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Scottish Parliament: Research Briefings: RN 99-22 Tourism in Scotland

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Research Note 99/22
10 August 1999

TOURISM IN SCOTLAND

This research note provides an overview of the nature and performance of the tourism sector. It describes the broad framework of support for the Scottish tourism industry, highlights a number of key issues and the policy reviews which have helped shape the industry in Scotland.

A definition of tourism

Though there is no single definition of the tourist industry, it is generally taken to include a proportion of the activity/employment in hotels, catering, retail, and other services (1). The tourism industry therefore does not fit in neatly to a single Standard Industrial Classification (SIC) category, as it is defined more by the source of demand for services (from tourists), than by the activity itself. Within some areas the proportions of the above sectors related to tourism (for example public houses) will be much higher than in others. The Scottish Tourist Board (STB) defines a tourist as someone who spends one night in Scotland away from home regardless of the purpose of the trip. This obviously excludes day trips for leisure purposes, though information on these is picked up in other STB research. These issues help make a definitive measurement of tourism activity difficult.

THE ECONOMIC SIGNIFICANCE OF TOURISM

Scottish Tourism Spending 1990 - 1997

[NOTE: Table here in original]

The table above indicates a fluctuating rise in tourism expenditure in Scotland between 1990 and 1997. The Scottish Tourist Board estimates that spending by tourists in Scotland (both leisure and business) amounted to nearly £2.5billion in 1998, a fall from £2.7billion in 1997 (2), and that tourism employed 8% of the Scottish workforce (3) (some 177,000 jobs). Initial reports for 1999 are mixed, with for example Highlands of Scotland Tourist Board reporting figures down 20% from 1998 (4). However results for the first quarter of 1999 for the whole of Scotland indicated a rise of 11% in spending from UK visitors and a rise of 7% from overseas visitors (5).

Scotland ranks eighth in the world in terms of visitor spend per head of population, and for example, contributes proportionately more to the Scottish economy than English economy. In 1995 tourism receipts account for $539 per head of population in Scotland compared to $358 for England(6).

Within Scotland there is significant variation in dependence on tourism (7) as is illustrated in the table below. Approximately 8% of Scottish employees are associated with tourism, but for Highlands and for Perthshire the figure is over 14%. Similar evidence is available for tourism receipts per head of population in 1996. With a Scottish average of £470 per capita, the Highlands secures over £1,600 per capita whilst Glasgow and Clyde Valley secures just over £205 per capita

[NOTE: Table here in original]

Source; UKTS, IPS, Census of Employment. (Employment excludes selfemployed) (8).

Sources of Tourist Income

Over 60% of Scottish tourism revenue comes from within the UK. Between 1990 and 1997 domestic visitor expenditure rose in real terms from £1.3billion to £1.7billion, an increase of 26%. However from 1997 to 1998 there was a fall in income from UK tourists. This was composed of a small rise of 4% in spending from English tourists, but a decline of 38% from Scottish residents.

The USA provides the largest element of the overseas market accounting for £200million of spend, with other large markets including Germany (£89million), France (£42million), and Holland (£39million). In real terms spend by overseas visitors rose from £710million in 1990 to £965million in 1997, an increase of 36%.

Since the 1980s spending by visitors from Europe has overtaken spending by visitors from the USA.

Some 20% of Scottish tourism revenue in 1998 (£500million) was generated by business tourism. 80% of this related to UK business tourism and 20% from overseas. Business tourism has the advantage of generating a higher than average per capita spend and being less seasonal.

Progress has been made in reducing the seasonality of tourism in Scotland. For example the proportion of UK tourism expenditure taking place outwith the July to September period has increased from 55% in 1986 to 62% in 1996 (9). There appears to have been less success in the dispersal of visitors into rural areas. The proportion of spending outwith Edinburgh and Glasgow was taken as an indicator of dispersal in the 1994 Scottish Tourism Strategy (10). Between 1986 and 1996 there was an increase in the proportion of spend by UK visitors to Edinburgh and Glasgow from 16% to 24%. However for overseas tourists the proportion has changed little.

