The Perfect Storm

12th of October, 2017 | Posted in Editor's Picks Email Article | Print Article

Confident or Concerned?: That was just one of the questions that was put to 311 hospitality businesses in Scotland by Assenti Research who were commissioned by The Scottish Tourism Alliance to get a “clear insight into the factors affecting the future growth of tourism businesses.”

There is nothing like a piece of research to focus your mind and the launch of The Scottish Tourism Alliance research into The Rising Cost of Doing Business in hospitality has definitely raised a few issues of concern from the perceived lack of support from government, and local government, to the inability to raise finance from lending institutions, and staffing concerns. What follows is a condensed version of the research document.

It is certainly not all doom and gloom, but there are definitely areas where help from government is required. Also bear in mind this by no means the whole picture – of those that responded to the questionnaire there were only 68 hoteliers (22%).

Other hospitality professionals taking part included B&B operators, Restaurateurs and publicans, tour operators and self-catering providers.

Marc Crothall, CEO of the Scottish Tourism Alliance (STA) commenting on the research said, “The overriding theme to emerge from the research is that despite the confidence which many business have attributed to the buoyant season we’ve had and the favourable exchange rates for tourists, sectors with Scotland’s tourism industry have concerns about a broad range of issues. There is not one particular cause for concern within tourism businesses, rather it is the ‘perfect storm’ of factors, a term so often used to describe the current situation within our industry and which is leading to rising business costs and falling profitability.”

hospitality

When it came to business confidence 44% of 30 hoteliers surveyed were confident in the future performance of their business. The highest level of confidence however came from self-catering accommodation providers who were twice as confident as hoteliers.

Those that were confident cited various reasons including the increases in overseas visitors and the exchange rates; business growth (especially in the last two years); current business performance; the fact that they had a well established brand and also had good repeat business and bookings; and some said the fact they had diversified or expanded also gave them confidence. Location specific advantages such as the NC500 and the benefit of cruise traffic were also mentioned.

One in six businesses lacked confidence but the hotel industry did not top the league – the least confident sector was pubs and restaurants, with 35% of the respondents in this sector lacking in confidence compared to 26% or 18 of the hotel respondents.

What drove the uncertainty:- Brexit, the uncertainty around a second referendum; rising staff costs, including the living wage, pensions and Apprenticeship levy; Business rate increases; the rising cost of food and drink; the impact of online travel agents; local infrastructure issues with regard to struggling to cope with more visitors and a perceived lack of support for the sector from local and Scottish government.

When it came to annual profits 73% expected a rise or, at the very least, profits to remain the same. Just under a third reported that they expected profits to decrease.

Those running visitor attractions were most positive above the prospect of increasing their profits, followed by self catering and 55% of hoteliers expected an increase in profits or profits to remain the same, while 43% expected a decrease.

When it came to investing in their businesses – investing to simply maintain standards – ie investing to maintain rather than grow their business – this applied to 79% of the businesses surveyed (there was no sector breakdown here).

The report suggested that when it came to sustainability and growth there were a wide range of factors deemed to be impacting on future growth – the rising cost of utilities; economic and political uncertainty; the growth in business rates; growth in employment costs; rising costs of food and drink; poor online connectivity; instability of sterling and the exchange rate; difficulties recruiting and retaining staff.

The hotel sector thought that the most significant impact on their businesses would come from the increase in rates, closely followed by employment costs.

hospitality

Paul Brown a Partner at Anderson Strathearn commented, “Among the principle concerns for many operators and business in the sector is the issue of staffing. Whether the Government like it or not, in Scotland as in the rest of the UK, we rely heavily on non UK labour to provide the service and fill the jobs that cannot or that UK workers simply do not want to do. Brexit is a double-edged sword for the tourism industry. On one hand the weak pound has led to an increase in visitor numbers but that has also had an adverse effect of the number of foreign workers, particularly Eastern Europeans, who are willing to come to this country to work.”

He continued,”The drop in the value of the pound because of the Brexit vote, even before we have actually left the EU, has resulted in many of those workers choosing not to come to the UK as it is no longer as lucrative for them to do so.”

“The survey provides a platform for discussion and reflection on what we need to do about attracting our international and home grown talent to work in the industry as successfully as we are attracting visitors.”

While Iain Walker of accountants French Duncan pointed out, “The research suggests that hotels and restaurant owners are less confident than self-catering and other attractions. Hotels and restaurants are generally likely to employ higher numbers of staff, ant this less confident outlook could be of concern.”

Fiona Hyslop, MSP, Tourism Secretary commented “Our tourist sector is of vital importance to the Scottish economy. It delivers £11bn across the wider visitor economy supply chain and provides 217,000 jobs. I would like to thank the STA for progressing this piece of research. It serves to provide a fuller picture of the tourism landscape and in doing so, I welcome their collaborative approach.” She added, “I look forward to working with industry to see how the research finds can be addressed.”

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Hotel Magazine Scotland News Team

Hotel Magazine Scotland News Team

Hotel Scotland is a new publication (2017) from the publishers of DRAM - Scotland's leading on-trade magazine. Hotel Scotland is a newsy magazine which covers all aspects of the industry in Scotland. From who's who, to industry issues and refurbishments.
Hotel Magazine Scotland News Team

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