Long-term support needed as Scottish tourism faces grimmest winter yet

December is a hugely important trading period for the sector with many businesses bringing in a third of their revenue at this time of the year. Instead, our sector went into 2022 having lost the most important annual period of trade; one which would have cushioned the finances of businesses through our exceptionally tough shoulder period. 2022 did not start at all well for Scotland’s tourism industry despite our hopes for a stronger recovery.

As Omicron levelled off and public health restrictions were lifted, we faced what would become our greatest challenge yet. Russia’s invasion of Ukraine created shockwaves in global energy markets leading to widespread price volatility and economic uncertainty.

Just as our industry had recovery within its sights, we were presented with the double-edged sword of the cost-of-doing business crisis for cash-pressed businesses across all sectors of tourism and the cost-of-living crisis for consumers.

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If 2020 and 2021 were all about Covid and Brexit, 2022 has been undoubtedly defined by soaring inflation and energy bills, both of which have had squeezed consumer spending to margins we haven’t seen in decades and debilitated any momentum towards recovery for an industry which has been in turmoil for three years.

The cost-of-living and the cost-of-doing business crises have put thousands of businesses and livelihoods across our industry at serious risk; this is being compounded by a conveyor belt of regulatory costs – Short Term Lets Licensing, the introduction of the Deposit Return Scheme and proposals for the introduction of a Transient Visitor Levy to name just three – coming at a time when our sector continues to operate very much in recovery mode.

VAT bills are looming at end of January, while businesses grapple with winter energy costs, the pressure to repay borrowings and the mental and financial challenges of three years of intense hardship. We have already seen permanent closure or mothballing of businesses in the sector in the lead up to Christmas and expect see a good few more in the new year.

Marc Crothall (Image: STA)

Shortly before Christmas, our tourism industry pinned its hopes on being offered a lifeline within the Scottish Government’s Budget statement.

The news that the Scottish Government would freeze the current rate of non-domestic rate poundage for another year delivered a sigh of relief within the sector; this was a key ask from the industry of the Scottish Tourism Alliance.

However, there was much disappointment as the Scottish Government elected not to offer comparable rates relief to the UK and Welsh Governments leaving many businesses very much on a knife edge when it comes to their bank balance and cash flow projections.

It seems that long-term solutions are not on the table of any government at the moment.

This is perhaps our grimmest winter year and with little respite for our industry and no long-term, meaningful fiscal support from either government, the ability for our sector to bounce back quickly continues to be compromised.

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Strikes, high levels of inflation and another rise in interest rates has further squeezed household spending, severely curtailing footfall at a time when businesses are reliant on trading at a much healthier level.

Business needs this trading period to be strong to carry them through to the opening of the tourist season; it is the third consecutive year of pain and challenge for businesses.

With prices going up, so too does the expectation of exceptional experiences from today’s visitors; remember that 70 per cent of tourists in Scotland are from the domestic market and right now, every penny is a prisoner in most households across the UK.

We are all looking for quality, value for money experiences if and when we choose to spend on leisure activities.

The pressure is very much on our tourism and hospitality sector to deliver the best for our visitors and customers at a time when inward investment is almost non-existent and quality at risk.

The situation for early 2023 looks bleak for many, however Scotland’s tourism and hospitality industry can, if supported with the right fiscal measures and the burden of costly and untimely regulation removed, provide the economic stimulus needed to improve the health and wealth of the nation.

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There are multiple factors relating to the crisis facing our industry which must be addressed and a number of fiscal levers which, if applied immediately, would significantly ease the burden for businesses in our sector.

VAT reduction on supplies relating to hospitality, accommodation and attractions, deferral of the coronavirus business interruption loan scheme repayments and the bounce back loan repayments, support for businesses struggling to pay and secure energy contracts and an immediate review of immigration rules to address the labour workforce shortages within the sector.

Tourism must become front of mind and be high up on all national and local government agendas; it will be a key driver in overall economic recovery for Scotland’s businesses and communities. Tourism is and can be a powerful force for good.

Continued supportive measures will be needed to ensure future recovery and for Scotland’s tourism industry to remain competitive.

In the meantime, the majority in the industry will as they have done in past years remain resiliently optimistic with determination to drive forward long-term sustainable recovery and grasp every opportunity they can to compete with our global competitors.

Marc Crothall is chief executive of the Scottish Tourism Alliance