Written evidence submitted by UKinbound

Promoting Britain Abroad

Department for Digital, Culture, Media and Sport Select Committee Inquiry

Submission by UKinbound

Thursday 6 January 2022

Julian Knight MP

Chair, DCMS Select Committee

House of Commons

London

SW1A 0AA

Thursday 6 January 2022

Dear Mr Knight,

Evidence submission to the DCMS Select Committee Inquiry into the Promotion of Britain Abroad

I would like to begin by thanking the committee for launching this inquiry and for the opportunity to present evidence. My association, UKinbound, has over 300 member businesses from England, Scotland, Wales and Northern Ireland. They include accommodation providers, attractions, destination management companies (DMCs), destination marketing organisations (DMOs), service providers (including restaurants, transport, retail, ticketing and professional services), and tour operators, and are all vital to the UK’s inbound tourism supply chain.

In the decade prior to 2019 inbound tourism was the jewel in the UK’s crown, a global success story. It is one of the most competitive tourism industries in the world, ranking sixth in the World Economic Forum’s 2019 Travel and Tourism Competitiveness Index[1] and is globally the fifth most valuable tourist industry by visitor spend[2]. However, it is also 140th (last position) in terms of Price Competitiveness, 77th in terms of Policy and Enabling Conditions and 55th for the Prioritisation of Travel and Tourism.

In 2019, 40.9 million international visits were made to the UK, with visitors spending a record

£28.4 billion[3]. This makes inbound tourism the UK’s third largest service export[4], after other

business services and financial services, and the UK’s fifth largest export industry[5], on a par with our pharmaceutical and automotive industries.

Inbound tourism generates high levels of revenue and employment throughout the country, aiding the levelling up agenda. It transcends the four nations, supporting over 500,000 full time equivalent jobs[6] in cities and regional economies. Tourism is well spread throughout the country, with no region having fewer than 100,000 tourism related employees[7].

Covid-19 has had a devasting effect on the inbound tourism industry. In 2020 the UK received 11.1 million inbound visitors, who spent £6.2 billion, a decline of 73% in visits and 78% in spend on 2019, representing a loss to the UK economy of £22.2 billion[8].

Current projections for inbound tourism for the full year 2021, is for 7.7 million visits and £6.9 billion spend, a decline of 81% and 76% respectively on 2019, representing a further loss to the economy of £21.5 billion[9].

Inbound international tourism to the UK, and the supply chain that sustains it, was the first industry to be affected by Covid-19 and will be the last to recover[10]. Throughout the pandemic inbound tourism businesses, specifically intermediaries such as UK tour operators and DMCs, have been systematically excluded from numerous Government support schemes due to the fact that they were not mandated to close and do not have consumers visit their premises. However, these businesses are vitally important to the UK’s tourism infrastructure as over 60% of all inbound visitors book their trips as a package via an intermediary[11]. These businesses have also seen their revenue drop by an average of 91%[12] in 2020 and 93%[13] in 2021, compared to 2019.

Throughout the pandemic UKinbound has surveyed its members regarding trading conditions and businesses’ propensity to survive and aid the UK’s economic recovery. In early December over 100 member businesses provided feedback regarding the impact of the new UK border restrictions imposed due to the Omicron variant, with 86% confirming they had received cancellations or were expecting to receive further cancellations in the run up to Christmas. 75% had received cancellations for December and 46% had received cancellations for January.

Promisingly, demand is there for 2022; but in order for this to be realised, businesses need to survive in order to convert it. The latest forecast[14], run just before the Omicron Covid variant was discovered, was for inbound visits in 2022 to increase to 24 million, and spending to £19.2 billion, representing 59% and 67% respectively of 2019 figures. However, in a recent survey, UK tour operators and DMCs[15] expected revenue to be 46% of 2019 levels in 2022.

The removal of pre-departure testing and day 2 PCR testing announced on the 5 January 2022 was warmly welcomed by UKinbound and its members. It will give international consumers the confidence to book a holiday to the UK in 2022. However, the requirement of international arrivals to take a lateral flow test by the end of day two leaves the UK uncompetitive compared to its neighbours such as Ireland, where additional testing for vaccinated arrivals is not required. There is also concern in the international community that visitors will be stuck in the UK if they test positive on arrival. Only when these restrictions have been removed will the industry be able to fully recover, and we therefore need Government to have in place a clear roadmap for this to end. 

