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Could abuse of business rate relief by second home owners threaten relief for genuine operators?

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Alleged abuse of business rate relief scheme by second home owners could cause the Government to review the relief and potentially penalise genuine self-catering and furnished holiday let businesses in the process.  In recent months there has been increasing Parliamentary interest in the practice, among some second home owners of claiming business relief on properties that are in fact used purely as second homes, or are only occasionally let, or loaned out to friends and relatives and therefore don’t meet the qualify condition of a commercial business.

In 2012 Councils were given the discretion whether or not to apply the 50% rebate to empty or second homes, some in popular holiday areas immediately took the opportunity to start charging the full rate, others have since followed.  By 2016 there was speculation that many holiday home owners were flipping their properties, registering them as businesses and claiming 100% business rate relief on properties with a rateable value of less than £6k, tapering to £0 for those valued up to £12k.  In 2016 one estimate put the cost of the practice at C £4m in Council Tax, however, it was not then thought to be wide spread as the majority of second homes were still thought to be registered for Council Tax.

In 2017 the 100% relief was doubled to all businesses with a rateable value of less than £12k graduation to £0 for those valued between £12k and £15k. In Scotland, England and Wales furnished holiday lets and self-catering properties must be made available for rent for at least 140 days, some of the other basic requirement differ in Scotland, whilst in Wales they also need to be let for at least 70 days in the tax year.

It is said that a significant number of additional properties have been registered as businesses, specifically to take advantage of the new higher valuations threshold. There is nothing wrong with this if these properties are genuinely being run as a qualifying business.  If, however, these are actually second homes, or occasionally let or loaned holiday homes that don’t in reality qualify and the owners are registering them to avoid paying both Council Tax and, by dint of the relief, business rates, it is at best questionable, if not fraudulent.  As businesses these properties, when sold, can also attract advantageous rates of capital gains tax as compared to those applicable to the sale of a second home. If they aren’t genuinely businesses then that could well be deemed to be tax evasion rather than avoidance?

On the flip side many established furnish holiday lets and self-catering businesses are said to struggling in the face of recent business rate revaluations which has seen some businesses above the rate relief thresholds paying considerably higher rates since the revaluation.  Any negative change to the relief  would exacerbate the problems for many, mainly smaller businesses.

Government may well ignore the issue, preferring instead to encourage local authorities to use their existing powers to require business owners who they suspect of avoidance to prove that they meet the requirements.  Appearing to meet the requirement is apparently quite easily done, whist proving avoidance is said to be difficult.  Alternatively, Government could review and change the thresholds and qualifying requirements which could easily penalise some of the smaller, genuine operators.

Representing the interests of destinations, I am torn between ensuring that local Council partners receive the funding they desperately need and are entitled to and the need to protect the business interests of your local partners, including the self-catering and furnish holiday let providers.   In anticipation of further movement on this issue post the summer Parliamentary recess, I am seeking any local evidence and views on issues outlined above that members are able to offer.

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Mixed messages in the latest news: Swings and roundabouts for UK tourism?

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Household spending.  On 26 July ONS issued a report entitled “Making ends meet: are households living beyond their means?”.  Its key findings have since featured in a number of financial articles.  The report states that UK households on average spent £900 more than they earned during 2017, the first time that average household expenditure has exceeded average income in 30 years, on this occasion creating a £25 bn deficit in the year, contributing to the worst level on record.

This worrying news isn’t brand-new, the figures coming from the ONS household expenditure survey 2017 first published at the beginning of 2018.  It was also subsequently referenced by the Governor of the Bank of England in his discussion of the recent base rate rise which was, in part, aimed at reducing unsustainable levels of sending and discouraging the accumulation of household debt.  As a national average the overspend and associated debt isn’t evenly spread, it is greater away from London and the South East of England and far more concentrated in lower income groups and the under 30s.

