Memorandum submitted by the Regional Development
Agency, Tourism Leads Group
1) The challenges and opportunities for the
domestic and inbound tourism industries, including cheap flights
abroad, and their impact on traditional tourist resorts
Challenges
The principle challenge facing the sector is
that posed by competing destinations in other countries, which
have become increasingly accessible to UK residents over a number
of years. That accessibility is a function of both increased wealth
and the lower cost and greater ease of air travel from the UK.
These have shaped and reinforced a fundamental shift in the tourism
behaviour of UK residents. The growth of tourism on a world scale
has increased the range of competing destinations and fuelled
investments by both the private and public sectors.
The response of the sector to these competitive
pressures within the UK has not been a coordinated one, nor has
it been informed by a strong sense of the nature of the competitive
environment. In terms of company numbers, the sector is dominated
by small and medium sized enterprises, for which the acquisition
of in depth market knowledge is difficult. Market conditions have
not been supportive of investments by SMEs in a general sense.
There are of course exceptions; examples of companies that have
understood that changing nature of demand and have responded well.
In general, the larger companies in the sector have understood
and responded to the significant changes and challenges of recent
years, though again there are exceptions. Given the cross-over
that exists between tourists and non-tourists, and the renaissance
of many of our larger cities, there has been much development
that has been of a positive nature, strengthening the appeal of
these places as vibrant, lively destinations. The problem has
been (a) that such responses have not been driven by an in-depth
understanding of the importance of tourism, and that in particular
there has been a lack of importance attached to the quality of
place and the role of design within this, and (b) that while cities
generally are much more attractive, much of the country outside
these metropolitan centres, has fallen further behind; Blackpool
is an example. Again there are exceptions.
Seaside resorts in particular suffer from high
pockets of deprivation, and low wage economies, yet house prices
can be high because of high levels of retired residents and second
homes. The seasonality of employment is also an issue, with an
influx of workers during the high season competing for local jobs
and a scarcity of jobs out of season. This clearly impacts on
the economic, social and cultural wellbeing of the local population
and therefore has an impact on the vibrancy of the visitor economy
going forward. Torbay, for example, is the 89th most deprived
local authority area in England, with average house prices 10.8
times the average wage and a GVA of 63% of the national average—the
lowest in the South West and one of the lowest in the whole country.
Torbay attracts 1.4 million staying visitors per year, but this
number is declining, because of changes in market conditions and
Torbay's inability to adapt to these changes.
The sector is also at disadvantage because from
both a domestic and an inbound perspective, it does not always
compare well to other services experienced by tourism consumers,
does not always move to meet and exceed the expectation of visitors
and is sometimes perceived to offer poor value for money. Nor
is the UK always regarded as a welcoming and friendly option compared
to near neighbours and similar destinations; it currently ranks
17th in the world in terms of welcome. There is also a need to
consider the perceptions of careers with the visitor economy;
this clearly links to skills and professionalism within the sector.
It is, however, crucial to address negative
perceptions (and realities) of the UK as well as ensuring that
marketing is effectively targeted and focused. The right messages
need to be presented to potential visitors, and the products and
services themselves need to meet their expectations. If there
is truth behind negative perceptions, the country cannot afford
to be complacent, but must address issues head on. The country
must not sell a false promise, now or leading up to the Olympics;
otherwise the lasting legacy will be a negative one.
The general ability of the country to respond
to competitive pressures of the type experienced in recent years
is significantly constrained by structural barriers to productivity
growth that were well explored and explained by the McKinsey Global
Institute in work for the UK Government in 1998. For example,
they estimated that "regulations governing land use, planning
and building mean that the cost of building or refurbishing a
hotel in the UK is up to 40% higher than in the USA". As
a result, the occupancy levels required to achieve a break even
point were significantly higher in the UK than the US, according
to the consultants.
