 morning, and welcome to the first meeting of the 2021 Economy and Fair Work Committee. Our first item of business is the decision to take items 3, 4, 5 and 6 in private and for the next meeting to be in private session. Our members are content to go forward on that basis. Our next item of business is an evidence session on Scotland's tourism and hospitality sectors. This session is designed to provide the committee with a snapshot of the as we recover from the pandemic, and in recognition of the important role that they play in Scotland's economy. We have two panels this morning. I welcome the first panel, Mark Rothall, Chief Executive of the Scottish Tourism Alliance, Stephen Wont-Gomerys, Spokesperson, Scottish Hospitality Group, and Liam Thomson, Executive Director at UK Hospitality Scotland. Welcome to the committee. I ask all witnesses and members if they could keep their questions concise and to the point that would be helpful for our timings this morning. Can I start by asking a question of the panellists? We have obviously been living through the pandemic, it has been extremely difficult for hospitality in tourism sectors, and in more recent months, the Omicron variant presented further challenges at the end of 2021 and into the new year. Can I ask about the support that was available? Obviously, Omicron was to some degree unexpected and support had to be an attempt to deliver support quickly. I will allow all members to answer. If you can be brief, please, and the answer would be helpful. I will invite all witnesses, I will invite Liam Thomson to come in first. Good morning, convener. Thank you very much for the question. Yes, the Omicron variant caught everybody by surprise, as you said. The restrictions combined with public health messaging impacted massively on the sector. With that happening, the Scottish Government moved to find funds to make them available for impacted businesses. The funding was never intended to cover losses but was intended to help with cash flow issues. Around about £100 million was made available for hospitality businesses and then a further £5 million for nightclubs that were ordered to close and £10 million was made available for businesses impacted by the table service only regulations. The funding, as far as I am aware, is still making its way out to businesses, which is very disappointing, because that was money that was needed in the immediate aftermath of the announcements from Public Health Scotland and the restrictions being imposed by the Scottish Government. Although the money was helpful when it was announced, we still have businesses waiting to receive their funds. Can we bring in Stephen Montgomery next and ask if the way in which the businesses have been identified? I understand that there is a desire for flexibility, but has that approach been helpful? Has it reached businesses that need the support? Thank you very much for inviting me today for today's session. I think that it can come over with what Macaulay Dane has just said. However, what I would say is that it was not targeted the way that it has been distributed. It was done just on the same old way that we did it back where it was done through the non-domestic race system. It did not matter how affected you were with Omicron, but you still got the funding. It has always been the job of the task force how Macaulay Dane and I are on to make sure that that funding was targeted. However, that has not been the case. I have spent all this week trying to get on to different councils to get that funding out. The same went for the table service fund, which has been out as well. There are still no applications out for that, and that is going to public houses that have been affected, yes. However, there are many public houses that are actually restaurants and restaurants that are actually public houses to fit any and how they are on the NDR register. Mr Crosall, can I ask you to comment on that? On the way in which funding is delivered, the previous two witnesses have both spoken about that they would like to see more targeted funding. Is it a challenge in trying to get the money out quickly? Is there a balance to be struck between getting the money quickly at the door and doing something that is more granular in terms of identifying who actually needs that kind of support? Thank you, convener, and again thank you all for inviting me to the session. That is the biggest challenge, obviously, in a short period of time of how you can get money quickly into businesses. The sector is very diverse and very wide, and obviously the hospitality sector in itself has a lot of different components to it, but looking at the broader tourism industry as a whole, the range of self-catering properties to guest houses, hostels, bore operators, everyone in one way or another was directly impacted by Omricon. Having a balanced and fair and proportionate response is always going to be hard, but a response that would make the most impact or provide the most impact and support was going to be difficult. 100 million plus the extra on top for the tourism sector was never ever going to achieve that goal. We would support much more targeted and concentrated measures but, again, would not want any business to fail. Most significantly, as we all know, the Christmas window was a critical time for all businesses in the sector, particularly the hospitality sector and many in the more immediate supply chain, to make their cash to see them through these next three months. There lies the big challenge of the liquidity of businesses. The Scottish Tourism Alliance conducted a survey over the Christmas period, which was part of a UK-wide survey that my colleagues in England and Wales have done, to assess the impact of cash liquidity in business. Over 53 per cent said that they have less than two months' cash reserves to be able to navigate their way through. Grant support is hugely important to everyone. The blend of respondents to that survey was far and wide. It was not just the hospitality community, it was tour operators, as well as other people. Obviously, the impact of no international business and trade that would come in with festivals cancelled was the last hurrah for any potential inbound activity, too. A targeted response going back to your first point is really important. However, unless the level of support is a significant amount, it is very difficult to make it meaningful for any business in this current climate. I will now hand over to Alexander Burnett to be followed by Maggie Chapman. Thank you convener. I know my register of interests around tourism. If I could just ask a quick question on the support for the longer term recovery and a good meeting with Visit Scotland a few weeks back who explained that during Covid they had been able to pivot their budget to be more focused on capital expenditure projects in readiness for the return of tourism. I just wonder if you could comment on how effective you think that has been and whether that approach has ended or, if not, should it, and if so, to what extent? Maybe Leon first and then Stephen and then Mark. Yes, thank you for the question. The hospitality sector needs as much support as it can get right now. We are not out in the woods with the pandemic and the on-going challenges that the sector faces. Anything that Visit Scotland can do is very welcome, particularly around promoting and marketing Scotland and hospitality as part of its activities for this year. Ultimately, what we need is a strong year of trade ahead of us, and we need to be able to attract visitors. We have done well with the domestic market, but we really need a big focus on the international market and the business market, because that is the kind of spend that is going to make the difference to businesses that are looking at their depleted cash reserves and wondering how they are going to manage to continue. From a hospitality point of view, that is a key ask of Visit Scotland to get that marketing and promotion message right and to the right audiences, so that we can start welcoming people back in good numbers and people coming back with delivering high levels of spend, which is the case with international visitors and business visitors. Beyond that, the big focus for UK hospitality Scotland is pushing the UK Government to retain that at 12.5 per cent. That is a key measure that would make a big difference to hospitality in the coming months. With the Scottish Government's conversation around business rate relief and whether the 50 per cent, which is in place through from April to the end of July, can now perhaps be extended further through the financial year, particularly given the losses that are incurred by businesses over Christmas and a new year. I thank you very much indeed for the question. I think that it concurred exactly again with what my colleague Liam has just said. If we look at today where the parliamentary inquiry in Westminster where the APPBG, which is the all-party parliamentary beer group, has launched an inquiry into the rates system in England, where the effect that the business rates have had on the licensed trade sector in England. That is something that has come back from what Liam has just said, that that is something that maybe needs to be set up in Scotland, where we can have an all-party discussion on how we look at business rates again. In December, we were all looking forward to a bumper Christmas. However, with Omicron hitting us, Boston in the sector, in the region of just over £1 billion of turnover, the fact that we are getting a rates relief now for the following 22-23 years is probably out the window. That rates relief for many, because it is capped at £27,500 per business, is only as far as SESG members are concerned. It probably equates to about 3 per cent saving. We really need to look at that very, very soon so that we can look at how we say that business is money going forward. Because this recovery is not going to happen overnight, customer confidence is really, really low. We need positive messaging coming out from all parts of the Government, whether it be the current Government and the Opposition as well. That really needs to be a key feature in any recovery for hospitality. Mark, do you have anything to add to that? Yes, I do. Thank you again for the question. I think that this has to be a joined-up effort in terms of recovery. The importance of international has been well stated. Pre-Covid, there were 3.9 million international visitors coming and spending a significantly greater amount than the domestic market. We would anticipate as well that there will be an outbound spike this year and we will see many more domestic holiday makers who have supported the industry over the past two years, exiting and going out abroad. There is a recent survey done only in the last couple of days by a well-respected organisation in Scotland that said 59 per cent of Scottish adults are still likely to take a holiday break, but only perhaps one break this year. The cost of household budgets being stretched is important. Investing in that international piece is absolutely key. Visit Scotland has a lot of activity already happening, but we cannot lose sight of the need to support the tour operator community and the supply chain that very much broker a lot of that activity. I will then service and deliver on the ground, which in turn feeds into the hospitality