New Year, same old problems?
Apologies for the delay in the first British Destinations’ general update of 2023 which I have held back on in the forlorn hope of accessing a lot more upbeat news. Much like the closing months of 2022 it is in relative short supply, all though at least this note does ends with news of the approval of a second major Accommodation BIDs. But even that may presents some potential new national policy issues?
1. General reports still be firmed up for the much-needed Christmas and New Year bounce have been relatively poor for the domestic market, with lacklustre performance in most if not all destination. As ever there will of course be exemptions and outriders. However, these seldom negate the unpalatable truth that good or bad, performance still typically measured again the same period in previous years, current equates to, at best OK and in many cases dire performance largely because of the additional factor of unrecoverable increased input costs. I have not yet had the chance to speak directly to all destination managers in membership and therefore would welcome any comment that confirms, denies, expands on, or further informs this thumb nail assessment.
Last week’s confirmation of the nature of the plans to restructure the UK’s business energy support scheme has not been particularly well received among potential recipients, essentially because it significantly reduces the levels of support and, thus, increase the amount to be paid for the energy consumed from 1 April 2023 onward. There are already a range of other issues, particularly for those where existing contracts have fallen due or new contracts are being sought for any other reason. There would never be a good time to reduce the level of support but for some (many?) in “tourism” who have struggled through the last three plus month and who had been hoping to hang on through the next three, always very difficult months of the off season, for spring and the first flush of the new main season, the timing seems particularly cruel. Just as the demand side should be picking up a major component of the supply side costs seem set to rise again.
The news could be the last nail in an already well nailed coffin for those yet to recoup and recover from the deep scaring of the 2020-21 pandemic. That said, despite ongoing and potential new international instabilities, wholesale prices for gas have, we are told, fallen back to pre-Russian invasion crisis levels. This is due in large part to relatively mild weather and larger than anticipated storage in Europe. As yet that, admittedly potentially fragile prices relief has not been reflected in the energy cost to UK domestic and business customers. Only the events of next 12 weeks or so, as the playout across numerous destinations will tell whether a trickle of permeant closures and an unusually high proportional of temporary, off-season closures and curtailments, will turn into an avalanche of business failures. More on business support scheme at: https://www.gov.uk/government/news/chancellor-unveils-new-energy-bills-discount-scheme-for-businesses If you have seen or start to see firm evidence of unusual or unexpected closures please let me know, so I can continue to report it upwards.
2. On the flip side reports on domestic outbound bookings suggest these have been strong and rapidly returning towards 2019 levels of booking. Mindful that late December early January headline travel trade pronouncements can be as much part of the promotional hype as an accurate assessment, it does genuinely appear that much of last year’s attitudinal and intentions research regarding a strong outbound market recovery is indeed proving to be true, regardless of current UK economic conditions. It is of course telling that the vast majority of these early sales are now based on ever more generous no or very low deposits, with payment often not due until a month before travel. Whether all that booked business comes to fruition is therefore yet to be seen. The most worrying aspect of last year’s research being comments on the growth of the intention to preserve the “main holiday” (often shorthand for an overseas holiday) regardless of the cost-of-living crisis and to do so often at the expense of savings on other leisure, tourism, short break and other holiday activity. The baulk of which, in practice, fall largely on domestic tourism and the wider local UK visitor economy.
I have yet to hear an expectation from any destination manager that the staycation effect of 2021 (a largely captive audience) and the OK but generally weakening summer of 2022 will be replicated in 2023. The general view being that the domestic market, as a whole, will be weaker than 2022 with of course some winners and a lot of losers, both of which, if standard pattern pertain, are reasonably predictable. Again, any and all views, opinion and any hard and fast evidence, either way, would be most welcome.