In the public sector our ability to respond
appropriately to competitive pressures has been very severely
hampered by a lack of credible and detailed data. Policy must
be based on good quality and well understood evidence if it is
to have any chance of succeeding. The data that is collected on
the sector is of relatively poor quality, and so lacks credibility,
particularly with respect to the large proportion of sector expenditure
which is spent by same day visitors. More significantly from a
policy perspective, data is not collected at the level that allows
for robust disaggregation below the national level. Yet without
this fine detail, any analysis will be flawed and will fail to
address the real issues in many if not most particular cases.
Despite similarities, no two English regions are the same, and
within each region, there are marked differences between sub-regions,
each with particular challenges and opportunities. At the sub-regional
level, the same is true. So for example, the challenges and opportunities
faced by Carlisle or West Cumbria are not the same as those of
the Lake District, though all face real challenges.
RDAs have taken up these issues very strongly
and are improving their knowledge, which is now much better than
it was two or three years ago, but the national picture is still
very poor and the fundamental problem cannot be addressed solely
by regional organisations; although they are leading moves to
address it.
The lack of credible data does not simply hamper
the crafting of well-designed policy it also undermines the ability
of the sector to win political support and the access to resources
that flows from this. Without political support and without the
co-ordination of response that comes from a robust and widely
accepted analysis, responses to the challenges have necessarily
been at times piecemeal and ad hoc, particularly in the late 1990s
and early 2000s as the balance of payments on the tourism account
moved firmly into the red.
Opportunities
The post FMD changes to national and regional
structures and responsibilities has been positive. RDAs have taken
their responsibilities to lead the tourism sector seriously and
have allocated considerable discretionary resources to support
growth in the sector. Given that most RDAs have come from a standing
start, and that they have seen a major broadening of their responsibilities
during the period in question, their collective response has been
impressive. Inevitably however it has not been carried through
at the same rate or in quite the same way in the different regions;
the extent to which this is a problem is for others to judge.
RDAs have both sought to understand the nature
of the challenges faced by the sector and to respond to the opportunities
presented to them. Generally the response has been focused on
the quality of the experiences that can be provided to visitors—product
and service quality—rather than on marketing. Repeated calls
for more resources to be spent on marketing, which usually refers
to promotion, are in the view of the RDAs misguided. Consumers
are increasingly sophisticated and demanding, and increasingly
able to obtain independent reports on destinations, hotels, attractions
and other places from websites like trip advisor.[1]
Promotion is obviously important, but it must be undertaken as
part of the strategic management of what is being promoted. The
best businesses understand this fully and it is a lesson that
needs to be learnt and applied to the tourism sector. RDAs have
focused on the wise use of all of the resources available to support
tourism growth, and have generally sought to rationalise promotional
activity, much of which has been ineffective in the past.
The tourism sector is both complex and diverse;
particular emphasis, therefore, must be placed on the national,
regional and local tourism interfaces and the pursuit of economies
of scale in all their dimensions. Too often in the past, public
sector expenditure on the visitor economy has been fragmented
and ineffective, and despite the constructive changes brought
about by the RDAs and their delivery partners, this remains true
to quite a significant extent.
The recognition of these concerns led to the
creation of Partners for England, which has been RDA driven. The
Partners for England summits addressed the key issues surrounding
the better management and marketing of the tourism industry in
England. Particular emphasis has been placed on the national,
regional and local tourism interfaces and the pursuit of economies
of scale in all their dimensions.
The opportunities for the UK are firstly to
grow domestic tourism, and secondly to reduce the speed of its
relative decline in world rankings as an inbound destination.
Both are best achieved by improving the quality of the experiences
that are provided to visitors. Improving the appeal of the UK
to domestic visitors must be the priority for a number of reasons:
improving the quality of place that is an essential component
of this has broader economic and social benefits; it will have
positive impacts on the balance of payments; it should have positive
impacts on climate change; it will increase competitive intensity,
and subject to action being taken to address structural barriers,
should have a positive impact on productivity growth and on the
generation of GVA.
