UNCORRECTED TRANSCRIPT OF ORAL EVIDENCE To be published as HC 133-iii
House of COMMONS
MINUTES OF EVIDENCE
TAKEN BEFORE
CULTURE, MEDIA AND SPORT committee
TOURISM
Tuesday 8 January 2008
MR BOB COTTON, MR ROB HAYWARD and MR BRIAN WISDOM
MR STEPHEN DOWD
Evidence heard in Public Questions 288 - 374
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Oral Evidence
Taken before the Culture, Media and Sport Committee
on Tuesday 8 January 2008
Members present
Mr John Whittingdale, in the Chair
Philip Davies
Mr Nigel Evans
Mr Mike Hall
Alan Keen
Adam Price
Mr Adrian Sanders
________________
Memoranda submitted by the British Hospitality Association
and the British Beer and Pub
Association
Examination of Witnesses
Witnesses: Mr Bob Cotton, Chief Executive, British
Hospitality Association; Mr Rob Hayward,
Chief Executive, British Beer and Pub Association; and Mr Brian Wisdom, Chief Executive, People 1st, gave
evidence.
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 oHsuggested
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 threats, we are also 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 is coming to London this year, 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 big
slump in beer sales since the Great Depression. Your industry clearly is not in quite a great state of health at
the moment. How is that 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 tourist people 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
general statement of 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, but there has been a shift and it is pub companies generally that
do. Secondly, in fact what was 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 are
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, 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 Mitchell & Butler, 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.
Q300 Mr Sanders: Presumably they must be growing in number as
the other ones decline.
Mr Hayward: I wish that any of the particular sectors
were growing. We are seeing, depending
on how you do the calculations, about ----
Q301 Mr Sanders: Are they growing or not?
Mr Hayward: No, they are not, but I was about to say ----
Q302 Mr Sanders: So, in other words, your premise that there
are fewer managed and tenanted cannot be right if the free houses are not
growing. Either that sector is getting
bigger or it is not as a percentage of the overall sector.
Mr Hayward: As a percentage, I was going to say ----
Q303 Mr Sanders: But that is an issue and that is an important
issue.
Mr Hayward: ---- pubs are closing at a rate of about six
a week which is why I was answering the question, "Are they in decline?" and
all the three sectors, as a proportion -----
Q304 Mr Sanders: Which sector is most in decline?
Mr Hayward: Managed houses are.
Q305 Mr Sanders: And free houses, they are also in decline?
Mr Hayward: Yes, all pub sectors are in decline.
Q306 Mr Hall: To follow on from that, the impact of beer
sales in pubs on local economies, the money that is spent in pubs and
restaurants in places like Blackpool or the east coast, declining resorts, how
much of that actually stays in the local economy and, to follow on from
Adrian's point about the chains, Wetherspoon, Yates, how much of the money
spent actually goes to national HQs?
Mr Hayward: A fairly small proportion partly because, as
I have said in my evidence, about 80% of all pubs are either free trade or
leased tenanted and, therefore, they are themselves small businesses, but
clearly you are at a competitive disadvantage if you have a headquarters and
you have an excessively large headquarters, so it is a relatively small proportion
for all the big companies and in fact it is a diminishing number because over
the last five or six years what we have seen is a series of mergers of the
companies so that actually the importance of head office relative to the
individual pubs around the country has diminished because there are fewer head
offices in one place or another. Mr
Sanders referred to Yates and in fact Yates is now part of Laurel, a company which is itself a merger
of three or four managed house companies and, therefore, two or three of those
head offices have now disappeared.
Q307 Mr Hall: But can you actually put a figure on it or a
percentage of how much is spent?
Mr Hayward: I was given notice of this and it is terribly
difficult, but it is actually a very small proportion of the total business
because, as I say, you start with 80% who are actually small businesses
themselves.
Q308 Mr Hall: So your premise is that the majority of the
money that is spent does actually go to the local economy?
Mr Hayward: Overwhelmingly. The difficulty is associated with, for example, food because it
depends whether you are buying it specifically locally, whether you have it
supplied in locally or whether you are being supplied for some products on a
broader national basis, but certainly a number of companies have, for example,
attempted to shift from more national beers to local beers. There is a number of agreements where people
have agreed to take supplies from micro brewers, for example, within their
areas which they did not a few years ago and that is an agreement one or two of
my companies have gone into with the Small Independent Brewers' Association.
Mr Cotton: I would just add to that that, particularly
with our rural and regional hotels and particularly on the restaurant side,
obviously the two biggest items that you buy running a hotel or restaurant are
essentially labour and food. More and
more of our members, particularly in rural and regional areas, are now buying
local food because it makes good economic sense to form partnerships with local
supply chains and local customers because that brings those people likely to
use your business as well, so we are seeing a very strong growing trend at the
smaller end of local sourcing and local supplies and, therefore, that means
much more of, as it were, the economic activity generated is kept locally than
maybe was the case ten years ago. It is
sort of going full circle from being entirely local to then being a national
supply source and it is now going back to being more a local supply source.
Q309 Mr Hall: You have been able to give a very detailed
picture of the pub industry in terms of ownership, tied, managed or free
houses. Is there a similar way of
designating restaurants and who actually owns them and who gets the benefit of
the business?
Mr Cotton: Let us just start with the easy bit first. There is on hotels, so, if we start with
hotels, historically if we just go back ten years, maybe 15 to 20% of bed stock
in this country would have been with the big brands and the big chains, so 80%
would be proprietor/owners. That has
been changing quite dramatically in the last ten years and the big brands are
probably now 25 to 30%, particularly with the growth of budget hotels. If we look across the water to America, big
brands are probably 45 to 50% of the American market, whereas, if we look to
France, there is still strong family ownership and the brands are much less,
but the brands are growing on the hotel side, particularly if you look at
almost any city centre development.
Because you split out the ownership of hotels from the running of
hotels, property owners want a brand to run their property, so we are seeing a
growth there. When we are looking at
the restaurant side, I have not got the precise figures, but it would be more
than 80% of all restaurants will be proprietor owned, but again even on the
restaurant side, and I will not mention them by name, we see the growth of
brands now in restaurants, particularly again in the city centre sites and
prime high-street sites because property-owners want a secure rental income, so
they will go to the brand which will guarantee the rental income, so in city
centres we see the predominance of the brand growth, whereas in rural and
regional areas it is the proprietor/restaurateur.
Q310 Mr Sanders: If I can come back to Rob in terms of free
houses, if you have got about a third of all pubs being free houses today, what
percentage was it 30 years ago?
Mr Hayward: It would have been somewhat smaller. I can do some checking, though I am not
actually sure whether I can give you an accurate percentage, but it would have
been smaller because of the pubs that have closed, and I said earlier on that
it was the leased tenanted estate which has been the most heavily affected and
I think all hon gentlemen will recognise in their own constituencies that there
are what you might describe as the backstreet pubs, the community pubs which
have tended to close. Now, those are
the ones that fall essentially into the leased tenanted estate, so free houses
will range in size and scale, so my guess is that, if it is a third now, it
might have been something between 25 and 30% previously. It has gone up slightly.
Q311 Mr Sanders: Who would have those figures, accurate
figures, that would be able to compare 2007 with 1977?
Mr Hayward: Between us and the government department, I
can provide you with them or as accurate as we can get them.
Q312 Mr Sanders: It would be useful to see that pattern of
change because there is a sense that tourism is of less value to a local
economy today than it was 30 years ago or 50 years ago because less of the
money that the tourist spends stays within the local economy, but it gets
sucked out in charges, fees and of course shareholder dividends.
Mr Hayward: I have been doing this job for nine years and
the biggest single shift has been the decline in the managed house sector which
is actually the sector to which Mr Hall referred, ie, the ones that have head
offices elsewhere. That is where the
big shift has been, but I will provide the Committee with the actual stats as
best we can and I say between ourselves, the Home Office and DCMS, but it has
actually been a notoriously difficult figure to get a hold of even with the
best will in the world, but we will do the best that we can.
