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National
Jeremy Watson

A resilient industry awaits the mass return of overseas visitors

In early spring, a national UK newspaper proudly listed a collection of ‘hot new hotels’ for 2022.

Not overseas in some exotic location, but here in Scotland, where the pandemic might have dampened trade to an alarming degree, but has proved no bar to ambition.

Among the big names expanding their territory is Gleneagles, whose new Townhouse in the centre of Edinburgh has been called one of the most eagerly-awaited openings in Britain, while Richard Branson’s Virgin Group is setting up its stall in a historic building near the city’s Grassmarket.

According to the list, tourists have a lot to look forward to, with new ventures at the luxury end of the market in Skye at Bracken Hide, the return of Marine Hotel in Troon under American ownership, and an expanded SCHLOSS Roxburghe hotel and golf resort at Kelso in the Borders.

It all suggests a hard-hit hospitality sector returning to rude health after weathering the Covid storm, with the luxury hotels the flagships of a tourism industry that, pre-pandemic, was earning more than £11bn annually for the Scottish economy; as well as nourishing more than 200,000 jobs.

Conor O’Leary, managing director for Gleneagles, is among those expecting an uptick in the industry’s fortunes. “We’re very much looking forward to contributing to the city’s ongoing renaissance, through the opening of Gleneagles Townhouse and the flourishing return of tourism to both Edinburgh and the country as a whole,” he enthused.

Yet is the expected bounce back really happening? And if it is, how high will it go?

Will international travellers, particularly from the US - the big spenders of the tourism world - come back in significant numbers, or will their return be derailed by events such as war in Europe?

For even the biggest cheerleaders of the tourism industry in Scotland, which before 2020 was enjoying consistent growth, it is difficult to forecast the outcome of the next three quarters.

Marc Crothall, chief executive of the Scottish Tourism Alliance (STA), which represents more than two-thirds of businesses in the sector, stated: “Sadly, there has been no positive change to help the sector recover.

“Things have only got tougher with energy costs rising, household budgets being further squeezed and US international travel confidence to the UK at risk due to the war in Ukraine.

“Fortunately, resilience is in this industry’s DNA.”

An STA survey at the start of this year highlighted the challenges ahead in 2022. One in three (of 1,335) tourism and hospitality businesses stated they felt likely to fail this year.

Just over half of all respondents said they had either zero or just a couple of months of cash reserves to stay afloat.

Two-thirds said they were in financial difficulty, citing extreme concerns over increased costs, particularly in relation to utilities, reduced revenue or a combination of both, while half said they had been impacted by staff shortages.

This followed a long period of stop-start, as lockdowns were imposed then eased, with many hospitality venues having to operate at reduced capacity, hampered by staff shortages due to Covid-19 absences and the effects of Brexit.

Some premises have not reopened and many experienced staff members have deserted the sector, perhaps permanently.

Overall, hospitality businesses reported turnover down 10% on pre-Covid levels, with the 2021 winter lockdown just before Christmas delivering another £1bn hit. That was before this year’s cost-of-living crisis, with its alarming rise in energy and supply line costs.

The result is that some restaurants and cafes are still not opening at lunchtimes, or closing for more days of the week, even in tourist hotspots. Where jobs are being filled, many recruits are inexperienced and need greater training and supervision. Skilled staff, such as chefs, are in short supply.

Analysis by commercial property agent Avison Young concluded that profitability for hotels will remain challenging until occupancy can be sustained above 50%. While the mid-scale and economy sectors will recover first, luxury travel destinations - sometimes over-reliant on international visitors - may take longer.

As well as the Americans, thousands of wealthy, whisky-loving, golf-playing Russians will be absent.

Crothall expects the easing of Covid restrictions around international travel, which accounts for 45% of total tourism and hospitality spend, to be the “game changer” this year.

“It is this mix of business and leisure tourism and the economic buoyancy it stimulates within communities which has a direct impact on the health of the industry and the nation’s wealth,” he pointed out.

“The removal of this market has been devastating for so many tourism businesses and the supply chain, so its return will mark a pivotal moment which should give us hope and refocus the energies of our businesses, government and public agencies in delivering the ambitions of Scotland’s Outlook 2030 tourism strategy.”

The industry is calling for the UK Government to relax visa restrictions to attract back the overseas workers it lost to the pandemic and Brexit, although the issue has been clouded by the Ukrainian refugee crisis.

“We do need a change in migration policy,” Crothall insisted. “The UK Government has responded favourably to certain sectors, such as the care sector, and we need that same adjustment.”

There is widespread recognition that overseas labour is no longer the long-term solution for a people-led industry. The STA wants the education sector to put greater effort into promoting careers in hospitality.

“We have a gap and we need to plug it,” Crothall said. “We need more effort in schools and colleges to educate young people about the opportunities to work in the sector.

