SCOTLAND'S tourist industry is facing "one of its toughest challenges" after a study revealed hotel occupancy rates have slumped further than elsewhere in the UK.
The number of occupied rooms in Scotland's hotels last year fell by 4.1 per cent, with revenues also down further than the rest of the UK.
The news comes at the start of Scottish Tourism Week in a year when the Scottish Government is relying on r
evenue boosted by the Homecoming celebrations to prop up the country's faltering economy.
Last week, a report showed the number of people visiting some of Scotland's most popular tourist attractions had slumped. And there was further bad news for the sector yesterday, as it emerged several councils, including Edinburgh, were planning to divert money from VisitScotland to market themselves.
The hotels report, compiled by accountants PKF, found occupancy rates north of the Border last year were down 4.1 per cent on 2007, compared with a 2.7 per cent fall in England and 2.5 per cent in Wales.
Scottish hotels also saw their income per room declining fastest, by 2.3 per cent, against 2.1 per cent in England and 1.7 per cent in Wales. However, income rates remained higher in Scotland than in the south.
Hotel chiefs described the report as "very concerning", while tourism officials admitted 2008 had been "challenging".
However, experts said 2009's Year of Homecoming – a series of more than 300 events running from Burns' Night to St Andrew's Day – gave Scotland a "unique advantage" over other countries to boost visitor numbers during the recession.
Tourism employs one in every 11 people in the Scottish workforce and contributes £4.2 billion to the economy. Scottish hotels and guest houses are used by nearly one-third of tourists from the UK and almost one-quarter of those from overseas.
PKF, whose survey covered mainly three- and four-star chain hotels across the country, said revenue per room last year fell the most in Edinburgh among Scotland's three largest cities, at 4.2 per cent compared with a 2 per cent drop in Glasgow. Aberdeen recorded a 3.4 per cent increase, which was attributed to an increase in business trips related to the oil and gas industry.
However, Aberdeen also saw the largest reduction in hotel occupancy, dropping 4.6 per cent, with Glasgow down by 4.3 per cent and Edinburgh slipping 4.2 per cent.
PKF said the immediate outlook was still grim, with the hospitality industry "facing one of its toughest challenges for some time".
Alastair Rae, a partner at PKF specialising in the hospitality and leisure sector, said: "The decline in both occupancy and rooms yield in Scotland has increased in pace toward the year end and looks likely to continue into 2009. Reductions in both business and leisure expenditure are now having a serious impact upon the sector.
"Aberdeen's oil- and gas-based economy has had an active and successful year in comparison to Edinburgh's financial services-based community."
VisitScotland has yet to publish full-year figures for overall hotel occupancy, but it said the largest monthly falls had been of 4 per cent in July and September. However, there was also a 4 per cent rise in January last year.
Debbie Taylor, who chairs the British Hospitality Association's Scotland committee, which represents 3,000 businesses, said: "The PKF report is very concerning and clearly demonstrates the extent of the impact the economic downturn had on Scotland's hospitality industry last year.
"It is more important now than ever to focus on the fundamentals of providing an exceptional service and value for money. It is also important we capitalise on new business opportunities such as the domestic leisure market, since many more people are likely to holiday closer to home this year due to the fluctuating exchange rates."
Dr Joe Goldblatt, a tourism expert at Queen Margaret University in Edinburgh, said the Year of Homecoming could provide a vital catalyst to boost Scotland's tourism fortunes.
He said: "It could have a very positive domino effect if the Scottish diaspora who visit tell their friends back home Scotland is good value for money, as word of mouth is the best advertising. The event has given Scotland a unique and cost-effective advantage."
Dr Goldblatt said the strength of the euro against the pound could also increase visitors from the Continent, but this was a recent phenomenon whose effects had yet to be seen.
Several hotel chains are still expanding in Scotland, with Apex due to open a 180-bedroom outlet at Waterloo Place in Edinburgh, and EasyHotel lodging a planning application last week for a hotel at Cambridge Street in Glasgow.
A spokeswoman for VisitScotland said: "2008 was a challenging year for Scottish tourism, with high fuel costs, unfavourable exchange rates and the overall economic uncertainty all playing a part.
"Already this year, some businesses are telling us that they feel more confident and are seeing increasing numbers of domestic and European visitors, due to the value of the pound against the euro. Homecoming Scotland 2009 also gives us a great draw for visitors this year."
A Scottish Government spokesman said: "These figures confirm that like other sectors of the economy, tourism is not immune from the effects of the global economic downturn."
George Kerevan - Foreign high spenders shun UK as global recession bites – so will Brits fill the gap?LAST summer, if you were visiting Florida, a pound would buy you $2. Today, it fetches around a quarter less. With UK interest rates at their lowest level since 1694, the pound has also reached near parity with the euro – making buying a cup of coffee at a European airport a painful experience.
But if travelling Brits get poorer as the pound falls in value, foreign visitors to Britain should get a lot more for their money. So why aren't they flocking to Scotland in droves?
In fact, the number of foreign tourists coming to the UK in 2008 dropped by 2 per cent compared with the year before, despite the cheaper pound. And there was a catastrophic 13 per cent fall in those coming from North America. These are the high spenders that big Scottish hotels rely on.
The reason for the drop: sterling may be low, but the global recession has robbed foreign visitors of the wherewithal to holiday in the UK. America lost 600,000 jobs in January alone.
