ECONOMY FEARS: Warning that one in three Highland tourism firms could fail in 2022

The next few weeks are “critical” for securing international bookings and saving the 2022 season

One in three tourism and hospitality businesses in Scotland say they are likely to fail in 2022, according to a survey just published.

Businesses from the Highlands and Islands accounted for almost one third of those responding to the survey conducted by the Scottish Tourism Alliance.

Local tourism body SkyeConnect described the results as “deeply worrying” and said it showed the impact of measures imposed over the festive period. It also echoed the STA’s calls for reduced business rates and other financial help. 

A total of 1,335 businesses across Scotland’s 31 regions took part in the survey which ran from 17th December to 10th January. 

Just over half of all respondents stated that they had either zero or just 1-2 months of cash reserves left to stay afloat.

Some 68 per cent of respondents said they were in financial difficulty, citing extreme concern over increased costs, particularly energy bills, reduced revenue or a combination of both as contributory factors. 

Fifty two per cent had been impacted by staff shortages over the survey period, the majority being in the hospitality sector.

In terms of support needed to aid business recovery, sector-specific grants were seen as being of the most value across all sectors, particularly within the coach and tour operator category and food and drink which includes hospitality businesses.  

Retaining the 12.5 per cent rate of VAT was also viewed as a priority to recovery, mainly within the food and drink and hospitality sectors. The removal of restrictions was stated as likely to make a key difference to all sectors in the tourism industry.

The survey results were presented to economy secretary Kate Forbes, the MSP for Skye, Lochaber and Badenoch, at the recent STA Member Council meeting and will feed into the activity of the Scottish Tourism Emergency Response Group.

Marc Crothall, chief executive of the STA, Scotland’s umbrella body for tourism businesses, said: “The strength in the number of responses to the survey shows just how anxious tourism businesses are to communicate the level of deep financial pain and commercial instability they’re experiencing as a result of the recent measures introduced and of course the dip in consumer confidence in line with public health messaging.  

“Emergency financial support from the Scottish Government has been hugely welcomed by the sector. However, for the vast majority of businesses, this won’t touch the sides of what is evidently a gaping chasm between business failure and any sense of stability.

“What our survey highlights is a much greater opportunity and the need for governments to leverage supportive policy around areas such as business rates and the retention of the current rate of VAT beyond March.  

“We also need to see a commitment to supporting a robust marketing campaign to stimulate the international market which our visitor economy is so reliant on.

“The window of opportunity from an international perspective will close in March – the next few weeks are therefore critical for securing international bookings and the hope of a relatively buoyant summer season.”

A spokesperson for SkyeConnect said: “The STA survey results are deeply worrying. They demonstrate the undeniable impact of preventing hospitality businesses from trading at one of their busiest times of year. SkyeConnect carried out its own survey at the beginning of December and what was noticeable was the sudden change in sentiment from growing optimism in October/November to pessimism in December. 

“As well as direct financial packages, we support the STA’s call for reduced business rates and the retention of the current rate of VAT beyond March. 

“It is also vitally important that government messaging is focussed on restoring public confidence so that businesses start to see a surge in bookings for this spring, summer and beyond.”

The SkyeConnect survey in mid-December showed that 78 per cent of local businesses had suffered cancellations, costing tens of thousands of pounds, following advice from the Scottish Government that the public should avoid work Christmas parties amid the surge of the Omicron variant.