What are the implications for UK tourism, if any?  Experience suggests that tourism and the wider visitor economy are some of the first areas of discretionary spending to be curtailed and can be the slowest to recover when the economy improves. A squeeze on UK household expenditure will definitely hit discretionary spending, if it isn’t already doing so. Lower income groups are likely to be hit hardest, as are those destinations and visitor economy products that are relatively more targeted towards them.  Some of those loses may be mitigated by other groups trading down as all but the highest income groups are likely be affected in some way by this squeeze on disposable income. There is also a question mark over the degree to which “holidays” have become a life style essential for many, rather than a discretionary item in recent years, hence in part perhaps the recent increased levels of household debt? It may be too early in this summer season to assess and too near the recent base rate increases to see marked changes resulting from it yet but there is still good reason to be concerned about the likely negative impacts on domestic tourism and the wider visitor economy now and going forward in to 2019 and beyond.

Exchange rates. In other financial news the “plummeting pound” and its predicted continuing BREXIT inspired volatility is said to be having potentially positive impacts on this year’s domestic holiday taking and on international visitor numbers.  The British are said to be choosing to stay at home in larger numbers (but are they all holidaying and/or day tripping at home?) and overseas visitor numbers continue to increase as more international visitors exploit their greater buying power (albeit much of it still London focused?).  The weak pound is also said to be hurting the late booking UK summer outbound market and major travel operators who still have quantities of increasingly distressed, stock to sell.  Whether the exceptional good weather in July had as much to do with the suggested continuing domestic boost, as the poor exchange rates remains to be properly assessed; as does both the GB Tourism Statistics and UK International Passenger Survey figure for the main summer season that, for very good practical reason, are produced several months in arrears. Only when the data for the full summer is published (December?) will we know for certain whether the anecdotal evidence is supported by national survey results.

More domestic holiday taking and more international visitors could be viewed as a significant success, but success that is predicated on poor exchange rates and economic uncertainty is a rather hollow success that is ultimately unsustainable for the Nation as a whole.  This is well illustrated by today’s reports of a resurgence of interest in Turkey as a UK popular summer holiday destination based largely off the back of crash in the value of the Turkish lira; nice for the tourists, OK for tourism businesses but desperately bad news for the majority of the Turkish population.

Potentially the impact of exchange rates on domestic and international tourism may pale into insignificance against the possible immediate impacts of other potential BREXIT related uncertainties.  Is post March 2019 currently, really the best time to be planning to visit the UK, or to leave it on a foreign holiday?  Several travel commentators currently think not.  Much now depends on what develops in the coming few months and what actually happens post-midnight on 29 March 2019 and how quickly the tourist industry and prospective tourist then respond to it.

Over tourism. Anecdotal evidence, including media reports of a 20% increase in visitors to Cornwall this summer, supports the view that domestic tourism has had a significant welcome boost.  That said not everyone, everywhere is being as optimistic about their own destination’s performance and many of the same reports on Cornwall 20% boost, have also contrived to misrepresent Visit Cornwall’s very sensible attempts to deal with “over tourism” at two small and relatively isolated locations.  So, what is the truth behind the headlines?

Good weather and the “Poldark effect” have meant that Porthcurno and Kynance Cove on the adjoining peninsulas on the toe of Cornwall have become unexpectedly overcrowded and, at times, almost inaccessible by car, particularly during busy weekend periods.  Consequently, Visit Cornwall have suspended promoting them and instead are encouraging current visitors to visit one of the other 400 plus beaches on Cornwall’s other 400 plus mile coast and return to see Porthcurno and Kynance Cove on another day, preferably on a subsequent visit, perhaps even one made out of main season; all of which seem to be very sensible marketing messages in face of an otherwise difficult situation.  In parallel Cornwall Council as the asset managers are pondering how best to manage the physical situation locally.  Some of the reporting of this and the media headlines in particular, might suggest to the casual reader that Cornwall is full or that Visit Cornwall are actively discouraging visitors from going to beaches in general, neither of which is true.

Visit Cornwall’s central point is that there is no benefit to either visitor or resident if the volume of visitors exceeds carrying capacity and as a consequence the visitor and the visited both have a bad experience, that neither will wish to repeat.  As yet routinely managing tourism volumes, so they don’t exceed carrying capacity isn’t a mainstream destination management or destination marketing organisation function in the UK but it could well become one, during peak periods in an increasing number of urban and rural hotspots, if domestic and international tourism and day trip volumes continue to grow.  We should be thankful that we have yet to reach the levels of “over tourism”, for example, experienced in Rome or Venice where at peak periods visitors can’t actual experience what they come to visit because of the density of the crowds being channelled past international travel icons like the Trevi Fountain.