Our evidence submission features both short- and long-term stimulus, which would aid the UK’s recovery, stimulate demand and the economy, develop skills and create jobs, aid the levelling up agenda, enhance the UK’s soft power credentials and encourage international inward investment.

My members and I would be happy to address the committee in person to discuss the contents of our submission.

Yours sincerely,

Joss Croft                                                       

Chief Executive

1. What needs to be done to re-establish the UK as a holiday destination for international travellers?
• What should Government and the tourism boards be doing to support the inbound tourism industry in its recovery?

UKinbound response –

The UK’s tourism offering is world class. However international tourism is hugely competitive, with rival destinations prioritising travel and tourism to a much greater degree than the UK and outspending our marketing effort many times over. A sustained, heavily invested demand driving activation that allows the UK to stand out next to its competitors is required. Tourism’s ability to revive a country post economic downturn, means that globally destinations are vying for visitors. Research[16] has identified that tourism is a key driver of UK economic recovery. After the 2008 global financial crisis tourism accounted for a third of all new jobs created in the UK between 2010 and 2013[17].

However, the pandemic has negatively impacted Brand Britain globally. The world’s perception of the UK as a welcoming visitor destination has reduced[18], with international headlines regarding the ‘UK variant’ and our perceived ‘confusing’ traffic light, testing and quarantine systems. In addition to this, the UK has removed the acceptance of ID Cards at its borders, and disbanded the VAT Reclaim Scheme. This needs to be addressed quickly and adequately, otherwise potential visitors will choose competitor destinations that are perceived as more attractive, easier and safer to visit in 2022 and 2023.

To re-establish the UK as a holiday destination for international travellers, the Government, tourism boards and private sector needs to collaborate effectively on four key components.

•    Brand Britain – We need to implement demand driving initiatives, which at their core showcase that the UK is welcoming, tolerant and a safe place to visit.
•    Affordability – When analysing price competitiveness, the UK ranks 140 out of 140 countries[19]. To draw back visitors we need to be price competitive.
•    Accessibility – We need clarity and consistency on entry requirements to the UK but only once there are minimal restrictions at UK borders will inbound tourism be able to fully recover.
•    Skills – The UK’s tourism sector is facing a skills and labour shortage, which will only be exacerbated in the long-term, if both short- and long-term solutions are not implemented.

We propose putting in place the following initiatives, which would drive demand and improve the UK’s international competitiveness –

Increase International Marketing

An additional £50 million in funding for international tourism marketing over the next two years would generate £2 billion for the UK. VisitBritain generates a return on investment on its international marketing expenditure of 23:1.

VisitBritain delivers impactful marketing campaigns; however, the scale of its budget is dwarfed by our competitors. Pre-pandemic, the private sector likewise spent many millions of pounds promoting and selling the UK and converting that demand into bookings for the UK – with depleted reserves and little disposable funds, these operators are unable to invest in these marketing communications and the UK now runs the risk of underinvestment against our competitors. Budgets for VisitBritain campaigns should be increased. VisitBritain should increase its cooperative working with the travel industry including through a marketing advisory group made up of expert DMC representatives to ensure that marketing messages are aligned and where necessary co-funded in a similar way to our competitors.

The pandemic has negatively impacted Brand Britain globally and we therefore need to showcase to the world that not only is the UK safe, open to and welcomes tourists, but we also need to remind people of what the UK offers in terms of heritage, culture and experiences.

Given the level of global competition, rebuilding the UK’s inbound tourism industry to 2019 levels by 2023 will require the level of funding allocated to international marketing to be enhanced and co-ordinated with international sales missions and subsidised attendance at international tourism exhibitions for both VisitBritain and intermediaries. This would directly aid a business’ ability to export UK tourism and compete with the world, ensuring consumers choose to visit the UK, instead of one of our competitors.

Introduce a new five-year visitor visa

Generate an additional £2 billion in revenue by reducing the cost of a five-year multiple entry visa to £145 and encourage international visitors to upgrade from a £95 standard visa, thus stimulating demand for return visits.