community and, of course, the attractions and the adventure operators. There is a combination of right conditions that need to happen to drive resilient recovery and favourable financing conditions for servicing debt and enabling on-going investment so that the sector can stay competitive. As Stephen was just referring to, the level of relief in the business rates is very small in comparison. For a large operator or any operator that is looking to be diverse and adapt to the net zero agenda, it cannot help them at all, particularly with loss of income over the festive period. Having a supportive fiscal policy and proportionate legislation and a consistent policy response have been well co-ordinated. Allowing businesses to embrace technology, so that the digital boost programme is very good and the industry has been innovative, but it is a variety of funding and the recommendations that Sturge has put forward as part of the phase 2 recovery proposals. Obviously, we would ask and hope that they would be looked on favourably and supported, as well as the process of delivery that needs to be sustained going beyond that, too. Business rates relief, low levels of that and, as with Leon, the tourism of Scottish tourism lines, we sit on the UK Tourism Industry Council and go back to the survey that I referred to earlier. Part of that survey's intention is to help to inform the Treasury to try to swing the favourable response from them. I know that colleagues will be coming up in on much of what you said, so that's my question. Maggie Chapman will be followed by Colin Beattie. Good morning to the panel. Thank you for joining us this morning. I have a couple of questions, but I want to start with a question around numbers. Occupancy rates, footfall, what we've seen over the last, I suppose particularly the last few months, how have things looked in your respective sectors and what does it look like? What are you projecting for this coming year, thinking quite short-term at the moment? If I could ask Mark first and then Leon and Stephen. I'll let my colleague Leon update on the occupancy levels in the hotel sector. There's also a very different position here. The cities in particular have been heavily hit in terms of occupancy and forward book. A lot of that is the need for international visitors, but business tourism, which is the value of business tourism, was £2 billion to the total tourism pot pre-Covid. The cities have a very different challenge, and there are many rural properties—those in the honey spots—and have been well managed and have got a good loyal following and have done okay. There are forward bookings. The self-catering sector is also reporting relatively strong bookings for the first quarter and looking beyond. I guess that there's a watch out there as people may choose to go abroad now. We saw last year where there were a lot of bookings being held for self-catering and bed and breakfast, etc. There was a flip where those domestic bookings were cancelled and people chose to go abroad in the short windows that they had. A lot of people have also now been reframed from taking sizeable deposits, etc. There's a challenge there. We know from the golf tourism sector that has carried over a lot of their bookings into this year. Their challenge now is to find capacity and accommodation for any new bookings that are coming in in 2022, and to let them learn golf tea times. The importance of going back and building that future pipeline of businesses is important, too. However, it remains a challenge, and it's certainly not at the level that we would want it to be. In our survey, we asked what is the percentage of businesses that have seen more than 50 per cent cancellation or decline in their bookings for the first quarter. I think that it was in excess of 50 per cent as well. We are not confident, but, hopefully, with messages changing recently, there will be an upturn. However, I don't think that we can be 100 per cent reliance on a shored-up book going forward. The self-catering sector is probably the one that is likely to perform the strongest in the first quarter. Thank you very much for that, Mark. Stephen, if I could bring you in, and if you could also speak about the rural-urban difference, if there is one that Mark has identified? Thank you very much for the question. It's more Leon's bag on this one, as far as UKH is concerned, as far as the hotel sector is concerned. However, on SCSG, can we comment for where we are? Certainly when we operate throughout rural and city centres, and as Mark has alluded to, their city centres have been really hit hard because of the footfall with the work from home message. That's going to take a long, long time to get back. Ruraly, again, depending on restrictions, because customer confidence is really at a long time low and that came a real impact whenever the Public Health Scotland message came out in December. If we take wet sales as far as pubs, where only draught or alcohol is sold and no food is sold, they took a real massive hit in December and will take a long one before they get back. I've come down to probably 25 per cent occupancy, as far as footfall is concerned, because it was table service. However, I'll go back to the same thing. It's going to be customer confidence to get people back. It's not just city centres, that's for real as well. I have to say that hospitality will have to play a big part in city centres to help retail as well, and retail will have to play a big part to help hospitality. Together, that will bring people back in, and the need to bring people back into the office will help us all. Thank you, Stephen. Leon, are you interested in hearing your thoughts? Yes. To add to the comments and observations from colleagues, members in the hotel sector reporting occupancy rates of 20-30 per cent at the moment. Little confidence that they will be adding to that level this month. At the moment, things are fairly static. Cities have been very badly impacted, so that remains the case. That is why we really need to see a big uptick in international visitors, but business visits as well, because it is business visitors who will add the numbers and the spend to occupancy rates for hotels. In rural areas, as Mark mentioned, it is a bit of a different picture, because forward bookings look good for spring and summer as people are looking for holidays. As we know from the pandemic, rural and coastal areas have performed quite strongly, as people have chosen to not go to cities. For the cities, we really need to see some energy injected into the offer. We need to see the return of events in our cities, giving people more reasons to be there and to highlight the great experiences that people can have in our cities safely. That is absolutely critical. There is a city centre task force advisory group that has been invited to join, which will hopefully help to frame out some of the response to support our city centres as they seek to recover. I am now interested in thinking longer term. We know that international experts are saying that full recovery does not look likely until at least 2024. I suppose that there is a question about how we deal with the next two years. Are there discussions in your respective sectors that full recovery in 2024 will not look like pre-Covid? What innovation changes? What diversification is happening? What are the pressure points that you need us to be focusing on or targeting to ensure that we have a vibrant and sustainable tourism and hospitality sectors going forward, especially if we think about non-pandemic challenges such as the climate emergency? Mark, do you want to start? Thank you very much. I was just going to come back in there and clarify. It was 34 per cent of businesses who responded and said that their booking levels were down by 50 per cent in the first quarter. On the positive, there are some things to take away from here. In the last nine months of this fiscal year, we have seen 480 new startups and new enterprises coming into the sector. Clearly, there is entrepreneurship out there and there are businesses already in the sector who have done a lot of investment into technology and finding different ways of bringing different products to market. The absolutely critical need is for us to be competitive in terms of the offering and respond to what the consumer trends are telling us and what the customer expectation is. We have seen a lot of growth and a lot of new development in hotel stock in the cities. The new version of properties is opening up in both Glasgow and Edinburgh in the coming weeks. We have also seen a good number of acquisitions taking place. Only yesterday, in the rural parts, Argyll holidays have just transacted their business for over £100 million, which is a sizable investment from a business and there are many other investors coming in. That, in one respect, has to be a good thing because we hope that those investors will bring the much-needed finance that will help to transform some of those properties. However, we do have to ask the question as to why those operators, merely of whom it has been long established, have decided to get out, I think, possibly the strains of the last two years that have taken their toll on them. The Scottish Tourism Emergency Response Group and the Task Force recommendations go back to responding to the needs of what needs to be done. Labor supply is absolutely probably one of the most critical situations that we face. We can drive demand and grow all the demand that we want, but we still do not have a workforce of sufficient size and scale to be able to deliver the volume and the capacity levels that we would want. Solutions to that are urgent and there are a number of initiatives that are under way. We continue to invest in the workforce that we have already. The Observatory project, which is one of the first-phase projects that has been announced again, is one that needs to be sustained because that will provide a repository of insights and data that can inform both marketing initiatives and investment plans and, importantly, businesses to make less risky decisions on the investment that they have given that their capital is probably going to be very challenged. I refer back to all of the first and second-phase proposals that have been tabled by the emergency response group, each one being of high importance. It is how do you prioritise them as the challenge of people without question remains a critical need. To Stephen's point about messaging and again, I think that everybody, the more negative messaging and the more restrictive messaging that comes out around the uncertainty does not do our recruitment activity any favours whatsoever. We need to be positive about the opportunities in the sector that previously employed 229,000 people before Covid-19 and 11 in the economy. Thank you very much. Again, that is a very good question. Hospitality is still facing significant challenges and suffering from long-term effects of the pandemic. We have supplier increases, utility increases and all that going forward. Improvement crisis marks are just put there. Even in the business in Scotland 2021 publication that Scottish Government put out, we have seen about 1,000 businesses lost between 2020 and 2021 in the accommodation and food sector, so we need to be looking at that. BBC reported last year that there were 9.7 fewer restaurants in 2021. We