The Scottish Government

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Listen

One : Our Market

What's happening across the globe?

Strong trends in global growth: Across the world, tourism is growing strongly after 3 years of low growth caused by 9/11 and SARS. The number of international tourism trips in 2004 were up 10% on 2003, and outward travel from the US and Canada is growing again. The World Tourism Organisation is forecasting 4-5% growth until 2020. People are working harder for longer; are wealthier; place increased importance on leisure, health and well-being, and continuing education; and are more able to take holidays and travel more frequently than in the past. The internet is increasingly the method of choice to book a holiday. There is sustained growth in domestic and intra-regional travel to a massively greater choice of destinations.

There are now over 200 countries offering a tourism product.

VisitScotland research shows that the world's leading tourism destinations:

• offer a wide product base and a good variety of holiday experiences which are well marketed and offer discovery and experience as key themes;
• target growing consumer interest in outdoor activities, cities, culture, well-being and business tourism;
• use native/traditional culture and heritage to differentiate themselves from other destinations, and use special events to boost profile and visitor numbers;
• make heavy use of the internet to promote themselves;
• use private/public partnerships to deliver key roles; and
• depend on domestic tourism as well as the international market, and campaign to convince local people of the benefits of tourism and to encourage tourist-friendly attitudes.

These are the things which we have to do very well indeed just to avoid losing market share to the international competition. Major destinations across the world are promoting themselves in similar ways; offering similar products; and targeting similar markets including youth, seniors, city-breakers and business tourists. To grow, we have to do even more.

What's happening in Scotland?

Huge importance of UK market: Scottish tourism has grown since 2002; hotel occupancy rates are running at record levels. Growing overseas markets is very important, because overseas visitors stay longer than UK tourists. It's also important to remember, though, that they represent only 19% by value (9% by volume) of Scottish tourism activity (for business tourism 15% by value). 44% of tourism trips in Scotland are by Scots themselves, while 47% are made by visitors from England and Wales. Half of the population of England and Wales have never visited Scotland, so our biggest market is also our nearest one.

Overseas markets are growing faster: overseas visitor numbers were up 20% in 2004 over 2003. The US is still by far our biggest overseas market (in 2004 it was worth over 3 times as much as the next one, Germany), and although the North American market has yet to get back to where it was in 2000, it's starting to grow again after several years of standstill. From the latest statistics available for the first three quarters of 2005, visitor numbers from North America to Scotland were up by 3% against a decline of 3% for the UK as a whole, compared to the same period for 2004. It is the European markets which are growing most strongly, though, helped by better direct air access assisted by the government's Route Development Fund. Arrivals from EU countries were up 23% in 2004 over 2003 and from non- EU Europe they were up by 41%. In the first nine months of 2005, that growth accelerated, with a 35% increase in all overseas visitors, which included a 67% increase in visits from Europe (although that figure is artificially high because 2005 is the first year that Prestwick was an interview point in the International Passenger Survey).

What do our visitors think of us?

Overall satisfaction levels are high: VisitScotland's extensive consumer research shows that the most important factors in choice of Scotland as a leisure destination are our scenery, natural environment, the number of things to see and do and the friendly attitude of the local people. Visitors from both overseas and the UK tell us that:

• satisfaction with their holiday was high; 96% had their expectations met or exceeded;
• 97% of visitors were very or quite likely to recommend their holiday experience;
• visiting pubs/bars is extremely popular with all visitors;
• the authenticity of the 'experience' is vital to all visitors; and
• the opportunity for visitors to interact with Scots is important to them, but especially for North Americans, who very much want to meet local people.

The criticisms most commonly mentioned were the weather, prices/exchange rate and quality of accommodation, with many comments on the need to improve the quality of the food in eating places generally.

What are Scotland's key markets?

The UK leisure tourism market (including Scots themselves and people visiting friends and relatives ( VFR)) is worth around 60% of total tourism revenues generated in Scotland; ¹ the VFR component is around 7% of the total. This is increasingly a short break market (average stay 3.6 nights).

The overseas leisure tourism market including VFR is worth around 13% of total revenues ( VFR component around 4%). It sees a longer average stay (9.3 nights in Scotland) but short breaks are increasingly popular.

UK and overseas business tourism is worth around 22% of total tourism revenues (spend per night is twice that of leisure visitors), with other tourism revenues accounting for the remainder.

There's increasingly strong competition in all of these revenue segments.

Leisure tourists (both from the UK and overseas) are finding that traditional sun and sand destinations as well as eastern European destinations are diversifying into cultural tourism, while the capitals and secondary cities of the new EU entrants offer novelty and low prices, increasingly with direct access. UK and overseas competition for business conferences is also increasing; 35% of all international association conferences held in the UK were hosted in Scotland in 2004, but this was down from 38% in 2002-03 - so there's a challenge here too.

