Examination of Witnesses (Questions 288
- 299)
TUESDAY 8 JANUARY 2008
MR BOB
COTTON, MR
ROB HAYWARD
AND MR
BRIAN WISDOM
Q288 Chairman: Good morning and welcome
to this, a further session of the Committee's inquiry into tourism.
I should like to welcome Mr Bob Cotton, the Chief Executive of
the British Hospitality Association, Rob Hayward, the Chief Executive
of the British Beer and Pub Association, somebody who is no doubt
familiar with this room, and Brian Wisdom, the Chief Executive
of People 1st. If I can start off, one of the things that has
become apparent already in our inquiry is the confusion regarding
some statistics and the lack of available information. The DCMS
have suggested that the tourism industry generally is worth £85
billion. The British Hospitality Association, in your trends and
statistics, say that it is worth over £106 billion. How come
your measure is so much greater than the DCMS one?
Mr Cotton: I have always taken
the view that I am not quite sure what precisely tourism is as
a single entity in that really all that links tourism activity
is a common customer and that may, therefore, include retail,
it may include theatres, flower shops, taxi drivers, you name
it. What I do understand though is a linkage between tourism,
hospitality and leisure and all those activities and I have always
taken the view that one gets a better understanding of sectoral
activity in the industry by linking all those things together.
Certainly when we do our trends and stats, and hopefully you have
had a copy, I look at what I term "all catering activity",
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 and,
if you look through our, as it were, totalling of that total,
it comes to over £105 billion, and I think that is a better
understanding of sectoral activity. Perhaps I could add another
point and it is best, I think, exampled probably in Rob Hayward's
sector, the pub sector, where, if you look at the detailed DCMS
figures, they actually say, "We only count part of the pub
activity in tourism", and the rest is excluded. I find, quite
frankly, that that is not a very convincing argument to me when
I am looking at the total activity because what I am always interested
in is how we grow that activity and we look at the conflicting
issues which affect that activity, so that is where we come from,
and I am firmly of the view that it is about £100/105 billion
and it employs 2/2.3 million people.
Q289 Chairman: If there is this difference
of views as to precisely what constitutes tourism, it makes it
very difficult to judge the health of the industry, does it not?
Mr Cotton: It does indeed. That
is why I think it is important that we get a common understanding
of what constitutes this sector, and I would call for that as
a key proposal from this group.
Q290 Chairman: What is your view
of the state of the industry at the moment?
Mr Cotton: What I am seeing at
the moment of British hospitality is that we are quite well placed
to take a view as to what is going on because even within the
UK, my own existing members, our UK turnover would be about £28
billion this year from my UK members alone, which is quite a big
chunk of that activity. What I am seeing is three key sectors
now in this tourism/hospitality/leisure field and I am seeing
extremely strong growth in Central London and London has probably
had its most successful year ever just concluded, really strong
growth. In the regions, I am seeing the regional cities doing
okay, driven by strong investment into Leeds, Manchester, Sheffield,
Liverpool, Glasgow, Edinburgh, Bristol not too bad, Cardiff, et
cetera. When one gets maybe ten miles outside those cities,
I am seeing a very different picture and I am seeing a lot of
businesses struggling, I am seeing perhaps businesses in decline,
less activity and that particularly affects the small, micro businesses
that make up this tourism/hospitality/leisure field, so three
different areas. If you aggregate the total figures, as government
statistics do, I suspect that, because of the extraordinary value
of Central London, you will probably see this last year to have
been overall a successful year in value terms and probably even
in visitors terms because London has done so well, but, when you
break it down beneath the surface, I have got real concerns about
what is going on in rural and regional areas.
Q291 Chairman: Can I just press you
on London a little. Obviously we are told that, for instance,
this last year London has been subject to terrorism attacks, we
are told that the strength of the pound against the dollar has
made it difficult to attract visitors from the United States and
we are also told that coming to Britain is much more expensive
for overseas visitors in terms of all the visa requirements, not
to mention the taxes when they actually get here, and that, therefore,
the UK has become less competitive. Given those things, how is
it that London has just enjoyed its best year or is the industry
crying wolf?