really need to be looking at city centres as well. As we come out of the lockdowns, we are allowed to have outside trading, so that is a key thing for hospitality and city centres. That will also help to retail, because we have seen where it gives customers a customer choice, where we were allowed to have alcohol outside, but we were not allowed to have alcohol inside, so that produced outside trading. In Edinburgh, Glasgow and all the major cities, they were allowed pavement service, et cetera. That is a fundamental issue going forward, where we need to be looking at the licensing to allow that to continue, especially for our inbound traffic and our local traffic, where tourism can continue that, because it gives up the people and daresay the European feel, if you like, where we can sit outside or have that choice, which will give people a customer confidence. Back to what Mark was saying on the recruitment, our own group, the Scottish hospitality group, we have now, and I do not know where, columns were of this, however, but I would invite Collin to attend one of the meetings where we have been involved in devising a screening programme with Dumfries and Galloway Council, which is going to be hopefully released at the end of February to the pilot where it is a 12-week course, when that will be for anybody from 16 to 60 who has either wanted to get into hospitality or has been, as we would call them, a silver service. We have been in hospitality before, got married, had their kids and their kids in a university and wanted to come back into some kind of part-time work, but we are able to give that part-time work. That will be a 12-week course. It will all be about British training, it will be about cocktail training, it will be about everything, front-of-house, housekeeping and all that kind of thing. We are trying to play a major part in working with Government and taking our own initiatives to try and solve that recruitment basis, because we have not got the European workers any more, so we now have to start looking at where we build for the future, because it is not going to be an overnight stop-calf. However, if we can get that 12-week course started and it is recurring, it can then, if it goes well, it can be looked at to be devised in other areas of Scotland and in different councils. Thank you very much for that, Stephen. Anne-Leone? Yes, thank you for the question. Businesses appreciate that things have changed and that recovery will take a while. One of the key things that we really need, first of all, from the Scottish Government, is a clear roadmap through the situation that we are currently in, and a strategic framework that largely discounts restrictions and closure and so on, because those are the things that are holding hospitality back from really getting on the road to recovery. That is really the first thing to say. The other thing that I wanted to highlight was that hospitality is a very resilient and adaptable sector and it has shown that throughout pandemics, even despite the challenges that are all there, which Mark and Stephen have referenced just now, which I highlighted in the paper that I put through to the committee, there is still positivity out there in the sector in terms of what it can deliver, in terms of what the future can look like. We need our businesses to be in a position where they are free to trade and to operate, free from restrictions and challenges put in place. That is the key thing for our businesses. We know that we have changed behaviours in terms of customers as well. A couple of things to say around that. Consumer confidence has been mentioned already, and that is something that we need to rebuild and restore. We look forward to working with the Scottish Government to do that and encourage more people to back out into hospitality and to take breaks in Scotland and other parts of Scotland as well. We also know that business travel is unlikely to return to the levels that it was at before businesses were obviously looking to save money. One way of doing that is for people not to travel for business quite so much. That links in with the net zero agenda that you mentioned, which is a really important issue for hospitality as well. The sector is looking at how it can change, how it can adapt. Net zero is absolutely one of the top priorities for hospitality there. The sector is working hard to lower its emissions and working with organisations like Carbon Zero Forum. That is providing roadmaps for hospitality businesses so that they can reduce their emissions. That ties in with Scotland being a sustainable destination as well, and hospitality is a key part in achieving that. As we have touched on labour and market issues, I will bring Gordon MacDonald in next. First, I will clarify with Leon. You talked about the city centre task force advisory group. Leon, is that the one that is centered around Glasgow in particular? No, that is something that has been driven by the Scottish Government. I can send you more details of that, convener, if that would be helpful to send that across after the meeting. That is helpful. Thank you, Gordon MacDonald. Just to move on on the labour issues. Clearly, we are all hoping that hotels return to their previous pre-Covid and pre-Brexit occupancy levels and that restaurants start taking up the opportunities when people start travelling again, whether it is stay casiners, business travellers or international tourists. In order to do that, we need the staff. Leon, you said in your briefing that you gave us that there were 340,000 vacancies in the UK and around 40,000 in Scotland with 40% of businesses were not confident in their ability to recruit staff during 2022. What do we need to do to take up those challenges and take advantage of the opportunities? How do we close that labour shortage gap? That is a great question. Thank you for that. The labour shortages are probably the most pressing issue for a lot of businesses right now who are looking at higher levels of trade in the coming months and wondering how they are going to manage to deliver everything that they need to. The key thing is that there is not one way of managing that and finding a solution to it. It is going to take a collaborative effort between industry and our Scottish Government and UK Government to achieve an uptick in applications for the vacancies that exist at the moment. We are also facing the short-term challenges, but we are also facing long-term challenges as well. In the short term, what we need to do is encourage more people to consider jobs and careers in the sector. Perhaps people who are not working at the moment are looking at school leavers and encouraging them into the sector. Apart from working pensions, we have worked closely with them around kick-start and other initiatives to bring people into the workplace. We feel that jobs and careers in hospitality are great opportunities for young people and people of all ages. We are working closely with Government departments on their initiatives to maximise the benefit that can come to hospitality through being involved in those particular initiatives and schemes. That kind of activity, as well as the work that we had last year with the Scottish Government, where there was a £100,000 social media campaign run to encourage primarily younger people to consider jobs and careers in hospitality, is that kind of activity that can help in the short term. In the longer term, we need to get the talent pipeline back on track. We have had two years of disruption. There is still a lot of interest and a lot of people coming through hospitality courses in our colleges, but that has been disrupted. We will hopefully begin to see that starting to be repaired and we will start seeing those people coming through into jobs in hospitality, and that will help as well. We also need to look at our immigration system as well. We have not got one post-Brexit. We do not have an immigration system that is fit for purpose. We really need the UK Government to look urgently at additional routes for people to come and work in the UK, come and work in Scotland and lower perhaps some of the visa thresholds that would certainly help. We need some creative thinking around areas such as the youth mobility scheme. Can that be extended out to more countries? Can that be extended out to to the EU 27 so that we can have young people coming to Scotland working here perhaps in peak season, but perhaps at other points in the year as well? That would be beneficial, I believe, for cultural exchange and exchange of skills as well, because there are lots of great hospitality schools in Europe. It would not be great if we could attract young people who have been through those schools and that training into our hospitality businesses here. There is no quick fix. There is no one way of doing this. It is about using all the initiatives that are there. It is important to talk up the sector as a destination for our young people. In the long term, we have to accept that Scotland will rely on labour coming from overseas to work in our businesses. I want to ask you, on that point that Leon has just raised about, we need a new immigration system to attract whether it is the visas that the hospitality industry called upon last year and was rejected by the UK Government. We are at a record low of unemployment in Scotland at 3.6 per cent, below the level that is considered to be full employment. We are at a briefing of Edinburgh Chamber of Commerce on Friday that said that hospitality trade, particularly Edinburgh, is 90 per cent for EU nationals. Many of them went home because of the pandemic and because of the ending of free movement of travel, they are having difficulty in returning. It is back to how to be closed the gap. Leon has raised some very good points, which I absolutely think that we all support. The Scottish Tourism Alliance was having those conversations with the Scottish Government and the UK Government pre-Covid about the challenge that we face as an industry, which was thriving to fill the labour gaps, not just in hospitality. I would stress the point that the challenge of shortage of labour is not just in one part of our industry, it is right across the sectors, whether it is in visitor attractions or outdoor adventure operators. There are a number of factors. We need to have a better visa system. Our industry is an international industry. Culture and language and everything is hugely important. People go around the world to embrace the different cultures but also want to be able to have people who can guide them with the right language and deliver their own vibrancy in their communities. Going back to the city centre, we need city centre vibrancy. I am just picking up on what we are doing on the short term to touch on the Tourism, Hospitality and Talent Development programme that has been invested in by the Scottish Government over the past year since Covid, first phase and second phase action. The business response to that has been co-ordinated by the industry, with the hospitality industry trust and the Scottish Tourism Alliance. We have had over 2,000 colleagues come through the first programme of online activity, focusing primarily on supervisory management and leadership programmes. As Leon pointed out about bridging that gap of where is that supervisory talent and how can we upskill quickly to get people to be more