It is to be hope that in the UK as a whole we will take a common-sense approach like Visit Cornwall’s and encourage physical dispersal to equally attractive but currently, less populated alternative destinations or place of interest within them, rather than going down the alternative route of corralling, controlling and traffic managing the excessive flow of visitors in situ. The latter approach may retain immediate volume and value locally but in doing so it can give the visitor a manipulated, half-baked, tourist version of the genuine experience. That, I would argue, seriously threatens the longer-term volume and value and sustainability of the destination, as most people go to experience the place, not to experience being an obvious part of the tourist scrum.

What of course Visit Cornwall couldn’t reasonable be expected to do, had it been necessary, was to suggest that visitor disperse to say Devon instead of, or as well as the rest of Cornwall.  Managing occasional peaks by a policy of much wider regional or national redistribution can only conceivably be managed at a regional or national strategic level, by regional or national bodies.  Even then these bodies are likely to be precious about trying to retain as much as possible of any redistribution within their own, albeit larger, administrative boundaries. If we genuinely think that: politics, international finance, effective marketing or even some guaranteed better weather might somehow contrive to continue to sustain ever-increasing tourism volumes, then it may be prudent to start discussing with the National Boards what their policies are, if any, on the management of point or wider area, over tourism?  For example, do they see this as a purely local management issue or one they should be prepared to engage in, perhaps for the very reason that dispersal by local management interests beyond local administrative boundaries isn’t currently a practical proposition, especially in the face of local, often paying, business partner’s opposition.

Can you help?   If any of the membership have anecdotal evidence on the main season’s performance so far, I would welcome it. Views on the local policy or national strategy on the management of over tourism, something I know many of you would love to have the need to face, would also be welcomed. It’s far from a mainstream topic yet but it one which is starting to appear somewhere, every main summer season and if nothing else I would like to be in a position to start offering an informed destination-based view on how best to handle it.

GB Day Visit Survey 2017 and Visitor Attractions Trends in England 2017

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I have added the recently published Great Britain Day Visits Survey 2017 and the Visitor Attractions Trends in England 2017 to the Britishdestinations.net research and statistics library.

At a glance detail for Tourism Day Visits can be found at page 11 -13 of the full 254-page GBDVS.  I would recommend that definitions of 3 hours + Leisure day visits (LDVs), Tourism Day Visits and Activities core to tourism (ACT) on page 9 are read for context and that the definitions and key finding for ACTs at pages 45 -46 and pages 61 – 62 for LDVs are also read in full as a minimum. Much of the content of the main body of the report which runs up to page 81, contains breakdowns that should be of considerable interest to most destination managers, if and when you can find time to read it.

The Visitor Attraction Trends in England report contains a wealth of detail in its 70 pages, much of it of indicative interest to destination managers regardless of whether they are based in England or not.  The headline findings which are a must read can be found at pages 8 to 11.

The reports can be accessed separately at:

https://britishdestinations.net/1194-2/content/the-great-britain-day-visitor-survey-2017-2018/

https://britishdestinations.net/1194-2/content/visitor-attraction-trends-in-england-2017-2018/

Or together, alongside all 120 plus major reports now held at:

https://britishdestinations.net/research-and-statistics/

 

Gig economy update.

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Following its first international lunch in Australia in late February 2018 Ola the Indian ride-hailing app has announced plans to launch in the UK.  Having secured operating licences in South Wales (from September) and Greater Manchester (start date?) Ola is in discussion with other local authorities regarding its ambitious plans to expand across the UK commencing by the end of 2018. One of Ola’s selling points is that model differs from many others in that it will apparently allow the customer to choose between an app hailing vehicle or a traditional “black cab”.

