STB's Performance

1. This chapter considers the impact of STB. It also seeks to place the Board's performance in a wider context by noting the value, importance and past performance of, and prospects for, the Scottish tourist industry.

Measurement of Industry Performance

2. The measurement of tourism as an economic activity is not an easy matter. There is, for instance, no absolute consensus as to what is precisely meant by tourism. Definitions tend to vary. Some may be based on the reason for a trip, length of time away from the normal place of residence, or the origin of visitors to the area. STB, along with the other British National Tourist Organisations (NTOs), uses a relatively wide definition. It includes anyone who spends at least one night in Scotland away from their home, regardless of the purpose of their trip. Thus, business trips are included as well as those undertaken for leisure purposes. Scottish residents are also included provided they fulfil the criteria of an overnight stay away from home. Day trips for leisure purposes are not covered by this definition (but are in practice measured by STB and provide valuable market information).

3. Apart from definitional difficulties, there are also problems in trying to quantify the scale and impact of tourism on the economy. The concept of tourism covers a diverse range of activities, many of which are operated on a small scale but have in common the fact that they obtain all or part of their income from tourist expenditure. The various activities dependent on tourist demand cover a wide range of industries such as hotels, catering, retailing and transport. The tourist industry defined in this way does not correspond to any of the Activity Headings used in the Government's 1980 Standard Industrial Classification (SIC) System since they are defined in terms of their product type rather than markets.

4. These problems give rise to further difficulties. Comparisons made between tourism and other sectors are liable to be misleading because of the different ways in which the term "industry" is defined. More importantly, it means that there is a lack of basic official information on, for example, the numbers employed in the sector and the contribution of the sector to output. In the absence of any official and comprehensive figures relating to the tourist industry, most statistics ­ whether collated by ad hoc research studies or on a regular basis for STB ­ are obtained from sample surveys which are subject to varying degrees of sampling error. This means that estimates relating to the scale of the tourist industry will be subject to some degree of uncertainty.

5. The main factors determining tourism's value to the Scottish economy are the number of tourists, the level of their daily expenditure, the pattern of their expenditure and their length of stay. The total volume of tourist expenditure provides, therefore, the starting point for estimating the economic effects of tourism. As with other industries, though, some of the money spent has no economic effect in Scotland because it leaks straight out in the form of imports, from remitted profits, wages and rents, direct and indirect taxes, and savings. The expenditure that remains recirculates within the Scottish economy and generates additional income and employment. Despite this caveat, data on gross visitor expenditure ­ especially when expressed in terms of medium to long-term trends ­ is widely used as the principal measure of the tourist industry's performance.

6. From the policy point of view, employment generation is an important objective for public sector financial assistance. Whilst it is possible to estimate the likely employment impact of particular projects, there are obvious difficulties in trying to estimate the overall employment in the economy attributable to tourism. To try and avoid these problems, the Government has identified a list of SIC Activity Headings in what is termed "tourism related industries" and provides regular estimates of employment on this basis. These Headings are "the sectors of industry that serve overseas and domestic tourists most directly". The Headings currently used are:

­ Hotels and Other Accommodation Types (SIC Codes 551, 552);

­ Restaurants (Code 553);

­ Public Houses and Bars, Night Clubs/Licensed Clubs (Code 554);

­ Travel Agencies/Tour Operators (Code 633);

­ Libraries, Museums, Galleries, Other Services, Sport, Tourism Services (Code 925); and

­ Sport and Other Recreational Activities (Codes 926, 927).

Inevitably, this is a broad brush approach but, in the absence of any viable alternatives, it remains the best source of data on tourism employment.

Value of, and Trends in, the Scottish Tourist Industry

7. As a first step, it is instructive to place tourism's value to Scotland in a wider context. Table 3.1 therefore compares tourism receipts on a per capita basis for various countries. Figures for England, Scotland and Wales have been extracted from total UK figures and are shown as separate countries. On this basis, Scotland would rank 8th in the world in terms of visitor spend per head of population. In relative terms, therefore, tourism is much more important in Scotland ($539 per head) than in England ($358 per head).

Table 3.1: External Tourism Receipts of the Top International Destinations plus Scotland, England and Wales in 1995

8. Table 3.2 shows the relative importance of tourism in Scotland and other parts of the UK. While the importance of London is clear with about 30% of all tourism expenditure in the UK, Scotland receives about 9% of all such expenditure and its total is only exceeded by London and the West Country. On a receipts per head basis, again London is clearly in a league of its own but the only other English regions to exceed Scotland are East Anglia, Cumbria and the West Country. (It should be noted here that the economic importance of tourism also varies significantly within Scotland: this point is dealt with in more detail in Chapter 5 ­ tables 5.2 and 5.3 refer.)

Table 3.2: Relative importance of tourism within the UK, 1995

9. STB was also asked by the Steering Group to provide an analysis covering recent and prospective trends in Scottish tourism's performance. This is contained in Annex G.