Framework of Support for the Scottish Tourist Sector

A wide range of organisations are involved in the promotion and development of Scottish tourism. Recent estimates indicate that well in excess of £80million per annum of public money is spent on tourism in Scotland (11). A review of all the support arrangements for tourism was carried out in 1992-93, and this is discussed in more detail later in then paper. As a result of the review, from 1st April 1994 the Scottish Tourist Board was given responsibility for tourism marketing and sponsorship of the Area Tourist Boards (ATBs). Responsibility for business development and training was consolidated within the Enterprise Network (Scottish Enterprise, Highlands and Islands Enterprise and the Local Enterprise Companies).

• The Scottish Tourist Board (STB)(12) – the STB’s main aim is to “help maximise the economic benefit of tourism to Scotland” (13). The STB has five main corporate objectives:
1. Leading the Industry and Providing Strategic Guidance
2. Increasing Visitor Expenditure
3. Increasing the Seasonal Spread of Tourism
4. Developing Tourism Outwith the Main Tourism Areas
5. Increasing Competitiveness by Providing Quality and Value For Money

The STB has an annual budget of approximately £25million (made up for 1998-99 of £19.5million from Government Grant-in Aid and £5million from revenue earning activities, including funding provided to the Area Tourist Boards (14). For the 1999/2000 financial year some 48% is allocated to marketing activity, 22% is expected to be spent on the running costs of the organisation, and 19% is for the support of the Area Tourist Boards. The remaining funding covers “competitiveness” projects such as the Ossian tourist information management system, and ”external communications”. (15)


The STB and the BTA Concern was expressed at the Scottish Affairs Select Committee Inquiry into Tourism that BTA has not been promoting Scotland adequately (paragraph 852). However Tom Buncle Chief Executive of the Scottish Tourist Board reported that he met with the BTA immediately after the devolution referendum for Scotland and stated;

“I would suggest that we turned the relationship with BTA on its head, which had been characterised perhaps more like a father/son relationship in the past to a client/agency relationship with us being the client, thereby giving us much greater control over the image of Scotland and input into BTA’s marketing” (paragraph 190).

It has been estimated that of the £35million spent by BTA in 1998/99 “in the order of some £5million went to Scotland, which would be a proportion higher of course than our population ratio”(paragraph 852).


• British Tourist Authority (BTA) – also established by the 1969 Act the BTA has prime responsibility for undertaking the co-ordinated marketing of Britain overseas. BTA provides representation in 38 countries overseas.

• Area Tourist Boards - there are currently 14 Area Tourist Boards (ATBs) in Scotland with a membership of over 16,000 businesses. Core funding for the ATBs comes from local authorities (typically 30% - 40% of core ATB income (16)), the Scottish Tourist Board (typically 15% - 20% of funding (17)), and commercial income and membership subscriptions providing the remainder of funding.

• Scottish Enterprise (SE) and Highlands and Islands Enterprise (HIE) – SE and HIE and their networks of local enterprise companies are responsible for support for business activities and training in the tourism sector. The Scottish Enterprise Network action plan includes objectives for 1999/00 relating to the information flows across the industry, the effective use of information and communication technology, promoting innovation in tourism business, developing skills in the industry, developing transport and other infrastructure, and developing a vision for the industry (18). The SE Network spent an estimated £15million on tourism strategy, research, business development, training and property in 1996-97 (19).

Highlands and Islands Enterprise states its tourism priorities as being to (20);
• boost private-sector leadership and integrated trade development
• develop indigenous strengths in balance with environment and resources
• extend the season through development of new niches eg wildlife
• foster skills and career structures appropriate to the future needs of the industry
• encourage tourist friendly culture.

• Scottish Executive – The Scottish Executive tourism function is described as “sponsorship of the Scottish Tourist Board. That essentially means we are responsible for advising ministers on issues of tourism policy on resource allocation to the Scottish Tourist Board, on appointments to it and on matters of strategic guidance as well as broader tourism matters which may be without the remit of the tourist board” (21).