There is now a welcome focus from DCLG on place
shaping, an agenda that RDAs embrace and will work to support.
Each RDA now has a Tourism (or Visitor Economy) Strategy in place,
with all having a focus on the importance of product, and of place,
and with all seeking real improvements in the intra-regional coordination
of activity, particularly by local authorities. The RDAs are working
with their Regional Assemblies on the development Regional Spatial
Strategies, and with VisitBritain and the LGA, are seeking to
improve inter-regional co-ordination by means of the Partners
for England initiative.
There is clear merit in considering a concerted
and high level programme to focus on areas of product and service
quality in the years preceding the Games and to carry forward
a new approach to customer care, skills and quality to create
a lasting legacy; World Class Skills are especially needed in
our visitor economy given that we will be hosting one of the biggest
events in the world.
2) The effectiveness of DCMS and its sponsored
bodies (such as VisitBritain) in supporting the industry
Alongside welcome devolution of decision making,
which has enabled places and regions to play to their strengths,
there is a policy gap at the national level, which is in part
at least, a function of the lack of fine grained data as discussed
above. The diversity of the tourism sector and the large number
of companies involved makes the development of appropriate policy
very difficult without a higher level of understanding and detailed
knowledge than is currently the case. There is a danger therefore
that policy is driven by political considerations rather than
by an in-depth understanding of the issues faced by the sector;
to that extent it is reactive rather than proactive. The result
is that national policy is inevitably broad in its sweep, is often
composed of generalities, and runs the danger of being no more
than a set of good intentions. At its best it should be enabling
in its nature, and supportive of action by RDAs and others. It
does not yet achieve this consistently.
DCMS has an important role within government
in ensuring that tourism is understood by other departments. Evidence
on its performance in this role is not readily available; it is
not therefore easy to asses how well it is carrying out this role
although the current capability review of DCMS may shed further
light on performance. RDAs are increasingly focusing upon both
the place-centred concept of the visitor economy, and the person-centred
concept of a tourist in developing their approaches to tourism
growth. This is an agenda that DCMS could usefully embrace more
fully, given the perceived importance of cultural activity to
the creation of economically successful places. DCMS could and
should play a strong role in supporting the development of the
place shaping thinking being carried out by DCLG, and in addressing
with this and other departments, the structural barriers to productivity
growth.
One specific action that we would recommend
is reform of the current targeting framework as it relates to
tourism. Since the RDAs took policy responsibility for tourism
a variety of measures have been put in place at regional level
but there has been no national framework from DCMS to guide and
measure strategic performance in line with DTI practice. DCMS'
PSA targets around increasing participation and its newer focus
on the 2012 Olympics have little connection to the considerable
investment being made by RDAs, local authorities and other bodies.
Earlier PSA targets on improving the industry's productivity were
more relevant although these did require more robust definition
and measurement systems.
The focus of VisitBritain on domestic marketing
is welcome, and should be encouraged and strengthened. It is absolutely
right that domestic marketing by VisitBritain should be carried
out in full partnership with the RDAs as the bodies with strategic
responsibility for tourism. Through the Partners for England initiative,
plans are currently being developed to better coordinate leadership,
research and intelligence, marketing and the local management
of destinations.
3) The structure and funding of sponsored
bodies in the tourism sector, and the effectiveness of that structure
in promoting the UK both as a whole and in its component parts
The structure of the sponsored bodies is broadly
appropriate and in general terms is working well; both VisitBritain
and RDAs have a strong sense of purpose and role and are delivering
against their own targets and those set for them.
The structure is not as strong as it might be
in terms of overall coordination and policy leadership. In part
this is a function of the constraints on joint RDA action, in
part the lack of responsibility for this at the national level,
though as indicated above, the Partners for England initiative
is a positive move to address this gap. In terms of promotion,
current funding could be better co-ordinated; a strategic marketing
function would better align promotional work and increase impact,
and link it to product development requirements. This is something
that Partners for England is considering, with the aim of developing
a way forward.
