Insert Doc Domestic Industry Panel research Wave 20 - May 2012 1.
1. Background and Objectives The Domestic Industry Panel, founded in 2006, is a group of senior people in key businesses in the tourism sector, put together to help VisitEngland understand the reasons behind the numbers reported in major quantitative tourism surveys. Interviews with panel members traditionally took place 3 times a year (in October/November, February/March and June/July to capture information on the summer, autumn/winter and spring periods) 1. However, this year the decision was taken to conduct the interviews twice yearly; at the beginning of the Spring/Summer period (around April/May) and at the end of the Spring/Summer period (around September/October). Each wave collects information on the performance of the preceding few months and expectations for the coming months. The objectives of the research are to: Identify business performance in the previous few months (in the current wave this is looking at performance since January 2013); Look at expectations for the next few months and for 2013 as a whole; Identify how satisfied panellists are with their business performance; Understand the factors which affect business performance in 2013; Identify the impact of the business environment on customer behaviour; Explore the opportunities and challenges facing businesses, and indeed the sector more generally in 2013. 2. Methodology The Panel consists of around 60 people in senior roles in the tourism sector mostly Director or Chief Executive Level. They comprise representative from the accommodation sector (including hotels, self-catering, B&Bs and camping & caravanning), attractions, conference and event management, operators and destinations. A total of 20 interviews were completed with panel members in the current wave. Although the majority were completed over the telephone by VisitEngland researchers (taking around 15 minutes), a small number are completed electronically. The current wave of interviews was carried out in April 2013 (between 08 April and 24 April 2013). As a note of caution, it is important to note that results are designed to be more qualitative in nature. The aim is to provide a snapshot of what is happening in the industry, not to provide statistically significant data. As a result, findings relating to numbers of responses should be treated with caution. 1 Panel membership is refreshed periodically (most recently in waves 15 and 17) 1
3. Summary Visitor Numbers and Earnings Most businesses had experienced a very tough few months, driven largely by the economy and the very poor weather. The weather had also fuelled the late-booking trend, with people leaving it later and later to book their holiday or short break. Those with a strong programme of events this year were feeling the most positive, with some evidence of increased visitors and uplift in web traffic as a result. Some businesses are doing better than others and there are some clear regional differences. Expectations for the next few months/2013 Despite a tough start to the year for many there was a sense of optimism about the next few months, however, the success of the next few months was felt to be in the hands of the weather gods. Many had seen an uplift in forward bookings compared to last year and there were some late spikes in web traffic, possibly due to pent up demand on account of the poor weather earlier in the year. Opportunities & Challenges Many were focused on cultural events or new attractions to bring in business. Nevertheless, there was no time to be complacent as businesses were mindful of the need to always be planning for the next big thing. Despite the focus on the poor weather, the economy is still viewed as the main challenge affecting businesses, with consumer confidence low and the desire for cost-savings high. The desire for quality experiences at reduced prices remains strong, which continues to put pressure on already squeezed businesses. Increasing petrol and fuel costs remain a challenge affecting the distance visitor s travel and the profits businesses make. Keeping abreast of new technology and making better use of digital marketing and social media were also cited as key challenges for the industry, particularly given that consumer buying habits are constantly changing. In addition, given the volume of information available on the internet, remaining relevant was crucial for many businesses. Other challenges include VAT rates, Airport duty, VISA restrictions and a possible oversupply of Accommodation stock. 2
4. Business performance 4.1 Visitor Numbers Although the first four months of the year had been positive for some, by-in-large businesses had experienced a very tough time, with bookings down across the board, events cancelled or disrupted by poor weather. The particularly poor weather in the first few months of the year had a huge knock-on effect, with many attractions seeing a decline in visitor numbers so far this year, particularly those based in resorts. Many accommodation businesses also suffered during this period, however, there was some evidence of this being regional, as generally those in central England/South East tended to report a stronger first quarter than others, largely due to proximity to the London area. Things are extraordinarily tough. We ve got a good product, lots happening but it s been far, far too cold for a day out by the seaside (Attraction) January is a critical booking month. The snow in the 3rd week of January meant that activity was very low - people were just concentrating on living (Accommodation) There was an acceptance that the weather was exacerbating the late booking trend, with many leaving it later and later to book in order to maximise their chances of getting decent weather. Many visitors were thought to book according to what the weather is like on the day, especially in the case of short breaks, where, if the weather is good on a Thursday people will book for the forthcoming weekend. There is a reluctance to risk money in advance. People are weighing up the savings they can make by booking earlier against the possibility of not having the best time they could possibly have (due to the weather) (Attraction) In addition to the weather, late-booking is being driven by the desire to obtain the best possible discount. For example, some accommodation businesses noted a peak in website visitors in the two weeks prior to the Easter/halfterm holidays, with people holding off booking until the last minute in order to obtain the best possible price. Many spoke of accommodation providers having to hold their nerve and not discount too early or by too much. The fact that the price was often manipulated by agencies and booking providers also meant that many owners were having a particularly difficult time. Although many leave booking to the last minute to maximise their chances of getting good weather or to obtain last minute discounts, a number of participants argued that many book when they have the money available. People are booking as close to the start date as possible as they don t have the money until then the more middle class with kids, those bookings are there. It s the budget sector of the market that would book early but have got not choice (Conference Centre) Nevertheless, it s not all doom and gloom. Some participants had a good start to the year, with performance up against the same period last year. This was particularly true of destinations, attractions or accommodation providers/conference centres that had events on. For example, one conference centre suggested that although the Easter period was poor for the town itself, a programme of events and conferencing was keeping the hotels busy. 3