3. Is there anything to be done about the potentially double whammy and the resulting perilous state of the domestic market? There are a number of potential opportunities on the horizon to reinvigorate the stalled and always contentious debate about the relative value and importance to UK Plc of domestic v domestic outbound tourism. My feeling is that simply surviving the unprecedented ubiquitous impacts of the pandemic rightly took centre stage during the last two to three years. In practice this also meant that inbound international and out bound domestic travel, became a low priority and all but an irrelevant positive or negative factor to the performance of domestic tourism. As we endured and then slowly emerged out of the pandemic the roles, value, power and purpose of domestic tourism has becomes far clearer to all, unobscured as it usually is by the other two legs of the UK tourism triumvirate. There has never been a better time to evidence that domestic tourism underpins the economy of many communities and is critical to that of almost of those places’ disadvantages by dint of their location and the nature of the locality. It feels very much to be something that should chime with levelling-up if levelling-up or whatever it may become is still genuinely a key policy objective? Making that case might not do much to change the fortunes of 2023 but it might start making a difference in future years with this and other administrations yet to come.
More contentiously, it has never been easier to demonstrate that, while outbound tourism may generate significant income within the UK, it also represents a major exports/imports cost and that it does so in direct competition to UK domestic tourism. Recent national statistics show a direct correlation between falling domestic and rising domestic outbound tourism volumes and values. In another 12 to 24 months all the tourism lessons of 2020- 2022 will be history and have been forgotten. Surely among the key lessons learnt, is that it is in HMG’s post BREXIT, best interests to look again at the major benefit of modest policy, if not financial support for domestic tourism, particularly in England where the support is by dint of previous policy direction especially sparse. Again, that might not be something that would necessarily improve the immediate prospects for 2023 but it could have a significant influence on future performance. If colleagues have thoughts, particularly on an immediate action that could influence 2023 directly or views on improving the support for domestic tourism over time, then please let me know.
4. A couple of colleagues have contacted me regarding an approach from STAA the short-term rental accommodation sector trade body putting the case for a light touch registration scheme in England and seeking further meetings, presumably to gain support for this. As you will be aware DCMS are currently refining the option or options for a registration scheme with the intent to consult further on the option or options chosen. I am assuming STAA are getting their ducks in a row before announcements are made? Before supporting STAA plausible stance on light touch registration, I would urge colleagues to look again at the Airbnb “white paper” on this subject that recommends a very light touch approach indeed: https://britishdestinations.net/1194-2/content/airbnb-short-term-lets-registration-white-paper-2021/ . So light touch that in some people’s view (mine included) it would almost certainly be ineffective and serve in part to reinforce the erroneous but understandable consumer view that the UK already applies first world standard backed by first world checks, balances and many would assume full inspections, all obviously done before owners are allowed to trade. As we know that simply isn’t the case, despite Airbnb and other platform and operators own light touch, self-assessment enrolment. Simply having little more than a list of traders and trading addresses may be a considerable improvement on the current total lack of visibility but it may not do anything to address the fundamental issue that people can trade on a whim and, in many cases, with nothing more than the completion of a basic self-assessment form submitted to the third-party agent or platform providers.
By all means engage with STAA (indeed I would urge you to) but do interrogate them about what is meant in detail by light touch and assess for yourself whether their vision of it would improve, make no meaningful difference or unintentionally serve to make matter worse, by for example, giving consumer further unjustified confidence that all accommodations provider must meet mandatory standards to trade. The potential pitfalls of issues like Airbnb’s proposed exclusion of “amateur” providers, no registration fee and therefore no funding for the necessary enforcement etc. should all be self-evident to you but may not be self-evident even to those genuinely wishing to bring all parts of the short-term rental accommodation sector under some (or is it the same?) level of necessary control.
There are numerous examples of the abuse of various light touch regulation schemes in the UK by a small but persistent minority; often the self-same minority that regulation was created to control. Light touch regulation not genuinely backed by the guarantee of robust enforcement, offers false promise to the consumer, to the majority of providers and to the wider industry. The Westminster Government need to recognise that that current lack of regulatory control is a reputational disaster in waiting for tourism in England (and by inference the UK). This is a once in a generation opportunity to put things right, to do it properly and to do it before that currently inevitable disaster happens. Whatever scheme is adopted we are likely to have to live with it for many years before it will be reviewed or improved.
5. In the wake of Liverpool’s late November announcement of the UK’s first accommodation BID (now live), Manchester announced in December the successful ballot for the UK’s second and now largest ABID. The new ABID is again based around and manged by an existing city centre BID company. The ABID will go live on 1 April 2023, in this instance helpful from the same day and concurrent to the existing BID’s own new 5-year term (unlike the Liverpool equivalent with its three BIDs with three different start/end dates and years).