The nominal funding of RDAs by DCMS is just
that, nominal; it is not directly calculated on the basis of the
challenges they face. RDAs have supported tourism on the basis
of their analysis of its economic importance and will continue
to do so. The place making and shaping agenda being taken forward
by DCLG should, it is hoped, lead to a more focused approach to
the allocation and use of resources designed to improve the quality
of places within the UK, with due and appropriate attention being
paid to their importance as tourist destinations.
The funding of promotional activity is important
and should be sustained, and to the extent that this is supported
by evidence of its effectiveness, increased, particularly in the
context of the 2012 Olympics. However it would not be appropriate
to simply copy the high levels of promotional spend by other countries,
though we should of course evaluate and learn from others' experience.
Given the analysis put forward above, there should be an increase
in promotional spending focused on the domestic market, but again
this must be supported by careful analysis of the most effective
means of achieving the goal. It is noted that according to visitor
research last year in Cumbria for example, with a high volume
of repeat visitors (83%) to the area, the most popular source
of information used was previous experience, used by over half
of visitors (56%). The Internet was also a popular source, with
a third using this method (33%) overall, but with a significantly
higher proportion of both overseas visitors (55%) and first-time
visitors (64%) using this as a source. Just 13% used a brochure
and 10% a guidebook and only 5% used a Tourist Information Centre,
yet these continue to receive high levels of funding from local
authorities.
Promotional spending must support more broadly
focused strategic marketing activity that is driven by a clear
understanding of the nature of the experiences visitors are seeking.
To divorce, as currently happens to a large extent, control of
spending on promotion from control of spending on getting the
product right is not a recipe for optimal success. No private
sector company would choose to operate in such a manner. There
is thus a strong argument that any additional funding for domestic
promotional activity should be channelled via the RDAs, particularly
given the investments they already make in promotional activity.
4) The effect of the current tax regime (including
VAT and Air Passenger Duty) and proposals for local government
funding (including the "bed tax") upon the industry's
competitiveness
RDAs do not propose changes to the current tax
regime with respect to tourism. RDAs are supportive of the proposal
to include aviation in the EU emissions trading scheme from 2011.
There is no doubt that the UK is a high cost destination for international
visitors, and that its lack of price competitiveness with many
overseas destinations is a factor in the growth of outbound tourism.
The Agency's primary response to this is to re-emphasise the importance
of matching the product and services offered, to the expectations
of visitors, in a way that meets or exceeds their expectations.
That this is possible is clearly demonstrated by many excellent
tourism companies within the UK. RDAs generally are working to
improve the ability of tourism businesses to understand the changing
nature of demand, through the commissioning of research, eg into
non-visitors, and through the development and use of tools to
create a more structured understanding of the future.
RDAs do not support the idea of a "bed
tax". More generally, the RDAs agree with the analysis set
out in the Stern report that "public finance principles would
generally militate against the earmarking of revenues, on the
grounds that it prevents efficient resource allocation across
government". There is clearly scope to improve the effectiveness
of existing local authority spending on tourism, and this should
be a priority.
5) What data on tourism would usefully inform
Government policy on tourism?
The lack of credible and robust data on the
value of tourism is a major hindrance that undermines a proper
understanding of the sector and therefore renders difficult the
efficient allocation of resources. It is widely acknowledged that
statistics are not good enough. The need to plan, monitor and
develop relies on robust, quality data. The lack of this data
is a major weakness which has led to the proposed development
of the National Tourism Intelligence Unit which is being championed
by Partners for England and led by the Regional Development Agencies.
Tourism Satellite Accounts (TSA) are the internationally
acknowledged and validated benchmark for assessing the value of
tourism. Such accounts provide a conceptual framework within which
supporting data can be gathered and from which analysis and intelligence
can be generated in the periods between accounts; typically these
are produced every three or four years.
