Written evidence submitted by TDA, Visit Cornwall, Destination Plymouth, English Riviera BID Company, Visit Devon, Visit Somerset and Visit Dorset
Call for evidence:
Impact of Covid-19 on DCMS sectors
Response on behalf of the Great South West
This response has been developed by TDA, Torbay Council’s economic development company, on behalf of the Destination Management Organisations (DMO) in the Great South West.
The Great South West is the ‘powerhouse’ brand to promote the partnership between the Local Enterprise Partnership (LEP) areas of Cornwall and the Isles of Scilly, Heart of the South West, and Dorset. It aims to deliver £45Bn of economic benefit and become the leading region for the green and blue economy. The Great South West is led by a powerful alliance of business leaders, LEPs, universities, colleges and local government.
1.1. All areas of the regions tourism and the visitor economy has been hugely impacted from the pandemic ranging from; language schools, cruise ships, events, cultural activities, visitor attractions, food and drink establishments, as well as hotels, B&B’s and self-catering accommodation providers. Evidence also suggests that the regions food and drink producers and suppliers are experiencing significant adverse effects as a result of the impact on the tourism sector.
1.2. As the pandemic is a global crisis, international visitors have not been able to visit the region and in fact, some of the earliest impacts were felt from foreign students from the language schools returning home prematurely as the pandemic hit Europe. As well as cancellations of overseas tour operators from Germany, Italy, France and Spain who cancelled trips and planned visits to attractions almost overnight when the respective countries went into lockdown.
1.3. Initially the domestic tourism segment of the market was not affected. However, from the end of February to the official start of lockdown at the end of March the cancellation of domestic bookings snowballed, with the entire sector closing down, and some parts not even reopening since the winter shut down, and many DMOs being forced to actively discourage visitors from the region while following government guidance.
1.4. A recent survey undertaken by the South West Research Company in April 2020 suggests that 95% of tourism businesses across the region were closed during April as a result of the COVID‐19 pandemic, 1% had been closed for part of the month whilst 3% had remained open.
1.5. Between February and April, it is estimated that approximately £1.7Bn of anticipated tourism business turnover has been lost across the South West region, this breaks down to 98% of all turnover in April being lost (£1.2Bn), 72% of March’s turnover (£462M) and 8% of February’s turnover (£60M). Of those tourism and hospitality businesses, which were still open in April, around 88% of them were operating at decreased turnover levels compared to April 2019.
1.6. Additionally, during April it is estimated that as a consequence of the lost tourism spend, approximately a further £230M of indirect expenditure has been lost through the supply chains which support the regions tourism businesses. Within the SW, tourism and the food and drink sector are highly integrated. The regions farming industry, cheese and ice cream manufacturers, artisan bakers and producers, and the fishing sector have all been directly impacted as a consequence of the tourism sector.
1.7. Looking ahead, it is estimated that £1.9Bn of turnover from forward bookings between May and August from staying visitors has been lost to date within the region. Approximately £671M of spend would have occurred in the accommodation sector, while the other £1.2Bn would have taken place in other tourism sectors such as food and drink, attractions/ entertainment and transport activities. This figure is based on cancellations and does not include bookings which would have likely taken place, as visitors would have booked nearer to the time of their visit.
1.8. As a result of the lost tourism spend from staying visitors, approximately £355M across the supply chain of tourism related businesses on the purchase of local goods and services in the region is also unlikely to occur during the same period.
1.9. Quantifying the lost revenue to the sector as a result of day visits which will not take place in the future is challenging, as it will be heavily effected by behavioural factors. However, for the period between May and August in 2018 day visitors spent around £1.8Bn in the region.
1.10. Across the SW it is estimated that between March and April, around 76% of those employed in the tourism sector were furloughed, 11% laid off, 4% were on unpaid leave, and 10% were still working – of which 6% were on reduced hours while the remaining 4% were working unchanged hours.
1.11. 57% of all businesses said they had suspended any plans to hire additional seasonal staff as a result of COVID‐19. When analysed, those that had previously stated they had hired staff, this percentage rose to 77%.