Ola will not only provide competition to established traditional taxi firms but also to Uber and other ride-hailing app companies operating in the UK.  However, some commentators note that the Japanese investment group SoftBank which holds large stakes in both Uber and Ola are pushing for a merger between the two company’s Indian operations.  Whether this goes ahead or not it will have no direct impact on UK operations. Although it may be fair to assume that given SoftBank’s involvement there might be more room for cooperation and a degree less competition between Uber and Ola in the UK than the original announcement would suggest?  Only time will tell.

In the US the Mayor of New York has imposed a limit on the number of ride-hailing app vehicles operating in the City by imposing a moratorium on new licences for a 12-month period (less wheelchair accessible vehicles) whilst they assesses the impact of 80,000 plus vehicles operated by 4 main ride-hailing app companies. The new bill also gives powers to regulate minimum rates of fare, minimum rates of pay for drivers and create, “a new rule book”, for app companies.  The restrictions should give some comfort to the drivers of the City’s 13,500 yellow cabs who have seen their livelihoods damaged by the rapid and vast increase in competition.

The headline reasons for the City’s actions are cited as concerns over traffic congestion and the impact of low pay for drivers both of which the app companies dispute.  The promised study into the impacts of ride-hailing apps in New York, the largest US market, could prove to be informative to other authorities who, in the face of game changing new technologies and new business models, are wrestling with the question of what is appropriate regulation for taxi and private hire operations.

Links to articles on both subjects have been added to our gig economy page which can be found as a drop-down menu from the “Sharing economy” main menu tab on Britishdestinations.net or go direct to the page at: https://britishdestinations.net/tourism-the-sharing-economy-and-its-wider-implications/gig-economy/

Tidy Britain litter survey and Sharing Economy update

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1. The Tidy Britain Group today launched the findings their local environmental quality survey of  England 2017/18.  Of the 7200 sites surveyed 14% were deemed to be unacceptable a rise of 4% on the 2014/15 survey. This is a worrying trend that will in time impact on the perceived  quality of the of England as a domestic and international tourism destination.  Although a report on England the findings are likely to be replicated elsewhere in the UK as the underlying causes of increasing use of disposable packaging, a growing public disregard for doing the right thing and pressures, particularly but not exclusiveness on the public sector’s finances for non-statutory or partly statutory areas like cleansing and maintenance all begin to bite.  The press release is at:    http://www.keepbritaintidy.org/survey-reveals-littering-increase and the short summary report at:   ://www.keepbritaintidy.org/sites/default/files/resource/National%20Litter%20Survey%20201718.pdf .

2. I am working on comments on a draft position paper produced by the Tourism Alliance regarding proposals to introduce statutory registration as a mechanism to level the regulatory playing field between the sharing accommodation and established accommodation providers (a recommendation of the APPG Inquiry).  Rather than distribute it widely if any member is willing to assist me or simply wishes to look at the Alliance’s original draft, then please let me know and I send the detail to you.

Meanwhile, in researching my comments I have come across a number of recent international developments  relating to sharing accommodation provision, most notable in New York and Japan which I have added to the list of articles on the Britishdestination.net  “Sharing economy” page:  https://britishdestinations.net/tourism-the-sharing-economy-and-its-wider-implications/

It is worth noting that element within the UK are not alone in their concerns about the unregulated expansion of sharing economy platforms and sharing accommodation providers, and especial those providers that are not genuinely sharing their own spare capacity within their own main residency, I.e. at a reasonably low-level.  It is also noticeable that the platform providers seldom if ever seem to comply with requests to assist regulators in their duties until they are, or are about to be forced to.  In that respect pressing for compulsory registration whether you fully support the idea or not has merit if only to get the platform providers to start considering voluntary alternatives.

Destination Management Plans and Strategy policy update

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I have been asked to clarify the current position on destination management planning in England (I have also alluded briefly to the situation in Wales in the last paragraph).

Five or more years ago, we were urging English destination management organisations (DMOs) to adopt VE’s guiding principles for destination management planning or adapting existing plans at their next revision to more closely align with them.  The rational was simple: the principles were generally sensible and much of it already common practice among most DMOs.  Moreover, funding and marketing support, formal recognition as a “DMO” by VE and attendance at the biannual VE Destination Management Forum were all subject to demonstrating that a local destination management plan, or strategy broadly following the guiding principles had or was being adopted.  In essence not to follow the advice was to risk disappearing off, or being downgraded on, the then English National Tourist Board’s radar.