Mr Cotton: I think you make some
very excellent points and all the points you raise do actually
have some impact, if I can take them one by one. First of all,
London has had a very good year for a number of reasons, not least
the success of the financial services sector in Central London
which has really driven, as it were, businesspeople coming to
London. Middle Eastern people come to London to do business now
and not New York, the centre of Europe, and London has been extraordinarily
strong at that top end of the market; people need to be in London
to do business. Secondly, and I would like it on the record, Visit
London, the Tourist Board for London has got an extremely effective
marketing policy now where they recognise the importance of staging
key events to attract people to London. Thirdly, when you look
at the attractions London has, O2 is now extraordinarily successful,
Wembley is now open to all the Millennium Stadium business that
has transferred to Wembley, the Tour de France came to London
in 2007, all these events have made London extraordinarily successful.
If I then take up your point about the terrorism activity, it
is interesting that we have seen terrorism activity in the last
five years, be it in London, New York or Madrid, yet the three
strongest-performing cities in tourism in the world in the last
two or three years have been those three cities. There has been
a strong need to want to sort of get back to business as normal,
customers wanting to say, "We're not going to be afraid to
come back to London". Having said that, there are some real
issues for London for the future, and what we see at our major
airports does not help business prospects into the future and,
when we see increased taxes, it does not help business into the
future, so there are some real concerns that, even though we have
had a very successful year in London, the prospects for the coming
year are much more uncertain. Yes, London has done well, but I
think London is unique in many regards and we have done some things
well in London.
Q292 Chairman: Rob Hayward, you have
talked about the biggest slump in beer sales since the Great Depression.
Your industry clearly is not in a great state of health at the
moment. How is this affecting the industry and what are you looking
for in terms of government action?
Mr Hayward: In terms of the industry,
yes, there has been a problem particularly for the brewing industry.
People automatically associate that with the pub industry as well
and clearly it is important to the pub industry, but I think it
is reflective of the changing nature of hospitality that pubs
not only sell beer now, but they have changed their offering and,
therefore, the nature is very different. I would echo what Bob
has said in terms of the current economic circumstances. London
has been the most resilient part of the country. I gave evidence
or made comments to the Governor of the Bank of England about
three or four months ago and we were already by then picking up
that places such as Bexley, Tamworth and Leicester were beginning
to show marked downturns and I think it is fair to say that in
recent months that has extended right into the centre of London
in terms of economic prospects going forward. I have identified
in our evidence that we think that the most important drivers
for our sector and, I think, a lot of the tourism sector in general,
because there are so many small businesses involved, are either
regulatory or taxation. The general burden of both those two fields
is such that people find it questionable as to whether they want
to continue in business, how they continue, at what level of profitability
and, therefore, the level of investment. Obviously most of our
business, as Bob says, we are the hospitality sector and lots
of people will go to pubs and bars from other parts of the area
rather than other countries and, yes, foreign tourists are attracted
to pubs because they find it a particularly interesting element
of the British tourist scene, but the vast majority of our business
is either local or tourists travelling from one place or part
of the country to another. I would just echo one thought, that
much is made in relation to the strength of the dollar and clearly
that hits the high-end hotel industry, but the pound is moving
downwards against the euro which makes us a very much more attractive
destination for large numbers of people coming from Europe, in
particular, and that will impact on not only ours, but possibly
different sectors of Bob's industry.
Q293 Chairman: Your industry obviously
almost annually puts forward an argument to the Chancellor as
to why this year excise duty should not go up by as much as in
previous years. Do you detect any sympathy from the Government
to your plight at the moment?