effective and obviously be able to earn more money as well on top and if productivity improves. The success of that programme has been funded again through the innovation fund and we are very delighted now that we have 1450 applicants coming on to the programme again from right across the sector as a whole. It is not just hospitality, but commitment by industry to invest in their workforce currently, recognising the challenge. Some of the challenges that we saw where there was a draw and appeal to the industry to come and work in the sector over the past few months during Covid, the retention of those individuals was quite—the attrition of those individuals was very high. That we put down to the front-line managers who would normally induct and give that new entry a very passive way and it is a good experience of coming into the place of work. We actually had their heads down the toilets, physically cleaning the toilets and unable to look after the people that they would want to do so. It is a challenge, but we have to see some changes in the immigration system to get more freedom of movement in place and attract more talent in. I think that I have always said and we work—Steven is also very closely working with Springboard on the advisory board, organisations like that, bringing young people as well as those who have perhaps had a bad start in life into a sector that can create employment and actually accelerate careers very quickly through the industry as a whole. It is not just being a waiter or a barman. There are digital marketeers, accountants and engineers on mountain railways. We say that tourism is everyone's business. That message needs to be reinforced by the teaching community, the secondary school community and really profiled by all of us in society. I think that the parent forum also has a big part to play in getting a true understanding of what a career in tourism can deliver for anybody of any age in this current climate. We have highlighted that there is a need to attract new talent into the hospitality industry. Given that we are at full employment and given the situation with a lot of EU nationals leaving the country pre-pandemic and the lack of a hospitality visa, Edinburgh Chamber of Commerce highlighted on Friday that there should be a devolved immigration policy. Is that something that your group will support? Absolutely. Anything that will help to get the talent from anywhere in the world into Scotland to support us in recruitment, we would absolutely support. I mean the Scottish Affairs Committee in the Westminster Committee where I brought that up. We have had various meetings to try and encourage UK Government to open up the visa system to do that, but going back to where we are with the group and now, I have always been one to go back to basics. We need to bust the myth of hospitality being long hours, badly paid, badly run and all that. Whenever you see the adverts for the army, you do not hear them saying the advertising that they are going to war, they are going to do that at the other. You hear them talk about a great career, a great this, whatever and come out of it. Hoptally Rising is a great initiative that has been done now where we are aiming to earn or raise £5 million to try and do a TV advert and advertise me throughout the whole of the country to try and encourage people in. It is things like going back into schools and getting into secondary schools really early. I do that through springboard, hopefully getting back into classrooms very soon to try and do that. We are sometimes getting them too late. It is about trying to look at foundation apprenticeships, modern apprenticeships and doing some work in the workplace that will encourage people not just to come into hospitality but those who have been in hospitality for years to come back because of the myth-busting thing that the new hospitality is a bad place to work. We need to look at the wellbeing of our staff, we need to open up the books again and look at everything that can make our staff feel comfortable, make them feel valued and make them see that they are well-paid as well. One thing that has come home to me in the course of evidence-taking is the sheer complexity of the hospitality and tourism business. It is incredibly diverse and especially if you start taking into account local and international supply chains and so forth, you are talking about a fairly complicated beast to deal with. To me, that makes it quite difficult to do targeted support for one particular sector when the knock-on effect all the way through the businesses is extremely complex. Overall, we have talked about various parts of the hospitality and tourism business. How would you describe the overall financial status of the business, particularly in terms of cash flows and importantly debt levels that some of them may have taken on in the course of the Covid emergency and maybe hangovers from before as well? Maybe I could ask Leanne Thomson to kick off with that. Businesses are really at the end of whatever cash reserves that they had leading up to Christmas. Period of six to eight weeks would have given businesses a huge boost in revenue to sustain them through the early months of this year, because Christmas and Hogmany did not happen not in the way that businesses expected. That puts additional pressure on to those businesses that were already struggling with cash reserves. We are looking at somewhere around two thirds of businesses that, according to the ONS, had less than three months of reserves. That was from a survey that they published in December 2021. I have said that they depleted their cash reserves. You are talking about 2,000 businesses. As we have already agreed, the hospitality and tourism business as a whole is incredibly complex. Where are those 2,000 businesses in terms of the overall picture? Who are they? Are they hotels? The 2,000 businesses, is it that you are referring to the STA survey? Yes. I was giving you some statistics from the ONS business insights and conditions survey that was published in December 2021. That is a UK-wide snapshot of what is happening. In terms of the STA survey that was run, that was a very broad weep of hospitality and tourism businesses. A good number of my members' hotels, bars and restaurants that they participated in that survey. Businesses from the accommodation self-catering side were included in the survey. Visitor attractions, activity providers and so on. Mark will have a clearer picture of all the sectors that made up that responded to that survey. It is a very broad sweep of businesses. It presents, I would say, a very accurate picture of where businesses are right now in terms of their cash reserves. You also asked about debt levels. Debt levels are at an all-time high, an all-time record, and those debts are now having to be paid back as well, which is putting additional pressure on businesses. Many businesses are starting to trade again after the Christmas and new year restrictions. They are in very challenging circumstances and that is for larger entities as well as for smaller businesses. The financial pressures are right across the board. Just to clarify my head, the 2,000 businesses referred to in the survey were across the UK. If we are talking about the STA survey, then those are Scottish businesses. The 2,000 businesses that you referred to are Scottish businesses alone. Did I refer to 2,000 businesses? Yes, you did. Right. I was quoting figures from the ONS business insights and conditions survey. The 2,000 businesses were from the ONS survey. I suspect that there would have been more than 2,000 businesses covered as part of that survey. Thank you, Deputy Convener. I want to provide a bit of clarity around the Scottish position because we can give you the breakdown by the type of business that is in financial difficulty and reported as being in financial difficulty. I would like to come back to your opening remark. The complexity of the sector is one and the consequential impacts of other things in the sector or outwith the sector that have a direct bearing on the businesses ability to be able to trade. It goes back to the Labour one as well. The significance of a lack of affordable housing and the right accommodation and the transport infrastructure as well as being critical to do that. Coming to the point around financial difficulty, we surveyed 1,335 businesses of which 26 per cent of that total were hotels and guest houses and bed and breakfasts. 10 per cent, just 130-odd pubs, bars, restaurants and cafes responded. A good proportion of 36 per cent self-catering caravan parks and visitor attractions were just under 10 per cent as well, and tour operators in a similar park. From service to accommodation, again, that is hotels and guest houses, 78 per cent said that they were in financial difficulty. On service to accommodation, the self-catering sector that has had relatively strong trade, not all those properties that I would point out have traded at the same level. The larger self-catering properties were very much impeded by restrictions that were unable to trade. 54 per cent of them were in financial difficulty. Pubs, bars and restaurants, which are the most volatile and, again, have had to be so dependent on the fall into the cities and where many of them exist, 84 per cent of the 100 plus pubs, bars and restaurants in financial difficulty, 62 per cent of the attractions that responded were saying the same. Tour operators, again, and those businesses, coach operators, heavily dependent on international movement, 76 per cent. They are all concerned. Many of them and the majority have probably borrowed, and they are now faced with that level of potentially returning to 20 per cent. A very business rate relief, whilst welcomed, is relatively low by comparison in terms of financial benefit, plus on top of that, no cash through the tills or limited trade through the tills, low cash reserves. I believe that the banks have told us that many of them have borrowed and possibly had bounce-back loans that are sitting on deposit at the moment, just as a last gasp, because they are still concerned about how they will service that debt going forward and if businesses do not return. It is right across the spectrum, and that is why I go back to the points where I made in my opening comments around the importance of having favourable financing conditions for servicing debt and enabling that investment, so Scotland stays competitive against our competing destinations and a supportive fiscal policy with proportionate legislation that does not put any additional cost on to business or on to the sector to allow it to recover over the coming 12 to 18 months and have a very strong spring-summer and autumn trading period. Just a couple of points on what you have been saying there. It is probably worth noting that for non-domestic rates, when you touched on rates relief there and you seem to indicate that it was not tremendously beneficial in some ways. In total, since 1 April 2020, businesses, not just in tourism and hospitality, have actually saved £1.6 billion in rates, which is not inconsiderable. It is a fairly large sum. The other thing is that I would like to explore more about debt levels, and you mentioned that the bounce-back loans do not seem to be, well, if they have been drawn down, they have not spent it because they are afraid of repayments. This