Q313 Philip Davies: From what you have said, I understand that
free houses have done proportionately better than the tenanted leased pubs,
which is what I find in my constituency.
Given that they face the same regulations and the same taxes, does it
not come back to the point that actually the reason why that must be the case
is because the tenanted leased pubs are finding it more difficulty to compete
with free houses because of the deals that they are tied into by the breweries
and it is the breweries themselves that are actually causing this
disproportionate amount of tenanted leased pubs to close down?
Mr Hayward: The answer I would say is no because it has
more to do with the nature of the estate.
I do not want, Mr Chairman, to go back over an inquiry which the Trade
and Industry Select Committee had, but, as I say, in simple terms, my view is
that, as I say, we are talking here about the nature of estates and the vast
majority of leased tenanted pubs are in fact what you have described as the
backstreet pubs and we would describe as community pubs, and they are the ones
that have actually been the hardest hit by the social changes, the fact that
there are no longer factories nearby, that men do not go out of the factories
and drink virtually every day of the week immediately after work, the fact that
there are social changes in terms of the mix of society, that a large section
of the population in many of those areas actually do not drink alcohol, and it
is those sorts of factors which have affected what we would describe as the
community pubs.
Q314 Mr Evans: How important is the pub to tourism in
Britain?
Mr Hayward: We take the view that it is important and all
the indications are that, when you ask tourists from abroad about what they are
attracted to in Britain, one of the things they will identify, along with the
Houses of Parliament and Big Ben and the like, are the social institutions of
this country, one of which happens to be the pub, but the pub industry is
important not only in terms of foreign tourists, but local tourists because the
vast majority of people, if they go away for a weekend somewhere, will also
spend their time either in a pub or in a restaurant and of course in this day
and age many of the restaurants may actually be in a pub.
Q315 Mr Evans: But the evidence is though that there are
fewer international tourists going to pubs and fewer domestic tourists going to
pubs.
Mr Hayward: In terms of total numbers, yes. The throughput in terms of pubs and beer
consumption, in particular, is diminishing, but, as I said earlier, food sales,
soft drink sales and those sorts of things are actually rising. Interestingly enough, a greater proportion
of the population go to pubs because again, if you go back 20 years, it was a
male-dominated institution, so for women and families it comes back to the
change in the offering of the hospitality sector where pubs, hotels and
restaurants have made a great effort to attracting families as much as just the
male-dominated society.
Mr Cotton: Perhaps I could just add, and Rob makes the
point, that I am not quite sure where a pub/restaurant ends and a restaurant
serving a wide range of beers begins. I
hate to mention brand names, but be it a Harvester, a Beefeater or whatever,
there is a whole range of places now and it is difficult to say whether they
are a pub selling a whole range of food or a restaurant selling a whole range
of beverages.
Q316 Mr Evans: You say you are losing six pubs a week. That is a net loss?
Mr Hayward: Yes.
Q317 Mr Evans: Are they then the more spit-and-sawdust pubs
and basically they do not serve food?
They are the old working-class pubs where there is not much extra added
on other than beer?
Mr Hayward: That is the sort of pub that has been most
hard hit over recent years, yes, the vast majority of pubs. I was asked by a journalist last week to do
an estimation of how many pubs served food 20 years ago and the answer was
probably about 20 to 25% of all pubs.
Nowadays, that is somewhere around 75 to 80% of all pubs serve food, so
those that are continuing have actually changed their offering quite
dramatically.
Q318 Mr Evans: Do you think that the shake-up is going to
continue and that there are going to be more pubs that are going to close
irrespective of what the Government does and, even if they peg the taxation on
beer in public houses, there is still going to be a greater shake-up?
Mr Hayward: When we gave evidence to the Department of
Health in relation to the smoking ban, we indicated that we thought, with the
decline in beer sales, that we would lose about 5% of the pubs, not solely
because of the smoking ban, but because they were already marginal in terms of
profitability and that would actually tip them over the edge, and it is that
sort of thing that we are seeing which is probably accelerating that shake-out
because in fact the 5% that we gave to the Department of Health is probably
turning out to be nearer 6 or 7%.
Q319 Mr Evans: So how many pubs do you think you are going
to lose before it stabilises in the UK?
Mr Hayward: I do not think that figure will stabilise in
the next five years. I think we are
likely to see the ongoing loss. We have
currently got an estate of between 55,000 and 60,000 and I would hesitate to do
a precise calculation because the nature of the businesses are changing and,
therefore, what you might have defined as a pub a few years ago will not exist,
but pub/restaurants will and exist in a different form. I would hesitate to make an
off-the-top-of-my-head guess.
Q320 Mr Evans: But the network of pubs throughout the UK is
not in crisis?
Mr Hayward: It is not in crisis, but in a number of
places it is in serious difficulty, there is no question about that.
Q321 Mr Evans: Let us look at the smoking ban. What sort of impact has that had and how
many pubs has it closed?
Mr Hayward: As I say, when we first had discussions with
Caroline Flint, the Minister, myself and my then Chairman gave an indication to
the Department of Health that we thought that about 10%, ie, 5,000 pubs, would
probably go out of business partly as a result of the smoking ban. We are realistic about that and we supported
the introduction of the smoking ban because we believed that it was important
that we should have a level playing field across the whole field, but we said
that that was the stark position. We
were looking at the impact on Ireland and we were already conscious because we
were closer in Scotland to the position that those businesses were not going to
go out of business solely because of the smoking ban, but they were already
marginal because of other elements of economics.
Q322 Mr Evans: So, in your experience since the smoking ban
has come in, you have seen marginal pubs going out of business. What have pubs been able to do about any
problems they have had in trying to cater for the smokers?
Mr Hayward: I think what overwhelmingly the industry has
done is moved more aggressively towards food and other offerings in terms of
attracting families, females, et cetera, so they have made changes. There have been difficulties and clearly
some areas have had more difficulty than others, but in general I think it is
fair to say that we have overcome the difficulties and in some places it has
been more of a challenge than in others.
Q323 Mr Evans: The difficulties that you have looked at
right at the beginning when the smoking ban came in, the planned difficulties,
with people erecting umbrellas and little lean-tos and goodness knows what,
have local authorities in the main been a fairly soft touch, would you say, and
sympathetic towards the pub industry or have they been quite Neanderthal in
certain parts of the country?
Mr Hayward: I think there are 370 local authorities and
there are probably 370 different approaches to it. I think, if anything, and it is historical now because it has
passed, but, if I am critical of any particular element of the process, the
Department that we got least assistance from was DCLG. We asked, as did the Department of Health
and DCMS, that DCLG should encourage local authorities to prepare for a large
workload and they did not prepare, they did not through DCLG, but we had to go
to the local authorities and make sure that they were geared up for all the
applications for the different elements of external provision. There have been some difficulties and clearly
noise is an important issue, but our experience in Scotland has been that noise
is initially a big issue and then it diminishes as time goes on and you are
left with a few venues where it is a particular problem, but you work that
through with the local establishment if you have got good management and with
the local authority and the other agencies, but overall, if I was critical of
one particular element in the whole process of the smoking ban, it has to be
DCLG.
Q324 Mr Evans: Leaving that to one side, do you think that
as far as tourism generally is concerned, both domestic and international
therefore, that perhaps we could have had the same impact as far as the smoking
ban was concerned, but been perhaps more conciliatory towards smokers in some
way, shape or form, and I am looking at the French experience here that has
just come in on 1 January? If any
country, I would have thought, might be pushing jelly up a hill in trying to
introduce a smoking ban in cafes and bars, it would be France. Do you think there is going to be any sort
of difference in experience there?
Indeed the general attitude here is that the French introduce a rule and
then go on to ignore it. Is that going
to happen? They have not quite brought
it in in France in the same way that we have here.
