One in three tourism and hospitality businesses predict failure in 2022

One in three tourism and hospitality businesses have stated that they are likely to fail in 2022, according to a recent survey conducted by the Scottish Tourism Alliance (STA).

One in three tourism and hospitality businesses predict failure in 2022

A total of 1335 businesses across Scotland’s 31 regions took part in the survey which ran from 17th December to 10th January with just over half of all respondents stating that they had either zero or just 1-2 months of cash reserves to stay afloat.

The survey found that 68% of respondents stated that they were in financial difficulty, citing extreme concern over increased costs, particularly in relation to utilities, reduced revenue or a combination of both as contributory factors and 52% said they had been impacted by staff shortages over the survey period, the majority being in the hospitality sector.

In terms of support needed to make a difference to business recovery, sector-specific grants were seen as being of the most value across all sectors, particularly within the coach and tour operator category, many of whom have had little or zero business over the past 20 months and food and drink, which includes hospitality businesses. Retaining the 12.5% rate of VAT was also viewed as a priority action for recovery, predominantly within the food and drink and hospitality sectors and the removal of restrictions was stated as likely to make a key difference to all sectors in the tourism industry.

The background request to seek evidence was initiated by the Department of Culture, Media and Sport (DCMS) at a UK Tourism Industry Council meeting, which the STA has attended throughout the pandemic and the survey shared by tourism counterparts across the UK nations.

The survey results were presented to economy secretary Kate Forbes on Tuesday 11th January at the STA Member Council meeting and will feed into the activity of the Scottish Tourism Emergency Group (STERG).

Marc Crothall, STA chief executive, said: “The strength in the number of responses to the survey shows just how anxious tourism businesses are to communicate the level of deep financial pain and commercial instability they’re experiencing as a result of the recent measures introduced and of course the dip in consumer confidence in line with public health messaging.

“Emergency financial support from the Scottish Government has been hugely welcomed by the sector, including today’s announcement of a further £9M for the sector to be assigned to coach businesses, day and tour operators, hostels, inbound tour operators, outdoor and marine activity operators and visitor attractions. However, for the vast majority of businesses, this won’t touch the sides of what is evidently a gaping chasm between business failure and any sense of stability.

“What our survey highlights is a much greater opportunity and the need for governments to leverage supportive policy around areas such as business rates, the retention of the current rate of VAT beyond March and remove potential barriers which are recognised as being significantly detrimental to business survival and recovery. We need to see a commitment to supporting a robust marketing campaign to stimulate the international market which our visitor economy, particularly city destinations are so reliant on.”

He added: “The window of opportunity from an international perspective will close in March; the next few weeks are therefore critical for securing international bookings and the hope of a relatively buoyant summer season. Positive messaging in relation to safety around travel to and within Scotland will also be essential to restore public confidence.

“All businesses across every part of the sector in Scotland are experiencing a rapid increase in costs combined with significant financial losses; there has never been a greater need for the sector to trade unencumbered, without additional costs since financial support will never fully restore businesses to a more even keel in terms of viability and the ability to remain competitive.”

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