Short-term lets: consultation annexes

Tourism in Scotland

Economic Value of the Tourism Sector

Tourism is of growing economic value for the Scottish economy (Scottish Government 2018a). In 2017 tourists in Scotland generated around £14 billion to the Scottish economy and contributed 6% (around £8 billion in basic prices) of the Scottish GDP (Tourism tax: Discussion Document^[31]).

In 2017, the Sustainable Tourism Growth sector (restaurants, hotels and others) employed 206,000 people, around 8% of total jobs in Scotland (1 out of 12 jobs), from which over one quarter were employed within the accommodation sector (56,000 employees, equal to around 27% of the total) (Tourism tax: Discussion Document 2018, p. 11). Overall, tourism employment has increased by 12% between 2011 and 2016, equivalent of 20,000 additional jobs (Scottish Government 2018b). In 2016, the sector had a large share of part-time employment: 47% compared to 27% of the total part-time employment in Scotland (Scottish Government 2018b).

Overnight Visitors and Expenditure

In 2017, around 14.9 million overnight visitors came to Scotland, of which the majority were from the UK (Tourism tax: Discussion Document 2018, p. 6). The most popular months in 2016 were between July and September, with around 28% of domestic visitors and 40% of overseas visitors (Frontline 2018).

The number of overnight visitors decreased between 2011 and 2016 by around 9%, driven by a decrease in visitors from the UK (-14%), with overseas visitors showing an increase since 2011 (+17%) (Scottish Government 2018b). A similar trend was seen between 2015 and 2016, when international visitors increased by 6%, while UK overnight visitors decreased both in number of trips and amount spent (VisitScotland 2017)^[32]. However, findings from a VisitScotland 2018 report^[33] and the recent discussion document on transient visitor taxes in Scotland showed that between 2016-2017 there was a slight increase in UK resident overnight trips (+1.3%) and a growth of 3.8% in spend, as well as a much greater increase in international visitors trips (+17%) with a +23% growth in expenditure (VisitScotland 2018).

Visitor expenditure has increased in recent years. In 2017, expenditure by overnight visitors to Scotland was around £5.3 billion– up over 9 per cent in real terms on 2016, from which £2.3 billion corresponded to overseas visitors (Tourism tax: Discussion Document 2018). Between 2011 and 2017, there was an increase in total overnight visitor spend of 6.4% in real terms, largely driven by international visitors (increase spend by almost 40% in real terms between 2011 and 2017) (Tourism tax: Discussion Document 2018, p. 6). The Scottish tourism strategy target is to increase visitors' spend by £1 billion by 2020^[34].

Touristic Destinations across Scotland

Tourism is not evenly spread across Scotland. In 2017, Edinburgh and the Lothians attracted 44% of Scotland's overseas overnight visitors and 29% of total overnight visitors to Scotland (almost 5 million overnight visitors), followed by Greater Glasgow and the Clyde Valley (17% of Scotland's overnight visitors) and by the Highlands and Islands (11%) (Tourism tax: Discussion Document 2018, p. 7). Visitor expenditure across Scotland is similarly concentrated. As shown in Figure 10, Edinburgh and the Lothians saw the highest domestic and international overnight visitor spend (around £1.8 billion of expenditure by overnight visitors in 2017 – 35% of the Scottish total). Glasgow accounted for over £700 million of overnight visitor expenditure in 2017, around 13 per cent of Scotland's total (Tourism tax: Discussion Document 2018).

Figure 10 - Overnight Visitors by Region of Scotland, 2017

Source: ONS (2018) International Passenger Survey 2015-17; VisitEngland, VisitScotland and Visit Wales (2018) Great Britain Tourism Survey 2015-17; VisitScotland (2017) Islands Visitor Survey 2017.

Hotels in Scotland

Hotels, together with guest houses, bed & breakfast, self-catering units, short-stay accommodation, hostels and caravan and camping parks form the Sustainable Tourism Growth Sector in Scotland. In 2018 there were 3,120 registered business sites within the sector, with the majority offering hotel accommodation (Tourism tax: Discussion Document 2018).

Hotels in Scotland accounted for:

• 11% of the Sustainable Tourism Growth Sector (2017)^[35]
• 30% (£2,062.1) of the sector's turnover (2015) and
• 33% (£1,227.8) of GVA (2015) (Scottish Government 2018b, pp 14-16).

Occupancy Rates

In 2017, the average hotel room occupancy rate was over 72%, a rate that varied from around 51% in January 2017 to around 89% in August 2017^[36] (Tourism tax: Discussion Document 2018, p. 10). Self-catering unit occupancy rates averaged at around 54% in 2017, and varied between 29% in January to 85% in August 2017 (Tourism tax: Discussion Document 2018, p. 10).

Occupancy rates also varied across Scotland's regions. According to the recent discussion document on tourism tax published by the Scottish Government in 2018, Edinburgh and the Lothians, as well as Greater Glasgow and Clyde Valley showed relatively high levels of occupancy across the year. On the other hand, occupancy rates were relatively low in Aberdeen & Grampian and Dumfries and Galloway (Tourism tax: Discussion Document 2018).

Also, Scottish Enterprise (SE) and Scottish Tourism Alliance (STA) based on research conducted by STR Global^[37] claimed that:

• In 2016, occupancy in traditional hotel accommodation in Edinburgh, Glasgow and Dundee increased
• In Edinburgh, occupancy increased in each of the previous four years
• During the 2016 summer, hotel occupancy in Edinburgh was over 90%

(Scottish expert advisory panel on the collaborative economy: evidence paper).

The review draws on research commissioned to Indigo House by the Scottish Government on short-terms lets in Scotland^[38]. In line with the above findings, Indigo House (2017) based on research conducted by LJ Research^[39] claimed that:

• January 2017 was the 13th consecutive month of growth in hotel occupancy in Edinburgh
• Occupancy growth was 2.4% in Edinburgh and 4.5% in Glasgow between December 2015 and December 2016/January 2017
• Continuous visitor surveys (sample of 1,000 visitors per city per year) show growth in the incidence of Airbnb in Edinburgh (4% in 2014, 6% in 2015, 9% in 2016) and Glasgow (1% in 2014, 3% in 2015, 5% in 2016)

(Scottish expert advisory panel on the collaborative economy: evidence paper).

Overall, the findings suggest that the growth of the short-term rental sector in Edinburgh and Glasgow has not caused a reduction in hotel occupancy rates. However based on the available evidence, we cannot say whether it inhibited hotel occupancy growth.