is something that we have heard in previous evidence before, and I just wondered the extent to which this is an issue. I would say first to your first point around the rates relief. Nobody is going to say would they disagree that any rates relief that the sector has received has been unwelcombed, and whatever we get in the future is exceptionally welcome. We had no trade at all in 2020. We had very limited trading opportunity in 2021. The burn rate, as an example, of a medium-to-large hotel per day, is around £25,000 in some quarters. It is much higher, but it is all proportionate to the size of business and the size of rates relief that they have. It is very welcomed, but to maintain the basic overhead of a business, just to sit there with the lights on or lights off and no customers, is exceptionally high. Again, they are part of Scotland's assets, and that is what draws people to come and spend their money here. The bounce-back loans, I can't quantify how many businesses have done that. There is a huge number of businesses who have taken those loans, not just bounce-back loans, but Siebel's loans, too, and invested in their asset already. I have also had to spend that money using it to service debts and help pay some of their overhead. Furlough was not a free ticket for anyone. Obviously, trying to retain staff came at a cost to business, and that cost gradually grew over the course of the Covid place. Those who have it are on deposit, but it will not be given the size of overhead that a business has to service to be competitive and reopen in March. Many of them will reopen in March. That comes at a cost. You cannot just switch on the lights without having to spend a fair bit of money on basic maintenance and ensuring that they are safe and well equipped to receive the guests in the summer season. Whatever money is there, it will go very quickly, I am sure, but I am not by any means saying that the majority have actually tucked away money into a reserve account for a rainy day when that might come quite the opposite. I would like to ask a slightly different question, a different angle on that. How well have businesses been supported by Visit Scotland and the wider enterprise and skills agencies? Are there any lessons to be learned from that experience? I think that it is a bit of a difficult question to ask, but I thank you for it. I think that Visit Scotland has done everything that it can and through the STA, Mark and his team, Visit Scotland have done everything possible, but with the variant and everything that we have gone through in the past 20 months being so changeable and we face different things every week, it is hard to, during the past 20 months, certainly path away through this because we were constantly put down with restrictions or we were coming out of restrictions or going back into restrictions. It is a hard one to answer there, convener, but Mark will be better placed to that because I am not involved with the STA. However, when you are talking about debt levels, try to go back on that. I can give you some specifics on that. The average small to medium-sized pub is between £80,000 to £85,000 debt, nightclubs £160,000 to £175,000 debt, bounce back loans, a lot of limited companies took bounce back loans and used them for the service debt or actually live on as well because directors got absolutely nothing from support where self-employed people got their tax back etc. If you look at the Scottish hospitality group alone, when Mark was referring to furloughing up being a free ticket, that is absolutely right. Across our membership £196,000 per week, we are paying out on tax, national insurance and pension contributions to keep the furlough scheme alive. I am at my own business here. Between 2020-19 and 2021, accounts were 42 per cent down, so that is £462,000 on a £1.1 million turnover. That is a big drop in sales, and that is going to be a long way to recovery. I will have to make some progress, convener. I apologise. Michelle Thomson, to be followed by Jamie Halcro Johnston. Good morning, everybody. I apologise that I am remote, but I hope that you can hear me okay. I just wanted to ask a couple of general questions. The committee continues to be interested in how women specifically have been affected by the pandemic in your sector, so I have a couple of general questions that I will just take and answer from you all. One, do you routinely disaggregate data that you are collecting about the specific impact on women? Two, what are your observations against how they have been affected? And what thoughts do you have about how that could be rectified? Perhaps Mark, you might like to go first with those general questions. Thank you very much for the question. Our industry is probably one of the most diverse and inclusive industries out there. I am referring back to the tourism and hospitality programme that I referenced around the online learning police. The greatest majority of participants on that programme are women. It is the highest majority, and we have some fantastic female leaders in our industry. We have a great body called Women in Tourism that is absolutely integrated into our networks and right across the country. My own team are all women, and I could not do without them. Clearly, as we have alluded to earlier around the need to look inwards at our businesses of how we can be more flexible with working hours and attract more talent in all diversities and age groups, balancing home lifestyles, which again have become a new thing for a lot of us. How kids have had to learn at home, and there is a lot more opportunity to work from home, that very much opens up more career opportunities across all levels of the businesses to men and women. Right now, I stand very proud and can say in many of us and the men on the call, that my colleagues will say the same. The women in our industry are very much part of our industry, and there are some great leaders. Kate Nichols, who is the chief executive of UK hospitality, Emma McClarkin, who heads up the UK Beer and Pub Association. There are many female leaders around the UK Tourism Industry Council. However, it is important that we continue to make sure that those adjustments in our ways of working can open up the door and be more flexible. The mental health piece was touched on earlier, and that is not just for the women in the industry, but for the wider workforce. The industry has taken ownership of that, and we have some great mental health wellbeing programmes that have been supported and helped by Scottish Government funding to deliver that support to everybody. I understand the question, but I can stand tall and believe that women in our industry are very much part and parcel of and a big part and an important part of the sector. Before we move on, do you have hard data on women-led businesses? Do you routinely disaggregate that data in any surveys, for example? I am heartened by the warm, fuzzy feeling that I am getting from you, but data is everything. Do you have any hard data? I personally do not have it, but I would be reasonably confident to think that women in tourism, which is an established group, have that data, Skills Development Scotland, and collect that survey data on a regular basis around MIX. It is something that we review, not just by sex but by age group, and where the geography sits. It comes back to some of the points that I referenced earlier about transport infrastructure, housing and all the key important ingredients of having the right backup in destinations, particularly in rural communities, to attract couples and families to settle in those areas to ultimately work in the industry. I can speak to my colleague Susan Russell, who is the chair of Women in Tourism, and to bring that data forward for you, as well as Lauren Sturden in Skills Development Scotland. Thank you. Stephen and Leon, in your particular order, answered the same question. Thank you so much for the question. I absolutely backmark up on everything that you just said there. If you take up my own business here, we have 42 members of staff and 34 of those are female. I couldn't do without them. I really couldn't. They have certainly supported me throughout this pandemic, and I thank them for that. As Mark said, we've got some really great ambassadors throughout tourism in Scotland and the UK as a whole, as Mark alluded to in the clerk. Kate Nicholls, who has done fantastically. I would stand by any agenda that was put forward to promote the females in hospitality, which is put on the female environment as well. I think that every hospitality business will work on open door policy. You know where they have female mentors or whatever the case may be. As I said before, I totally agree with what Mark just said. Is it the case, Stephen, that given the high proportion of women already in tourism and hospitality, you are already well versed with some of the flexible working that we've now seen come forward for other sectors by their very nature often when women are juggling multiple elements in their lives? Is that true to say that? Yes, I think that it would be fairly true. I think that hospitality, as Mark said, is very flexible, especially when you have the older signs where males would be out working and females would be at home looking after kids or whatever the case may be. That has all changed. As we have seen in the past 20 months, we have had work from home, schooling from home while that kind of thing, and businesses have had to adjust to that. I think that that has been a really positive move, which has opened up everything for us to make that we have got to do that now, because we are not through this yet. We won't be until 2024-25 at the earliest, so we have got to embrace flexible working. We have got to embrace the mental health, the wellbeing, all that kind of thing of our employees. If that is by promoting our female staff or whatever gender staff are, that is the way that we will go. I would stand by any agenda to promote that. Just to echo what colleagues have already said, hospitality is one of the most gender-balanced sectors that we have in the country. My chief executive has been name-checked, so I want to highlight the great work that Kate has done not just for UK hospitality, but for the sector as a whole. I think that we cannot be complacent about the impact that that has had on our women workers. We know that a lot of people have exited hospitality, and we need to understand the gender split within that as well. I cannot give you any data on that. It may be that I can come back to the committee with something that might be helpful and we are in the process of running a benchmarking survey at the moment. I will take a look at how that is rolling out and the questions that are being asked in there around gender as well. That would give a UK-wide picture on what is happening. It is important that we recognise the challenges that women have experienced over the course of the pandemic, such as juggling home life challenges around work or formal cost pressures and so on. As employers, businesses are goods at looking at flexibility around shift patterns, that is something that businesses will have to become better at in order to attract and retain talent, so that is going to be a key feature of what happens. We should probably also be looking at women returner programmes so that we can start encouraging the women to