Over the last 10 years the number of UK visitors from visa national countries has doubled, however this is dwarfed by the growth in international outbound travel - the outbound market from India to the UK has halved over the last 15 years at an annual cost of £750 million. Cost is a key factor. A standard Schengen visa is £70 and allows travel to 26 countries. Currently the UK five-year visa costs £655. In comparison, an Australian 10-year visa is £550, and the United States charges Chinese visitors £160 for a 10-year visa.

Reinstate the VAT Reclaim Scheme

Launching a new VAT Reclaim Scheme would generate £4.4 billion over two years for the UK economy, with a net benefit to the Treasury of £1.3bn[20].

When the UK closed its VAT Reclaim Scheme at the beginning of 2021 it became the only European country that does not offer tax-free shopping to visitors. In 2019, visitors from China and Gulf Co-operation Council countries comprised 4% of all international visitors to the UK, however they were responsible for 60% of all tax-free shopping spending. Without a UK VAT Reclaim Scheme these individuals will choose to shop in competitor destinations such as Paris and Milan instead.

Implement the De Bois Review

Implementing the findings of the de Bois Review would allow the 25 core sub-national boards to generate an additional £2 billion[21] per annum for local communities over a two-year period, which would also boost the success of the UK’s 2022 milestone events.

The report recommended that the Government:

• Bring coherence to England’s tourism landscape through tasking VisitEngland with the establishment of a structured and tiered network of Sub-National Tourism Boards
• Provide £51m over 3 years to 25 core Tourist Boards to enable them to deliver Government priorities related to sustainability, skills, inclusive tourism and levelling up

Create a ‘List of Travellers’ Scheme for Student Groups

Introduce a collective List of Travellers scheme in order to boost educational travel from Europe, while generating £1 billion for the UK economy.

The EU was the biggest market for educational travel to the UK, however since requirements for all visitors to the UK to have full passports was introduced on 1 October 2021, this market has collapsed. A List of Travellers Scheme would rebuild the UK’s educational travel sector by allowing students travelling under the supervision of teachers from EU schools to enter the UK for a period of up to six weeks in order to attend an accredited English Language School and visit cultural and historic attractions. Around 550,000 students come to the UK for short periods to study English as a language, spending £1.2 billion, almost 5.5% of the UK’s total annual tourism earnings.

Reduce Air Passenger Duty

Waiving Air Passenger Duty (APD) for 12 months would generate £7 billion in Gross Value Added.

Research[22] has shown that waiving APD would generate 21 million additional passengers travelling through UK airports and save some 45% of routes that would otherwise have been lost, as well as potentially securing 8,000 jobs.

Tourism Export Recovery Fund

Develop a capped fund of £47 million for the UK’s c.200 intermediaries, which represents an ROI of £10 for every £1 distributed.

This investment would ensure intermediaries can cultivate new international business for 2022, 2023 and 2024, while maintaining basic operations over the quieter winter season and protecting valuable jobs. The fund would provide a one-off grant to UK based intermediaries that can clearly demonstrate the economic benefits they will bring to the country and the Exchequer.  A fund mechanic, which includes a revenue and time cap, can be viewed here. 

What will the impact on the UK’s hospitality, cultural and heritage sectors be if inbound tourism is slow to recover to pre-pandemic levels?

UKinbound response –

Inbound, outbound and domestic tourism, collectively they are a powerhouse of UK industry. They have a symbiotic relationship, and all rely on a very similar supply chain of UK businesses. If any one of them is slow to recover, it will impact the entire UK tourism sector.

We cannot rely on domestic tourists to make up the revenue gap left by international visitors for a number of reasons –

• International tourists spend on average £685 a day in the UK, domestic tourists spend just a third of this[23]
• International visitors bring new money into the country, in contrast domestic money is already in the economy
• If border restrictions are minimal, there is likely to be a surge in outbound bookings for 2022 and into 2023, however we can’t assume the same for inbound

There are roughly 200 intermediary businesses in the UK, which deliver millions of international visitors to UK hospitality, cultural and heritage locations across the country. A lack of Government investment in these businesses will directly impact their ability to bring international visitors to the UK, leading to job losses and a reduction in the UK’s competitiveness.

