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Potential developments in tackling the unintended consequences of online trading.

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Although not directly related to any specific tourism issues the ongoing Public Accounts Select Committee inquiry in to “VAT fraud and error”, launched last week may prove to have some interesting implications and generate some potentially transferable lessons for tourism, or at least that’s my initial assessment based on what I have seen and read so far.

The inquiry was prompted by a National Audit Office report published in April that estimated that up to £1.5bn was being lost annually to online market place VAT fraud and error. It relates mainly to a relatively narrow but burgeoning circumstances where UK online market places sell goods for non-EU international businesses; goods that have already been shipped to and are stored in the UK , thus, making their deliver as competitively quick and easy as those being sold by UK based companies.  The only difference is the location and legal status of the sellers and in some instance even goods are the same, having been made by or purchased from the same overseas manufactures.  In the case of Amazon (and others?) they are not only selling these goods on behalf of a third parties but they are also very often storing and fulfilling the entire transaction, from order through to payment to the seller from their own Amazon premises.  It may therefore be open to debate as to where ownership and liability for the sale and attached legal duties should in future rest?

The specific problem, however, is that some of those non-EU businesses selling pre-positioned goods are not registered for, or are but are not paying some or all of the UK VAT due; either in ignorance, by error or by way of deliberate avoidance, all of which reduces UK Government’s revenue and creates damaging, unfairly competition for the trade of compliant, UK online (and High Street) business that are charging and paying 20% VAT.  There was also some mention of associated concerns about facilitating the sale of counterfeit and unsafe goods, although I suspect that is largely peripheral to the specific issue of pre-positioned goods.   More on the background to the inquiry and the NAO report can be found at: http://www.parliament.uk/business/committees/committees-a-z/commons-select/public-accounts-committee/inquiries/parliament-2017/tackling-online-vat-fraud-error-17-19/

At the heart of the last week’s debate was the unintended consequence of the innovative and rapidly expanding business models of the major online market places and, specifically, the degree, if any, to which they now should or should not be held responsible for voluntarily or mandatorily helping to rectify, some or all of these issues.  It is clear that the major online market places are already cooperating with HMRC to an increasing degree but the inference from HMRC’s evidence, as I read it, is that they could and probably should be doing more?

The likes of Amazon and EBay (who gave evidence last week), not unreasonably, would argue that it isn’t their job to police the UK’s import and tax systems for Government.  The counter perhaps is that having created a new trading environment on such a scale, at such a pace, they surely have a  moral if not a business reputational duty to  proactively help tackle the unintended opportunities for abuse that accompany any such unprecedentedly large market place developments?   It was interesting to note that this is by no means a unique UK problem and also notable that the experiences in other jurisdictions were being actively examined and potentially even embraced, rather than being typically rejected outright as irrelevant to UK circumstances.

So what’s the potential tourism connection?  Currently tentative but the principles and practices that might emerged from this inquiry could have direct application to, or inform the direction of policies in those areas where similar burgeoning online marketing innovations are having potentially negative, direct and indirect impacts on tourism, tourists, residents (host communities), destinations or on other existing tourist businesses.  From inquires these include: lost personal and business taxation, VAT and business rate revenues, impacts on appropriate, planned or authorized use of housing stock, detriment to local residential areas or conversely poorly located tourism assets (poor product), implications for compliance with fire and electric safety and food hygiene,  for liability and property insurance (for the properties concerned and for neighbouring properties), for levels of mortgage and housing benefit fraud, for engagement and contribution to cooperative destination management and market activities and for unfair, damaging competition with other compliant, online and more traditionally based tourism businesses.

Online platforms are undoubtedly making a hugely positive contribution to the industry, in particular by bringing a wide range of new product and accommodation stock to the market place, a lot of it in peak periods or in places where levels of more traditional accommodation stock have not previously been available.  It would appear that many of the issue experienced are associated not with small scale, part time operators that many of the platforms were originally designed for, but with an increasing switch to larger scale, multi property, full-time businesses that can, if they so wish, avoid some of the liabilities normally associated with the true scale of their business operations.

As with online market places, in the exponential expansion we have experienced there are all manner of negatives and loopholes unintentionally created that can and will sadly be exploited until such times as they are tackled head-on.  Similarly it wouldn’t be unreasonable now to look to the major player in online tourism for their active cooperation and their direct support for efforts to remove the opportunities for some of the worst excesses.  In many cases the solutions may lie with them being willing and able to share the information they already hold on who is doing business where and when, with the appropriate National and Local  Government Authorities and Agencies.  It may not be their job to police legal requirement but providing key information to allow those that are charged with that role to do it simply and efficiently could go an awfully long way to help.

Unlike the online market places and the sale of goods, online tourism has a unique vested interest in ensuring the products (communities, places and properties visited) are all enhanced by the experience.  If the host communities and/or the customer’s fall out of love with each other, then the online business models start to fail and that is in no one’s interest.