Mr Hayward: I think Bob and I went through the whole
process of the smoking ban and we have to deal with what we have in our society
which is a British society. We might
wish that there was a French approach in terms of regulation on a number of
issues, but there is not and overall, as I say, whilst there are things we were
tearing our hair out with at the time, we have overcome them and I think that
is true of hotels and restaurants and it is also whether you are dealing with
large visitor attractions or holidays and home parks from whom you have had
evidence previously. It was quite clear
that there was going to be a smoking ban at some stage. We would have preferred managed change and
we made that clear, but, if we were not going to get managed change, then, as
far as we were concerned, it was important that there was a level playing field
for all sectors of the hospitality industry.
Q325 Mr Evans: Is the vibrant future of the pub industry in
the UK more threatened by cheap alcohol from supermarkets than it is from any
other regulation, including the smoking ban?
Mr Hayward: I think I would hesitate to say that it is
more threatened. It is clearly a factor
and there is a marked shift amongst younger people to do what we call in the
trade 'pre-load', in other words, drink substantially before they go out to the
night-time economy, and that is not only happening in effect in our sectors,
but it is also having an impact obviously on other sectors as well. What we are also seeing now, we reckon that
amongst youngsters, by which I mean 15- to 30-year-olds, about 85% of all that
age group actually pre-load, but what we are now also seeing is probably more
post-loading and that is people who go elsewhere afterwards and it is the sheer
cost of providing the service where you have got lighting, labour and all the
rest of it.
Q326 Mr Sanders: What about the Gambling Act? Does that have an impact in terms of income
from pub slot machines?
Mr Hayward: Yes.
Q327 Mr Sanders: A negative impact?
Mr Hayward: Yes, it has, and there are regulatory burdens,
there are taxation elements, and fixed-odds betting machines, so, therefore,
there are attractions in other venues where they can offer something very much
more substantial.
Q328 Mr Sanders: To whom are you losing that trade? Is it the betting shop?
Mr Hayward: Primarily, yes. Betting shops and pubs fall into the same kind of general social
medium which I think you would all recognise, and that is a serious effect.
Q329 Mr Evans: The 24-hour availability of certain pubs, has
that been a benefit, do you think, to tourism being attracted to the UK?
Mr Hayward: Yes, we do take the view that there are very
few pubs that have 24-hour licences and there are even fewer, and we have only
found two in the whole of the United Kingdom, that actually open 24 hours and
they are both in Blandford Forum, though why we do not know, and 80% of all
pubs that have 24-hour licences that do not use them are in north Dorset, west
Dorset and north Norfolk, so it is a slightly odd distribution, but it has
overwhelmingly been an advantage because people can see that we are now
providing a service without the rigidity that there was previously.
Q330 Mr Evans: And, as far as London is concerned, what is
your view on the availability of extended licensing in London?
Mr Hayward: Westminster has been incredibly restrictive
and, associated with that, that has not helped one of the big changes which I
think all MPs and the police would have liked to have seen which was what we
call a 'demographic shift' in that, if you are a theatre-goer, for example, and
you have come out of Les Mis, that
finishes at ten to 11, so you cannot, therefore, get into a pub. Now, Westminster is not allowing extensions
and the only extensions are those that exist already and they are those that
are youth-oriented. Now, if you are
going to see less aggressive town centres, you have to ensure that the people
who are older, the over 30-year-olds, are attracted into those pubs. One of the big changes that we have not yet
seen is that demographic shift of older people, in particular, in London
staying longer in pubs; they do not go there because they cannot get into them
after they come out of the likes or the theatre or a restaurant.
Q331 Alan Keen: It is encouraging older people to spend more
time in pubs then! It is a very
entrepreneurial industry right across pubs, restaurants and hotels, but, if you
are lobbying the Government, you are lobbying them to reduce tax and
regulation, but do you get enough help on a positive basis? Do the RDAs help and can the Government help
in any other way to co-ordinate and help the industry when it has got
difficulties? Is it a lack of
co-ordination?
Mr Hayward: I would make two observations in relation to
it. One is, and I say this having sat
on your side of the fence, that I do not think you can ever appreciate it
unless you have run a small business, the sheer impact of ever-growing
regulation on small businesses, and I would just say that every Bill introduces
more and more regulation and that is an enormous impact. The other thing for small businesses, which
is particularly important for the tourism sector given the amount of small
businesses, is the sheer proliferation of bodies. I actually checked with a friend of mine, I am a native from
Torquay and a friend of mine lives in Torquay who currently runs a
bed-and-breakfast. I checked with him
yesterday, he set up in business four years ago, and I asked him where would he
go in terms of looking for business assistance, and he had not got a clue. His first thought was the local council,
but, beyond that, he had no idea, and there is a sheer proliferation. If you say skills, if you say business
advice, whatever, there are just so many bodies that even somebody like
ourselves, as head of trade associations or sector skills councils, would be
hard-pushed to identify the total number of different places you can go and,
therefore, they are all trying to provide advice to a small businessman who has
got very little time because he is trying to keep his business going.
Q332 Alan Keen: So there is not any co-ordination?
Mr Hayward: There is no co-ordination, no consistency
whatsoever.
Q333 Alan Keen: So there is a proliferation of people who get
paid for offering that advice, yet you cannot find anyone for the industry as a
whole who can really help?
Mr Cotton: I would just add to that that I deal with all
the RDAs and, first of all, I see a difference in different RDAs. Those that are having some impact at the
macro-level, and there has been some really good work done on regeneration in
the same way that maybe the National Lottery has had a major impact in major
visitor attractions or sites, at the macro-level some RDAs have done some
really good work for the tourism industry, but, when it comes to individual
entrepreneurs and small businessmen in terms of whether he relates to it,
whether he understands what it is doing and whether he can get advice from it,
there is no connection whatsoever. I
would reiterate Rob's point that, for a small hotelier or restaurateur, if you
want advice, help or you have a problem, if you belong to a trade association
or you belong to the chambers of commerce or whatever, you have a point of
contact and, if you are outside of that link, and, quite frankly, in this
sector probably 70% of all small businesses are, it is almost impossible to
know where to go to get sensible advice on anything. That would be my experience.
Mr Sanders: It is not just tourism, but any business and
industry.
Q334 Alan Keen: Can you tell us something about the trends? We have got these boutique
hotels now and we have ----
Mr Hayward: Not many in Feltham and Heston, I would have
thought!
Q335 Alan Keen: We have not got a boutique hotel.
Mr Cotton: We are seeing quite significant changes in
what you might term 'the hotel sector'.
If we think back maybe 20/30 years ago, at the very lowest end, there
might be what you might term 'the youth hostel' or a small hotel, low standard,
through to a two-star, right through to the three-, four- or five-star luxury
hotel that you would see on Park Lane.
What we have seen probably in the last five years and in the last two
years accelerate quite dramatically is essentially the very bottom end
beginning to disappear altogether and, where there is a bottom end, it is being
replaced by modern youth hostel types where it is a modern minimum-service
hotel at a very low rate. Then there is
an extraordinary explosion of growth in the budget sector and budget hotels now
probably account for 140,000 bedrooms and, if I say ten years ago there were
only 5,000 or 10,000, I can tell you that some 30 budget hotels were opened in
the three months leading up to Christmas and they are essentially replacing the
bottom end of the market. It is not new
demand, but they are replacing that bottom end of the market and they are moving
into newer areas, seaside resorts, they are good for regeneration, and the
three-star market is disappearing altogether because there is no mid-market
price point. The four-star market is
now segmenting down between a corporate four-star, a boutique four-star, a
leisure lifestyle four-star and then there is the five-star luxury, so there
are different price points and different experiences that, as it were, the
customer wants.
Q336 Alan Keen: When I talk about a lack of co-ordination or
when I questioned you on whether there was a lack of co-ordination, in the
budget hotels you can rely on getting a modern, clean hotel and what is lacking
is any atmosphere. Is there no way that
those groups, and I know it is simpler to run if you do not have any involvement
in it, but there must be some potential for those hotels having links with
local companies who can provide that slight difference in the restaurant aspect
of it?