come back into hospitality to those women who have left the sector. That all chines in with fair work. Flexibility is going to be absolutely key for all our employees as we move towards recovery. Thank you very much for that. For any of the three of you who have some data, of course we have stats out that say that women-led businesses have decreased from 21 per cent in 2017 down to 14 per cent just now. It may well be that the sector is slightly exceptional and so it would be useful to know that and start to understand some of the themes. Thank you very much, convener. We are a bit pushed for time and I have three members who still wish to come in with questions. I could ask members and witnesses to be concise. That would be helpful. Jamie Halcro Johnston to be followed by Fiona Heslop. My question is one around support and one around rural economy side of it. The first one, if I can ask this to Mark and to Liam, is about competitive funding and support. In the Sturg meeting notes from 21 October, it highlighted that Ireland will receive £288.5 million in support or promotion in 2022. That is an increase of 67.6 million euros. The total fund works at around £240 million if you compare it. In the same year, Visit Scotland will receive £49 million and, although there are other areas that support the tourism sector, some of those areas, such as Hyze Budget and local government budgets, are being squeezed as well. Mark, can you give an idea of where we sit with our support of our tourism sector compared to our kind of competitor nations? A good question, Jamie. Thank you for that. Obviously, we would always like more money to do. The Visit Scotland budget is £49 million, as you say. Thankfully, that has been protected. It has not gone backwards. Obviously, there are funds that have been distributed as well to destination groups through that Sturg recovery plan, which has enabled the destinations to activate marketing campaigns over and above the national marketing campaign. The islands that you referred to, we saw some amazing exposure of our islands on the media programmes, documentaries and things, which were great. I suppose that there was a secondary benefit that came through marketing activity. However, to be able to respond and deliver against our competitor set, you look at Ireland at the moment. The PGA golf show in Orlando that was on last week, the delegation that the Irish Government funded and backed and sent out to Orlando to be there was far greater than Scotland's presence. I think that the sector is that we need to have a bigger presence at these international shows as a big team Scotland place. That comes at a cost, but to be able to be at the races and the head of the game and ride up there with the leaders, because we are a destination that has huge appeal and demand, but we have to have presence. Therefore, I would encourage that there would be further commitment to funding to enable additional, up-weighted and marketing activity at a national level and through the destination communities as well. Likewise in the sector groups, and another lady who is championing the outdoor adventure sector, Victoria Brooks of Wild Scotland, again promoting that proposition and it would be wrong for me not to nod to other leaders in our industry, Fiona Campbell, Susan Morrison and Rebecca Brooks as well, but all who are very much there to lead and promote Scotland. More investment, yes. On par with our competitors, I think that we are probably slipping slightly behind and we need to get back up and do more as much as we can to be ahead of the curve and be the world leader in 21st century tourism, which is the underpinning strap line of our national strategy Outlook 2030. We are at a point where destinations are really ramping up their marketing and promotion. As people begin to travel again, we are back into a very competitive environment, which was the case as we went into the pandemic as well. Scotland does very well through its national tourism organisation, very imaginative campaigns, which resonate very well with visitors, whether domestic or international. We are blessed with great assets, which are a wonderful draw for visitors, but we cannot be complacent. I know that Visit Scotland will be well aware of this, that the competing against new and emerging destinations, as well as established destinations, people will have more options for travel this year. It will be really important to make sure that we have hard-hitting and compelling international marketing campaigns, as well as campaigns that resonate strongly with domestic markets. This year, we have our theme of Scotland's stories. There are some great ways in which that can be exploited, and I am sure that that is already happening. We have unboxed as well, which can deliver some great events or will deliver some great events taking place right across Scotland. Issues around comparison of budget are always there. We would always wish that there was more money to market and promote Scotland, and we are facing increased competition. On those headline figures, compared with Ireland, it is looking at five times the amount that is being spent in the tourism sector. I can imagine that, with all our assets and the like, it puts us at some disadvantage. On the rural side, we have talked about the impact, particularly in labour markets and the like. One of the issues that has been raised is that, if we do rely slightly more on the next few years on domestic, UK and Scottish markets, they are more price-sensitive in the international travellers. Given that some parts of Scotland are harder to get to, certainly in the Highlands and Islands areas that I reach, how could that impact on being able to encourage domestic tourists to visit all the parts of Scotland that we know and love? On the more focused rural side, one of the big issues in the tourism sector at the moment has been the introduction of short-term lets licensing. That impacts a lot on guest houses and B&Bs, which perhaps were not intended to be included. How does that impact as well? Maybe get your thoughts on that too. If I can start with Leon, as you are on screen at the moment. You are absolutely right. Cost is going to be a major issue. Businesses are looking at how they can manage their costs and trying to keep costs down for their customers, who are obviously also facing inflation and rising costs on utility and also national insurance costs coming along as well. People will be looking for value for money, holidays, breaks and destinations. Scotland can offer that, but we need to be able to talk up the advantages and the great things that people can do while they come here to Scotland. Transport, you mentioned that there are issues for people travelling—ferry costs, perhaps, are off-putting for people who want to get to island destinations. That is an area where there probably needs to be some work looked at in terms of how that can be made more competitive for visitors who are trying to get to more rural destinations. Those are challenges, but they are probably challenges that we are going to face right across the country as costs increase and how we are able to promote Scotland as a competitive destination and, at the same time, offer a high level of service and experience. You asked about short-term lets. You know that UK Hospitality Scotland is in a slightly different position from our colleagues in the short-term let market. For my members, there was a real desire to arrive at a situation where there was a level playing field between accommodation providers and the growth of short-term lets in rural and urban settings. It puts hotels at a competitive disadvantage, so the licensing scheme, we believe, will address some of that. There are also issues around provision of affordable accommodation. You will be very well aware of those challenges in rural settings, but it also applies to our cities. The impact that that has on my members who are already struggling to recruit staff because people just cannot find accommodation or are not living in nearby areas is a major challenge. We had a different view on the importance of short-term let legislation, and we believe that we have arrived at a situation that can benefit all accommodation providers. The working group for short-term lets is meeting later today to look at guidance for businesses to streamline the process for them as much as possible. I think that the point that was made about transport, Leon touched on ferry pricing, and I think that what is important is that we have ferries that actually are able to get from A to B on a frequent and consistent basis. It is a well-documented challenge that CalMac has faced with a fleet that is in disrepair most of the time. Obviously, the uncertainty of whether or not the boat will run is one that has caused concern for many of the island community. However, we need to be able to optimise the trips that can carry the demand into the island. Having that transport infrastructure not just on the sea but also good to see that Scotland's railway is also looking at tourism as a main driver of opportunity. Infrastructure is critical. The short-term lets piece had to be neutral on that because of our membership having differing views. However, where we can stand absolutely together on that, and it goes back to the point that I made earlier, is that we have to have a means of being able to help and support a very clear and concise and equitable process of collection of that licence and not have a cumbersome and costly set-up through the local authorities, who will no doubt find it challenging to collect the licence. In the industry, I know that organisations such as the ASSC and the Bed and Breakfast Association are very up for supporting local authorities in keeping those costs to a minimum but making sure that we have the licensing scheme in place that has been approved and will go through. I think that there is a willing way to work in partnership, but what is concerning again is that we could have 32 variations on a theme and additional costs on top because of an under-resourcing in some local authority areas that could administer that programme. I think that Highland Council will be one of the first big movers. There are a lot of properties to consider there, but I would urge everybody to work with the industry bodies who can support a smooth process in this and keep costs to a minimum. I might point out that Ireland has received £920 million from the EU in Brexit compensation that gives flexibility, but I want to talk about the domestic budget. Mark Rothlaw has mentioned that the Visit Scotland budget has been protected, but I want to put specifically—I might be just for brevity of time—to ask out the Scottish tourism emergency response group's work. We were disappointed to see that the phase 2 funding from that group is not in the face of the budget, but the cabinet secretary said that the door is not closed on phase 2 funding and she is working with Visit Scotland and she referred to amounts of £25 million in resource and £24 million of capital. How hopeful are you that you might get the in-year funding for that programme? Are those levels of funding that you recognise? What are the key elements of priority? When would the best timing of spend be, particularly for that international marketing, bearing in mind what we have heard about, when we are likely to get pick up in