International visitors visit all corners of the UK, our cities, countryside and coastal locations. They spend valuable money in our hotels, restaurants, attractions and experiences. If inbound visitors and their valuable money is slow to return, businesses will have no choice but to reduce capacity, reduce jobs or potentially exit the market. This will have consequences across the whole of the tourism supply chain and directly impact the levelling up agenda, as well as adversely impacting the opportunity for UK residents to enjoy these cultural, heritage and leisure assets that are directly supported by international visitor spend.

2. Does the Tourism Recovery Plan go far enough to support the industry’s recovery from the Covid-19 pandemic? 

UKinbound response –

We were very pleased to see the Government recognise the importance of both the inbound and domestic tourism industries in the recovery of the UK’s economy and its ambition to return these sectors to pre-pandemic levels by the end of 2023, a year earlier than forecast.

This strategy is extremely welcome, however the two main initiatives set out in the Recovery Plan, that aims to generate an additional £20bn in tourism revenue, are the £10m in vouchers from the national Lottery to visit tourism attractions and a new domestic rail pass. These initiatives will enhance domestic tourism, however they will have little impact on inbound visitors to the UK.

At the moment the plan does not include any demand driving initiatives for inbound tourism. Without this the industry’s recovery will be slower than expected and the Government will miss its target of generating an additional £20bn in tourism expenditure.

The new inter-Ministerial group for Tourism, chaired by the Secretary of State for Digital (DCMS), Culture, Media and Sport and supported by the Minister for Tourism does however offer a huge opportunity to ensure that policy decisions made outside DCMS (e.g. by the Department for Transport, Foreign, Commonwealth and Development Office, Department for International Trade, Department for Levelling Up, Housing and Communities and Department for Business, Energy and Industrial Strategy), but that hugely impact inbound tourism, can be better informed.

What are the biggest challenges to delivering the plan?

UKinbound response –

Resilience of visitor economy businesses

Businesses across the inbound tourism industry are in a precarious position. For example, inbound intermediaries saw their revenue in 2021 down 93% on 2019 and in 2020 down 91% on 2019. They’ve taken out expensive loans, which they now need to begin paying back and all Government support has ceased. These businesses normally invest millions of pounds undertaking demand driving initiatives internationally, however their ability to do this has diminished due to the pandemic. 

The staffing issues facing the domestic tourism industry also directly impact inbound tourism’s ability to successfully operate. A survey of 500 businesses[24] found that only 18% have sufficient staff. Figures also show there is a shortage of over 300,000 employees in the hospitality sector[25] and as a result, a quarter of businesses are having to cut services or capacity.

Restrictions at our borders

The discovery of prevalent new strains of the Covid-19 virus will continue to pose a threat to the revival of the UK’s inbound tourism industry, and the businesses and jobs that depend on it.

The discovery of Omicron, and the new restrictions imposed on international travellers to the UK, had a profound effect on the industry, as outlined in our opening letter. Although these restrictions have been lifted, we still have the day two lateral flow test requirement for vaccinated arrivals. Ireland has removed this requirement, placing the UK at a competitive disadvantage. This restriction presents a continued threat to the recovery of our sector, as businesses’ ability to trade is being curtailed but no additional financial support has been provided.

The speed at which border restrictions are implemented, and the type, has also led to international nervousness to travel to the UK. Vaccinated arrivals are concerned about the financial implications of visiting the UK, especially if they test positive on arrival.

Additionally, there are also other factors outside of the UK’s control, such as other countries placing restrictions on travel to the UK, such as the recent example of France and Germany. This all risks the revival of the industry and the targets outlined in the Tourism Recovery Plan. 

International competition

International tourism is massively competitive and many countries around the world are desperate to rebuild their inbound tourism industries post pandemic. These countries have submitted significant funds to achieve this, for example:

• Ireland has announced an additional £33 million for Enhanced Tourism Marketing & Product Development
• Australia has announced marketing expenditure of £250m over the next three years to rebuild its tourism industry
• The USA is finalising a one-off appropriation of £185m for additional tourism marketing to rebuild its tourism industry

A lack of investment in demand driving initiatives will leave the UK at a competitive disadvantage, in the short-term. In the longer-term the UK will have to work even harder to win back lost business and return to 2019 levels of inbound tourism.

3. What should the UK be doing to maintain its status as a ‘soft power superpower’ and further promote its culture and heritage on the global stage? 

