Scott Wright: Tourism has huge battle on its hands as cost-of-living crisis derails recovery

But even though those dark days are (hopefully) behind us, they have been followed by a tidal wave of challenges in the wake of the pandemic, some of them inter-connected and a few that would have been almost impossible to foresee.

The shortage of staff sparked by Brexit and now being felt so keenly across the broader hospitality industry was widely predicted, of course. And the supply-chain difficulties that have arisen because of lockdowns began to become clear as economies reopened after lockdown.

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But Russia’s war in Ukraine, and the subsequent impact it has had on the price of energy, fuel and food that is contributing so much to the soaring inflation we are seeing now, is unlikely to have come into the thinking of tourism chiefs as they figured their way out of the pandemic.

Neither would have the wave of industrial unrest now sweeping across the country, bringing disruption to services such as the railways, as workers fight against cuts and campaign for pay settlements that can help mitigate the surging cost of living.

Yet, that is the reality of life in the middle of 2022, and it has presented a catalogue of difficulties that are making it extremely hard for the tourism sector to recover from the pandemic.

The challenges have been laid bare this week by the latest state-of-the-nation survey by the Scottish Tourism Alliance, published on Monday.

Reflecting the views of more than 700 tourism enterprises, captured between May 17 and June 8, the survey signalled that the cost-of-living crisis, lure of overseas holidays and a lack of competitiveness on the world stage were hitting the industry’s prospects hard.

The survey found that 50 per cent of businesses have fewer bookings than normal for the June to August period when compared with the outlook when quizzed at the same time in 2019, while 40% reported a fall in spending since May 2021.

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And it identified rising energy and supplier costs, difficulties with recruitment and staffing, and inflation as the top three challenges facing the industry today, each making it difficult for businesses to recover fully from the ravages of the pandemic.

With official figures published yesterday showing that annual consumer prices index inflation had increased to 9.1 per cent in May (it is forecast to reach 11% by autumn), it was no surprise to see Marc Crothall, chief executive of the Scottish Tourism Alliance, state that the cost-of-living crisis was “hitting Scotland’s tourism sector very hard on many levels”.

Mr Crothall said: “People are hesitant about committing to booking a break due to household financial challenges and uncertainty, consumer spend is down and with the rise of energy prices and supplier costs, many businesses are finding that the level of recovery is almost static. This impacts the ability for our tourism industry to remain competitive globally; we struggle to compete on price and we’re unable to retain and attract the quality of staff required to deliver the level of service demanded by today’s consumers.

“The majority of our businesses cannot move beyond running to stand still, despite the fact that we’re now almost into the main tourist season. The transport disruption and planned rail strikes only make the challenge that much harder. The market is still fragile and businesses are finding it increasingly hard to trade their way into a place of sustainable recovery.”

That many Scots are holidaying overseas again will compound the malaise currently affecting the Scottish tourism industry, which has benefited over the last two years from the so-called staycation boom. But on the flip side cities such as Edinburgh are witnessing the return of visitors from abroad, including US citizens who may feel Scotland is an attractive place to visit in part because of the favourable exchange rate.

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Mercat Tours, which runs guided walking tours of Edinburgh, has highlighted growing demand from both the international and domestic markets, with managing director Kat Brogan telling The Herald recently that the city is busy with tourists again.

While that is certainly encouraging, the survey from the STA would suggest the picture is not being replicated across the country.

The health of the Scottish tourism industry depends to a large extent on the domestic UK market. But Scottish tourism businesses are being forced to sustain huge increases in their costs – on energy, goods, wages, national insurance contributions and the return of valued-added tax to 20% – while their target market is becoming increasingly worried about the cost of living. Weekends away or trips to visitor attractions that people used to find affordable in addition to their main summer holiday may now be out of reach for many consumers who are a lot more worried about making ends meet.

That would appear to be evident from the latest findings of the STA, which said this week that 57% of businesses had reported fewer bookings for September to December when compared with reviewing this period in May 2019.

What, then, can be done to improve the situation?

Direct grants from government are unlikely to be forthcoming, especially now there are no restrictions to trade. But the tourism industry does make some interesting suggestions that ministers in the Scottish and UK governments ought to consider, from providing further relief from business rates to cutting the level of value-added tax applied to the wider hospitality industry again.

Businesses would also like to see immigration policy tweaked to ease the current staffing crisis, though sadly this is one course of action the UK Government is highly unlikely to take.