Mr Cotton: Well, essentially a budget hotel is a room
for the night in the same way that a budget airline gets you from A to B at the
cheapest price, end of story. What we
have found particularly in tourism, hospitality and leisure is that, if one
looks at the customer of 20 years ago, if you were a sort of luxury customer,
you were almost always a luxury customer whether it was at work, at home or
when you went on holiday; you always stayed in the same grade hotel. What you find with modern customers and
modern consumers is that that same person, sometimes he is happy to use a
budget hotel because it meets his need, on another occasion he will want to
stay in a boutique-type hotel because he is having two or three days away with
family, his girlfriend or boyfriend and wants that sort of experience, another
time he is happy to stay in a corporate-style hotel because that meets his
requirements ----
Q337 Mr Evans: And someone else is paying!
Mr Cotton: Someone else is paying. Finally, it may be his Golden Wedding
Anniversary and he may stay in a five-star hotel, but the same customer is
happy to go through all those different experiences. That would not have been the case 20 years ago.
Q338 Chairman: This problem of complying with regulation and
a difficulty in finding advice as to how to deal with administrative burdens,
is this something that People 1st can assist with at all?
Mr Wisdom: Clearly there is an issue with both. First of all, in the last few years the
Government has been reducing the amount of assisted training done on regulatory
burdens, so things like basic food hygiene and health and safety training that
at one time were subsidised within the system are no longer which means that
actually industry is footing the bill for that now. The impact of that is that actually some of the added value training
around customer service and management and business skills that industry may
have taken before is potentially suffering as a result. Clearly the other issue is about finding and
accessing support where it is available.
In fact, we surveyed 5,000 businesses in the sector just 18 months ago and
our findings show that 98.5% of small businesses have never accessed any
funding support on skills. Actually,
when you consider that something like £600 million is being expended by
learning and skills councils, regional development agencies and other government
agencies on tourism and hospitality skills in the UK, that is, I think, an
extremely worrying trend and actually it is something that industry clearly
needs help on in terms of understanding where it can access those things. People 1st has actually developed
a communication tool called 'UK Skills Passport', UKSP, which is actually
available that does actually help industry find where that funding support can
be found and actually does point industry to what are the sort of best qualifications too that fit various job
levels within the industry. The issue
for us, as always, is how you reach those businesses and actually, without the
support of trade associations, for example, the chances are we never will. Indeed, the regional development agencies
have a very important role to play in terms of reaching the small and medium
enterprises which comprise 80% of tourism businesses. The way the workforce falls, 45% of the workforce in what we
would classify as tourism is in the biggest 280 businesses UK-wide and 45% sits
in effectively small and micro businesses, and the small and micro businesses
are the ones that are the most difficult to reach.
Q339 Mr Sanders: Turning to London 2012, what estimates have
you made regarding the impact of the Games on the hospitality industry both
during the Games and in the legacy?
Mr Cotton: As far as 2012 is concerned, I got involved
some several years about whether we should support a bid for 2012 or not in the
first instance, and we had a fairly lengthy discussion in the hotel sector as
to whether we would support this bid or not.
When I say that, my principal members have catered for every Olympic
Games since 1948 and are currently hosting all the main hotels in Beijing for 2008,
so my major members have a lot of experience of what it takes. If you are a major hotel group with 15 empty
hotels in Paris and seven full hotels in London, you might take a view as to
whom you want to win the bid. We took a
collective view that we actually wanted London and Britain to succeed in this
bid, so I got the hotel industry together and we put together one contract in
support of the bid for 38,000 bedrooms, one contract, the same conditions to
every hotelier in London, so we took a collective view that we were very keen
on London winning, and we took the view for two or three reasons. One is that we felt that, for the long-term
growth and success of tourism for London and Britain, we needed a major
investment in our transport infrastructure and our airport access. That was absolutely critical if we wanted
tourism to continue to flourish into the long term and we felt that, if we had
the Olympic Games in London, there was a fair chance that we might start to get
some real investment in our airport infrastructure, transport infrastructure,
rail access, et cetera, so that was one point.
Secondly, we took the view that, whilst London has been successful and
is successful and the success of London impacts on the whole country in tourism
terms, we were looking to the future and we could see that, if we could get the
whole of the east side of London regenerated and thriving, that would add to
London being a successful place to do business down the track. Thirdly, we did recognise that with the Olympics
comes enormous exposure. The fact that
there are going to be 20,000 journalists here during the Olympics is an
enormous opportunity to put your best foot forward and show what we have to
offer. Those were the three driving
reasons for supporting that, bearing in mind we do have real knowledge and
experience that 2012 itself will not be a busy year, so let us get this in
context. London has something like
135,000 bedrooms, whereas, if you look at Barcelona, if you look at Sydney, if
you look at Athens, they have between 18,000 to 25,000 bedrooms, so it is a
totally different order. If you look at
visitors to London, London in July/August of any year will be catering for 2 to
2.5 million visitors. The Olympics at
best perhaps will bring 600,000. 350,000 visitors go to Wimbledon in the ten days/two
weeks. We are well used to dealing with
big events. The year itself? No big deal. It is the potential of raising the profile of London and Britain
and of getting this investment in transport infrastructure and the east side of
London. I would add one or two other
things, and I am sure Brian will comment: yes, of course it gives us an
opportunity to focus on raising skills and those key things we want to do in
improving customer service. I
personally want to use the opportunity - and I have ensured it is in the
Olympic strategy for the Government - to promote British food, the probity of
British food and of supplying it locally grown. We have a great opportunity to show that we can showcase British
food, at its best, right across the country, sourced from Britain. We have a great variety of ethnic
restaurants. Most of their supplies can
be sourced locally. That is why I am strongly
in support. I think there will be
benefits. Whether there will be
a net £2 billion legacy, I would question, but I do see the upside
and strongly support it.
Q340 Mr Sanders: What plans do you have to collaborate with
London's 2012 volunteer programme, given the involvement of People 1st with the
London Skills Strategy?
Mr Wisdom: First of all, perhaps I could come back to
talk about our approach to 2012 and how we aim to support the tourism industry
into 2012. On the back of the research
we did of 5,000 businesses, we pulled together a national skills strategy. We worked very closely with the Department
and together with industry on that and we published it back in March of this
year. It lays out a ten point plan for
upskilling the tourist workforce in time for 2012, using that as a milestone
along the way. As part of that, Ken
Livingston also launched a London version earlier this year. Particularly in the context Bob has just
mentioned of customer service, the great opportunity is to improve
international perceptions of customer service in this country and tourism, a
visitor-facing economy, is in the frontline of that. People 1st is currently working in partnership with the London
Development Agency and Learning and Skills Councils, as part of that plan to
research world-class customer service, with the aim of putting in place
subsidised customer service training, widely available to industry, in the two
years in the run-up to 2012. That
should bring a significant advantage to a lot of businesses which currently do
not have access to that form of training.
We are also looking to ensure that one of the biggest areas of skills
shortages is dealt with appropriately during the next five years. Currently there are something like 30,000
practising chefs and cooks in the UK who have no qualification at all and a
further 50,000 who have only the equivalent of a basic food hygiene
certificate. That means there is
a significant skills shortage in the industry today and, as we have been
hearing, demand for food has been growing.
Whilst the pub sector itself may be in decline, sales of food within the
pub sector are growing and there is increasing demand. There is increasing demand as a result of
social changes for more authenticity in provenance and for the preparation of
food from scratch. Today we do not have
a delivery system of chefs that meets the demands of the tourism industry. We need to fix that. To turn to the volunteering programme: that
is effectively linked to another Sector Skills Council, SkillsActive, because a
lot of the volunteers are coming from sports clubs in the UK. There is a pre-volunteering programme,
which is about giving the unemployed employment skills, and we are contributing
to that in terms of the key fundamentals that people should have when they come
into the hospitality, leisure, travel and tourism business. Some of those are around giving people the
skills in things like good hygiene and health and safety which are currently
not supported through subsidised education.
