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24 Sep 2015

BY Matthew Parsons

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TTG Intelligence: Lobby push to revive tourism

A report by Oxford Economics for the British Hospitality Association, as part of its inaugural Hospitality and Tourism Lobby Day last week, saw the BHA urging the government to make hospitality and tourism an economic priority in the way some countries such as China and the US have done.

Westminster Big Ben

Tourism is clearly a growth industry for the UK, and OE estimates that 331,000 new jobs have been created by the sector in the past five years.

 

The think tank believes another 300,000 new jobs will be created by the end of the decade and says tourism represents 10% of UK GDP, earning the country £143 billion.

 

It is not all good news, however. According to the United Nations World Tourism Organisation, the UK is the eighth largest international tourism destination by visitor numbers, but was in sixth place as recently as 2012, and has now dropped below Turkey and Italy.

 

The report also sounds warnings around government policy. It states that countries set to benefit most from the growth of global tourism “will be those which have a clear strategy and leadership from the top of government”.

 

It adds, however: “Unfortunately, successive UK governments have consistently fallen behind other countries in fully appreciating tourism as an economic contest between nations.” The pessimistic view is echoed by The World Economic Forum Travel and Tourism, whose Competitiveness Monitor tracks the competitive position of 141 countries.

 

In 2015, WEFT findings positioned the UK 63rd in terms of government policy and enabling conditions for business, 35th in terms of government prioritisation of the industry and 140th in terms of price competitiveness – specifically meaning tourism taxes and fuel taxes applied by the UK government.

 

To remedy this, the BHA wants a series of commitments from government.

 

They include The setting up of a new inter-ministerial tourism group; more dialogue with the industry; apprenticeships for SMEs as well as large businesses; a reduction of VAT on accommodation and attractions from 20% to 5%; ensuring the visa process does not discourage visitors from new markets; building a third runway at Heathrow; and banning rate parity clauses that stop hotels from selling at a lower price direct than through online travel agents.

 

The ease of obtaining visas is one of the key issues mentioned in the report. It notes that despite government concerns about Chinese visitor applications, 96% of the 358,000 applications from the country were granted in the year to March after vetting procedures proved they were genuine.

 

Now, the BHA is monitoring a pilot scheme run with Belgium to enable Chinese visitors to obtain a visa for both the UK and Schengen area (which comprises 26 European countries) with a single application, and hopes to extend the partnership to larger European countries.

 

More controversially, OE calls for a ban on “anti-competitive online agent practices” that forbid hotels from discounting direct.

 

“Consumers are being led to believe that the search results they find on price comparison websites represent the best deals for them,” it says.

 

“In fact, the order of search – which we know is critical in terms of where they make their ultimate purchase – is actually driven by commercial factors such as the level of commission the OTA receives from a particular business.”

 

The OE notes that the French government earlier this year banned such clauses and that German competition authorities have stopped a leading OTA from using the tactic.

 

The report highlights a similar arrangement between search engines and restaurants. It claims: “Currently, meta search sites and aggregators effectively divert customers away from the restaurant in the original search to the aggregator website.

 

The aggregators are then able to divert the customer to restaurants of their choosing.”

 

On a more macro level, the UK’s VAT rate remains one of the biggest irritations for the industry, with the tax rate on accommodation in key European countries ranging from only 6-10%, compared with the UK’s 20%, while 25 out of 27 European nations have reduced VAT on tourism products.

 

The BHA estimates that cutting VAT to 5% will raise an extra £3.9 billion over 10 years via increased expenditure generally. Another consideration is the National Living Wage.

 

The hospitality and tourism industry accounts for a third of those earning more than the minimum wage, but less than the living wage of £9.35 an hour proposed for 2020 for those over 25. The report warns the industry’s pay bill will rise by “several hundred million pounds” and adds:

 

“Unless there is a comparable increase in revenues, margins will be eroded with potentially damaging consequences for investment and job creation.” The BHA also warns devolving more power to city councils could be bad news if a local tourism or “bed tax” is introduced.

 

It adds: “It is misleading to look at the experience of other cities in continental Europe which charge a tourism tax, because they are charging visitors significantly lower levels of VAT.”

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