1.12. Across the region’s tourism sector, around 16% of businesses were confident of surviving the coming months, 24% felt making cut backs would be their only way to survive, and 51% were not confident about the future of their business, the remaining 9% were currently unsure at the moment.
1.13. For the majority of tourism businesses this is a very scary time with businesses reporting:
2.1. The Coronavirus Job Retention Scheme, Retail, Hospitality, and Leisure Grant Fund, Local Authority Discretionary Fund, tax deferral, and VAT holiday have all been very much welcomed and supported by the DMO’s across the GSW. However, despite this support there have still been a number of significant redundancies and administrations within the GSW region.
2.2. The speed at which the Job Retention Scheme was implemented, the process, and payment for furloughed staff was relatively swift. However many people have fallen through the ‘cracks’ in support, particularly seasonal staff and the many self-employed who work in the visitor economy and are still waiting to be assessed for any payment. Whilst the furlough scheme is generous, it has not been comprehensive enough to protect seasonal workers; around a sensitive time for the sector which was recruiting ahead of Easter with new staff missing out, due to the eligibility criteria pending on the Real Time Information (RTI) submission. In the vast majority of cases, submissions of the RTI are made by payroll advisors/ bookkeepers or accountants on behalf of the companies and tend to be submitted around the time in which staff are paid, resulting in new employees starting around the end of February or beginning of March being excluded from the support.
2.3. Retail, Hospitality, and Leisure Grants along with the latterly introduced Local Authority Discretionary Fund are being accessed by those across the sector which are eligible. However, there are some businesses particularly across the GSW geography who don’t pay business rates, yet have on going costs that are not eligible. Companies such as boat charters, mobile catering units and tour guides are all affected but are unable to access the grants. This issue is magnified in different areas across the GSW, in which the rates in prime locations tend to be higher, along with the way businesses are rated is not always consistent across the LA’s (there being geographical discrepancies for similar premises). Similarly, the Local Authority Discretionary Grant has resulted in inconsistencies across the sector, particularly in the case of Language Schools which have not seen a consistent approach across the country from the different LA’s.
2.4. Business intelligence has indicated that the rateable value eligibility cap for the Retail, Hospitality, and Leisure Grant is not high enough particularly for big venues, independent pubs, and large hotels.
There has been a cohort of businesses particularly in the sector which have not been able to access any support due to being above the £51K rateable threshold and also not being successful in accessing support from banks through the Coronavirus Business Interruption Loan Scheme (CBIL). There have been a significant number of redundancies already reported across the GSW hospitality and tourism sector, with the recent announcement of the Specialist Leisure Group going into administration with the loss of over 2,500 jobs of which the majority will be from the GSW. A number of performance venues within the arts and culture sector are also at risk of closing permanently in the near future without any direct support.
2.5. Business survey results have indicated that the Job Retention Scheme and Business Rate Grant has been accessed by almost all businesses which operate in the Night Time Economy, over 75% of serviced accommodation providers, attractions, and those in the retail sector, and over 66% of restaurants, and tourist related transport providers. For 43% of businesses, this support has made a significant difference to survival, however questions remain over the provision of ongoing support and in line with the Government’s Recovery Plan and Roadmap timelines. There is growing concern across the sector that if businesses are unable to operate with social distancing measures in place they will have to close and with no idea when they can reopen again.
2.6. A single co-ordinated support response from VisitEngland, providing a single point of concise guidance for the sector would have been helpful to the wider industry, as many of the smaller independent businesses are not members of relevant industry groups.
2.7. Support from the banks and insurance companies has created additional unnecessary burden and stress on companies within the GSW tourism and hospitality sector. Mainly of those within the local industry were unsuccessful in their CBILs application, with the minorities tending to be larger more established businesses. Support from insurance companies to the sector has been very poor, and clauses in policies have prevented some hotels from being able to provide temporary emergency accommodation for the homeless or venerable adults and children which are under LA care. Greater support from the Association of British Insurers is needed to ensure the tourism sector is covered for business interruption, particularly if there is no end in sight for the virus.
