Give us a break: can the UK's £127bn tourism industry recover from coronavirus?
People cycle along the beach front in Bournemouth, Dorset seven weeks into lockdown | PA Images
From Cornwall to Shetland, UK tourism is facing an existential crisis, with the highest proportion of workers on furlough of any UK industry. With no idea if businesses will be able to reopen even when lockdown eases, how can we save the sector?
Easter should have been the start of the season for tourism businesses across the country. Instead, nearly three weeks into the Government’s lockdown to contain the spread of Covid-19, hotels, B&Bs, pubs and restaurants were closed, beaches were empty, and police were turning away any visitors or second homers trying to flout the stay-at-home rules.
“Tourism was the industry that was hit first and hit hardest,” Patricia Yates, acting CEO of VisitEngland/VisitBritain, tells The House. Riddell Graham, director of industry and destination development for VisitScotland, reports the same: “Business has effectively ended. It has fallen off a cliff for every tourism business in Scotland. There’s not one part of the industry that’s not been effected severely.”
His team have been fielding calls from tourism and hospitality businesses across Scotland for weeks now, trying to provide or signpost support. “It’s been a pretty harrowing experience to be honest, people crying on the phone, in total despair,” he says.
In normal times, the tourism industry in the UK is worth £127bn per year, according to VisitBritain, and supports 200,000 small or medium businesses, employing 3.1 million people – around 8% of the UK workforce, and peaking at 35% in some areas. Now, 80% of those employees are furloughed – the highest proportion of any UK industry – with no idea if businesses will be able to reopen even when lockdown eases.
VisitBritain has modelled a 55% loss in expected inbound tourism income for 2020, and a 24% loss in domestic tourism income – totalling at £37.2bn lost income. However, this is based on domestic tourism starting again in June, and international tourism starting again in August, both at significantly reduced levels. Whether this will be possible, like much else, remains uncertain, and across the country, tourism businesses and their representatives are asking: how can the industry survive?
Someone described it to me as facing three winters. Most, if not all, of tourism and hospitality will simply not be able to function properly until the autumn
Steve Double represents St Austell and Newquay, the latter being the largest tourism destination in Cornwall – a county where tourism and hospitality accounts for 30% of the economy. “It is hard to overstate the impact this is having locally,” Double, who is also chair of the APPG on Tourism and Hospitality, says. “Literally, it’s just shut down entirely.”
The loss of Easter trade alone has set the sector in Cornwall back around £300m. And in communities reliant on tourism, the impact on the wider supply chain is massive. “It’s often said in Cornwall that if tourism has a bad summer, electricians, plumbers, builders, everyone has a bad winter,” he explains. “The knock on effect on the local economy goes way beyond those businesses in the sector.”
At the other end of the UK, Alistair Carmichael, MP for Orkney and Shetland, expresses similar concerns, fearing that those unable to make a living in tourism will leave the islands. “We have a very good quality offer in the visitor economy we have built up over decades. We risk losing everything we’ve built up.”
The timing of the coronavirus is particularly devastating to the tourism and hospitality sector. “There was never a good time for something like this – but it’s difficult to think of a worse time just as you’re coming into Easter, in what is a very seasonal trade, to be hit like this,” Carmichael explains.
Most tourism businesses in the UK make the vast majority of their income in the summer, peaking in July and August – with that money then supporting them through the lean off-season between October and March.
With the Government indicating that leisure and hospitality businesses will be among the last to be allowed to reopen, there is now a real concern that if businesses cannot open this summer, they won’t have the cash reserves available to open through the winter, instead waiting until next spring to start trading again.
As Alex Sobel, the new shadow tourism minister, points out many are small or family run businesses, particularly in coastal and rural areas, and have not had any significant income since the end of the 2019 season last September. Even if they are able to open in a limited capacity following social distancing and public health measures, many may fold if the appropriate support is not made available. Sobel says the industry “needs a high level of intervention and support, and the Government needs to have a smart strategy about this.”