• Local Authorities – local authorities contribute to tourism through the part funding of Area Tourist Boards and specific tourism projects often as part of local tourism partnerships. Additionally local authorities are direct providers of tourist facilities (eg leisure facilities), and indirectly exert a major influence through the planning system and provision of infrastructure and services.

• Other bodies – a number of public agencies contribute to tourism including the Forestry Commission (visitor access to forests), Historic Scotland (operation of historic properties), Scottish Arts Council (development of cultural tourism), Scottish Museums Council (development of member museums), Scottish Natural heritage (development of natural heritage as a visitor resource), Scottish Sports Council (development of sports facilities for use by visitors), and other private/voluntary organisations including National Trust for Scotland and Scottish Conference Association.

• Scottish Tourism Co-ordinating Group (STCG) – The STCG, chaired by the Scottish Executive, was set up in 1987 to help avoid duplication of effort among the public bodies involved in developing Scottish tourism. Its role was expanded following the 1992-93 review, and it published a Strategic Plan for Scottish Tourism in 1994. This has been followed by annual reviews of progress, the latest published in Spring 1999.

A number of working groups take forward specific action plans under the strategy. These include Tourism Training Scotland, Arts and Tourism Scotland, the Tourism and Environment Task Force and the Seasonality Working Group.

• Scottish Tourism Forum (STF) – set up in 1994 the STF co-ordinates views of the trade interests in the tourism industry. Members include representatives from a range of organisations representing different sectors of the tourism industry. The STF chair represents the private sector on the STCG.

• European Commission – has exerted a significant influence among other things through the availability of Structural Funds, (particularly Objective 1 and Objective 2 funding). Under the new Structural Funds Regime “the scope of the programmes will be unchanged so that tourism will be capable of benefiting from the new programmes” (22)

Issues for Scottish tourism

The Scottish tourism industry has been characterised as being diffuse, containing a high number of small businesses, and having a lack of vertical integration (23). This has a number of implications for the development of policy in terms of coordination and development of policy, and work towards development and marketing of an integrated "tourism product”. A number of key issues and questions were raised by the Scottish Tourism Co-ordinating Group in its recent Scottish Tourism Strategy Interim Review report. (24)

• Understanding and communicating with existing and potential customers?
- Who are the customers of the future? Eg what are the key market segments
- How to communicate with customers? Eg use of information technology (25)
- What will customers want? Adapting to changing expectations

• How should Scottish tourism be supported?
- What will be the effect of a Scottish Parliament?
- Can a clusters approach benefit tourism? applying the Scottish Enterprise “clusters” approach to economic development (26)
- How should tourism support be organised locally? The issue of funding Area Tourist Boards is raised, and is discussed in some more detail below.
- What is the future of European funding? Post 2000

• How will the tourism brand fit in with the branding of Scotland? Ensuring consistency in Scotland’s brand positioning across all Scottish export sectors?
• How to make sure all of Scotland benefits from tourism
• Can Scotland develop Year Round Tourism?
• How to make Scotland more accessible? By air road, rail, and ferry?
• How to ensure high standards in the tourism workforce? Increasing Investors in People, and tackling recruitment and retention, and improving the image of the industry? (27)
• How can Scotland make its tourism industry sustainable? Green tourism, cultural tourism and community involvement in tourism.

One particular issue currently being raised in the debate on tourism has been the funding and structure of ATBs. Concern for greater stability and certainty in the funding of the Area Tourist Boards has been expressed a number of times. It has been suggested that all core funding could be channelled through the Scottish Tourist Board as opposed the current situation where a significant proportion comes annually from local authorities (28). Other debate has focused on the need to ensure efficient working relations with the Local enterprise Companies and Local Authorities through for example ensuring where possible that there are co-existent boundaries with the Area Tourist Board (29).

It has also been suggested that there are opportunities for the national marketing of tourism to be carried out more closely with Locate in Scotland, and the SNP have proposed the setting up of a Welcome to Scotland agency (30)

Pathfinders to the Parliament - Tourism As part of the Pathfinders to the Parliament consultation exercise with Scottish business Lord Gordon of Strathblane, Chairman of the Scottish Tourist Board, was invited to suggest the priorities for the tourism sector. These were based on discussions then ongoing in the Scottish Tourism Co-ordinating Group (STCG) and work on the Strategic Plan for Scottish Tourism for the period 2000-2005, and reflect the issues identified above.

