UK hotels gain government backing with new sector deal
UK hotels gain government backing with new sector deal
28 JUNE 2019 9:24 AM

It’s been three years in the making, but the U.K. government’s sector deal finally has given the hospitality industry the recognition and backing it needs in turbulent and competitive times and elevates the industry to the highest levels of government to discuss taxes, rates, labor and other issues.

LONDON—Today the United Kingdom government announced at the G20 conference in Osaka, Japan, that tourism and hospitality, including hotels, would be one of only a handful of industries that would be given special focus, something known as a sector deal.

According to a news release from the U.K. government, the benefits of the sector deal include:

  • the addition of 10,000 apprenticeships in tourism and hospitality businesses;
  • the creation of a “Tourism Data Hub” that will arm hoteliers with “the latest trends and spends, allowing businesses to better target overseas visitors;”
  • a commitment to build 130,000 new hotel rooms, 75% of which will be outside of London;
  • a £250,000 ($317,700) investment in broadband connectivity for U.K. conference centers to spur business travel;
  • the creation of a new government strategy to spur off-season travel; and
  • the start of up to five new “tourism zone” pilot programs to support travel to different areas of the U.K.

The announcement, greeted by hoteliers as important and timely, aims to attract another nine million visitors per year by 2025.

The hotel industry has been quick to praise the news.

In a news release, Simon Vincent, EVP and president, Europe, Middle East and Africa, Hilton and co-chair of the U.K.’s Tourism Industry Council, said “the (deal) is an important vote of confidence in the U.K. tourism industry, providing a long-term vision which reflects the skills and innovation in our sector and will help ensure we continue to thrive in a highly competitive global market.”

At a 18 June Westminster Media Forum seminar titled “The U.K. tourism industry—skills, growth and delivering a sector deal,” attendees heard what the deal might provide, although even government officials there hinted that with the current changes in U.K. politics there still might be delays or no deal at all.

“Tourism is calculated to bring in £257.4 billion ($324.3 billion) by 2025 and contributes 10% of gross domestic product and 3.7 million jobs, with the U.K. being the seventh-most visited country, but a dip of 7% was seen in U.K. tourism spend in 2018, while globally there was a 4% increase,” said Joss Croft, CEO, UKInbound.

“Confidence could be better,” Croft said, “and the European Union makes up 60% of visitors. One problem is that there will be a £8 billion ($10.1 billion) gap in local authority spend by 2025, and tourism marketing is non-statutory.”

The feeling that the U.K. is not welcoming due to Brexit policies is hurting the domestic hotel industry, despite inbound visitors enjoying foreign-exchange advantages resulting from a weaker pound sterling, sources said.

“We need to have visas that encourage more stays. Every time the government gives out a visa it loses £50 ($63),” said Kurt Janson, director, Tourism Alliance.

Janson added that the U.K. is currently ranked 133 out of 136 countries in terms of price competitiveness, value-added taxes (sales taxes) is the second highest in Europe, language skills in the U.K. are at their lowest levels since 2000 and in regards to air-passenger duties the U.K. is at the very bottom of the list.

“Actually we rank second bottom in air-passenger duties, but the only reason for that is that Chad did not send in their return on time,” Janson said.

It is not surprise that labor issues dominate hospitality conversations, sources added.

“European Union nationals make up 11% of tourism employees but 45% of new employees,” Janson said.

Seminar chair The Right Honourable Lord Shutt of Greetland, a member of the House of Lords and its Regenerating Seaside Towns and Communities Select Committee, said there remained “areas where a little more public money would make things even better.”

Sector deal
Government and Civil Service officials lined up to say why the sector deal would cement recognition of the hotel and hospitality industry as being one of country’s key industry sectors.

Timothy Jenkins, policy and public affairs manager, VisitBritain, said increasing tourism by just 1% would add £12 billion ($15.1 billion) by 2025.

Jenkins said the priority is to create a tourism strategy where a career in tourism can be seen as a career for life, data is better shared and the U.K. becomes the most accessible destination for those with disabilities.

“(The deal) is all about being at that top table,” Jenkins said.

Another initiative that has been well-received but also criticized is the apprenticeship levy that is paid for by eligible firms via a 0.5% payment based on annual pay roll.

The problem of this in the hospitality industry is that businesses are often seasonal and small to medium in size, Jenkins said.

“There remains the commitment of between 30,000 and 40,000 apprenticeships in tourism, and the recognition that tourism is a net contributor to GDP has never been higher,” Jenkins said.

“There requires the need for a percentage of the tax raised in tourism to be reinvested in (destination management organizations),” Jenkins added.

Jenkins said the upcoming creation of “tourism zones” would be another game changer in terms of long-term support and might see changed regulations concerning taxes, business rates and Sunday-opening hours.

Don’t expect quick changes
There remain caveats warned David Martin, head of tourism strategy and sponsorship at the U.K. government’s Department of Culture, Media and Sport.

“The reality is we have a hung Parliament, and it is fair for the government to say they do not want to go there at this moment,” Martin said in reference to changing laws and regulations.

Martin said the government had five pillars it wanted any deal to address and strive for—skills, the business environment, infrastructure, productivity and ideas.

“There is the requirement to hold (both sides) to account once the deal is signed,” Martin said.

Lord Shutt expressed worry as to how strong a deal would be when the U.K.’s new prime minister is sworn in after the current Tory Party elections following Prime Minister Theresa May’s resignation, or if a new government takes power.

He added that another concern is that the government has had four different Parliamentary under-secretaries of state in charge of tourism, a junior cabinet position, in the last two years—Tracey Crouch, John Glen, Michael Ellis and Rebecca Pow.

“It is hard to provide certainty when there is none,” Martin said.

Ultimately, Martin said the tourism sector deal would go ahead regardless of who is in power.

“We are very aware of the timing, but I think this is a good news story for any incoming minister. He or she will publish it and say, I’ll take the credit,” Martin added.

UKInbound’s Croft said the government’s post-Brexit proviso that EU citizens wishing to work in the U.K. must have salaries above £30,000 (£37,800), excluding many in the hotel industry, is troublesome, but on 24 June, the government’s Home Secretary Sajid Javid ordered a review into that annual threshold.

Croft added a study paper of salary caps and the effects on the hotel industry would be published by the end of the year.

Croft added that any tourism plans must also ensure it has “community acceptance and environmental sustainability.”

“There will be more focus on tourism being a net contributor to greenhouse gases,” Croft said.

The industry, nevertheless, considers the news a gigantic step forward.

In an accompanying news release, Kate Nicholls, CEO, UKHospitality, said this “move will be absolutely critical in changing the perception of the sector within government and the wider public opinion and acknowledges that hospitality is key to the country’s economic growth.”

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