The production of Tourism Satellite Accounts
requires that there be an institutional structure that supports
the provision of the high quality data inputs that are necessary,
and will create the necessary drive for improvements in these
data inputs where required. The proposed National Tourism Intelligence
Unit is intended to act as a single point of focus, of authority
and of expertise in the field of tourism data, helping considerably
to strengthen the institutional structure; it is a real opportunity
to take the agenda forward.
RDAs have played a leading role in recent TSA
work and are supportive of further work and investment in this
area, regionally and nationally. There is a strong belief that
there should be a real, national commitment to producing accounts
according to a sensible and published timetable. RDAs see benefit
in setting out a clear goal of producing accounts in 2009 for
2006, in 2012 for 2009 and in 2014 for 2012, and in putting in
place the necessary measures to increase the robustness of these
accounts, and the value obtained from them over this period.
RDAs are also pioneering work to develop alternative
methodological approaches to gaining an understanding of the economic
value of same day tourists.
6) The practicality of promoting more environmentally
friendly forms of tourism
In the RDA's view it is both practicable and
appropriate to promote more environmentally friendly forms of
tourism and this view underlies the argument put forward above
in favour of making growth in domestic tourism a priority. However
this cannot be done in isolation from other strategically focused
measures to grow tourism, nor from actions that address and seek
to reduce, the environmental costs of transport, particularly
those associated with air travel.
RDAs have made sustainability a core element
in their tourism strategies; see for example that for the South
West—Towards 2015.
7) How to derive maximum benefit for the industry
from the London 2012 Games?
There is clear potential to use 2012 as a catalyst
for changes in tourism policy and practice that RDAs were already
wishing to bring about, and to use the opportunity to engage in
dialogue with partners who would otherwise be difficult to reach.
The strategic marketing focus is not well enough articulated in
the consultation document, nor are the implications of this properly
explored or set out. It is certainly through the showcasing of
the whole of the UK that the Games will have most significant
effect. It is a welcome fact that DCMS are already working closely
with the partners to explore benefits that might accrue to the
regions.
It is recognised that the direct impact of 2012
will be limited, if measured in terms of additional visitors directly
attracted to the regions (outside London and the South East) during
the games.
There is an understanding of the focus placed
by VisitBritain on (a) both games related and games motivated
visitors, and (b) on broader promotion, brand development, media
handling and use, work with public diplomacy partners, the cultural
Olympiad, and on the appeal of new events. Broadly, this approach
is welcomed, but with the strong proviso that this work must involve
regional partners, and be designed to generate clear benefits
for the regions.
There is concern at the lack of additional funding
in order to take full advantage of the opportunity presented by
the Games, and at the threat of even more funding being drawn
into meeting the core costs of hosting and preparing for them.
All stakeholders recognise the overriding importance
of improving the quality of the experiences that are offered to
visitors, and the need to have a clear sense of the competitive
environment in which international tourism operates. The 2012
Games represent a real opportunity to address fundamental issues
of poor quality in both product and service, and to address the
structural barriers to growth in productivity that the sector
faces. These challenges and opportunities are not dealt with well
enough in the consultation document. RDAs would like to see a
more carefully considered analysis of the actions that can be
taken to address the barriers to productivity growth. They would
also like to see stronger, more public direction of work to improve
the quality of the service provided to visitors.
More use could be made of digital media and
content, and of the anticipated continued pace of change in this
area. RDAs would support more work being done to develop strategic
foresight in this area, and see clear benefits in so doing.
There is a general acknowledgement that 2008
Capital of Culture will be a springboard for, and an opportunity
to learn lessons, for 2012.
There is a collective interest in working closely
with DCMS, LOCOG and others to make the best of this opportunity
for the benefit of all and a recognition that there are several
major opportunities for maximising the benefit leading up to and
during the 2012 Games, and also a need for effective management
of the hosting of visitors during the Games themselves.