Policy Reviews Relating to Scottish Tourism

It is perhaps indicative of the widespread recognition of the importance of tourism and the desire to maximise the benefits that there have been numerous policy and strategy reviews relating to Scottish tourism over recent years. It is useful to try and identify the key policy statements.

In 1992-93 there was “widespread concern that the support arrangements then in place had become fragmented and were no longer fully effective” (31). A review was therefore instigated by the then Secretary of State for Scotland into the public sector’s support for the tourist industry at both a local and national level. The key action points to come from the review were as follows:

- the composition of the Scottish Tourism Co-ordinating Group was reviewed and strengthened;

- an industry representative body, the Scottish Tourism Forum, was established to bring together a wide range of interests to contribute to strategic thinking at the national level;

- a strategic plan for the industry was devised, published and implemented and has been the subject of regular review;

- STB was given overall national responsibility for tourism marketing and ATB sponsorship with effect from 1 April 1994;

- also from 1 April 1994, responsibility for business development was consolidated within Scottish Enterprise (SE) and Highlands and Islands Enterprise (HIE) with STB's scheme of assistance for tourism projects (operated under section 4 of the 1969 Act) suspended with effect from 29 June 1993;

- the Area Tourist Board (ATB) network was reduced from 31 to 14 local boards with effect from 1 April 1996;

- with effect from 1 April 1995, a significant number of STB staff and functions were transferred from Edinburgh to Inverness; and

- co-ordination arrangements between STB, SE and HIE were improved by means of cross-board appointments

• Scottish Tourism, Strategic Plan (32) -published in 1994 by the Scottish Tourism Co-ordinating Group the overall aim was “to enhance Scotland’s established reputation as a high quality tourism destination by building on its history, culture, environment and the hospitality of its people”. Three objectives were as follows;

• To create new facilities and improve existing ones
• To promote tourism in a more effective and co-ordinated way
• To enhance skills, especially management skills

Subsequently annual reviews of the Strategic Plan have been carried out. The latest Interim Review (33) (March 1999) evaluated progress on the seven targets for the year 2000 identified in the 1994 strategy (see table below).

The National plan provides the analysis, vision, actions, and targets for the Scottish tourism industry. It therefore aims to provide a framework for, and influences the development of, Area Tourism Strategies. The area strategy should be the single document that directs tourism development involving a partnership of agencies within an ATB area. In turn the Area strategies will lead to local Action Plans.


Progress on Targets in the 1994 Scottish Tourism Strategy (34)
[NOTE: Table here in original, including reference to footnote (35)]

A New Strategy for Tourism - Consultation Document – On 3rd August 1999 Henry McLeish MSP, Minister for Enterprise and Lifelong Learning, issued a consultation document regarding the preparation of a new strategy for Scottish tourism. It was stated that the strategy should be action oriented, and should identify the opportunities and constraints. It should specify what needs to be done, how it is to be done, and who needs to do it. It is suggested that a strategy should address the following issues;

• identifying our future markets, both domestic and overseas
• addressing the decline in the Scottish market
• improving and maintaining quality
• maximising Information Technology
• boosting tourism in the remoter areas
• extending the season
• improving training and skills standards
• providing the products to meet market expectation and demand
• making Scotland more accessible
• making sure our tourism industry is environmentally sustainable
• the method of funding Area Tourist Boards.

The consultation process will involve a number of focus groups, meetings with the Minister and Ministerial team, and through written submissions. Views have been requested by 31st August 1999.

Following the consultation, the period to November 1999 will see a process of analysis, target setting and preparation of the new Strategic Plan, with the publication scheduled for December 1999 (36). Feeding into the development of the strategy will be the work of the STCG’s Tourism Futures Sub Group. Under the chairmanship of Lord Gordon the group, established in March 1998, looked at long-term trends and developed a “vision” for Scottish tourism. Included in this vision were a Scottish tourism industry with high skills, high standards, excellent market intelligence, effective use of information technology for marketing and skills development, a high quality infrastructure, and a collaborative, pro-active public/private industry support relationship.