3.1. It is likely that the sector will experience a ‘lost year’ if the continuation of lockdown continues and as we move towards another winter, many businesses in the GSW tourism sector will simply not survive. Measures such as a 14 day quarantine period for international visitors inbound to the UK will impact on a significant proportion of the 24,060,000 staying visitors which stay overnight each year in the GSW. This pandemic may provide an opportunity for the domestic tourism market to grow whilst international markets are restricted. Anyone relying on a large percentage of overseas visitors will need to consider concentrating on domestic visitors. Key segments of the visitor market such as business tourism, international students/ language schools, as well as international leisure tourists - who tend to have a greater propensity, travel in the shoulder months, and contribute a significant proportion of the total annual visitor spend to the GSW, will all be heavily impacted.
3.2. Operating under social distancing measures will have a greater impact on the hospitality and attractions segments within the sector. Additional resources and financial investment will be required to ensure rules and measures are being complied. However, equally this will result in restricted visitor numbers/ covers and lower levels of turnover – eroding profit margins in a sector which relies on reserves built in the summer to survive the leaner winter periods.
3.3. It is broadly expected by the GSW DMO’s, that a return to pre-Covid levels or similar will be unlikely until the 2022 season, with 2020 being a ‘lost season’, with no international tourists due to the knock on impact of both the domestic and overseas airline industry, and severely reduced domestic visitor numbers. Whilst tourism businesses may be open, the usual visitors may not have the confidence to travel, the funds available, may not feel leisure spending is their priority, or not feel safe returning to venues until the threat of the virus has vanished or become negligible.
3.4. Weddings, events, coach tours, and business tourism also make up a significant part of many hospitality venues income. Venues are reporting severe cash-flow issues where events or show tickets have been purchased but the shows have been postponed until 2021. A deposit voucher scheme backed by the government would assist venues and the events industry supply chain in weathering the storm.
3.5. Much of the 2020 season will be lost, and the long term impact will take years for the sector to recover. Businesses closures and high levels of unemployment will result and the economy taking a massive dive. We have already seen larger hotels in the GSW entering into administration, with many smaller ones now announcing significant redundancies. Long term support is required for the businesses in the sector to ensure there is an industry to come back to.
3.6. Longer term, it is essential that the tourism industry receives continued ongoing support. If restrictions mean that parts of the industry cannot open until Autumn 2020, many will not survive as they will be entering the off peak season, and not built up cash reserves over the peak months. If continued, phased social distancing measures means they cannot operate at previous levels of capacity, financial support will be required to see them through this restricted period in order to safeguard jobs and businesses. Trading at reduced capacity is financially unsustainable as the industry will continue to incur high fixed costs and the majority of the variable running costs while receiving a fraction of their revenue compared to previous. In a sector which is already less financially resilient and venerable compared to others, the cost of removing support in a region where tourism is key to the economy, will impact the livelihoods of over 247,209 people.
3.7. Staff will require training, systems will need to amended, equipment installed, and hygiene and safety issues will need to be addressed. Investment to ensure the correct measures are taken by businesses within the sector will all come at a cost. Financial assistance to ensure these measures are implemented in a heavily face-to-face sector where customer experience is so important, will be vital.
3.8. It is also expected that the demographic of visitors will change. Currently there is a large proportion of visitors who are in the older 60+ and over 70+ brackets, and tend to visit during the shoulder seasons, dependent on their health conditions and confidence to travel. Tourism businesses in the GSW will require additional support to help attract new visitors to the region by adapting their product. DMO’s need support from VisitEngland to identify and attract new markets to the regions through targeted marketing campaigns, data and research.
3.9. Across the GSW region there are a number of DMO’s, all are structured and funded differently with varying remits to manage and or market the destination to visitors and provide services to industry. The DMO’s have all been financially affected by the crisis. VisitEngland has provided financial support for DMO’s through the Destination Management Resilience Scheme Grant however this is only until the end of July and DMO’s now face an uncertain future due to loss of commercial income through traditional membership. For some DMO’s, current funding runs out 31st July and they face closure in August. A further detailed report on this is being submitted to DCMS.