UKinbound response –

Inbound tourism is an important component of the UK’s soft power credentials as it helps maintain our international profile and shape overseas perceptions. Many of the perceptions about the UK of international audiences are formed from and through tourism – either by visitation or through promotional messaging. There are also clear links between visits to the UK, education and studying in the UK, and trade and investment into the UK. It drives our Global Britain ambitions.

The overseas perception of the UK as a tourist destination remains positive – in 2021 the UK was placed fifth in the Anholt-Ipsos Nations Brand Index, with tourism ranked as the highest dimension for positive perceptions, however the UK’s ranking has dropped from second place in 2020.[26] The report outlined that the United Kingdom’s reputational strengths are on exports, culture, and immigration and investment, largely driven by positive perceptions of the UK’s contributions to science and technology, its sports and contemporary culture, and strong educational qualifications. In contrast, the United Kingdom’s relative reputation weaknesses are on people and governance – notably on the perceptions of the welcoming nature of its people and protecting the environment.

There are a number of points that are absolutely critical to maintaining and growing our soft power status. They include:

• Welcome – We need to showcase globally that the UK is open for business, as well as being welcoming, tolerant and a safe place to visit. We know from research[27] that those who feel welcome in a destination are more than twice as likely to recommend that destination to friends and family.
• Investment in marketing – Substantial new investment in our national tourist board and intermediaries will allow the UK to attract back visitors that are considering visiting alternative destinations.
• Investment in trade shows – Additional export support in the form of grants is required to drive demand and secure business at major global travel exhibitions.

How can the UK capitalise on its exit from the European Union?

UKinbound response –

In 2019 the UK welcomed 24.83 million EU visitors, who spent over £10.66 billion[28]. The EU is incredibly valuable as the number one inbound tourism market to the UK. This market will play a large role in the recovery of this sector, but additionally, they are also a competitor in the international tourism arena. For many visitors they have the option to visit the UK or Europe but not both, we need to ensure they are choosing the UK.

This is possible through a variety of means - 

Price competitiveness – Reduce VAT for hospitality and attractions, remove APD, launch an affordable five-year visa – each of these policies would make the UK a more attractive destination to visit.

Global centre for shopping – The UK has the opportunity to establish itself as a global shopping destination, setting us apart from other destinations and making us a more attractive holiday proposition. Reinstating the VAT Reclaim Scheme would allow the UK to establish itself as not only a VAT free shopping haven for non-EU countries but as a European VAT free shopping hub.

Flexible immigration system – We’re now able to develop a more flexible, targeted immigration system which can give us access to a global workforce and enable the UK to compete on a level playing field.

Investment in skills – Language skills are incredibly valuable to the UK’s inbound tourism industry, they allow us to successfully do business with our international counterparts and ensure we provide a warm welcome, however access to multilingual staff is a problem. In the short term those with language skills need to be added to the UK’s skilled worker shortage occupation list and in the long-term we need an education system that places languages at its heart and highlights the value of tourism careers. 

Safe destination – Showcasing that the UK is a safe and welcoming destination outside of the EU has never been more important.

Student group travel - 65% of English Language schools in the UK had more than half of their European students travelling on ID cards[29] and following the UK’s removal of ID as a form of entry into the UK from the 1 October, school groups are now travelling to English speaking EU countries instead, such as Ireland and Malta. Introducing the ‘List of Travellers’ Scheme would once again make the UK an attractive destination to visit for European school groups.

Visitor visas - Introducing a new five-year visitor visa would make a visit to the UK comparatively better value than visiting Europe.

What are the biggest threats to the status of ‘soft power superpower’?

UKinbound response –

The UK faces a number of risks to its soft power, superpower status, which include –

Handling of the pandemic - Although the UK’s vaccine roll out has been commended globally, the UK’s international image hasn’t been favourable during the pandemic. This is due to international headlines regarding the ‘UK variant’ and our perceived ‘confusing’ traffic light, testing and quarantine systems.

Investment in tourism – A lack of Government investment in the UK’s tourism industry will directly reduce the UK’s international competitiveness, which will result in a reduction in international investment in the UK and in turn our soft power leverage. The UK currently ranks 55th for the Prioritisation of Travel and Tourism[30].

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