Tim Farron’s constituency in the Lake District is home to the most visited National Park in the UK, with over 16 million visitors annually – 7 million more than the next largest, the Yorkshire Dales. A third of all jobs in South Lakeland are now at risk, according to the RSA. Despite getting some visitors in the colder months, Farron describes the difference between the summer and winter seasons as “feast and famine". “The coronavirus outbreak began right at the end of the famine, leading to the cancellation of the feast”, he tells us.
“Someone described it to me as facing three winters,” Farron says. “Most, if not all, of tourism and hospitality will simply not be able to function properly until the autumn which means we’re expecting people having missed out on the feast to start again in the famine.”
One of the multitude of issues facing the industry is how interconnected the tourism ecosystem is. Kurt Janson, director of the Tourism Alliance, describes it as a “horizontal supply chain”. Travel agents, marketeers and tour operators get visitors to book holidays, transport operators, from planes to public transport to coach operators to car hire providers, get visitors to their destination, where there needs to be accommodation – and once they get there, the attractions and food and drink offerings need to be available. If any part of that chain is missing, the UK’s tourism offer doesn’t function.
Currently, different parts of the chain are exposed to different risks. While the furloughing scheme has been welcomed as a lifeline, some businesses are still falling through the gaps despite their revenue streams completely drying up – whether that be the food and drink businesses that add so much to the tourism offering and have seen their market collapse, (“you can’t furlough cows,” as Carmichael says of Orkney’s cheese offering), or other technical issues with accessing Government support.
One such issue is that a number of tourism businesses including tour and coach operators are not eligible for the business rates holiday offered to the rest of the leisure sector, despite suffering similarly from the industry’s collapse. Janson, who is raising the matter with the Treasury and Ministry of Housing, Communities and Local Government, says that this is down to a “bizarre” distinction that customers do not walk in off the street to make purchases. “On that really odd distinction, if you went into a car hire place, you’d get support, but because the coach comes to you, you don’t get support,” he explains.
Another vulnerable element of the chain are the 60,000 professional self-catering accommodation operators. Mainly located in rural and coastal areas, they are currently ineligible for the Government self-employed support scheme due to their business being viewed as property investment rather than being part of the tourism industry – despite a distinction already existing in HMRC (the Furnished Holiday Lets scheme), which differentiates between properties which are trading businesses and second homes that are occasionally let out.
If any one part of this chain collapses, the ramifications could be huge. “There is this ecosystem of tourism where each part of the picture in a locality, or even more broadly, is reliant on another part,” Alex Sobel explains. So how then, can the industry recover more or less as one?
The many billions we’re committing on furlough and grants will all be money down the toilet if we don’t keep people going through to the time where the economy properly picks up
The industry expects domestic tourism to recover first when UK lockdown measures ease, with coastal towns and rural areas being the main beneficiaries. Their prevalence of self-catering accommodation and static caravans, and that their major attractions include wide open areas of natural beauty mean that they lend themselves more naturally to social distancing.
However, seaside resorts for which a large part of their appeal is amusement arcades and piers may struggle, warns Sobel. “Social distancing is very hard [for those attractions]. You’re talking about when the arcade is at its busiest, taking 10-20% of customers. How can an arcade survive on that level?” he warns. “That will have a knock-on effect in those kind of resorts.”
Hotels and B&Bs should be able to open up relatively easily with social distancing measures, such as staggered check-ins, protective screens at reception, intensive cleaning regimes, and the closure of (or at least socially-distanced) lounges and restaurants. However, Tim Farron warns that the need for more intensive cleaning between guests may lead to longer gaps between guest stays at B&Bs, resulting in reduced occupancy.
