| 838 | -11.1%
|
| Total World | 13,047
| 14,248 | +9.2%
|
|
41. The reason for the high cost of visas to the UK is
that UKvisas is required to be self-funding, including covering
the costs of compliance and enforcement . A better approach would
be to:
a. Reduce the cost of a standard visitor visa to bring
it in line with the cost of visas for competitor destinations.
b. Introduce a competitively priced "add-on"
UK visa for Schengen visa holders.
c. Introduce a cheaper short-term single entry visa to
reflect the duration of the majority of visits to the UK.
d. Fund compliance and enforcement costs from general
public expenditure as a matter of national security.
WHAT DATA
ON TOURISM
WOULD USEFULLY
INFORM GOVERNMENT
POLICY
42. Good quality data is essential for investment decisions
and to demonstrate the economic benefits that flow from tourism.
However, national tourism statistics (especially domestic and
day-visitor statistics) are inadequate.
43. The poor state of tourism statistics was highlighted
in 2005. National statistics on the impact of the London bombings
on domestic tourism were not available until January 2006 (six
months after the event) and statistics on the impact on day visits
(which constitute about 40% of total tourism expenditure) are
still not available in 2007.
44. We consider this unacceptable. In 2004, DCMS published
the Allnutt report, which found numerous gaps in Britain's national
tourist statistics. These included a lack of:
— Reliable lists of accommodation providers and
tourism businesses.
— Frequent and timely statistics of day visitors.
— Frequent and timely indicators of short term market
trends.
— Detailed statistics of tourist expenditure.
— Comprehensive and robust local statistics.
45. The report concluded that it was necessary "to
improve the main tourism surveys to ensure that they provide statistics
that are fit for purpose and warrant the reliance that the industry
and local and central government agencies place upon them."
It recommended that up to £8 million be invested to establish
a Tourism Statistics Unit to undertake this work and analyse and
distribute the results to the industry and government agencies.
46. DCMS accepted this recommendation and forwarded the
report to the National Statistician. In response, he agreed that
"this review leaves no doubt that there would be benefit
in looking more strategically at alternative ways of providing
a strong common direction and coherence to official tourism statistics."
47. However, DCMS has not provided funding, the Tourism
Statistics Unit has not been established and the Department's
implementation plan limply states that "it is not possible
to put timescales for implementation, let alone state what will
be in forthcoming work plans." Effectively, proper and reliable
tourism statistics have been shelved. This undermines the whole
policy and strategy for the UK.
PRACTICALITY OF
PROMOTING ENVIRONMENTALLY
FRIENDLY FORMS
OF TOURISM
48. The industry recognises the importance of business
management and promotion in an environmentally sensitive way.
Growing awareness of green issues and climate change amongst customers
will start to determine their choice of destination.
49. Travel and tourism needs to play its part in becoming
more sustainable. The Tourism Alliance's view is that this can
best be achieved through the education of businesses and consumers
and the provision of incentives for visitors to change their travel
behaviour rather than through blunt economic instruments that
simply aim to reduce travel or tax is progressively, which will
simply reduce tourism revenue.
50. In 2002, DCMS took over responsibility for the development
and implementation of sustainable tourism initiatives. Nothing
of significance has yet happened including:
— the promotion of visitor travel planning,
— the provision of incentives for dayvisitors to
use public transport rather than private vehicles,
— increased funding of domestic tourism as a substitution
for flights overseas,
— the development of an extension to the Quality
Assurance Scheme to highlight accommodation providers with sustainability
plans,
— dedicated funds for promoting "sustainable"
accommodation and attractions to provide an economic incentive
for businesses to join such programmes.
OLYMPIC GAMES
51. The Tourism Alliance supported the London 2012 bid
and believes that the potential benefits of hosting the Games
for the London and UK economy are considerable.
52. We have provided DCMS with a detailed submission
on the strategy required to achieve those benefits. To maximise
the benefits, DCMS must set a clear framework in which tourism
bodies and the tourism industry can develop and implement a coherent
and well-resourced marketing, media and communications strategy.
The key points are:
— There is clear ownership of the strategy and its
delivery against the target of £1.6 billion in additional
tourism expenditure.
— A national marketing and communications strategy
is developed with a brand that the tourism industry can use that
does not compromise IOC branding.
— An Olympics Tourism Forum be established with
members drawn from a wide range of tourism interests to co-ordinate
activities and provide consistent and coherent marketing and communications.
— Adequate funding for the marketing and communications
strategy via a public-private partnership.
— Core components of the marketing and communications
strategy are to:
i. Build inbound business and leisure tourism in the
lead-up to and after the 2012 Olympics.
ii. Sustain "normal" inbound and domestic tourism
during 2012.
iii. Use the Olympics to enhance London's role as a gateway
to the UK.
iv. Maximise the opportunity for world-wide media coverage
of Britain afforded by the 20,000 journalists expected to attend.
v. Develop contingency and crisis plans in case of adverse
events during the Olympics.
vi. Improve tourism statistics so that challenging, yet
realistic, quantitative and qualitative targets can be set and
monitored in the lead-up to, during and after the Olympics.
vii. Planning needs to start immediately and implementation
is a matter of great urgency if we are to achieve success.
53. Through the GLA, DCMS provides Visit London with
£1.25 million per year to promote the city as a gateway to
the rest of the country. There is a strong case to increase this
funding to broaden activity due to exposure through 2012, so that
it includes new and emerging markets and particularly China, India
and Russia.
We trust that this response has covered the main points of
your inquiry. We believe that the inquiry is timely and its outcome
may have enormous importance for the future of tourism in the
UK. The Tourism Alliance would be pleased to submit further information
on any point if the Committee wishes and would be pleased to present
oral evidence in support of this written evidence.
March 2007
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