In terms of 2012 and our approach to volunteering, our involvement is
not that great but, across the span, in terms of preparing tourism for 2012, we
have a significant strategy in place that is being developed as we speak and I
am happy to give the Committee copies of that strategy.
Q341 Adam Price: The public perception would be that the
hospitality industry generally is at the bottom of the wages league. Is that a fair assessment?
Mr Cotton: If you are looking at perception, there are
several issues. If you take an
employment payroll of two million, give or take, in tourism, hospitality and
leisure, it obviously exists on a very flat pyramid. A large proportion of those two million people will be working at
the lowest level and at rates which are minimum wage or just above, so, yes,
a lot of people do work at that level - in the same way that perhaps the
retail sector works as well. On the
upside, for those who start in this sector at the lower level it is relatively
easy to make rapid promotion, and mid-ranking salaries and above now compare
very favourably with those in almost any other industry. That was not the case ten or 15 years
ago. Maybe our failure is in not
getting that message across, that it is not just about joining the sector for
a job but that one can join the sector for a proper career with good training
prospects. It has been a failure
of the industry perhaps to get that message across.
Mr Wisdom: I think there are some unfair perceptions of
the industry. The reality is that 15%
of the workforce are on the minimum wage in these industries. One in five jobs in the industry are
management jobs. That means clearly
that there is a progression route that is very seldom seen and within our UK
skills passport we have opened that up so that people can see the galaxy of
career options that are available to people in this sector. There is also clearly an issue, which is
unusual in this sector, where some people - I think it is about 14% - do
actually sit below the minimum wage.
That is usually driven by three things.
One is the offset of accommodation - because there is a significant
amount of accommodation provided within the industry. The second is where people are in workplace full-time training
schemes, like apprenticeships. This
industry has the most apprenticeships of any industry sector currently. The third is the number of young workers
below the age of 18 who are working in kitchens and things part-time. Reality is sometimes not as bad as it is
painted. The truth is that it is a
pretty small sector of the workforce that is at the minimum wage here and the
opportunities and the levels of pay at management level are pretty
competitive.
Q342 Adam Price: What you have just told us contrasts a little
bit with the figures that we have seen.
A study by Oxford University, commissioned by the British Retail
Consortium, claimed that 96% of workers in the hospitality industry earned the
national minimum wage. Maybe you could
share your views.
Mr Wisdom: That is wrong. Clearly the fact that one in five jobs are management jobs will
tell you that that 96% cannot be the right figure. I am sure that my colleagues here would even more strongly ----
Q343 Adam Price: Maybe the issue was whether it was minimum
wage or above, so we will check those figures.
Mr Hayward: I have the study here and the figures you
have there are incorrect. That is
a misquote from it. I will provide
the Committee with the full study.
Q344 Adam Price: We are grateful to you for that. On the issue of the offset of accommodation,
what protection is in this to make sure that people are not being exploited? Are there standard rates?
Mr Cotton: It comes up every year. I have been involved in helping set the
minimum wage every year since it was started.
In fact I have a nominee who sits on the Low Pay Commission. In the very first year there was a very
strong view of, as it were, removing accommodation provision altogether -
perhaps driven by the trade union side of tied housing and the problems you get
with tied accommodation. We argued very
strongly that in certain rural hotels and certain areas it was important to
keep that. They did keep it but they
only kept it at a certain level. Every
year we have argued to keep it and they have uprated the set allowance by the
increase every year. It is interesting
that with the influx of foreign workers in the last two or three years
accommodation has become a much more important issue. It is a vital issue now, if you are a rural hotel,
particularly, and you want to get staff, to be able to provide accommodation of
a reasonable quality at a sensible price, otherwise these workers are priced
out of the local market and hotels would not be able to find labour. It becomes more important to have good
accommodation and the numbers have increased dramatically in the accommodation,
but the rules are very clear as to what you must deduct, how much you are
allowed to deduct, what it must include and what it cannot include, and it is
reasonably strictly enforced. When the
enforcers of the minimum wage go around to hotels, in particular, the first
thing they look for is the accommodation offset and what is being offset as
much as the actual rate of pay itself.
Q345 Adam Price: You refer there to the increasing importance
of migrant workers. Could you give any
figures on that?
Mr Cotton: The figures are what you make of them. I have done two surveys myself within the
last year amongst my members. I did one
in central London within the last six months - and this includes most of my
members in central London, where probably every branded hotel is in membership,
a very high membership - and 83% were from overseas. 83%. We broadly think
there are about 350,000 people in the hospitality industry in central London
and around 80% are from overseas. If we
look outside London - and I am talking about from Edinburgh, Glasgow, Bristol,
Cardiff - right across the country - probably 60% in our sector are from
overseas. This is predominantly from
central Europe but not central Europe alone.
There are extraordinary numbers of French, Spanish, Italian people here
as well. They are from the EU
predominantly.
Q346 Adam Price: That covers the pub sector as well, does it?
Mr Hayward: It does, broadly. We do not have the capacity to do the detailed stats but
experience shows that we may be marginally lower but we will not be
dramatically different. Bob made the
comment earlier on about where is the split between a pub, pub/restaurant and
a restaurant. You are quite often
'struck' in London if you get served by a British person in either a pub or a
restaurant. That does not mean to say
the service is any worse, and in many cases, tragically, it is better - which
is a comment on our society. It is not
just our sector; it is in terms of the service sector in general.
Q347 Adam Price: In terms of the visitor experience, people
are coming to the UK because they are interested in Britain and British
culture. Maybe you could say that
London is a different case, London is a global, cosmopolitan city, but if
they are going to a hotel in Scotland or Yorkshire or wherever they go and they
do not meet anybody who is from that place, is that a problem in terms of the
tourism product?
Mr Cotton: If one is going to spend a weekend at a hotel
in Scotland for a particular experience, one may argue that one would like to
have some Scottish experience, whether it is the bagpipes playing or a Scottish
accent welcoming you. We find that
people want a good value experience - good service, good food, good
accommodation - and to be well treated and, quite frankly, it is not an issue
at all. From front of house to
reception to waiting staff to accommodation staff, you want people who can
deliver good service in a friendly manner, and to get the price right.
Q348 Chairman: Are you suggesting that the only way you can
do that is therefore by employing Eastern Europeans?
Mr Cotton: Let me be very blunt about this: the people
we have had from central Europe have been the best source of labour this
industry has had in 100 years. It has
done more for improving standards in this industry than anything produced from
our local schools and colleges, and that is because of the skills, the
motivation and the fact that they want to work and they want to do the job as
best they can.
Mr Wisdom: There are some other factors involved.
Q349 Adam Price: You have given up on local workers then.
Mr Wisdom: No.
There are some other factors involved here as well. The first is the demographic shift which has
happened in this country, which means that effectively 70% of the workforce
that will be required in 2020 is already in work and there is a declining young
population at this time in this country.
The reality of that in an industry that has a very high turnover of
staff - and this industry has double the level of turnover of staff of other
industries - means that you do not have that young population. This industry employs three times the number
of young people that other industries employ in the UK. If that group of young people are not there,
where are you going to fill the gaps from?
Clearly an immigrant workforce becomes almost a necessity. That immigrant workforce happens to be
supplying this country at the moment with people who are more highly
skilled. For example, you will meet
lawyers from Poland serving behind the bar in hotels because they can get
employment here and they cannot get employment in Poland. The reality is that those workers are
unlikely to stay working behind the bar in the long term and therefore we have
to focus at the same time on our own indigenous population. We have to develop their skills because the
long-term future depends on that indigenous workforce still being there. In London, I would agree, there are round
about 70% - from the figures we have, and we represent travel companies and
tourism companies as well, which is perhaps the reason why there is a
difference - and outside London we are looking probably at about 15%
international workers across the whole range.