One of the destinations we spoke to also reported a strong quarter due to a large theatre event in the town which had boosted both staying visitors and day trippers. In addition, those who have invested in all-weather facilities are the ones who are performing best (i.e. hotels with indoor pools or spas), whose forward bookings tend to be stronger. Those that rely on the weather to be sunny have suffered (Destination) 4.2 Earnings Given that most of the research participants reported a decline in visitor numbers against last year this was also generally reflected in earnings. As many visitors stayed away due to the poor weather this also had an impact on earnings. Nevertheless, indoor attractions fared better in this period. In addition, the poor weather actually drove up retail and catering spend in many cases, with those venturing out forced by the weather to abandon picnics and use on-site catering. Attractions who saw an increase in catering/retail spend said that spend in this department was up, even if overall earnings aren t, arguing that increases were driven by being mindful of what the customer wants and being clever in their marketing and shop layout. Give them what they want. We have a range of food on offer, everything from Chinese food to burgers. It s about finding out what people want to buy and dressing up the shops to get people in. Our Park catering is up by 4%, which is also helped by the (new) shop (Attraction) Others saw increases as a consequence of increase sales or reviewing ticket prices, with a couple of the destinations we spoke to citing increases in staying visitors as a result of events in the town, or as a result of new accommodation which has improved their offering. Nevertheless, as mentioned in section 4.1, some businesses appear to be doing better than others in what is a very tough market. One large accommodation provider noted that big accommodation companies were faring slightly worse than others, particularly in the South West where there is a large volume of stock who are all in competition with each other. As people are leaving booking later and later this can result in local price wars, with many finding it difficult to compete with a business just down the road who is offering a similar product but at 50% of the price. A couple of participants pointed out that revenue was not necessarily the problem, but increasing energy/utility and food costs, all of which impact on profitability. 4.3 Satisfaction with Business Performance Despite a very tough economic climate and a fairly disappointing start to the year for most, there is a sense of pragmatism. Most accept that although things aren t ideal businesses needed to trade through it. The dials are against us but we re carrying on (Destination) 4
Although most would fall short of admitting they were satisfied with business performance, business was felt to be as good as it could be. Despite the difficult start to the year, there was optimism that things could only get better in the coming months. Nevertheless, this was very much dependent on the sun shining, or at the very least, the rain stopping, which no one could be sure of. Everything is in place, we just need the weather. We need a feel-good factor as people still want to spend on the kids (Attraction) We are cautiously optimistic things have got to be better than last year (Destination) Although there was a certain amount of uncertainty about what the rest of the year would hold (which is covered in the next section), many felt that if they ended the year flat it would be a good year, given the current economic conditions and the less than inspiring weather. Although times are tough holidays are not something people are prepared to compromise on, instead they are finding other ways of affording them. As a result, there was always optimism. We ve got to compete hard to recover the business (after the poor summer last year and bad weather of this year). However, holidays are not something people want to sacrifice. They will defer them, wait to the last minute, cut them short, look for deals (Accommodation) 5
5. Expectations for the next few months / next year 5.1 Expectations for future visitor numbers Despite a less than impressive start to the year, there was a general sense of optimism about what the next few months had in store. Destinations with a programme of cultural events, including festivals, outdoor or live music events or theatre productions in the next few months were confident that they would see an increase in visitors. Some accommodation businesses had also recently seen an increase in forward bookings and web traffic, possibly as a result of pent-up demand, with people deferring holidays or short breaks until the better weather. Last week was good weather and we saw tremendous web traffic. I think we ll have a strong period in the next 2-3 months (Hotel & Conference Centre) We ve had lots of enquiries so we re optimistic (Destination) Destinations that have experienced positive PR of late, such as those who were part of the Olympics or those who had recently featured on domestic or internationally broadcast TV shows are confident that they will benefit over the next few months. In addition, a few businesses said the summer period was likely to be better than last year as the Olympics are not here to distract potential visitors. However, unsurprisingly, any optimism about the future was tempered with uncertainty about the weather. There was a sense that, should the sun shine, this summer could be a really positive one for businesses. Nevertheless, if it rained again for most of the summer (as in 2012) many businesses could find themselves in trouble this year. It depends on the weather. Because we re a resort we re dependent on the weather. The key day is Thursday. If the weather is good then people will come for a last minute short break (Hotel & Conference Centre) It will come down to the weather. It will be hard but a good quality product will always shine through (Attraction) Although the economy continued to be a concern it had the advantage of encouraging the family market to take holidays in seaside destinations. This was due to the perceived flexibility that England had over destinations abroad. Nevertheless, there was a concern that some of those converting a holiday abroad for a holiday in the UK were doing so merely for financial reasons rather than out of choice, which may have future repercussions when the economy starts to recover. We can be optimist in the family market because of the cost of going abroad. You can do a 4 day break here rather than 7 abroad. However, this can also be challenging if it s compulsory switchers rather than voluntary switchers (Destination) Clearly there are some challenging times ahead, with the weather, economy and last-minute booking (not to mention discounting) all affecting company profits. Nevertheless, businesses were keenly aware that in order to survive they had to constantly develop and invest in their offering and the more successful businesses were managing to ride out the storm in a very tough market. 6
