When the tourists don't turn up

By Douglas Fraser
Business and economy editor, Scotland

Published
  • This should be the start of the main tourist season, but next-to-nothing is moving, and it's unclear when it will pick up again
  • The mood of those who run businesses is said to be turning to 'despondency, anger and frustration' as they realise government support measures aren't going to save their firms
  • Several parts of the industry are falling through gaps in support, and travel agencies are facing a crisis as refunds drain resources, without new income
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For those less focussed on its religious significance, Easter is the start of Scotland's tourist season.

But there isn't a tourist season this year. The places that usually depend on an influx of visitors, where they would be opening up attractions, shops and guest houses, are telling them to stay away.

The problem is global. The international body for tourism estimated last month that there could be 50 million job losses as a result of the pandemic and travel restrictions.

In Scotland, it is no less exposed than others, and a particularly important employer in rural areas. Yet it's almost entirely closed down. A few hotels are providing rooms for NHS and other key workers, to avoid a commute. Some are innovating with takeaway food.

Many thousands are furloughed, and on government pay subsidy. Around 5% of seasonal workers had not joined the payroll by 28 February, and therefore don't qualify for the Job Retention Scheme. The Scotland Office has acknowledged that scale of problem, and told the industry it "is looking for other solutions".

Most business bosses - including the self-employed - are scratching around to find where they can get help to get through the next few weeks and months.

image copyrightTeigan Johnston

This is a very diverse sector. It has a lot of small firms. They're not strong on productivity or profitability. Tourism doesn't have deep pockets of cash reserves for a rainy day fund.

The special importance to many remoter, rural communities is a result of limited alternative job opportunities. But don't forget that tourism and hospitality jobs are important to Edinburgh, Inverness, Stirling and Glasgow. There's less seasonality in the cities and, in normal times, more of a business mix with custom from business travellers and local customers.

The industry effectively subsidises other infrastructure. It pays a lot of bills for airports, and bus and rail operators. It feeds off Scottish farm produce. It drinks the whisky and craft gin and beer.

It needs people to clean hotel rooms, but away from the honeypots, it needs more people to prepare and deliver food, to launder the sheets and towels, to make the cashmere sweaters and the shortbread that's taken home as gifts. Many of those in seasonal roles are students, who will struggle to find summer jobs.

And don't forget that day tourism - by Scots, in Scotland - is no less important to the seaside vendors, cafes and roadside stops, the outdoor attractions, bike hire, shops selling boots and midge repellent, and, in a big way, to the festival venues.

All of that has stopped. The best hope for the industry is that there may be a staycation boost later in the year. But it may be delayed until next year, depending on travel restrictions.

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Some pubs and restaurants, with local and tourist custom, could bounce back relatively quickly. But for many in the industry - such as annual events, visitor attractions and adventure tourism - they don't expect to be back to a sustainable level of business for 18 months. So the next full season they'll have is likely to be two years away.

Visit Britain, the UK government promotional agency, is assuming that the return of international tourism will come at the end of this cycle. Better to focus on domestic tourism at first, it's telling ministers.

Will there be much of an airline industry still there then? It was warning this week about that return bringing big problems with government-imposed health barriers to people travelling, which could add a lot of cost and complexity to passenger handling.

To discuss much of the way this plays out in Scotland, there was a tele-meeting in mid-week between the cabinet secretary Fergus Ewing and industry representatives.

Gordon Morrison, head of Scotland's Visitor Attractions Association, noted how the mood of conversations with those in the sector has changed, towards despondency, anger and frustration: despite many billions of pounds being made available for loans and grants, people now see that the government schemes - as they stand - are not going to save their businesses.

Another noted that mental health is deteriorating, through anxiety and exhaustion.

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Most of the sector is benefiting from a business rates holiday for a year. There are grants, depending on rateable value, but a sore point is that those with several outlets in a chain - of pubs or cafes, for instance - get one payment in total, whereas in England, they would get a payment for each outlet.

Among the significant gaps in the schemes: self-catering businesses, tourist coach operators, annual events such as festivals, those who run outdoor activities without an office or shop on which business rates would be paid in a normal year, and bed and breakfasts where they pay council tax instead of business rates.

For those in annual events, the supply chain for that is feeling vulnerable. A UK survey of 1,500 supplier firms found 60% do not have enough cash to get beyond three months of lockdown, and only 5% had successfully accessed support. The warning there is that opening up for events will be much more difficult if there aren't the businesses there to provide the arena seating, marquees and portable toilets.

Another gripe: the grant system does not extend to those with a rateable value of more than £51,000. There's a plea to be more flexible on that, rather than depend on bank loans. Relationships between lenders and hoteliers, particularly those in areas with seasonal business, have not been all that warm since the 2008-09 financial crash.

As with many businesses, but all the more important for those with a limited season to operate, tourism bosses were asking for more clarity about when they can plan for travel restrictions to be relaxed. They want to take bookings. People want to book - some do, anyway. But nobody can be sure if they can go on holiday in July and August.

Flying abroad

For those who wish to fly further afield, there are teaser offers to boost the booking of flights next year, only asking for down-payments. Or for flights later this summer, there are offers, such as free baggage checks.

But for travel agents, there is a fear they may not get that far. ATOL protection requires them to refund a cancelled holiday within 14 days. There are reports that some are giving vouchers instead, which the Association of British Travel Agents says is not acceptable.

However, they do accept that IOUs may be necessary. Refunds are paid by agents, drawing on funds they can get from from airlines and hotels. And those operators are either closed or desperately holding on to cash.

The industry can make the refunds if it has a continuing flow of cash for new bookings - and, of course, it does not now have that coming in.

Done at scale, the payouts are colossal, and travel agencies say they simply can't survive unless the 14-day payment rule is withdrawn. If they don't survive, they say it's government that stands behind their promise. As with so much else.

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