The Manchester ABID has some notable differences to those in Liverpool. Those “short stay hotels and serviced apartments” in central Manchester and parts of Salford with a rateable value of £75k, subject to certain other criteria, will collect/pay a flat rate of £1 per night, per room or unit let. The BID levy is therefore based on performance of each individual accommodation provider and not on a fixed annual fee set as a proportion of rateable value. However, you try to present it, the Manchester model is far more akin to a traditional international “bed tax” mechanism but delivered via the only currently legal mechanism available to do so in England, the Business Improvement District legislation.
Like the Liverpool model it will excite much interest from other destinations, particularly larger Cities in need of new sources of subvention funding for major events and conferences and other key promotional resources. Like Liverpool’s ABID model I would caution that, in all likelihood, there will be key elements of historic happenstance that are not easily replicated elsewhere and for those outside major City Centre, issues around base costs and the necessary scale needed to overcome these to produce worthwhile deployable income, capable of generating measurable return to the levy payers that over time significantly exceeds any costs to them. Detail like the prospectus for the Manchester ABID are proving difficult (for me) to access. Rather than delaying any longer report this potentially game changing development I am doing so without more in-depth research or the usual links for you to follow-up on. I will find it and share it in due course.
Whatever the detail, this development is game changing and probably more so than the Liverpool ABID. Liverpool agreed something akin to an accommodation-based tourism tax and did so with the broad support of accommodation sector having had a formal request to Government to pilot a tourism levy/tax scheme declined. Manchester have agreed, with the broad support of the accommodation sector, to adopt what is all but in name a nightly bed tax/levy, very much along the lines of those used in many other countries. The fact it is the accommodation businesses that have helped design and deliver both these initiative to my mind makes the opposition to such “taxes” from several major industry bodies and the current Westminster Government, somewhat if not totally unsustainable. The answer to the question can we now revisit the case for a tourism levy/tax will almost certainly be: “what’s the problem? The mechanism clearly already exists”. My response to that is, well it might but because of the peculiarities of the BID legislation and BID process it isn’t anything near being a universal solution to an increasingly near universal problem experience across all major destinations; that of funding necessary and necessarily shared administrative, promotional and development expenditure.
I can confidently predict that a number of other Core Cities will quickly follow suit. There will probably be many other destinations of all types and sizes who will spend and potentially waste time and precious resources trying to make an ABID model work for them. I hope I am wrong but other than the few who have the volume of accommodation and the scale of businesses located in a relatively confined area and with a clear main purpose, most typically the need for subvention funding for major conference and events in venue of national or international standing, they will fail to make it fly.
6. In the meantime, the ABID approach will be great news for the early adopters and the accommodation businesses within them who will by default have a major competitive advantage to their less well funded competitor destinations. It will be reasonably good news for anyone able to follow suit thereafter but potentially very bad news indeed for everyone else who can’t follow suit because the model doesn’t allow it and therefore find themselves operating in an even more distorted UK market than we already were prior to 1 January 2023.
Regardless of any commercial reticence on the part of many in the industry and any reticence, doctrinal or otherwise on the part of Government, the successful creation of the ABIDs I think now makes it more rather than less important that Government urgently revisits the whole issue of public funding for destination management. Within that, as a legitimate alternative, there is an urgent need to look again at the newly altered case for a universally applicable, adoptive tourism levy mechanism that sit outside or alongside the current peculiar BID based mechanisms that Liverpool and Manchester have so skilfully adapted to their own, peculiar circumstances.
British Destinations has never opposed the principle of adopting tourism levies, if that is the only practical mechanism available to some or all destinations to fund necessary destination management. That stance perhaps needs now to move on towards a more proactive campaign for a formal review in the light of the almost certain fact that ABIDs will serve to give competitive advantage to only the few, mainly if not exclusively major cities able to adopt them. Again, views are sought, not least because I can’t simply decide I am right and that this is therefore the route our Association should now take. A senior managers meeting is probably urgently needed to bottom out this and several other emerging issues, for example proactively championing domestic over domestic outbound tourism.
British Destinations 