After the major reorganisation of 2015/16 VB, and within it the now VE department, have continued to promote the original guidance on their combined website: https://www.visitbritain.org/developing-your-destination-management-plan . Whilst circumstance have continued to change since 2015, including the nature of VB/VE’s funding support to DMOs and/or initiatives and the nature of VB/VE’s combined other activities with their focus now on international rather than domestic markets and marketing, the general principles in the guidance remain sound.

Meanwhile, a number of the typically 5-year plans adopted pre VE reorganisation are falling due for revision. Colleagues contemplating renewing their plans are not unreasonably keen to understand the degree, if any, to which future engagement with VB/VE will be dependent on alignment with the existing destination plan guidance. On the one hand the guidance is still being promoted, on the other circumstance have changed around VB/VE programmes and delivery.  Since we originally encourage participation, British Destination members are now asking us to give an update. I have therefore asked the relevant questions on your joint behalf.

The answers are that access to the current DEF funding and involvement in the now annual English Destination Forum are no longer formally linked to having a plan or strategy that follows the guiding principles; VE for, example, will no longer ask to see it as part of the bidding or funding assessment processes.  That is unlikely to change in relationship to any future DEF scheme or general engagement with VB/VE.

To a degree this is semantics.  VB/VE do still rightly expect those DMOs that they work with and support to demonstrate local partnership, have a clear understanding of their markets and the position and relationships sub regionally, regionally and nationally etc. All of this is very much the stuff of a good local tourism plan, strategy, call it what you will.  It may not now be necessary to follow the guiding principles as published line by line or slavishly use certain terminology or key phrases in preference to similar terminology for the sake of demonstrating compliance.  However, destinations of any consequence do need a sound management plan and to keep it refreshed, taking into account changing market conditions and changes like the evolving relationship with LEPs in England and new developments in some area such as City Regions and Combined Authorities.  Having an agreed destination plan and having the organisation and capacity to deliver it are two side of the same coin and functioning destinations need both to succeed.

It is also worth considering that if and when the UK tourism Industry Strategy is accepted and tourism zones (however defined) become a reality, in all likelihood quality destination management plans will be a perquisite for, or at least the platform from which any bid to become a tourism zone can successfully be made. Having an up to date plan in place to work from might be advantageous.

In Wales the 15 destination partnerships have all developed and published destination plans.  All 15 current plans can very helpfully be found in one place at: https://businesswales.gov.wales/tourism/working-together#guides-tabs–4

EU Settlement Scheme briefing pack

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On 25 July 2018 the UK Government published its 6 item briefing pack produced to help employers of EU nationals in the UK brief their employees on the UK Settlement Scheme which covers EU citizens and their EU, or non-EU family members.

The pack contains 2 briefing documents for employers, three leaflets for employees (which could be distributed directly to any EU citizens without involving employer engagement) and a series of posters for the workplace to help ensure EU citizens are made aware of the scheme.

The scheme is not ready yet to take application, (it has yet to receive Parliamentary approval, which it seems likely to do).  The intent appears to be to ensure that EU citizens and their families have access to information and, thus, more certainty about their future from this the earliest opportunity and to ensure that by the time the process is fully open for applications, individual are clear on how it impacts upon them and what they need to do about it, by when.

Key dates:

  • The scheme will be phased in gradually from later in 2018 until it is full open by the end of March 2019.
  • The scheme will apply to all those EU citizens living in the UK  by 31 December 2020. There will be protected rights for family members not resident in the UK by that date or children born after it.
  • Those living in the UK by 31 December 2020 will have until 30 June 2021 to apply, thus, allowing plenty of time between qualifying cut-off  date and application deadline.

Please consider sending the materials out to any local tourism partners who  may employ EU workers, stressing that this is the start of the process and that no immediate action is required of their employees.  The briefing materials can be accessed here.