STA Update: Latest industry survey reveals majority of Scottish tourism and hospitality sector financially fragile and still in survival mode

The Scottish Tourism Alliance, the overarching representative body for Scotland’s tourism and hospitality industry has published the results of its latest quarterly industry survey.

More than 540 tourism businesses took part in the survey which ran from 24th May to 14th June, with responses coming from all 32 of Scotland’s local authority areas and 21 core industry sub-sectors of the tourism industry, predominantly self-catering, bed & breakfast/guest houses, hotels, bars and restaurants, visitor attractions and tour operators.

Headlines
• More than half of tourism and hospitality businesses that responded, (52%) are still in ‘survival mode’ or ‘consolidation’, demonstrating the continued fragility of the sector following COVID-19 and the ongoing financial crisis.
• Almost half of businesses do not have enough cash reserves for the next quarter.
• Nearly 60% of businesses say that they want the Scottish Government to hold off on introducing and progressing additional regulations until the economy further recovers.
• 39% of businesses responded that current domestic bookings for June to September this year are lower compared to the same period in 2022.
• However, looking towards October to December 2023, over half of businesses (51%) are reporting that they feel ‘fairly’ or ‘very pessimistic’ about the outlook for their business.
• Only 1% of respondents said their business was ready to expand.
• Nearly half of respondents (49%) said they do not support the introduction of a visitor levy and a quarter of those that do, only do so only if the net revenue raised is ‘used solely for tourism investment and enhancement’.

Highlights from the survey:

Current Business and Performance
• Over half of tourism and hospitality businesses that responded (52%) are still in ‘survival mode’ or ‘consolidation’, demonstrating the continued fragility of the sector following COVID-19 and the ongoing financial crisis.
• Over a quarter (28%) of businesses are making a ‘good steady recovery’, while 18% report their business is ‘performing well’, so there are some encouraging signs of improvement.
• Only 1% of respondents said their business was ready to expand.
• 16% of businesses that responded have no cash reserves, while just over a third (34%) have only 1-3 months of reserves. Once again, this demonstrates the continued financial fragility of the tourism and hospitality sector.

Staffing and Recruitment
• Positively, 64% of businesses answered that they are operating with the level of staff they need to operate effectively. (Note: most responses came from self-catering businesses, which require fewer staff so this may have impacted on the final percentage).
• The biggest barrier to recruiting and retaining selected is the lack of available staff who want to work in the business (31%), followed by Brexit/Immigration system (26%)
• Perception of tourism/hospitality was also selected by a quarter of respondents as a factor (25%), closely followed by their business being based in a remote or rural location (24%)

Business Forecast
• 41% of respondents reported that they have currently had fewer bookings for June to September compared to the same period last year. An equal proportion of respondents (41%) are either ‘confident’ or ‘reasonably confident’ their level of confirmed bookings will either increase before or during the summer reason.
• Only 19% of respondents have reported better bookings for June to September 2023 compared to the same period in 2022.
• 81% of businesses responded that current domestic bookings for June to September this year are lower or the similar to the same period in 2022.
• 74% of respondents reported that they currently have similar or better international bookings for June to September 2023 compared to last year.
• However, looking towards October to December 2023, over half of businesses (51%) are reporting that they feel ‘fairly’ or ‘very pessimistic’ about the outlook for their business. This is likely to be due to the ongoing energy crisis and rising cost-of-living which is likely to hit businesses hard this winter again.

Best Environment to do Business
• The top priority according to nearly two thirds of respondents (59%), which will create the best environment to do business in Scotland is a pause on new and impending regulation.
• The second priority action deemed by respondents to be a factor which will improve the environment to do business is business rates relief for the tourism and hospitality sector, with nearly half of respondents choosing this option (45%).
• Nearly half of respondents (49%) said they do not support the introduction of a visitor levy.
• Over a quarter (26%) of those that said they do only do so if the net revenue raised from a levy is ‘used solely for tourism investment and enhancement’.

Marc Crothall MBE, STA Chief Executive said;

“There has been a strong response to the survey, particularly from the self-catering sector which reflects the current climate of concern around the impacts of proposed legislation. It is also clear from respondents across other sectors that businesses continue to experience significant challenges, however, pleasingly there is an increase in customer demand and subsequently, a renewed feeling of optimism within sector.”

“The reality is that healthy trading is all about the bottom-line performance of the business; while revenue may be strong for many businesses, the key to commercial success lies in the ability of that business to convert profit into sustainable recovery and growth.”

“A holistic review of the current regulation and taxation environment is just one key action needing to be undertaken now before more damage is done to the sector, as a result of a multiple of consequences. The Regulatory Review Task Force must act quickly. The recommendations currently being developed by the New Deal for Business Core and Sub groups when finalised must also be endorsed and acted on quickly to not only help protect business failure, but importantly to improve Scotland’s economic conditions, performance and to create a better environment to do business. I very much hope that the work of these groups, will lead to the delivery of more positive economic benefits for Scotland which will see us able to compete far more effectively as a global tourist destination.”

Stephen Leckie, STA Chair, CEO Crieff Hydro Family of Hotels said:

“The survey results very much echo what I’m seeing and experiencing as a business owner. Recruitment continues to be a serious challenge from my point of view; the removal of a significant part workforce as a result of Brexit is curtailing the ability of businesses to operate with a full service, deliver the experiences we would wish to and invest in our product with the ambition we hold.”

“The continued cost pressures on tourism and hospitality businesses combined with the constraints around operations as a result of the recruitment crisis greatly diminishes the profitability of businesses in our sector, the quality of experience, our competitiveness as a destination and therefore the long-term outlook for Scotland’s tourism and hospitality industry.”

“We urgently need a meaningful intervention in relation to working visas and immigration policy to give businesses that essential opportunity to grow and deliver much stronger benefits to our communities and Scotland’s economy.”

You can view the full survey report here.