10. Consideration of the paper's contents suggests that, while there has been a satisfactory increase in tourism expenditure in Scotland in recent years, the Scottish industry's long-term performance in the UK ­ primarily English ­ market remains relatively weak. This is attributable in large part to the significant decline in the long holiday (ie 8+ nights) market. It is believed that this market sector will continue to perform poorly as UK residents continue to take main holidays outwith the country. In response to this trend, STB opted some years ago to stimulate the development of shorter holiday breaks of up to 7 nights ­ a sector of the market with considerable potential. Results have been encouraging and, while Scotland's recent overall performance in the UK still fails to match that of the mid to late 1980s, prospects for the future are regarded by STB as promising. This is particularly true in the overseas marketplace where Scotland is well placed to capitalise on its good past performance and to continue to market a distinctive product which is likely to remain in demand. It has to be accepted, though, that it will do so against a background of intense international competition.

11. The paper also contains data on seasonality and dispersal. The need to improve both the spatial and seasonal distribution of visitors to Scotland is rightly regarded as essential to the improved performance of the Scottish industry as a whole. Annex G suggests that seasonal distribution has changed significantly with the July to September period less important than it once was. Results from the UK Occupancy Survey (which has now completed its first full year of operation) suggest however that utilisation of accommodation still remains more seasonal in Scotland than in other parts of the UK. Despite a better performance, therefore, there clearly remains scope for further improvement and this is recognised by STB in terms of its ongoing commitment to programmes designed to encourage more visits to Scotland outwith the main season. Distribution of visitors outwith the main destinations of Edinburgh and Glasgow has, on the other hand, declined as a % of total spend (though it has increased in absolute terms). The success of the two cities may simply reflect their more effective stimulation of, and response to, market demand. In any event, the fact that the rest of Scotland has performed less well gives cause for concern.

Measurement of Board's Performance

12. The Steering Group recognised at the outset that the performance of economic development agencies is more difficult to assess than that of other NDPBs or executive agencies. The activities of other bodies can be more easily measured because their targets are likely to be couched in gross rather than net terms and because it will be clearer as to what they have achieved at their own hand. By contrast, economic development agencies tend to work in partnership with other bodies and interests in both the private and public sectors and their ultimate measure of performance will rest on net economic achievements, ie the economic improvements their activity gives rise to which are additional to what would have happened anyway and which are over and above any activity which they displace.

13. STB is no different from other economic development agencies in this respect and considerable difficulty has been, and is, experienced in identifying and quantifying precise causal links between Board activities and final outcomes in the tourism sector. Taking the Board's marketing function as the prime example, STB markets, but does not sell, Scotland: the Board has no product line which requires financial inputs and has no sales figures which will be reflected later in profits or losses. A manufacturer or hotelier can, moreover, vary marketing or other efforts and look for a change in sales as a direct result. While the Board can have significant influence on both private and public sector interests in terms of product development, it has little immediate control over the product it markets. There is, therefore, little analogy between STB and a private company in terms of measuring overall performance.

14. As noted in paragraph 5 above, tourist expenditure is the best practical measure of impact and obviously STB's main task here is to secure increases in such expenditure. The problem, however, is that visitor spend is influenced by many factors other than STB activities. It is perfectly feasible for STB to perform well at a time when total visitor expenditure declines and, of course, vice versa. The Board has experimented with econometric models which would explain variations in total visitor flows but without success. Likely relevant variables include weather, income levels in source countries, price of access to Scotland, exchange rates and level of marketing effort but there is no known econometric analysis which has successfully explained and quantified these variations.

15. In the absence of direct sales figures or generally applicable analytical models, techniques have been devised to measure the effectiveness of marketing campaigns. Thus, the consumer's awareness of a product and his or her propensity to buy that product can be measured through sample surveys of potential customers who have seen marketing campaigns. STB, therefore, routinely receives figures relating to reactions to its TV campaigns. These analyses provide some insight but, ultimately, are of limited value since they cannot be followed through into sales figures in the same way that a private company can track figures for awareness, propensity and sales.

16. For specific advertising campaigns, various ad hoc techniques for monitoring have been devised. Surveys can estimate the proportion of respondents to marketing activity who then subsequently visit the destination being promoted. Further analysis can then put an estimated economic value on visits using, say, averages for length of stay, size of party and spend per day per person. Such studies, however, do present very real methodological difficulties. Moreover, it is very difficult to estimate the true costs of tourism marketing campaigns when estimating benefits. Some studies have not included the cost of marketing staff time or of responding to campaigns (eg brochure production and distribution costs) and few include support costs. Benefits are also often presented in terms of ranges (eg best case 15 to 1; worst case 3 to 1) and there is an understandable temptation to quote best case figures.