Obviously there are many more in the cities. We are still relying heavily on producing skilled workers from
this country too and in the longer term that will become increasingly
important.
Q350 Adam Price: Is the reality that you have to raise the
wage rates, even at the bottom, if you are going to attract local workers? Eastern European workers may be attracted by
the minimum wage but if you are going to compete for local workers you will
have to take it up to a higher level.
Mr Wisdom: I think it is twofold. One, you have to create the opportunity, and
you have to show the opportunities that are already there for people to
develop. People do not have to stay on
the minimum wage for very long in this industry. They are not always aware of the opportunities that are there and
they are not always aware of where they can get the skills to get those
opportunities to grow their careers in the industry. There are some fantastic careers in the industry to be had - lots
of them actually, more than in many others - and the failings have been in
not showing that career development structure that is available or in not
retaining the staff long enough to give them the opportunity to take those
opportunities. As an industry,
certainly moving towards 2012 we need to pay much more attention to upskilling
our existing workforce and enabling them to take those opportunities that are
available to them and also ensuring that the skilled workers that we are
getting from Eastern Europe - and we should welcome them, because this is all
about having skilled workers in the economy - are also attracted to stay, so
that if I am a lawyer but I can get a really good career going in this sector
then I will stay and take it.
Q351 Philip Davies: I honestly cannot make neither head nor tail
of what you are telling me. You have
said there are not enough indigenous people to fill those posts yet we are
always being told that there are one and a quarter million 16-24 year-olds in
this country who are neither in employment nor education or training. It strikes me that there is a large number
of people in this country who need jobs who would be perfectly capable of doing
them, so I do not understand that bit.
Then we are told that these people coming in from Eastern Europe or
central Europe are the best thing since sliced bread, yet the People 1st report
said that lots of employers believed that their staff skills were not up to
scratch. Its biggest concerns included
communication skills and language skills and it strikes me that that is going
to be exacerbated by employing more and more migrant workers from abroad. Then we are going to have this huge amount
of subsidised customer service training for everybody before the Olympics. What on earth is the point of everybody
understanding the niceties of customer service if you cannot even communicate
in the right language with people? I
really do not follow where any of you are coming from on this.
Mr Wisdom: The People 1st report you are referring to
does rightly highlight - and I think both my colleagues would agree - that
communication skills and team-working skills are two of the key skills that the
industry is looking for and is not happy that it has today. It is also true to say that 63% of employers
that we have surveyed are not satisfied that their staff had sufficient
customer service skills to meet the expectations of their customers today. The reality is that we still have a long way
to go in this country on customer service, irrespective of where the employee
comes from. In terms of language
skills, clearly there are some issues created by the influx of an immigrant
population around language skills.
Employers tell us, by and large, that those are very quickly
overcome. Indeed, many employers help
their employees acquire those skills very quickly and are investing in
acquiring those skills. Where those
skills are not in place, then clearly those businesses will suffer as a
result. Communication skills are more
than just language. Communication
skills are about the ability to work with other people within business; they
are about the ability to be able to put yourself in someone else's shoes and
the ability to articulate what the needs of the customer are. It is those issues that industry wants
addressed. That is not really an issue
around where the workforce is coming from.
Q352 Philip Davies: What is wrong with one and a quarter million
16-24 year-olds who are literally sitting on their backsides doing absolutely
nothing? What is the problem with those
people? Are they unemployable or do
they just not want to work in your industry?
Mr Wisdom: I will give you one example why some of those
people are not finding work in our industry.
If you want to work in a commercial kitchen, there are some fundamental
things you need to have. You need to
have some communication skills, you need to have a basic food hygiene
certificate, you need to have a health and safety certificate. If you look at how those people are being
prepared to work by Jobcentre Plus or whatever, you will find none of those
things being given. If someone had come
to me when I was running a restaurant chain a few years ago, unemployed,
with those things in their hands and said, "Give me a job" I would have
given them a job.
Q353 Chairman: If I arrived here from Lithuania I would not
have any of those things.
Mr Wisdom: No, you would not and most of our employers
would then train people to do it. But
if the individual is not self-motivated enough to go out and find those things
- which I think is probably the point Bob will make in a minute - that is
the key difference. Someone coming in
from Lithuania is very driven to get that training.
Q354 Mr Evans: This is quite damning, is it not?
Mr Hayward: Yes, it is.
Mr Cotton: I would go back to the point that we are
working with the Work & Pensions Department to give an opportunity to
15,000 youngsters on the east side of London, to try to get some of these 16,
18, 20 year-olds into job experience by giving them 28 days' experience. We find that the biggest problem is the
motivation issue. People have to want
to turn up every day to do the job.
Secondly, we have to look at the benefits system at the bottom end of
the market. A guy coming here with his
family from central Europe is strongly motivated to want to improve himself or
maybe send money home. He is highly
motivated to do something. The local
people, we find, do not have the motivation to turn up each day and, quite
frankly, once they have worked more than 15 hours a week their benefits start
to be removed, so there is no motivation to work more than 15 hours. Against that there is the migrant
labour. Those are the two key
issues. It is this motivation
issue. I agree with Brian: in the long
term we have to find a way that motivates those people to get involved, to get
engaged in work. That is a challenge
for us all. But if you are an employer
with a very keen person from Poland who is bright, smiling, wants to work,
turns up every day and will work 45 or 50 hours a week set against a person who
turns up one day, does not turn up the next day, is not really interested, it
is a no-brainer. That is the challenge. That is the challenge for you as well as
ourselves.
Chairman: That could lead on to an entire day's debate
on welfare reform but I think we should probably end it there. Thank you very much.
Memorandum
submitted by UKinbound
Examination of Witness
Witness: Mr Stephen Dowd, Chief Executive, UKinbound, gave
evidence.
Chairman: I would like to welcome Stephen Dowd, the
Chief Executive of UKinbound, and invite Mike Hall to start.
Q355 Mr Hall: Good afternoon. In some of the information that has been provided to the
Committee we see that inbound tourism is outstripping domestic tourism. The latest figures for 2005-2006 show real
growth whereas in the seven years previous to that the inbound tourism market
was virtually static. What is the reason
for that?
Mr Dowd: I think this was really a rebound from the
period 2000-2001, where we had the foot and mouth epidemic, followed by the
9/11 event, so you saw immediate growth from there onwards. The period 2005-2006 was pretty much the
peak of that recovery. We had quite
a bright start to 2007 but the second half has been much more difficult
and we are now looking at a much more difficult situation.
Q356 Mr Hall: You have almost anticipated my second
question. Do you have any more
up-to-date figures for 2007?
Mr Dowd: The latest IBS figures that came out for
October showed that the three months prior to that were about 1% down on the
previous year. Looking at the whole
figures now, we estimate that this year we are looking at a drop of about
400,000 long-haul visitors for this year, with a small gain of about 100,000
extra short-haul visitors from Europe; so, net, about 300,000 less, which is
about a 4% drop in the total numbers.
Q357 Mr Hall: What do you think the reason for that is?
Mr Dowd: There are many reasons for that, I am
afraid. First of all, the value of
sterling against the dollar is vitally important. For most of last year it was over two dollars to the pound and
this severely curtailed the North American market, which is our largest single
market, but those countries where the currency is linked to the US dollar also
suffered quite badly. That is why the
long-haul markets have been particularly hard hit. Secondly, there was a doubling of air passenger duty in February
this year. Particularly for long-haul
flights, where it has now gone up to £40 per passenger, we have found that has
had a great impact on long-haul travel.
Initially the impact was not too great but we have seen it increase as
the year has gone on, with other factors coming into effect. Also, we had the credit crunch -which you
all know about. That has damaged the
North American market significantly, where consumer confidence is at a 30-year
low. When Americans are nervous about
their finances, they do not travel. Add
to that the fact that it is an election year, which also impacts on what is happening
in the next 12 months, we think that is going to curtail things as well. That is part of the reason why the second
half of this year has not been so good and why we think that 2008 is also going
to be a very difficult year.