recovery? If we have time, I might ask Leon after that about the timing specifically very briefly. Mark, if you can maybe give me the views of the Scottish tourism lights, I know that you have been very involved in the recovery group. Thank you very much for the question. I am well aware of Kate Forbes' response to the committee at the last time. We continue to have that dialogue with Sturgeon. The suite of recommendations that were put forward in its entirety are very costly. It is difficult to put a price tag on it, but the net zero agenda is one that, as a country, we want to move towards and that, again, is work that needs to continue. I referred to the importance of maintaining the initiatives, like the observatory programme that they need to carry on. That needs funding. It will be wrong for it just suddenly to come to a blunt stop at the end of this year. International is absolutely critical. The window is really marched to be able to drive the pipeline. If that money does not come forward quickly, what we have in the tour operator sector is a group of tour operators who were protected with grant support, targeted support to see them through, but, again, going back, their employees were on furlough. We have now got a group of businesses who are the glue that will stick a lot of this together in terms of acquisition. Build a pipeline for 23, they have no furlough to fall back on, their human capital needs to be protected and they need to get out there and be able to market. That window going back to the competitive market, we have to be able to be there quickly. I know that we have had some very good dialogue with the tourism minister, Ivan McKee, in the tour operator group. We continue that, but I think that Ms Forbes is well aware of the needs and going back as well the other priorities around workforce. If we can tackle those two in the first instance and put the emphasis on that with funding, then we have a chance. However, if we miss the March window, again, we could be on the back foot for 2023 and beyond, and that would be a great change. Thank you. I will just briefly talk about that window and, if additional funding can be found for international marketing, what is the timeframe that would be desirable? I absolutely agree with Mark. Timers of the essence on this and March is the window. We need to have promotion, running, spend and taking place in order to attract international visitors. We need to start attracting international visitors from that point, because they are making their holiday plans right now and we need to catch them. Thank you very much indeed, convener, and good morning to the panel. Politicians are very good at not answering the question. You guys have managed to do something different by answering my question before I have asked it, but I will, and that was really supposed to ask what additional support you think the Scottish Government should be doing next in terms of supporting the sectors. I will give you a chance to very briefly highlight any issues you have not already covered without duplicating what has been said. I do have a second question for each of you starting with Mark. A point that you have made a number of times is that some areas have been especially hit hardest during the pandemic. City centres was the one that you stressed, but some of the rural areas in nontraditional tourism destinations have had a boost due to staycations in some fragile economies. Your emphasis seems to be on getting people back into places they used to go to, but surely there is an argument that if we are serious about building an inclusive economy, what we should be looking at is keeping those people who have gone to nontraditional tourism areas who have a very good offer but have not had visit numbers like that in the past for purely historic reasons, not because of that offer. Surely that is an untapped opportunity to grow the sector rather than simply going back to where we used to be. Thank you very much. Scotland Outlook 2030, which was launched on 4 March 2020, chaired the steering group. The First Minister stood with us on stage and launched it. The build of that strategy, which involves three and a half thousand industry colleagues and the Government and the agencies, is all about to spread tourism across Scotland and share the wealth. However, that requires infrastructure investments and working with those communities and making sure that the offering is absolutely right. The one thing that we benefited from Covid is that we have seen many, many Scots explore more of parts of Scotland that they never even knew existed. Hopefully, they will be telling their stories in this year of stories to friends and colleagues elsewhere. However, having that infrastructure in situ to be able to make sure that it is easy to get to and that people can transact online and that there are no blips in the supply chain is going to be really important. What else can be done? I should have touched on it earlier on, Grant's support. I have raised it a few times on calls now with colleagues and officials. It is all about being flexible now as we recover from Covid and we have to work in partnership, industry, Government and agencies together to get through this and we have to be flexible. The grant funding that has been made available to businesses has been hugely welcomed to, for example, the destination marketing funds. However, because we have had this pause over the winter period and disruption, we have now got a situation where monies that have been awarded are actually needing, under the budgetary compliance, to be spent by 31 March. There would be a lot of money probably in the system that is about to be committed or spent by 31 March. With a bit of flexibility, and possibly that needs to obviously be up with my pay grade and yours, no doubt, and others, with the Audit Commission, to say, look, we would get more ROI on this investment and it would be better spent if it could be rolled over into the next fiscal year, so we are not trying to concentrate everything into what is now only a matter of weeks. I know that many colleagues in the industry have been challenged by this and are actually even being able to deliver that activity in the time frame. I am sure that if there is anything over, we would rather be more flexible on spend as well and allow us to recover in a strategic and timely way to get the best bang for the investments that are there. That sounds very well made point, Matt. I am sure that the committee will pick that up. Thank you very much for that. Can I turn to Stephen and Leon and give you a chance to briefly give us any final ask? Can I also ask about how we can help hospitality to coin a phrase, live with Covid, as in some form it is likely to be with us for some time to come? When I was having a very good family meal at your hotel in Lochaber Stephen on Boxing Day, I was struck by a point that you made that you had not gone ahead with your usual Christmas date opening because you were very uncertain about where the Government was going with restrictions and you did not want to have to cancel everything at the last minute. Is there anything that the Government needs to do when it comes to a future Covid framework that would help the hospitality sector to have a bit more certainty when it comes to any response that we have to make to the pandemic in the future? I will start with Stephen and then to become the same point to Leon and sorry. Absolutely Colin, thank you very much for the question. I like to say thanks very much, so I hope that I am glad that you enjoyed your Boxing Day. One thing I would say, well two things really, proper consultation. Do not expect us to flick a switch and be able to adapt to change. Hostality, albeit diverse, it is not just something that we can change overnight. Planning, preparation and execution, that is the key to any success. We just cannot have an execution and everybody then thumbing around trying to plan and prepare. We live in a really lovely part of Scotland down in Dumfries and Galloway here, but my view is that we are always the forgotten part of Scotland. If you take it, it is the main route, the A75, from Sannark and Ryan to Europe, and if you look at the state of the road, it might be a bit of a disgrace, but if you are talking about connectivity and the way that we get to places, we need to have a look at that to drive people into Dumfries and Galloway. We are lucky now to be able to have an actual park that will hopefully come in here, but the dual at the A75 would be absolutely key to driving people into Dumfries and Galloway. Going forward, as Mark said, flexible support is key, but I will still go back to that, saying three things, planning, preparation and execution, to give us a proper framework and more consultation with the sector. In the same point to Leon about that future framework. Yes, thank you. Very quickly, consultation and having a strong partnership between the sector and the Government is going to be absolutely key going forward. In the framework, we also really need to see more trust being displayed by Government in hospitality to do the right thing and to keep workforce and customers safe. Businesses have shown time and time again that they will go beyond the baseline measures in place in order to restore consumer confidence and make sure that everybody is enjoying themselves in a safe way, in a safe environment. That element of trust needs to be built in somewhere into the framework. On that point of flexibility, we do not know what is going to be ahead of us, but what we need is a framework that can adapt and ideally ensure that businesses can stay open and trade as fully as possible. Thank you. I thank the witnesses for their contribution to our session. It is very much appreciated. We will now have a brief suspension while we change over the panel. May I now welcome our second panel to this morning's session? Rob Dixon, director of industry and destination development, and Vicky Miller, director of marketing and digital, both from Visit Scotland. Again, can I ask members to keep their questions concise as well as panellists? Thank you for joining us this morning. I first ask about Visit Scotland's own budget. We did take evidence from Visit Scotland in the lead-up to our budget discussions with the Government. You had highlighted the difference in grant aid allocation that has been an understandable decrease in 2022-23, but that left a gap between what the expectation would be for grant aid allocation. How is Visit Scotland preparing to manage the budget for this coming year and what challenges it is facing? I understand that the Scottish Government has secured the on-going budget, but there are issues with the budget that has been raised from marketing. Rob Dixon, do you want to respond to that first question? Yes, I am quite happy to start. Thank you very much. Good morning, everyone. I thank the opportunity to talk to you this morning. I think that the Visit Scotland budget, like many national agencies, has seen over the last two or three years some very unusual changes because of the way that the grant funding has played through for distribution. Perhaps the fair comparison is to look pre-Covid at where we were and where we are going to be from April this year. Our budget in headline terms is returning to pre-Covid levels. That presents some challenges for us, because we are