Across the leisure tourism market, the following reasons to visit (product segments) have been identified by VisitScotland as meeting visitor demands while playing to Scotland's strengths, and are the primary focus for VisitScotland marketing activities:

How are Scotland's markets changing?

The growth of the last 3 years in international visitors mustn't lull us into a false sense of security. Our visitors like us and what we offer them. However, the market is changing. Any analysis of how markets are changing will highlight trends which don't necessarily apply across the board, e.g. the strong growth of the short break market doesn't mean that no-one will come to Scotland any more for 2 or 3 week holidays. Nevertheless, VisitScotland's consumer research shows persistent change trends. It confirms that today's travellers want:-

• customised and flexible travel (a package but not a package holiday) to a destination generally within 3 hours' travel time;
• special interest holidays and special experiences;
• an authentic experience (with the experience mattering more than the destination); and
• good value for money (there's sustained pressure on prices at every level, with some Europeans making several calls and internet searches to save a few pounds per night).

Other key trends identified by VisitScotland are the increasing prevalence of late booking, which is related to a rising use of the internet for looking and booking; and a strong trend towards shorter breaks (because of limited time available, greater choice of destination) is driving the increasing popularity of city breaks. From these trends, the main types of break which this research indicates will be in increasing demand in future are those linked to:

• interest in good health (so even more demand for activity breaks of all kinds);
• the use of a break as a personal reward or well-being experience (so strongly increasing demand for more spa/ pampering experience as well as good food and drink and other more hedonistic activities); and
• the increasing interest in extended education (so more demand for history and culture-related holidays).

Of course, some visitors want to experience more than one of these in a single trip. Many also want a truly authentic experience, e.g. ancestral tourism or wildlife watching, where Scotland is a global leader. It is these consumer insights which are currently driving the shape of VisitScotland's current marketing campaigns, tapping increasingly successfully into rising consumer demand in these areas.

What might our markets look like in 2015?

Building on these trends, VisitScotland has done a lot of scenario-planning work. This paints a picture of what Scottish tourism could look like in 2015. It describes a sector with a focus on leisure short-break tourism which will grow strongly based on meeting rising consumer expectations with confidence. Business tourism will also be a strong growth sector. Competition for visitors will be stiff, and visitors will expect a warm welcome and can-do attitude everywhere they go. They are likely to be increasingly time-pressured with expectations that their experience will be smooth and any problems sorted quickly. The vast majority of visitors will live within a 3 hour travelling distance of their final destination in Scotland. Easy booking and good access will be crucial. Visitors will want self-discovery and chances to try new things, and will be ever better travelled and more sophisticated, with an interest in culture and the arts, high and low brow. They will be looking for rich opportunities to experience authentic Scotland, and will be turned off by any hint of a tourist trap. Population changes will mean more older visitors, and this will also have an impact on the workforce. The pool of younger talent will reduce, and more of our workforce will be born outside Scotland. However, the ageing population also presents an opportunity through experienced, enthusiastic second careerists and older entrepreneurs.

This picture suggests that the main opportunities for growth could come more from the UK market, along with Europe and North America. That doesn't mean that the long-stay or long-haul leisure markets will disappear. VisitScotland estimates that the volume of the Chinese market will almost triple by 2010, but it's important to keep this in perspective. That increase is from a very low base, most Chinese tourism will be to other destinations in south east Asia, and it will be a very long time, if ever, before the Far Eastern market replaces the North American or European markets.

Based on all of this research and scenario planning, significant changes are likely to take place in the Scottish tourism market by 2015:

• It is likely that the biggest market increase will continue to come from the strongly growing overseas leisure market, including VFR, predominantly from Europe and the eastern US and Canada but also from further afield. Current trends support the view that revenue could more than double.
• Business tourism revenues could almost double, and rise from the current level of 22% of all tourism revenues to 25% of all tourism revenues. The UK business tourism market will probably grow more strongly than the overseas market.
• It is likely that the UK leisure market will continue to grow but fierce competition will mean that it will probably do so more slowly than the overseas market.

Current estimates therefore suggest that gross tourism revenues could increase by 50% by 2015. ²

However, revenue growth of around 50% over the next decade doesn't mean an increase in visitor numbers of 50%. It's more likely to be driven by an increase in visitor numbers of perhaps 20% by 2015, with the rest of the growth coming from increased spend per head as we get better at offering a wider variety of experiences and products to meet our visitors' expectations. This view is based on extrapolation of current spending trends and experience in other countries, e.g. in Austria, where visitors spend half as much again per head as they do in Scotland. And given the different product mix and profile of visitors attracted to different parts of Scotland, this growth will not
be uniform throughout the country.

So changes in spending patterns could look like this:

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