Written Evidence to Welsh Affairs Select Committee from Andrew Campbell, Chair Wales Tourism Alliance.
Impact of Coronavirus upon Tourism in Wales.
The impact of the pandemic on the tourism sector resulted in the immediate shutdown of 97% of businesses with 80% of staff being furloughed. The figures are higher in comparison to any other economic sector. Findings from a recent VW Barometer Survey (May 2020) found that 23% of businesses do not expect to survive the next three months, with a further 30% of businesses not knowing how long they can survive. In short the crisis has been catastrophic, impacting significantly upon urban and rural communities across Wales.
To provide context, tourism in Wales during 2019 generated £6.2 billion in visitor spend and provided jobs for 130,000 people. It is a significant and valuable economic driver within the national economy, representing 9% of GDP. Although projections are not available for Wales, it is anticipated that job losses within tourism in England could be as high as 30%.
The effects of Covid-19 were compounded by the date of the lockdown. March effectively is the start of the season and the commencement of revenue earning opportunities. For many businesses it followed much financial investment during the winter in refurbishment or upgrading of facilities. UK tourism generally was experiencing pressures before March through the steady decline in international visitors as the virus took hold overseas. During February, with UK concern over coronavirus heightening, people began working from home in greater numbers, which affected business tourism. The loss of Easter trading and two subsequent Bank Holidays, which all fell within a time of unprecedented fine weather, created additional financial hardship. As tourism is an industry which intrinsically brings people together, managing social distancing protocols will be both complex and challenging. It is therefore likely that many sectors will be a long time in emerging from lockdown restrictions. In summary tourism businesses were amongst the first to experience economic hardship and will be amongst the last to return to normal trading. It is therefore an industry which is deserving of specific attention and support, in relation to other economic sectors.
The key objective for tourism businesses in Wales in the short term has been survival. Financial measures introduced by both UK and Wales Governments have been largely successful in achieving that. But the situation remains critical. Businesses have been particularly appreciative of the furlough scheme, which has safeguarded jobs and protected livelihoods. The recent announcement to extend the scheme until the end of July has been warmly welcomed. Local authority grants and low interest loans from the ERF have been vital in maintaining cash flow, but some businesses have struggled to meet eligibility criteria to access financial support. The WTA, along with other industry representatives have sought to highlight gaps where additional support is needed or where problems are being experienced in accessing monies. WG has listened to concerns expressed - and continues to listen, refining funding streams and eligibility criteria to better address hardship needs.
For businesses who are able to weather the immediate storm, 2021 will be realistically seen as a recovery year, returning to some sort of profitability during 2022. According to a recent VB survey, 41% of UK tourism businesses believe that it will take two years to become profitable again. In the medium to long term it is anticipated that general economic uncertainty will result in less business investment.
Economic factors aside, visitor management challenges have emerged as community anxieties have understandably arisen over the possible return of visitors from more highly infected coronavirus areas. There has been widespread media coverage of negative feelings expressed against second home owners, which has engendered an unfortunate anti visitor sentiment in some parts of Wales.
On a more optimistic note, the crisis has prompted some positive outcomes. The perennial problem of seasonality within tourism will need to change as businesses will seek to trade for longer to maximise revenue earning opportunities. Once restrictions have been eased, businesses will be keen to recoup losses by operating throughout the Autumn and Winter periods. In addition, because of the anticipated initial consumer reluctance to take overseas holidays, it is likely that visitors will stay longer in Wales, reversing the trend of short breaks – and thereby helping to make tourism a more sustainable year round industry. On the assumption of Wales experiencing a post Covid-19 bounce – and with spatial concerns uppermost in consumer thinking, there will be a need to disperse visitors from traditional honeypot areas, which will benefit less visited and well known areas of Wales. From a recent survey conducted by Celtic Manor, 60% of respondents indicated that taking a trip away from home will be their highest priority after lockdown restrictions have been lifted.
Tourism Sector Response to the Crisis.
Key word here has been collaboration. Tourism is a community business, but traditionally businesses have worked in isolation. The crisis has engendered a spirit of cooperation, with many informal local, regional and national networks emerging, helping and supporting each other and creating a spirit of unity. Post crisis, it is to be hoped that these networks will contribute towards more cooperative trading and will generate much new product development.
In the first week following lockdown, VisitWales set up an emergency Covid-19 Tourism Group, where the WTA sit on a weekly basis with nine other members representing different business sectors and regions throughout Wales. The Group also includes WG representatives and is attended by the Tourism Minister Lord Dafydd Elis Thomas. Minutes from meetings are circulated to WTA members through the Alliance newsfeed and newsletter. Meetings provide opportunities to present “the industry view”, share information and to shape current policy.
On the ground, WTA member businesses have sought to develop new income streams displaying ingenuity to meet changing market needs. Food and beverage operators have set up delivery services – and click and collect is fast becoming the new normal. Businesses with diversified income streams are faring better, particularly craft businesses who can sell products on line. There can be no doubt that digitally proficient operators have been better placed to create new services – and to engage more effectively with existing and potential new audiences. WTA members have reported that lockdown has provided all businesses with opportunities to improve their IT skills, which again post crisis will enhance resilience and competitiveness within the sector.