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Tourism UK Sector Deal application update

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At last week’s Tourism Alliance meeting we received a verbally update on the process for completing the development of an agreed tourism Sector Deal to be present to UK Government. This is a quick and dirty summary of that briefing, with some salient background points added to ensure you understand the broad direction of travel and can brief others locally if it proves necessary. It is largely my interpretation of events and may not concur fully with the views of others involved or those actually running the process.

Put simplistically, if the application is successful tourism will gain recognition as one of a number of different industry sectors that UK Government wish to actively support.  They will demonstrate that support by, among other things, attempting to shape future policies and strategic direction to help deliver the vision set out in our sector deal as, for example, they are already doing for the automotive industry whose first round deal looked to make the UK world automotive technology leaders (policies on electric vehicles from 2040, support for battery technology, driver-less cars etc.). That support may or may not include: earmarked funding for any particular sector deal or access to wider challenge funding to be made available to businesses within either a specified, or in a range of other industry sector deals.  I.e. funding may or may not be attached dependant on the deal struck and the sector involved.  Essentially if we are not recognised by the granting of a deal it follows that we will not automatically get the priority and attention accorded to others sectors that are;  it is a bit of a, “be in it to win it”, scenario.

As with the first round of the sector deals, successful bids are thought most likely to be announced only in the annual budget (because many have funding implications); unusually the next opportunity being the new Autumn Budget on 22nd November 2017.  Recent changes made to the Annual Budget and Annual Statement timetable from the Spring Budget 2017 onward (they have been swapped around) mean that if we now miss this November’s Budget, it could be up to a year to the next full Budget opportunity and therefore potentially up to a year before any new associated Sector Deal are announcements.  The view is that we can’t really afford to miss the current opportunity simply by not applying at all, or by putting it off to a later round, if indeed there are further rounds.  Hence the need for necessary haste to develop and present a single, “industry agreed”, tourism sector deal application now.

The output of a number of working strands which started in early May including: the Chairman VisitBritain’s discussions with industry figures, the 4 thematic industry working groups, (we participated in two and contributed comment to one), various English regional and Home Nation meetings held by VisitBritain (VB) and the online industry consultation responses, are all now being drawn together by VB.  These will be used to produce an options paper to be presented in late September to the Tourism Minister John Glen MP and the Tourism Industry Council for their decision on the content and form that the application will take.  That application will then go to Department for Business, Energy & Industrial Strategy (BEIS) for their consideration and hopefully onward to the Treasury for announcement in the Autumn Budget.

Timelines are tight, so although all the material that has been produced during the consultation will, we are told, be made available to interested parties to view after the content of the deal is agreed, there is no plan to consult further with those who have contributed thus far, including the four industry working groups.  Any deal is likely to be couched in terms of a number of high level ambitions. The deal is therefore not being presented in the form of a detailed tourism strategy, as some assume, nor is the detail of delivery likely to be set in concreate at any point soon.  Indeed these details are highly likely to form the basis for further industry negotiation and discussions once the form of any deal is approved.

Since his appointment as the new Minister of tourism in July John Glen has decided to streamline the Tourism Industry Council from c 26 members down to 12 and within that more select group of 12 broaden the exiting representation from individual, major private sector business interests.  The most notable addition, mentioned so far, being Airbnb.  It will be this new streamlined Tourism Industry Council (full membership yet to be officially announced?) that will consider the options paper at the end of this month.

Given that tourism sits outside BEIS an application from  DCMS and the Tourism Industry Council,  in open consultation with a lot of the industry via various mechanisms, probably has far more chance of being accepted than that made by any single trade body or loose coalition of tourism interests acting alone or together. It is conceivable but hopefully now highly unlikely, that others within the industry might still put forward an alternative, narrower  tourism, hospitality, leisure or visitor economy sector deal application to BEIS.  Although it has been discussed as a possibility I am hoping it is either a largely unfounded rumour, or that the VB facilitated application will now prove to be strong enough to prevail over any opposition.

Rural Tourism Inquiry update

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British Destinations wrote to Neil Parish MP the newly reappointed chairman of the EFR Select Committee in August 2017 urging the new committee, when appointed, to revisit the incomplete rural tourism inquiry, curtailed by the last election: Letter Chair EFRA Select Committee 8 Aug 17 .  MPs were selected this week to sit on the EFRA committee, those selected including a number of former members.  We have taken the opportunity this news presents to write again reaffirming our view that revisiting would be a popular move: Letter Chair EFRA Select Committee 14 Sep 17.

In August we encourage destinations, rural or otherwise, to consider contacting Neil Parish themselves, or to influence local or regional rural interest groups they may work with to contact him.  Clearly if you were able to do this you might want to consider contacting him again , or if didn’t contact him then doing so now off the back of the announcement of the appointment of the committee members.