Policy and Financial Management Review (PFMR) – Along with other Non Departmental Public Bodies the STB is required to be subject to a out every five years. The first stage is the Prior Options Review which is intended to “examine rigorously whether STB’s functions are required at all and, if so whether there is scope for privatising, contracting out, or transferring to another body some or all of its functions”. The most recent Prior Options Review was carried out in 1998 and concluded amongst other things that “consideration of STB’s operational results reveal a generally satisfactory performance” (37), and that “the Board’s performance is generally effective and its activities are of positive benefit to the Scottish tourist industry” (38).

Scottish Affairs Committee Inquiry into Tourism - the main conclusions and recommendations of the House of Commons Scottish Affairs Committee Inquiry into tourism, which reported in July 1999, were as follows

• There should be a Minister with sole responsibility for tourism in the Scottish Executive or at the very least the Minister responsible for tourism should have this made clear in his or her job title.
• The concept of a bed tax should be rejected as a way of funding public support for tourism.
• The Scottish Tourist Board should core fund the Area Tourist Boards directly.
• The Government should consult again with the national tourist boards with the aim of producing a unified classification and grading system for Great Britain.
• Small businesses must be encouraged to realise that the training of their staff is an increasingly vital ingredient to the long-term viability of their industry.
• A system of compulsory registration which requires all accommodation providers to meet basic safety, hygiene and public insurance liability standards was recommended
• The Committee wished to see the STB and ATBs put pressure on businesses to develop products, which offer greater value for money, as well as setting fairer rates and encouraging more transparency in rates quoted.
• While recognising the right of the STB to market Scotland abroad, it was recommended that it continue to maximise the services of the British Tourist Authority overseas.
• The Committee recommended that the STB monitor the situation of cross border marketing closely and, if required, use its influence to encourage ATBs to co-operate.
• The Committee welcomed the investment of public money in Project Ossian and believes that the web offers a huge marketing potential which the tourist industry must be in a position to take advantage of.
• The Committee stressed the need for better direct air access with overseas hub airports and sought the support of the Scottish Parliament for those working to improve air access into Scotland.
• The Committee recommended that an objective to make Scotland the most accessible and welcoming tourist destinations in Europe for disabled people be included in the 2000-2005 Strategic Plan for Tourism.
• The Committee recommended that a speedier process for obtaining consent as well as a more consistent approach to signposting be achieved.
• The Committee recommended that the Scottish Tourist Board and the area tourist boards examine the provision of lay-bys and viewing sites with a view to increasing their number as well as providing them with the necessary hardware such as tables and litterbins.