17. Improvements in the measurement of tourism marketing activities could be secured through the adoption of a standardised approach which permits comparisons to be made between different campaigns. Agreed measurement of relative rather than absolute success would be a significant practical advance. STB has gone much further than the other UK NTOs in its use of awareness and propensity surveys for TV campaigns and has also taken the lead in trying to achieve agreement on methods of analysing marketing efforts which will be used by all UK NTOs. The Board has secured agreement on this standardised system which will be introduced throughout 1998.

STB's Impact

18. At the macro-economic level, STB's impact can in theory be measured in terms of its contribution to the economic health of the Scottish tourist industry and the creation and maintenance of employment in that industry. For reasons already discussed, though, there are a variety of obstacles in undertaking such measurements and such information as there is has been produced by means of ad hoc studies undertaken by the Board.

19. In the absence of a comprehensive range of final outputs, it is considered appropriate to commence consideration of the Board's performance by commenting briefly on the relative health of the industry, especially with regard to employment.

20. The difficulty in measuring the employment attributable to tourism expenditure has been discussed above. Currently, reliance is placed on the Census of Employment which is undertaken once ever two years. This provides figures for the numbers employed in tourism activities and as such excludes the self-employed.

21. Table 3.3 shows that, at a time of considerable structural change, employment in Scottish tourism peaked in 1992 and has remained steady since that date at about 160,000. Inclusion of estimates for the number of self-employed are likely to increase this figure to over 175,000. Over the same period, the total number of employees in employment (excluding the self-employed) in Scotland has remained relatively constant at approximately 2 million.

Table 3.3: Employment in Various Industrial Sectors in Scotland ('000)

22. The difficulties of measuring economic output associated with tourism activities have already been discussed. In the absence of better data, trends in the volume of tourism expenditure can be examined and these are summarised in table 3.4. Between 1990 and 1996 the value of tourism expenditure in Scotland increased by 22%. Over the same period, Scottish GDP is estimated to have increased from £40 billion to £54 billion.

23. A further method of assessing the performance of an industry is to examine changes in productivity. One would expect productivity to increase over time as the industry becomes more efficient. Unfortunately, its measurement is not straightforward. A short-cut approach is to consider output per person employed, but this is only a partial measure as it does not take account of any changed inputs of land and capital. The added complication with tourism is the difficulty in estimating output and employment generated. One crude measure is to examine how expenditure on tourism related activities has changed compared to estimates of employment. This is presented in table 3.4 and shows that, using this simple measure, output per person by those working in tourism appears to have increased since 1990. In that year, tourism was worth £12,585 per employee. By 1996, that figure had increased by 20% to £15,140.

Table 3.4: Gross Tourism Expenditure per Employee Employed in Tourism Related Activities (1996 prices)

24. In line with the requirements of its Management Statement and as part of its corporate planning process, STB has developed a comprehensive system for defining targets and monitoring achievements. Major indicators and targets are either identified in the Management Statement or separately agreed with the Department. A wide range of operational indicators have also been devised and applied by STB. It also produces for the Department and its own board reports for the periods to 30 September, 31 December and 31 March on progress towards the achievement of targets: these reports are expected to include, where appropriate, statistical information in support of achievements, proposals to amend targets or measures to address likely substantial shortfalls in achievement. Most target outputs are intermediate in nature, providing information on the Board's performance at the operational level. The most important indicators of this type are listed in Annex C. Table 3.5 shows the Board's key performance targets and results for the years 1994-95 to 1996-97. Consideration of STB's operational results reveal a generally satisfactory performance. Targets are normally met or exceeded: where they are not met, satisfactory explanations have been provided by the Board.

Table 3.5: STB Performance Against Key Targets

(Targets as in 1996/97 Annual Report)

25. Most of the Board's research on impact has focused on marketing activities. Annex H gives examples of recent research commissioned by STB into marketing effectiveness. It also contains a table which quantifies the Board's achievements in generating additional business over a range of activities together with, as a proxy measure, those of other tourist agencies.

26. Table 3.6 summarises the leverage ratios contained in Annex H. Judging by the results of this wide range of studies, the overall picture shows a degree of consistency. Despite the methodological difficulties, therefore, there are reasonable grounds for concluding that the activities surveyed (which are representative of the bulk of STB's operational expenditure) do provide an acceptable return on investment.

Table 3.6: Summary of Leverage Ratios

Conclusion

27. As exemplified in Annexes C and H, STB has developed a wide range of performance and evaluation measures. This has been built up through monitoring activity using an extensive suite of intermediate outputs and by post hoc evaluations. The data provided by such exercises when taken with other material (including the results of the consultation exercise) allowed the Steering Group to conclude that the Board's performance is generally effective and that its activities are of positive benefit to the Scottish tourist industry. The Steering Group acknowledged, however, that it is not possible to quantify with any accuracy the Board's ultimate impact on the industry and that any assessment must involve a considerable subjective element. While it is unlikely that wholly objective conclusions can ever be reached, the Steering Group felt that some steps should be taken to minimise this particular problem and, more generally, help maintain and improve the Board's performance. This issue is discussed in more detail in Chapter 7.