5.2 Biggest opportunities for businesses in 2013 For those with large crowd-pulling events on this year, including both destinations and hotels/conference centres, these events were seen as great opportunities to generate expenditure through increased day and overnight visitors and were a key focus for the next few months. For others it was just carrying on with the day job, which meant reminding people why they should visit X or stay in X essentially encouraging people to get out and about and explore not only what s on their door step, but also other parts of the country before going abroad. For us it will be to keep shouting family, family, family and try and try and get rid of the town s negative and frankly untrue image (Destination) Destinations that are part of the RGF campaign, ran by VisitEngland, saw this as a big opportunity for generating trade in 2013, and indeed many were optimistic that the GREAT 2 campaign would be beneficial for encouraging more short breaks and trip-taking in the country. For others it was capitalising on the Olympics and investing in marketing or product development, taking advantage of the fact that people were still looking for bargains and making sure that these opportunities were being taken, but without compromising profitability to a great extent. 7
6. What challenges lie ahead? When asked about the challenges faced by businesses this year, and indeed the wider tourism industry more generally, many factors were cited. Asides from the weather, which incidentally was barely mentioned as a challenge (probably due to optimism about the weather improving in the key spring/summer period), most of the issues cited related to the economy. The current economic situation in the country continues to affect consumer confidence and spend, which in turn affects the profitability of businesses, many of which are already struggling (and some of which are only being kept afloat by the banks). A key challenge for us is funding how we can afford all the things we want to do (Destination) People are being very price conscious, comparing deals with very short lead-in times, coming for shorter periods, spending less (Destination) As a result of a lack of funds, many businesses are not spending or investing in product quality, which not only affects service standards but can also lead to reduced trade, since we know that those who invest in product quality are much more likely to do well. This issue of product investment was an issue particularly for attractions, since a new ride would prove popular for a while but couldn t guarantee trade for years to come. There was then a constant need to always be looking ahead and planning for the next big thing. The old days of you build a ride and they ll come for 20 years is gone. You need to give people a reason to come (Attraction) The weather puts the cream on top of the season but the underlying issues are all financial there isn t the money being put into quality, development, investment. People are not putting shiny new things in (Destination) In addition, increases in fuel prices (both petrol and heating) has meant that visitors are reducing the distance they travel for days out and short breaks, and increased fuel bills have resulted in owner s profits being squeezed further by increasing costs that can t always be passed on to the customer due to the need for competitiveness. How do you make the same margin whilst charging less? People need to be more innovative and cut down on waste (Destination) Many also believe that the impact of the welfare reforms are only now starting to be realised, which has the potential to make things even tougher for businesses as disposable incomes are squeezed further. In addition to the challenges faced by the economy, many of those we spoke to also spoke of the challenge of keeping up to date with, and indeed ahead of technology, particularly as consumers buying habits are constantly changing. Linked to this, ensuring that digital marketing and social media is used to its best advantage was also seen as crucial, and is something which tourism businesses are using more and more to engage effectively with visitors. A challenge for some is also that the digital revolution is also increasingly making tourism organisations question where they can add value if everything is now available online. This is particularly challenging in the context of further cuts to public spending. 8
The current level of accommodation stock was also seen as a challenge, since many felt there was currently more supply than demand. There are lots of hotels being built, this overcapacity is going to be an issue, particularly in London. Eventually some of the old stock will go out of business. Many are badly in need of refurbishment and offering low prices to get cash in (Accommodation) Other challenges mentioned included levels of VAT, airport duty and VISA restrictions. Destinations within close proximity to London were also keen to capitalise on overseas visitors and a key challenge those destinations had was encouraging those visitor to venture outside of London. 7. In Summary Despite a very challenging start to the year for many, there is optimism about the key spring/summer period, with many businesses quietly confident that business will pick up at least to 2012 levels. Nevertheless, businesses were mindful that the weather and the economy combined made market conditions more unpredictable, and so there was also caution. As both the weather and the economy were out with their control, the most successful businesses were the ones who continued to invest in product quality, who knew their market inside out and who were able to give the customer what they wanted, and who offered clever deals or discounts that did not compromise profitability. All-weather businesses and destinations also performed more strongly, especially in the traditionally quieter months of the year. 9