Experience at other major sports events, including
the Olympics, shows that as well as generating visitors for the
event itself, they stimulate post-event visits many of which are
by first time visitors to the host country. The 2012 Games represent
a unique opportunity for the UK to welcome a new and potentially
huge new audience. It is essential that product weaknesses, identified
above, are addressed. The need is to build the existing tourism
offer to overseas and domestic visitors in a sustainable manner
by improving our quality, welcome and service, with the following
core objectives:
— To communicate the scale and opportunity
of 2012 to the tourism sector whilst managing expectations.
— To ensure enhanced and sustainable
transport connectivity throughout country.
— To help develop a comprehensive and
sustainable events programme before, during and after the Games.
— To capitalise on displacement of
UK citizens from London and recognise the constraints that this
will impose on the Games being held in what will be "peak
season" in the regions.
— To drive up quality, improve destination
management, and increase the proportion of overseas visitors in
the long term.
— To improve the skills base in the
tourism sector through specific targeted intervention and development
of programmes.
— To review roles and responsibilities
and ensure that the most effective structures for delivery are
in place for 2012 and beyond.
— To develop the product in order to
exceed customer expectations.
It is crucial to have a realistic approach,
ensuring that expectations are not raised and that businesses
are clear that they may have to work to maintain their business
levels at the time rather than increase them. The showcase is
the legacy, and this should be communicated and embraced. Maximum
advantage must be taken of the Games to project an extremely positive
image for the future and to improve external perceptions. It is
important to recognise that some in the industry are sceptical
and will need careful convincing, not hype.
The assessment of the impact of visitor numbers
during the period of the Games is realistic and the overall economic
impact within London during this short period may be relatively
modest; the wider effects and the Games' legacy could be considerable
although it is hard to draw conclusions based upon past experiences
from other host cities since the geographical and infrastructural
contexts differ so greatly.
There is a risk that potential visitors will
think that the Games will make travel within London and the UK
difficult, and that prices will be at a premium; measures will
need to be taken, at both domestic and international levels to
counter this. There will be unprecedented levels of domestic public
interest in watching the Games and that this could result in a
downturn in domestic tourism, with a strong surge immediately
after. The challenge to increase levels of tourism during the
Games will be considerable, but not impossible.
Efforts need to focus on marketing the diversity
of the UK's wider cultural offer and experience, using the Games
as a "hook". This will require the application of a
coherent UK-wide strategy.
KEY POINTS
Regional Structures
— Changes arising from the RDAs' new
responsibility for strategic development in tourism have understandably
taken time to bed in. However since 2003 there have been dramatic
improvements to both the quality and depth of the support structure
for tourism in the regions, and the resource allocated for this.
Partners For England has made considerable strides in sharing
best practice across the regions.
Structural Changes
— International market forces have
changed the competitive landscape for tourism over the last 10
years, with major implications for the UK and with negative impacts
upon traditional UK seaside destinations in particular. The UK's
policy response has lacked drive and coherence, and has been hampered
by a lack of robust data.
Place-Shaping and the Visitor Economy
— The strengthening focus on place-shaping,
and the creation of a clear, broadly-based intent to create high-quality
places for residents and for visitors is welcome, and is mutually
supportive of the region's focus on planning for growth in the
visitor economy. Action is required to define the intent, and
to ensure that structures and processes support delivery against
this.
Data- and evidence-based policy making
— Poor quality data on the sector makes
a full understanding of the sector's importance to the economy
extremely hard to achieve; the consequence is muddled thinking
and poorly designed policy. Improvements in data are a priority
for RDAs who are working closely with DCMS to achieve this.
Strategic Marketing
— The separation between responsibility
for product development, and promotion, places a premium on the
quality of the partnership working between the agencies responsible.
RDAs have a clear strategic responsibility for product development.
VisitBritain has responsibility for the promotion of the UK and
of England. There is scope for closer working between these bodies
in particular, within a strategic marketing framework; the Partners
for England initiative is welcome in this context.
March 2007
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