Nine weeks into the crisis, attention has now turned to recovery planning. Businesses are now formulating strategies to accommodate two metre social distancing requirements. Guidance protocols are soon to emerge to provide further help and support. Increasingly WTA members are raising questions about the “two metre rule” which is at variance with many other countries – and in particular the World Health guideline of one metre. As capacity levels have a direct correlation to viability and profitability, questions are entirely valid. A recent finding from an Oslo study for indoor venues concluded that a one metre distance will achieve 70% capacity as opposed to 30% capacity from a two metre distance.
The WTA has provided support to members through representation at weekly Welsh Government Emergency Covid-19 Tourism meetings and UK TIER Tourism Group meetings; through ongoing communications with the Secretary of State for Wales – and elected Westminster and Senedd parliamentary members; attendance at UK and Welsh Government inquiries such as Economy, Infrastructure and Transport - and Wales Select Committees; UK and Ireland Alliance meetings; Senedd Tourism Cross party meeting; conducting TV and radio interviews; providing email newsletters and an up to date website newsfeed; posting regularly on Twitter – and responding to phone and email enquiries covering a range of subject areas.
Government Support for Tourism Businesses.
There has been general acknowledgement throughout the tourism industry that financial packages introduced by Government were immediate and have been supportive in addressing immediate cash flow problems. Demand for the WG Economic Resilience Fund has been strong, which has created problems in terms of processing applications and getting money out quickly to businesses. The first phase of the fund, the £100 million DBW Covid-19 loan scheme was fully subscribed after seven days. Additional tranches of money made available have also been popular. The eligibility checker has simplified the understanding of application criteria, but for some tourism businesses eligibility criteria has precluded them from applying. Many small businesses, particularly accommodation providers paying Council Tax, together with the self- employed and freelance operators have been particularly affected. It is to be hoped that the next ERF announcement will cover some of those shortfalls. The WTA continues to provide feedback to WG as to where gaps in support need to be plugged.
As mentioned earlier within this submission the Coronavirus Job Retention Scheme has received widespread approval and undoubtedly prevented much unemployment. It has provided stability and has given tourism businesses an opportunity to trade once restrictions have been lifted. The WTA welcomed the recent announcement over extensions to the scheme. But there is a very real danger that if businesses are unable to enter the marketplace within a realistic timescale, staff will simply be released once furlough arrangements are concluded. Because of the seasonal nature of tourism, the WTA believe that a special case can be made to extend furlough arrangements for the sector and will continue to press for this.
Representations continue to be made by the WTA and other industry associations for current government financial support packages, through the ERF, to extend into 2021.
Initial dispensation of £10,000 and £25,000 grants by local authorities to many tourism enterprises was excellent with businesses reporting receipt of grants within days of submitting applications. However the distribution of grants to self -catering operators has been problematic, with unacceptable delays experienced through the interpretation of eligibility criteria. After many weeks grants are now forthcoming, but at the time of writing some applicants are still waiting. To avoid any future problems surrounding the status of self catering properties the WTA believes it would be helpful if the VOA reconsider the eligibility criteria for properties registering for non domestic rates.
Main Concerns for WTA Members.
What additional support can be provided by Government?
The tourism sector remains in a vulnerable position and not unlike any other economic sector is dependent upon control and spread of the virus. In the short term it is not unreasonable to assume that once restrictions have been lifted, there will be an increase in UK domestic tourism, with less UK residents travelling internationally. However tourism businesses in Wales can expect to experience strong competition from all UK regions over the next 12 – 24 months. The immediate priority for the industry is to extend the season and to find ways to generate additional demand.
The WTA believes that consideration should be given by Government to the following action points to help achieve this objective:
The distribution of staycation vouchers to low income families which will be redeemable against holidays taken in Wales. It is a practice used by other European countries and is influential in dispersing tourists from more popular, honeypot areas to lesser known and more sparsely populated destinations.
Instead of distributing grants, WG should consider buying attraction tickets, bednights and other service products from businesses, which can then be given away to stimulate market demand. Hong Kong recently purchased 500,000 airline tickets from the city’s airlines which will be given away to encourage people to visit in the future.
The introduction of an additional Bank Holiday in October and on St David’s Day to stimulate additional trip taking.
The introduction of a two week Autumn Half Term to again help extend the length of the season.
Encouragement should be given to employers to introduce a four day week which will encourage growth of short breaks ( a recommendation recently announced by New Zealand Govt).
Increased funding be given to VisitWales to develop additional marketing campaigns – and to reinforce strategies to develop tourism more sustainably within Wales.
Review and strengthen the role of DMO’s in Wales with a view to adopting a “less is more” structure- and which would be part funded by Welsh Government.
A reduction in VAT to 5% to enable businesses to become more competitive. The crisis has prompted a cut in VAT in Germany, Austria, Belgium and Greece, with many other countries deferring VAT until 2021.
Relax licensing regulations to enable caravan parks to open for 12 months; relax planning laws re change of use to enable businesses to react more quickly to changing market conditions.
WG to provide grants to assist tourism businesses with cleaning, sanitising and protective clothing costs.