The fall in foreign tourists is actually accelerating. Overall, numbers are down 12 per cent, comparing the last three months of 2008 with the corresponding period in 2007. North American visitors dropped by 27 per cent and EU numbers are down 10 per cent.
One hope is that the lost foreign visitors will be replaced by stay-at-home Brits. Christopher Rodrigues, the chairman of VisitBritain, argues that the weak pound could result in up to five million additional domestic holiday breaks being taken this year.
However, this still remains wishful thinking. True, Britons are travelling abroad less frequently – down 1 per cent last year – but they are kicking the foreign travel habit less quickly than our neighbours. The number of British trips to North America in 2008 was the same as in 2007, while holidays to the rest of the world (apart from Europe) actually rose.
This should not surprise us. All the research into why people take holidays puts the search for novelty and a desire to escape everyday reality at the top of the list. Next comes getting to know your partner better (otherwise known as having time for sex). Staying in the UK for a holiday might not grab Britons as a way of escaping gloomy headlines.
The Association of British Travel Agents reports that some domestic breaks are performing well. But British hotels need not get their hopes up: instead of booking mini-breaks in boutique hotels, the humble self-catering holiday is coming back, with Butlins and the Youth Hostels Association reporting increased business.
Prove cash is helping us, capital warns VisitScotlandEDINBURGH'S tourist managers have sparked a rift with VisitScotland by placing strict conditions on the money they give to the tourist agency, it emerged yesterday.
Council leaders have decided that they will only give money to VisitScotland if the agency proves it is actually generating revenue for the Scottish capital. Councillors are expected to ratify the change next week.
The city has set aside £625,000 in its budget this year for VisitScotland. The money goes to the national tourism body for the joint service it offers for all parts of Scotland.
But there has been increasing disquiet in Edinburgh – from businesses as well as from inside the council – over the way VisitScotland has represented the city abroad. Some councillors and officials now believe they are not getting value for money from the agency.
Councillor Tom Buchanan, the city's economic development leader, said yesterday that the council would now only give money to VisitScotland on the basis of clear evidence that the money was generating tourists for the city.
He denied reports that as much as £500,000 could be cut from the council's VisitScotland budget or that Edinburgh was to break free from VisitScotland and "go it alone". He said: "We will still be buying services from VisitScotland, but it will be evidence-based."
And he added: "I am not going to put a figure on what we are going to pay because it is impossible to say at this point. But if we want to work with VisitScotland, they have to prove the money we give them directly benefits the capital."
It is understood that a number of other councils are watching the Edinburgh example with interest and may adopt the same approach if they decide that they, too, are not getting value for money from the national tourist agency.
There were unconfirmed reports yesterday that Glasgow and Shetland were also preparing to place strict conditions on their VisitScotland contributions and they might also require clear evidence of success before allocating money to the agency. VisitScotland gets about 10 per cent of its £70 million annual budget from councils and commercial bodies.
A spokesperson for VisitScotland said any cuts in funding by councils would result in cuts in services. She said: "We understand the funding pressures that local authorities are under and are working with them in a flexible way, so that we provide the services that will work best for their area. However, ultimately cuts in funding from local authorities will result in cuts in our services.
"Like all sectors, Scottish tourism is facing challenges due to the current economic situation and it is important that we work together and that there is no duplication of effort, particularly when it comes to public spending."
The spokesperson added: "Our primary concern is encouraging visitors to Scotland, and we would much rather focus on that than continual debates about structures, which at the end of the day will not bring a single additional visitor to Scotland."
How bad is it? View from the front deskSCOTTISH hotels are counting on their loyal regulars to pull them through tough economic times while calling for more promotion of the nation to attract tourists.
Mabel Gozo, front desk supervisor at the four-star Marks Hotel in Glasgow, said: "Our occupancy was down in January but it has picked up. People are still attracted to Glasgow, but more needs to be done."
Over at Hilton Glasgow (4 stars), Calum Ross, general manager for central Scotland, said there could be improvement for the industry by the summer.
He said: "There is nothing to indicate that our hotels are in any way worse off than those south of the Border. In fact, we are anticipating strong demand as we move toward the summer months with the more favourable exchange rate – and with Scotland's appeal as a key leisure destination."
Yvonne Thomson, manager at Ailsa Craig Hotel, a three-star establishment in Edinburgh, said: "It's very quiet. But I get a lot of return guests and that's what helps me. School groups also help out. People just don't have the money to go stay in hotels now. But I think I will see my way through the recession."
Donald MacLeod, front of house manager at Dakota Forth Bridge Hotel in Edinburgh (4 stars) said they are managing 70-80 per cent occupancy during the week.
He said: "A lot of our revenue comes from our grill, which has a knock-on affect for our rooms – people come for the grill and stay for the room. February closed off a lot better than we expected. "
The PFK survey said Aberdeen had falling occupancy rates, but higher room yield, and the city's hotels said it was down to repeat customers.
Grant Yule, assistant manager at the Atholl Hotel in Aberdeen (4 stars) said: "At the moment, Aberdeen is wearing the recession quite well, but some hotels will suffer. Everyone will have to step up their game to compete."
Kerry Thomson, manager at The Palm Court Hotel in Aberdeen (4 stars) added: "We were basically full, Monday to Thursday, every single week last year and it's continued this year. Most people come back to us. Hopefully any recession will bypass us thanks to those regulars."
Tristan Stewart-Robertson 