4.1. Lessons learnt from the financial crisis in 2008 have provided a ‘blue print’ for helping shape the national economic emergency response. A rapid response with quick, accurate and transparent coordinated communication is crucial in order to contain panic and mitigate negative impacts. To have been swifter in a response to the pandemic and following examples of good practice in countries such as New Zealand and Germany, who were ahead of us and acting accordingly to stop the spread of the virus earlier in containing the infection.
4.2. As a sector it would have been helpful for nationally recognised organisations such as VisitEngland to have acted as a central point in disseminating and coordinating information to those in the tourism sector, and as we move into transition to support with practical guidance on ensuring those are implementing safety measures.
4.3. If central Government want to control a staged opening then there needs to be some form of regulation for all accommodation providers, for example Air BnB should not be allowed to operate for holiday makers and visitors before the regulated providers.
4.4. A co-ordinated and joined up multi sector approach to re-opening the coast and countryside will be required to avoid congestion and any excessive visitor pressure on land, coast, communities and wildlife.
4.5. Communities need to be supported and led by clear and timely Government guidance, to embrace the return of visitors to their area and be assured that the industry is operating safely. Delays in official guidance being published runs the risk of people/ businesses/ other organisations producing their own and confusing the messages.
5.1. The GSW are working collaboratively on a Tourism and Visitor Economy Recovery Plan, led by a new partnership working group, to bring the sector back into operation, supporting businesses to open safely and with a long term strategy in place covering the next three years – to react, recover, and revitalise.
5.2. DMO support - immediate sustainability funding for a minimum of two years, provided at regional level to support delivery of projects and activities to re-open, stabilise and grow the tourism and visitor economy.
5.3. The Government reviews the structure and funding of all DMO’s nationally for the long term and in conjunction with Tourism Sector Deal ambitions.
5.4. The industry needs to know the ‘rules of the game’ and in what stages lockdown will be released without this we can’t evolve. Even if the recovery plan/ roadmap changes, at least there will be some indication of the order in which businesses can start up again. Industry appreciates dates can change however, early indication of the direction of travel, including clarify of information and guidelines is needed to support businesses.
5.5. Assistance with some kind of accreditation or kite mark to build visitor confidence that the tourism businesses which are re-opening are ‘safe’ and are complying with guidance. There is concern by DMOs of the financial impacts businesses will face to adhere and implement the required guidelines. Financial support will be required to help businesses invest in the correct safety measures, training, and equipment.
5.6. Throughout the evolution of the pandemic, we have seen businesses looking at new innovative ways of adapting. Across the GSW sector we have seen businesses taking to social media and utilising digital platforms to promote new product offerings, whether that be restaurants offering local takeaway, food and drink manufacturers/ processors/ distributors selling online direct to consumers, or attractions providing virtual experiences. Changes have also included altering opening hours (mainly to continue operating with reduced staffing levels), social distancing considerations, and switching marketing to focus on local and domestic. Support to help SMEs in the tourism sector to better utilise digital tools, particularly in ensuring their businesses have a digital presence and are advertised on the right platforms including the adoption of online booking and payment systems, in order to ensure booking processes and payment are easy and simple.
5.7. While over the next two to three years, the majority of businesses across the GSW operating within the visitor economy will be on local and domestic markets encouraging staycations and day visitors. A domestic marketing campaign to support ‘Great British tourism’ with investment for DMOs to develop distinct product offerings and place marketing to encourage holiday makers to holiday at home, when previous choices were overseas. This would also support the opportunity to capitalise on the changes in consumer behaviour forced by lockdown to consider sustainability/ climate change issues.
5.8. As has been implemented in other countries, a government backed deposit voucher scheme would assist accommodation providers, venues, and events with cash flow issues, where they have bookings but not received payment, but still have outgoing costs.
5.9. Consideration of an additional bank holiday/s to increase opportunities for family domestic breaks outside of school term time, and encourage consumer spending, as proposed by VisitEngland is very much welcomed
5.10. At a local level the relaxation of planning restrictions to maximise year-round operation of currently seasonal businesses to encourage full-time employment, and help extend the season.