Mario Bodini, chief executive of JacTravel, a consistently growing company that turns over £100m/year from hotel booking on the internet and inbound services has publicly criticised the British government for what he describes as an “intellectually bankrupt” stance on tourism.
This week the government launched a new ‘Tourism Strategy’, which contains modest measures to improve the issuance of visas to leisure visitors but no meaningful action on taxation, particularly Air Passenger Duty (APD), which has been the primary demand of the tourism industry.
Last August, David Cameron made a speech talking up Britain as a destination and the tourism industry as an engine of economic growth. He said he wanted to see the UK rise up the rankings to be in the top 5 destinations in the world but since then his government has implemented measures that make a fall more likely than a rise.
For example, funding for Visit Britain, the body that promotes the UK as a tourist destination has been cut by 34%. It recently shed 70 staff and can now only afford 21 overseas offices, down from 35 previously.
The organisation which funded Visit London was axed and a low-budget rescue had to be organised at the last minute by the Mayor of London.
Regional tourism budgets, previously administered by Regional Development Agencies, have been slashed and local tourist boards are closing or cutting staff all over the UK.
In the current economic climate, other countries have reduced VAT on hotels as a tactic to attract inbound tourism but the UK has gone in the opposite direction, lifting VAT to 20%.
Last November Air Passenger Duty (APD) was increased, making flying to the UK more expensive. A family of four coming from Australia, a core origin market, travelling in economy now has to pay £120 in new tax, up from £220 a year ago to £340 now, and if the family travels in any other class, it will be £680, up from £440. Two years ago the family’s APD was £160 for economy and £320 for all other classes of travel. In the past two years, there has been an increase of over 100%.
Mario Bodini says: “The Prime Minister has previously talked about making the UK tax competitive. That idea must embrace tourism so a visit to the UK is tax competitive too.”
A fundamental principle of VAT is that there should be no VAT on exports. Tourism is an export but the creation of holidays in the EU for visitors from abroad is subject to VAT under a regime called the Tour Operators Margin Scheme (TOMS) – that’s clearly disadvantageous to tourism exports. However, the creation of holidays for EU residents outside the EU is free of VAT. Mario says: “If the Prime Minister is serious about encouraging more people to holiday closer to home, he needs to go to Brussels and convince the other member states to reform TOMS because there is a massive tax incentive for all EU citizens to holiday abroad.”
Aside from the questions of taxation and spend on tourism promotion, there are two further areas where Mario says the government must take action. The first is visas.
The UK demands that potential visitors from emerging markets such as Korea give a day of their time in a location of its choosing to be interviewed, fingerprinted, photographed and charged £68. Whilst the new strategy will provide for guidance notes in the local language; prospective visitors will still have to complete their application forms in English. How many tourists would the UK send to Korea if they had to complete forms in Korean? Anyone buying a Schengen visa (at a cost of €60) gets 25 European countries to visit. Mario says that it is not surprising that France attracts twice as many Koreans (300,000 /year) as does the UK and, with the recent closing of the UK’s tourism promotion office in Seoul, any hope of capturing market share is pure fantasy.
The second is the priority given to tourism. In China, tourism is seen as one of five pillars of a master plan for economic growth. In the UK, there is a junior minister in the Department for Culture, Media and Sport and a new tourism strategy that is long on rhetoric and light on substance. Mario concludes: “Tourism needs a much higher status in government – at the very least a key portfolio in the Department for Business. What we are hearing is mere lip service; what we need is real action.”