Mr Hayward: I think there is recognition
that we are facing particular difficulties, but, as I say, I think
pub industries are complex. It is not just beer duty, though that
is clearly an element of it, but there are other elements as well
which are issues for us and, therefore, impact on profitability
and, therefore, the capacity to invest, et cetera, from
the pub sector. I think members of the Committee will have seen
over the Christmas period the figures that we have shown in terms
of recent months about the decline in beer sales and that is a
very, very stark decline that we are now facing and it will have
an enormous impact on both brewing and the pub sector.
Q294 Chairman: We are going to come
on to specific regulatory measures and indeed to specific points
on employment and skills, but at this stage, Brian Wisdom, is
there anything you want to say by way of a general statement about
the industry from where you sit?
Mr Wisdom: I think I would echo
the points that Bob and Rob have already made. I think there are
clearly areas of concern and I think they are areas of concern
moving forward economically, and of course the worry in the skills
or employment system is that skills may become a casualty if there
is any downturn in any of those rural or indeed particular sectors
of the economy which affect tourism generally. However, on the
upside, now there is a significant amount of public investment
in skills for the tourism, hospitality, leisure and travel industries,
and I guess really that the real opportunity is to ensure that
that spend is properly focused to meet the changing demands of
the industry and I think in Rob's case where clearly the smoking
ban and decline in beer sales have fuelled certainly a more aggressive
approach to sales of food in pubs, actually supporting that growth
properly is, I think, one of the things that we should be considering.
Q295 Philip Davies: If I can just
press Rob Hayward a bit on what he was just saying, I have a lot
of sympathy with what he said about tax and regulation, but, when
I speak to the pubs in my constituency, particularly the tied
pubs that are tied to certain breweries, their biggest complaint
that they have to me is not about tax and regulation, it is actually
the excessive price that breweries charge them for their beer
compared to the price that free houses can buy it at which they
find very difficult to compete with, so do you not think that
the brewing industry could do an awful lot more to help itself
and its tied pubs without having to blame the Government?
Mr Hayward: If I can take that
in three parts, one just to correct you because the brewing industry
overwhelmingly does not own pubs any longer, there has been a
shift and it is pub companies generally that do. Secondly, the
Trade and Industry Select Committee actually had a look at this
issue two years ago and I gave evidence to them at the time on
the subject. Clearly, there are issues around it and anybody who
is either a pub-owner or a tenant has a difference of view in
relation to it, but certainly, as I say, the Select Committee
did take evidence and came to a view on it and it made recommendations
and we have acted on those recommendations.
Q296 Mr Sanders: What is the distinction
between an owned pub and a tied pub?
Mr Hayward: There are really three
categories of pub. One is managed houses which generally tend
to be the larger houses, whether they are in the centre of Torquay
or they are ones immediately around here—
Q297 Mr Sanders: They are growing
in number, are they not?
Mr Hayward: No, they are not actually,
they are in decline.
Q298 Mr Sanders: So managed houses
are in decline?
Mr Hayward: The total number of
managed houses is actually in decline and that is for a number
of different reasons, primarily in terms of the cost of having
a complete structure associated with managed houses.
Q299 Mr Sanders: What sort of figures
have you got because one's anecdotal experience is of Wetherspoon
and Yates and the like being in great expansion programmes, moving
all the time.
Mr Hayward: They have been. I
cannot give you specific company figures off the top of my head,
but I am quite happy to write to you in clarification,[1]
but in my evidence we actually refer to there being currently
about 10,200 managed houses when we put in the evidence and only
a few years before that there were about 14,000, and they are
part of Mitchells & Butlers, as you say, Yates, Wetherspoon
and the like. They are overwhelmingly the larger pubs where you
will have employees who are managers and employees who are staff.
There are then the leased tenanted pubs which Mr Davies was referring
to where the property is owned by another pub company, but there
is a tenancy agreement with the pub company by a small businessman
and they pay rent and there is a tied supply of beer and maybe
a tie on other products, depending on the nature of the agreement.
Then there is the third category which is about a third of the
total sector which are free houses of some form or another.
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