“They should know that bar tendering and chamber-maiding are good jobs; there are great, lifelong, transportable skills to be learned.”

The hospitality industry is struggling to fill positions (Haydn West/PA)

SimpsInns, an Ayrshire-based hotel group, believes motivated staff are vital to recovery and is planning to recruit 20 trainees this spring.

Lee Simpson, son of the founders, said: “Young people within Ayrshire and around Scotland have the opportunity to play an important role in helping the struggling hospitality sector get back on its feet after the damaging impact of the pandemic.

“Employing committed, talented and enthusiastic staff will be an important part of that process.”

Most businesses survived the pandemic through a combination of government help - furlough, grants and cuts in business rates and VAT - and greater debt. Others went into innovation mode.

Among them was Dean Banks, a former Masterchef finalist from Angus who opened his first restaurant, the fine-dining Haar in St Andrews, in spring 2019 to critical acclaim. A year later, although the door had to close on his dream, he was determined it wouldn’t die.

“We were a young business without much money,” Banks said. “So we didn’t have any savings for a rainy day, it was sink or swim, so I decided to swim as fast as I could.”

Dean Banks, who is behind the Haar restaurant in St Andrews (Grant Anderson)

Banks launched the Haar At Home online arm with success fuelled by stay-at-home, holiday-deprived diners itching to spend disposable income.

“We launched just at the right point and we were one of the first restaurants in the country to go national with it.

“I just thought, 'let’s go and do it', I could take decisions very quickly along with the staff and we all just got on with it; I was collecting lobsters in the morning, preparing them and delivering them that night.”

Revenue surged to three times the amount the restaurant took during its first year and helped finance a new venture, Dean Banks at the Pompadour in Edinburgh. He has now reopened in St Andrews at a different location, but Haar at Home is here to stay.

“There is still a demand and we will continue with it because it supports the business as a whole,” Banks said.

He has his own way of coping with staff shortages, keeping most of his team intact by providing better pay and conditions, such as a four-day working week. However, inflationary costs - wine up 6% and food up 12% - combined with rises in National Insurance and VAT back to 20% will take a toll.

“Businesses will close as a result of that,” he predicted.

For some tourism businesses, it’s a matter of hunkering down to simply reclaim lost ground.

Scott Morrison, managing director of Dunrobin Castle, which has survived seven centuries on the Sutherland coast, commented: “There will be a recovery this year, but overseas visitors may take a little longer to return in larger numbers.

“We hope to open as normal and just get back to doing what we did well in 2019 and the years before that.

“We do have a new coffee outlet which is just to the side of the castle in a restored vintage horse trailer, and hopefully this is something our visitors will find useful.”

In the North West Highlands, Sarah Fox, who runs Ben Loyal Hotel in Tongue, reckons recovery is being hampered by a lack of staff.

“The additional pressures on the business from increased costs and the impact the price of fuel will have on tourists is also making us a bit nervous for the season ahead. But the biggest issue is not being able to employ foreign workers.

“We have countless applications from very suitable candidates, but are unable to take them on - we feel that we are treading water staff-wise and it limits your ability to grow and expand your services.”

It’s a similar scenario throughout much of the pub, bar and cafe sector.

Paul Waterson, the spokesman for the Scottish Licensed Trade Association, stated: “With all the staffing problems we have got and prices going up, the government must really look on us as a special case.”

With the return of overseas tourists vital to recovery, VisitScotland, the national tourism agency, has launched Scotland is Calling, a digital marketing campaign in partnership with online travel platform Expedia.

Vicki Miller, the agency’s director of marketing and digital, said: “This year we expect to get back some way towards pre-pandemic levels.

“Last year’s recovery was based on domestic visitors and our tracker shows that people are still anticipating taking more domestic holidays this year.

“International visitors are unlikely to return to pre-Covid levels for at least a couple of years, but we have new routes coming in from Canada and restored routes from the US.

“We don’t know at this point what impact the Ukrainian invasion will have on the North American market, but it will gradually pick up.”

VisitScotland, led by chairman Lord Thurso, believes a new emphasis on sustainable tourism will help the country’s hospitality sector attract a new wave of tourists.

For example, he is pushing for improvements in electric vehicle charging networks, particularly on the popular, but sometimes overcrowded, North Coast 500 circuit, to benefit the environment by luring drivers out of petrol-driven vehicles.

The future, he is convinced, lies in attracting the generations - from the Millennials onwards - prepared to pay a premium for low-carbon tourism.

“We need to concentrate on the quality and sustainability of the product and attract the people we want to have,” he said. “More than three-quarters of the people we have talked to want to buy a sustainable product.

“We should strive to become the world leaders in responsible, low carbon tourism; that will give us an edge.”

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