For Farron, access to natural beauty spots will also need to be better organised in order to implement social distancing, with a predicted influx of people desperate for open space after months of being stuck inside. Off-the-beaten track paths will need to be opened up, and fields will need to be rented from local famers to allow for an expansion of carparking spaces. “All of the national park authorities will be crucially significant in this to organise and coordinate access to the Lakes so you don’t have 1,000 people climbing the same mountain or parking in the same car park,” he explains.
There are also concerns in some rural tourist communities, particularly those with relatively low levels of Covid-19 cases currently, that visitors will bring the virus with them, especially given the usually older-than-average age demographic. “There is a real sensitivity that we need to recognise,” explains Riddell Graham. “It will have to be a gradual return, and we can’t just suddenly open the door and then an influx of visitors; they need to be able to cope with that influx.”
“If we began to release the lock down in a way that isn’t safe or too early, and then see another outbreak, to have to go into another lockdown perhaps in the peak of the summer would be even more devastating,” says Steve Double.
Industry is keen to stress that limiting the spread of the virus once lockdown is over by implementing social distancing in bars, pubs, cafes and restaurants is doable – with the necessary information and support.
“The ask from industry is that Government sets out the principles, and then trade associations and big business can work through what the guidelines look like, obviously making sure they comply with Public Health England,” explains Patricia Yates. “Then individual businesses can look at their business and think how they could re-open.”
Most of the industry would like the entire sector to be given the freedom to open at the same time, rather than pubs, restaurants, attractions etc being given different dates as in other countries. It would then be up to individual businesses to prove that they could open up in a safe manner, in line with Government guidance. To achieve this, work is underway, led by VisitBritain, on a UK-wide ‘kitemark’ for the tourism and hospitality industry, helping to train businesses online and give consumers confidence. However, even if they open up, their capacity would necessarily be much reduced – as would their income.
“I think the big question is how economically viable those businesses will be. If they’re working on 10% profit margin, which is fairly standard, then if you can only open with 50% of capacity or even less then that is going to be really challenging,” Yates says.
The ease of implementing social distancing will also be different for different types of tourism businesses and attractions. Outdoor attractions have told VisitBritain think they could open within a week, while hotels are saying four weeks. Pubs will be four-to-six weeks, partly due to issues with replenishing stock, and Heathrow, which has closed two terminals, is looking at a similar timeline to open up fully. Inside attractions such as stately homes and museums are exploring introducing timed-ticketing systems and spacing inside – however for some, the systems won’t be in place until towards the end of the year. For areas reliant on marquee events like racing or festivals, they may have missed their chance for 2020 altogether.
Given the myriad of challenges and long-term reduced income facing the tourism sector, the industry and local MPs would like to see ongoing, targeted support for businesses, the self-employed working in tourism, and those in the supply chain, through to at least spring 2021 – something the prime minister was asked about, but did not commit to, at PMQs.
For Farron, such a commitment is not just morally right, but economically sound too. “Having committed the many billions we’re committing on furlough and grants, it will all be money down the toilet if we don’t keep people going through to the time where the economy properly picks up,” he says.
Flexible furloughing while businesses slowly increase their capacity, similar to France, is a popular option, as well as targeted support for businesses in different areas of the country based on the challenges their own market face.
Additionally, the Tourism Alliance are looking to set up a working group with local government bodies and MHCLG to temporarily ease planning restrictions to allow pubs and restaurants in cities and towns to more easily set up tables on the pavement or public spaces to increase their socially-distanced capacity.
VisitBritain would also like the UK to look to best practice in other countries to encourage domestic tourism – such as in Sicily, where the regional government has set up a fund to subsidise holidays in the area. There will also need to clear messaging from Government, they say, guided by the scientific advice, that it is safe to travel – and eventually coordinated international efforts to encourage tourism again.
For now, however, the industry is clear: their highly interdependent ecosystem and seasonal nature mean they are high risk. “There is no silver bullet,” says Carmichael. Without ongoing, multifaceted government support until at least early 2021, the industry as we know it – and its three million jobs – probably won’t survive.