The EFRA Committee release included the following

For immediate release: 12 September 2017

New Committee membership agreed

The Environment, Food and Rural Affairs Committee membership for the 2017 Parliament has been agreed by the House.

The Chair and Members of the Committee are:

 Letters for the Chairman/Committee can be sent to: efracom@parliament.uk

British Destination Annual Conference & TMI Convention update

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I am pleased to announce that the date of the British Destinations 2017/18 Annual Conference will now be Monday 19 March 2018.

The date has been selected to allow us to radically alter the format for the conference and hold it as a long one day, joint event with the Tourism Alliance in London.  The venue is still to be confirmed but the outline plan  see it to commence at 10:00 with key strategic sessions through to 15:30 including a working lunch.  The conference will then move to the House of Commons to take in the Annual Tourism Parliamentary reception ending at 6pm.  The new format will allow us to: attract even high-profile national speakers, significantly increase the size and breadth of  audience involved, allowing our members to network with senior representative from most key tourism trade bodies, their members and other of influence within the tourism industry.   I hope that you will support the change of emphasis and the event itself. More detail will follow shortly but in the meantime please diary the date

Can I also take this opportunity to remind you that the last day for early bird discounts for the TMI annual convention in Manchester 30-31 October is tomorrow Friday 15 September 2017: https://www.tmi.org.uk/event/14/tmi-annual-convention-2017.htm

British Destinations member are entitled to the discounted affiliate rate.

Your help required with a quality graded only policy review

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Colleagues need your assistance with a review of their current quality graded accommodation only promotion policy.  Any substantive findings will shared with all members in due course.  More detail under the Forum menu tab of Britishdestinations.net, or go direct to the page at:

https://britishdestinations.net/need-an-answer/quality-grade-accommodation-only-policies/https://britishdestinations.net/need-an-answer/quality-grade-accommodation-only-policies/

Important meeting updates

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I am attending the Tourism Management Institute National Council meeting (12th) and the Tourism Alliance Board Meeting (13th).  If you have any burning issues you wish me to raise with either body at these meetings, beyond the key lobbying issues that you know that we are pursuing on your behalf in any case, then please let me know by phone or email.

Last week’s meeting with the new CEO and chief economist at the Joseph Rowntree Foundation was both timely and productive.  Having reviewed their activities JRF are  assessing their own research requirements to support their ongoing and future initiatives. At the meeting they appeared to be taken by the notion of us all better understanding the internal economic flows that underpins our novel proposal to look at tourism as an economic redistributor, rather than just estimating the value and volume at the point of consumption as we do now.  They seemed to warm to the idea of influencing the Treasury’s rigid attitude to tourism as being a purely displacement activity and they could see the potential linkage between that attitude and the ability of DMOs to deliver necessary destination management activities in support of significant but often fragile tourism economies.

Consequently we have been asked to provide a short  note  outlining the proposed research in more detail. As they currently have a particular interest in coastal resorts and rural areas, these are emphasized but you should note that any such research would have equal relevance to almost all destinations, including other towns (market, heritage etc,) and many older industrial cities.  There is absolutely no guarantee that they will support the research but they are seriously considering the merits of  what we had to say.  At the very least, this is yet another important organisation that is now starting to think about tourism in terms of a tool of economic redistribution and not just another economic activity that will happen largely on its own and without any need for serious local management.  As we know from past experience, drip feeding concepts from a wide base can also lead to significant changes, albeit over time.

All though not the main purpose of the meeting they were also taken by some of our wider tourism management viewpoints and approaches towards several other socio economic issues that I raised.  For example: the linkage between skills issues and retention and the availability of decent affordable accommodation, especially in some popular tourism destinations, or the potential negative impacts of the current unregulated growth of sharing accommodation platforms and services. I think that they may have naturally assumed that most, if not all, tourism bodies would lean towards supporting short-term commercial gains for some over the longer term, wider social and economic consequences for everyone else.

On this basis I believe that there is considerable merit in exploring the development of good working relationships with JRF on a number of issues and, especially, around those that some of our key strategic tourism partners might be more reluctant to be seen to tackle head on. Unless there is any serious objections raised by members in the next week, I will start working on doing this in parallel to pursuing our research proposals.

Two more research papers added

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We have added two new research papers to our extensive reports and statistics library.  The first produced by BETA looks at unlocking the value of youth, student & educational travel to the UK and should be of general interest to all.  The second produced by MAC looks at migrant labour markets in the UK and other countries’ migrant systems.  It may or may not be of direct interest.

The latter report isn’t a tourism report as such, but the statistics do help illustrate the relative scale of tourism’s current reliance on migrant workers.  It also acts as useful summary of some of the competing economic theory involved and differing approaches to migration used elsewhere:

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