Q358 Mr Hall: Will there be some compensation from the fact
that the pound is weaker against the euro?
Mr Dowd: Absolutely.
Yes, the same trend that we have seen this year will continue into next
year. There is some hope that the euro
will continue to appreciate against the pound next year and that should bring
more European visitors. The problem we
have is that the average short-haul visitor spends less than half the amount of
money here than one long-haul passenger spends. If we are losing 300,000 long-haul passengers and we are gaining
100,000 short-haul passengers, we end up with a net revenue reduction.
Q359 Mr Hall: In terms of controlling the variables, that
is quite difficult, is it not?
Mr Dowd: Yes.
Most of these are way beyond anything we can do as an industry to
influence. All we can do is to try to
offer our products at the best possible prices. That is what we have been doing for a number of years. As you have probably seen, there has been
quite a bit of consolidation going on.
Businesses have worked very hard to strip out all extraneous costs and
to reduce their margins to make sure they can still attract visitors here. That has become increasingly difficult.
Q360 Mr Hall: A very significant part of the business, from
evidence we heard earlier in this session, is that of business tourism - the
high end, the very high value business.
The UK seems to do very well out of that and we heard evidence earlier
about the UK being a magnet. Is there anything further we can do to safeguard
and grow that business?
Mr Dowd: That is a good question. I think most of those are beyond our
control. Businesspeople will travel if
they require to. As a downturn in the financial
markets for 2008 seems likely, the chances are we will see less business
travellers. Companies who are under
pressure will also limit the amount of travel their employees can make. I think we are going to have a much more
difficult scenario for 2008.
Q361 Mr Hall: When we have seen the growth for 2005 and
2006, is there anybody who should take credit for that?
Mr Dowd: VisitBritain, our national tourist board, has
done a very good job on our international marketing and we do support their
efforts fully. They have done well,
particularly, in dealing with prices.
As you probably know, I am a member of the Tourism Industry Emergency
Response Group and we have worked very hard to ensure that our response to each
crisis as it has come up has been dealt with in the best possible way. We have used the intelligence that VisitBritain
has gathered in markets around the world to make sure that our response was
appropriate and we have got pretty good at this over the years. We have had to. Putting that on the table and using the press and using the media
to put out positive messages about the United Kingdom, has helped enormously to
restore confidence in the UK as a destination and to attract people to come
here. I think you heard Bob Cotton
earlier allude to the rebound effect on cities that have been devastated by
terrorist activities. People want to
support you if they possibly can.
Q362 Mr Evans: If cheap airlines did not exist, do you think
the people who float around the sunnier climes of Europe would holiday in
Britain?
Mr Dowd: Probably not. The trends have always been that UK citizens would prefer to
travel abroad. I think the low-cost
carriers when they were set up were really answering that demand from the UK
citizens, which is why the UK is the European leader in low-cost carriers and
most of them are based here. With the
model that they have, the point-to-point flights, the model is that they will
market to their home market first, because that is the easy one to get, and
they will then take people abroad. In
recent years we have seen that we are reaching saturation point through many of
the airports on many of these routes, so these airlines are now marketing to
their target destinations as well to fill the aircraft and make sure they
continue to grow the business. That has
benefited us by bringing inbound visitors from those cities. Some of them are cities you would not expect
to generate business for the UK because many of the visitors have probably have
never even heard of the UK or know nothing about the cities they will be flying
into, if they are flying into Leeds, Bradford or Manchester. A net benefit, I think, is starting to show
for the UK in our sector.
Q363 Mr Evans: That is a good point: do you think some of
the airports they do fly from, particularly in the Midlands and the north west
and east of England, ought to be doing a lot more - maybe through the Regional
Development Agencies, the local authorities - to sell those areas as tourist
destinations for people in Spain, Portugal and the various other places that
people go to?
Mr Dowd: I think there is a move afoot now, in that
people are recognising that these direct links are important and they are
establishing them. The trouble we have
with the Regional Development Agencies is that they all do things in different
ways. It is quite confusing for perhaps
some of the destinations to know how to work with them to market the
places. I would like to see some
more clarity in that if we could.
Overall, I think it is great that we are raising awareness of the
regions of England and Scotland and Wales to these destinations. It can only be beneficial in the future.
Q364 Mr Evans: Mike mentioned business travel, which is
important, but all inbound tourism has to be useful. A lot of visitors will come through Heathrow. What is your opinion of Heathrow? How bad is it?
Mr Dowd: How bad is it? Sadly, I believe that Heathrow as it is today is a national
disgrace and Gatwick is, frankly, not much better. However, I do think it is very unfair to blame the current
management of those airports, Ferrovial, entirely for this. While normally in favour of private enterprise,
as you would imagine, I do believe our national airports are strategic national
assets and perhaps they should never have been privatised in the first
place. What is worse is that, as a
private company, BAA spent, I believe, a number of years fattening themselves
up for sale and focused too much on the profitable retail elements of airports
and not enough on customer service and the comfort of the people using the
airports. I think Ferrovial have been
sold a pup and are now unable or unwilling to invest the money that is
necessary to bring the airport up to the standard that we should expect. I think we need to go back to basics as far
as airports are concerned, in that we should have looked for safe, inexpensive,
quick, efficient and comfortable transit of passengers. That should have been the priority
here. Plentiful clean and working
toilets are essential. Comfortable
waiting areas are important. The
ability to get a meal and maybe something would be good, but luxury shopping
malls are completely superfluous and should have nothing to do with the running
of an airport.
Q365 Mr Evans: Do you think BAA should be split up? Should Heathrow be separate from
Gatwick? Would that lead to an
improvement for the customer?
Mr Dowd: Whether BAA should be split up or not is, I
think, frankly, irrelevant. What is
more important is whether our national interest is being best served by a
company that is driven by profit from retail activity? Whether it should be split up or sold or
whatever, I think we should perhaps think more in terms of "What are we looking
for here?" Maybe we should have
somebody to operate just the security, handling/transit of passengers, air
operations and the estates and then somebody else who runs maybe the retail
side of it. That might be a better
model to get what we need, which is to look after our passengers more
effectively.
Q366 Mr Evans: Schiphol Airport is clearly doing things
right: they do not have the same problems there; they certainly do not have the
same reputation. Charles de Gaulle used
to have a bad reputation, now it is a lot better. Frankfurt has a good reputation.
It seems as if we are losing out a lot on transit customers coming through
the UK - indeed, then people get a taster and want to come back. Security seems to have been a bugbear of the
airports over the past two years. Do
you think there is any justification for the way in which the customer has been
treated during the two-year period?
Mr Dowd: Not at all.
I think it is totally inexplicable.
When we had the problems two years ago at Heathrow, we were assured that
they were going to employ more security staff, and it was going to take six
months to recruit and train them and thereafter we would be fully manned, and
yet I go through Heathrow and Gatwick fairly regularly and I still see lots of
very expensive machines for scanning passengers which are idle while there are
long queues. Frankly, I am appalled
that it is allowed to continue.
Mr Evans: Thank you.
Q367 Chairman: Could I ask you now about another aspect of
international comparison: the cost of visas.
We have received evidence that, because of the significant increase in
the cost of visas, Britain is being left off the schedule for those doing a
tour of Europe. How significant a
problem is it?
Mr Dowd: It is a big problem, particularly in the
developing market in which we have to invest for the future. The growth of international travel is in
developing markets such as India and China, and over the last two years we have
seen a doubling of the price of a visa.
It is now £63 for a visa. That
simply does not compare very well with the rest of Europe. You can get a Schengen visa - and from 1
January this year there are now 21 countries that you can go to with one visa -
which costs, on average, 40 euros. We
have doubled the price at least of that.
We need to look at that very carefully to make sure we are not putting
additional barriers in the way of people choosing the UK as a destination of
choice.
Q368 Chairman: Do you see any sign of the Home Office
listening to that argument?