1 The Government provides a broad brush definition of “tourism related industries” as incorporating Hotels and Other Accommodation Types (SIC codes 551,552), Restaurants (SIC 553), Public Houses and Bars, Night Clubs/Licensed Clubs (SIC 554), Travel Agencies/Tour Operators (SIC 633), Libraries, Museums, Galleries etc (SIC 925), and Sport and other Recreational Activities (SIC 926, 927) – quoted in recent Policy and Financial Management Review of the Scottish Tourist Board 1998.
2 Scottish Executive Enterprise and Lifelong Learning Department, correspondence, July 1999
3 Annual Employment Survey/ Scottish Tourist Board Estimates
4 Scottish Affairs Committee, report on Tourism in Scotland, July 1999, paragraph 8
5 Scottish Executive Press Release SEO206/99, 3rd August 1999
6 Scottish Affairs Committee, Inquiry into Scottish Tourism, memorandum from the Scottish Tourist Board, 4th November 1998.
7 Policy and Financial Review of the Scottish Tourist Board: 1998, Scottish Office Education and Industry Department, tables 5.2 and 5.3
8 Taken from Scottish Tourist Board, Minutes of Evidence to Scottish Affairs Committee Inquiry into Tourism, 4th November 1998.
9 Scottish Tourist Board Minutes of Evidence, Appendix 1 “Trends in the Scottish Tourist Industry”, Scottish Affairs Committee; November 1998
10 Scottish Tourism Strategic Plan, Scottish Tourism Co-ordinating Group, November 1994.
11 Scottish Tourist Board Minutes of Evidence, Scottish Affairs Select Committee, 17th June 1998, paragraphs 9-27, also para 179, Lord Gordon
12 The STB is a Non Departmental Public Body (NDPB) established by the Development of Tourism Act 1969. The Tourism (Overseas Promotion) (Scotland) Act 1984 subsequently allowed the STB to actively encourage people to visit Scotland, subject to the approval of the Secretary of State who is required to consult the BTA.
13 Scottish Tourist Board Corporate Plan – 1999/2000 – 2001/2002
14 Scottish Affairs Committee, Report on Tourism in Scotland, paragraph 17, 21st July 1999
15 Scottish Tourist Board Corporate Plan – 1999/2000 – 2001/2002
16 Scottish Affairs Committee, Report on Tourism in Scotland, paragraph 20; 21st July 1999
17 Lord Gordon, Scottish Tourist Board, Scottish Affairs Select Committee, Evidence on Tourism in Scotland, paragraph 298, 4th November 1998
18 Scottish Enterprise Network, Tourism Priorities and Action Plan 1999/2000, June 1999
19 Scottish Tourist Board Minutes of Evidence, Scottish Affairs Select Committee, 17th June 1998
20 Draft Sectoral Policy Paper on Tourism, Highlands and Islands Enterprise, July 1999
21 Alan Fraser, Head of Enterprise and Tourism Division, Scottish Office: Scottish Affairs Committee Inquiry into Tourism, paragraph 4, 17th June 1998
22 Christie Smith, Head of Enterprise and Tourism, Scottish Office; Scottish Affairs Committee Inquiry into Tourism, 9th June 1999, paragraph 847
23 Policy and Financial Management Review of STB, 14th June 1999
24 Scottish Tourism Strategic Plan Interim Review, STCG, March 1999
25 The “Ossian” project aims to provide a user friendly, Scotland wide computer system with information on tourism establishments, and by the end of 1999 the ability to make bookings, pay for holidays, and prepare a full holiday itinerary online. Total cost is estimated at between £6million and £7million, involving £3million of “public” money, £2.5million from the Area Tourist Boards, and £1million from the private sector - Lord Macdonald, Scottish Affairs Committee Inquiry into Tourism, 9th June 1999, paragraph 856
26 The “clusters” approach forms part of the Scottish Enterprise strategy, and involves developing groupings of firms in the same industry, each firm benefiting from the proximity of the others.
27 Although not quoted in the report low pay has been cited as a key issue for tourism. A study in 1998 by the Scottish Low Pay Unit indicated that in the hotel and catering sector 96% of advertised vacancies paid less than the Unit’s minimum wage target of £4.79 an hour.
28 For example, Lord Gordon, Scottish Tourist Board, Evidence to Scottish Affairs Committee Inquiry into Tourism, 4th November 1998, paragraph 301
29 Lord Gordon, Scottish Affairs Committee Inquiry into Tourism, 4th November 1998, paragraph 180
30 SNP Manifesto for the Scottish Parliament, May 1999
31 Policy and Financial Review of the Scottish Tourist Board: 1998, Scottish Office Education and Industry Department, paragraph 2.15
32 Scottish Tourism Strategic Plan, Scottish Tourism Co-ordinating Group, November 1994
33 Scottish Tourism Strategic Plan Interim Review, March 1999; Scottish Tourism Co-ordinating Group
34 Scottish Tourism Strategic Plan Interim Review, Scottish Tourism Co-ordinating Group, March 1999
35 Scottish Tourist Board, personal conversation, 6th August 1999
36 Scottish Tourism Strategic Plan, Interim Review, STCG, March 1999
37 Policy and Financial Review of the Scottish Tourist Board: 1998, Scottish Office Education and Industry Department, paragraph 3.24
38 Policy and Financial Review of the Scottish Tourist Board: 1998, Scottish Office Education and Industry Department, paragraph 3.27

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Scottish Parliament: Research Briefings: RN 99-22 Tourism in Scotland

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