Mr Dowd: Not really at this time. UKvisas has just been absorbed into the
Borders and Immigration Agency. We had
made some good headway with them in explaining the difference between migrants
and tourists but I am concerned now, with BIA taking over. Their focus is very much on controlling
migration and I think there are some fundamental differences. I would want to say straight up that we
certainly do not support unrestrained immigration and we support the current method
of risk assessment for potential visitors from citizens of those countries
where the Foreign and Commonwealth Office has concerns. We fully support that. We have a problem with the way the cost of
those visas and that risk assessment is allocated. The Home Office and BIA simply have not grasped the differences
between a migrant and a tourist. As a
guideline, I would use the rule of thumb "Who benefits?" If somebody is coming to the UK to live, to
work, to get married or to have an education, they will gain some substantial
benefit from that. It may well be
economic benefit, but they will gain substantial benefit. If a tourist comes here who has already
passed through the system and is deemed to be a genuine tourist, they spend
their hard earned foreign currency here, we benefit from export earnings and
then they return home. If they are
deemed to be an acceptable risk, we should treat them differently simply
because we benefit more than they do. I
think that is where the balance has got a bit lost.
Q369 Chairman: Given that a large amount of our immigration
control is at the border, is it realistic to suggest that you could have a very
short four week visa at low cost which it would be easy to obtain? Would that not present an opportunity for
those people to come in and then not leave again?
Mr Dowd: I have served on the UKvisas Tourist Visa
Taskforce for the last two years and we have tried to get something like that
put in place. The problem they are
having is that the cost of risk assessing potential visitors is very high and
they are bound by a Treasury rule which says that they must recover all the
cost of their operations from the visa fees they charge. That is why the visa fees have risen so
dramatically in the last couple of years.
Until we break that rule, I do not think that is going to happen
because, whether somebody is coming for 30 days or 60 days or six months on
their visa, the cost of the risk assessment is exactly the same. We must break that Treasury stipulation of
full cost recovery and think about a graded approach so that genuine tourists
have a much more reasonable price. If
that means putting up the cost for those who wish to come and live here and
work and gain economic benefit, then we would be all in favour of that.
Q370 Chairman: You have been critical of the Home Office and
the Treasury. Can I turn now to DCMS,
which you said, in October, had "completely lost the plot" in relation to the
funding settlement for VisitBritain.
Could you perhaps expand a little on why you think VisitBritain deserves
to receive rather more than DCMS proposes to give it?
Mr Dowd: First of all, regarding me being critical, I
have to say to you now that I am normally a very positive person and I am happy
to give credit where it is due. It gives
me no pleasure to be critical of any of these government departments or,
indeed, DCMS. I just wish there was
more from DCMS that I could applaud or commend. Sadly, DCMS has given tourism, and specifically inbound tourism,
little if anything to be happy about during my tenure in this role. Most of my criticism has echoed what was
said by the last CMS Select Committee report in 2004 and, frankly, little has
changed. At that time, that report said
that the attitude of DCMS was a laissez faire attitude. That was probably right at the time but
things have become a bit worse since then.
I would, however, point out that I did congratulate James Purnell on his
handling of the flooding problems last summer: he was genuinely engaged; he
acted promptly to ensure that tourism was considered very early. I would welcome more opportunities to be
more positive. You then asked me about
VisitBritain. VisitBritain's funding
this year was, I think, a dreadful mistake.
It really is not good enough for the national tourist board, which by
international standards is modestly funded, to have their funding cut just as
we come to leading up to the Olympics in 2012.
Global competition is now more fierce than ever before, and, if we are
going to be successful, and if we want to have a real inbound tourism industry,
we have to have destination marketing.
That is not something that the industry can do for itself. Quite simply, they are predominantly small
businesses, and it is impractical and unrealistic to accept that they could do
destination marketing themselves. It
has to be done by a central national body and that is what VisitBritain
is. These savage cuts mean that we will
be facing less marketing from VisitBritain to the international markets over
the next three years. It is not just
the staff in London. One of the things
DCMS seem to think we can do without is the international offices, yet we feel
they are absolutely vital to what VisitBritain does. They provide a local contact point for the people who are out there
selling Britain to those countries.
They can give them intelligence on what is going on. They could help with strategic marketing and
tactical marketing in those particular areas.
To lose that would be a fatal mistake.
I would again refer back to the TIER Group: we would not have been able
to respond to the terrorist atrocities that took place in London if we had not
had those offices around the world who were able to feed back to us how Britain
was perceived and thought about in those countries during that difficult
time. It was absolutely crucial.
Q371 Chairman: VisitBritain are going to have to make cuts
in some areas. In which areas should
they make cuts?
Mr Dowd: First of all, could I make an
observation. I am worried why this
review that VisitBritain has been asked to conduct has come about following the
announcement of the Comprehensive Spending Review. I understand that VisitBritain submitted their CSR bid over a
year ago and I just wonder, if that bid was so out of step with what DCMS
thought they should be doing, why did they not ask for that review then, so
that it could have been completed long before the CSR announcements were
made? It strikes me that, now the money
has been divvied up, they are looking for something to give a patina of legitimacy
to that cut. That is what worries me
about the review. I have received
assurances from the Chairman of VisitBritain that there will be an independent
review. I hope that comes to the
conclusion that we need more money for VisitBritain, not less. As to what they should do, I think it
is really quite simple: they are going to have to go back to basics as
well. Destination marketing, both above
the line and below the line marketing, should be their priority, as well as
maintaining on-territory representation.
If that means they have to cut some non core activities, then that is
what they are going to have to do. The
hotel quality assurance scheme dealing with the star rating system is something
they could move out to private hands or to another body. Maybe that is something that should be
elsewhere. Maybe the RDAs could take
it over.
Chairman: Thank you.
Q372 Philip Davies: Your view that DCMS has completely lost the
plot is obviously shared by your members, because the poll we did recently found
that 14% felt that DCMS should retain responsibility for tourism and 44%
thought it should be moved to another department. To which other department should it be moved?
Mr Dowd: The final bit of that survey probably answers
that, which is that 42% believed that it would make no difference where it went
because of the low esteem in which tourism is held.
Q373 Philip Davies: So every government department has lost the
plot, has it?
Mr Dowd: No, no, not at all. You are putting words into my mouth. I am saying that, if it is moved, then we have to start the
education process immediately, from day one, with a new department. At least DCMS has some basic understanding
of what tourism is about. That is of
some benefit. Moving to another
department I do not think is the answer.
I think the answer is getting the officials within DCMS, and a dedicated
tourism minister who will spend the whole of his or her time dealing with
tourism and not the many other issues that currently are dealt with by the
minister.
Q374 Philip Davies: In a number of different inquiries we have
done on all sorts of subjects, one theme that we come across time and again is
that people do not think that DCMS has any particular clout in government; that
it may well be sympathetic to various different interests and industries but it
does not have the clout within government.
Is that what you feel, that it might be sympathetic to tourism but it
does not have the clout? Or do you just
think it is not sympathetic to tourism at all?
Mr Dowd: I have to conclude that I think there is a
lack of understanding or a will to understand tourism in DCMS. They are very much focused on the culture
and media. I think they feel those are
much more interesting topics for their time and effort than tourism Perhaps I could give you an example. For us one of the worst times was in
February 2005, when the Home Office and UKvisas announced that visa prices were
being increased by about 85% overnight.
There had been no prior consultation with the tourism industry or even
communication of their intentions to the tourism industry. We only found out about it through press
releases, so we thought we would turn to DCMS and find out what was going on,
only to learn that they had found out about it through the same press
releases. If DCMS does not understand
what is happening with UK visa prices, which is a matter fundamental to
tourism, then we wonder what else is going on.
I had a letter from Richard Caborn, 12 months before that increase,
in which he promised to raise the matter of the price of visas with the Home
Office, and yet they still did not deem it necessary even to inform DCMS in
advance.
Chairman: On that note, may I thank you very much.