still trying to support the tourism sector through recovery. The elements of what we need to do to ensure that that recovery piece is successful would be fundamentally different from where we were in pre-Covid times. That said, we will return to more of our core activity, the support that we provide for the tourism sector, particularly in individual businesses, particularly the destination management organisations and sectors, in that effort to support recovery. That is an opportunity for us to deploy our resources in a prioritised way that begins to focus more on early 2030 than the position that has been for the past two years in respect of responding quite rightly to the challenges that are presented by Covid. Much of the resource in Business Scotland over the past two years has been deployed to distribute grants. That is not a core business activity for Visit Scotland. It has been an essential activity in the past two years. It continues today as of the year, but we are optimistic that, in 2022-23, we will have the opportunity to return more to our core activity, but with an emphasis on supporting recovery towards every 2030. On the marketing point that Vicki might want to pick up. Can you talk about replacing the self-generated income, which I understand was £6 million in 2019-20? That would usually set about £14 million. Do you have expectations on when that budget is likely to recover? That is probably an area for me to pick up. The two areas that predominantly provide that income are around i-centres, tourist information centres and our quality assurance scheme. The income levels defray the costs that we incur in the provision of those services. Clearly in the past two years, the income has been much reduced inevitably, but so have the costs. As I outlined a moment or two ago, much of our resource has been deployed on grant distribution. As we move forward through 2022, we will need to ensure that we balance the ability to raise the income to continue to defray the costs that are required in the grant that we get effectively. We will see in the course of 2022-23 both our quality assurance scheme and our i-centres moving into a more normal way of operating. We expect to see the income levels begin to rise. It is probably unlikely that they will return to pre-Covid levels in the course of 2022-23. It might take another further year or perhaps even two, but we will need to ensure that we manage the costs of providing those services in a way that ensures that we balance the books at the end of the year. That is always the approach that is taken, and it will require a little bit more care in the next 12 to 24 months to ensure that the balance between the grant need available and the income that we are able to generate is taken into account effectively. That is helpful. I thank you. I will bring in Colin Smyth to be followed by Gordon MacDonald. In the previous session, Mark Crawford from STA made the point that it would help businesses to probably visit Scotland if there was flexibility on when grants and indeed budgets had to be spent, so there is an expectation that it has to be done by 31 March. Do you have any comment on the point that Mark was making? Would it help to visit Scotland? Would it help those businesses that you have been providing grant funding to if there was that flexibility as we head towards the end of that financial year? I am not sure who wishes to grab that one with both hands. I will leave it to you to decide. I will let Rob answer that one when I will come back on marketing later. Thank you. Colin was good to see you again. The position in the public sector is well understood that 31 March presents every year a challenge in respect of utilisation of funds. I think that this year it is particularly challenging—it is probably the most challenging that I have experienced in my career, certainly—because of the impact of Omicron around what would always be a particularly focused time of the year in December and January. The financial rules and expenditure has to be concluded by 31 March. Were flexibility to be available, then, of course, it would be welcome, but I will understand that the rules are in place across the whole of the UK for reasons of prudent management of public finances, and we will need to balance the requirements to match those rules with our ability to spend effectively in the next eight weeks. Crucially, we are helping and supporting businesses to spend in the next eight weeks with the funding that is available for them, and we are very focused on that across the funds that we are managing and operating at present. I will pick on one final point that was made by Mark and others. That was that a number of areas have been hit particularly hard as a result of the pandemic, so city centres in terms of visitor numbers and hospitality were highlighted. However, non-traditional tourism destinations in some rural areas have been boosted due to staycations, and arguably they have fragile economies, and all the economic indicators are probably lagging behind cities. The stress seems to be on how do we get people back to where they used to go, but surely there is an argument, and you will know exactly the areas that I am talking about, Rob. There is an argument that says, well, there are non-traditional tourism areas that have huge potential and for purely historic reasons haven't had the same level of visitor numbers than maybe other areas, and what your strategy should be about is trying to get people to stay in those non-traditional areas or come back to those non-traditional areas, because that has got real potential to grow the overall tourism market in Scotland. I will start with Rob, because you are on my screen, Rob, but then obviously, Vicky, I am sure, I want to come around how we market those areas. I agree entirely with the comments that you have made, and I agree with Mark's response to your comments earlier on. We will not grow tourism in Scotland if we continue to focus on the areas that have always been focused on. Setting aside the impacts of the pandemic for the moment, the crucial challenge of the 2030 tourism strategy that is in place in Scotland for this decade is about spreading tourism more widely and fulfilling the unfulfilled potential of many parts of Scotland. You are right to highlight that that has perhaps been one of the unforeseen benefits of Covid in particularly rural locations, but we need to ensure that we maximise the opportunity to sustain the visitor numbers in those areas. We also need to ensure that other parts of Scotland are less well visited and have the potential to host more visitors to boost their local economy because of the great benefit that tourism brings to the economy. We must pursue that. That, in the short term, has to be set against recovery, and I would not wish anyone to think that Visit Scotland is not focused on the need to support recovery in the cities as well as in many other parts of Scotland. However, we have to transition from a response to Covid to the recovery from Covid and onwards to our ambition in the Outlook 2030. In terms of what you said about potential of particularly rural areas, that is part of what we need to focus on in the Outlook 2030, and that is certainly the forefront of our thinking. Thank you for the question and good morning everyone. I absolutely agree with what Rolster said. The key focus of our marketing strategy has always been to promote seasonal and regional spreads and to add value and ensure that we are spreading visitors that we are promoting the hidden gems. That is a big part of our recovery approach without a very much irresponsible tourism focus in mind. Clearly, to do that, we have to be agile though we have to look at, if we are going to see short-term recovery, we have to be very agile. We have to use data and insight from the industry in Scotland and what we are seeing in terms of consumer behaviour to make sure that we are getting to those first returning visitors and directing them to the kind of experiences that they are looking for while at the same time we are investing strategically for the medium to long-term in a really build awareness of Scotland and some of those unique experiences that are less well known in the areas that are less well known. That will take time and investment over the long term. Going back to the earlier question on marketing, January to March is always an optimal window people are planning for their holiday but actually we need a year-round approach to marketing and something that visits Scotland and certainly I believe is that over the course of this pandemic we have done is to keep Scotland present in the minds of our consumers in all of our key markets even when that has been with a bedroom now travel later message because we need those first returning visitors to be thinking about Scotland. That will be very important in terms of short term with that strategic approach around the medium to long term. What will also be important I guess from a marketing perspective though is a investment in the marketing on-going but also restoring connectivity internationally will be key and getting back to the frequency of routes that we saw in 2019 and that will be really important in continuing best in the product. I look forward to a repeat of that, the very good South Scotland campaign that you had at a couple of years ago. Gordon MacDonald, to be followed by Jamie Halcro Johnston. Thank you very much, convener and morning to the panel. We obviously need the tourist industry to bounce back as quickly as possible given its importance to the Scottish economy and to continue the earlier discussion on labour shortages. We've got hotel occupancy levels that are low partially because many hotels don't have the staff to service all their rooms and we've got many restaurants that are closed at lunchtime or are closed a couple of days a week again due to staff shortages. Paraphras in the comment you just made a second ago, Rob, we can't grow tourism in Scotland if there's a labour shortage, so how do we address the 40,000 hospitality job vacancies that we have and when we are at full employment in Scotland? Thank you for the question. I think that the panel in the previous discussion covered this in some detail and were very accurate in what they said. There were pre-COVID challenges in terms of the labour market. Covid and the slightly longer period of post-Brexit now have probably accentuated those challenges. The critical point from a visit to Scotland perspective is to make sure that the national programmes fit for the tourism sector as best as we can make them. Skills Development Scotland clearly lead in this area in terms of labour market challenges in Scotland. What we've thought to do through the STERG response is to make sure that the tourism sector piece is well understood by Skills Development Scotland and the programmes that they have in place—some of which we're very fortunate to have been funded through STERG in the past 12 to 18 months—are as effective as possible. The forward look on this is very challenging. The National Records for Scotland progrosus about Scotland's population that was published in mid-January spells out very clearly the need for a sustained and long-term effort on this. We are not going to resolve the labour challenges in a matter of weeks or months. We're going to have to take a much more systematic view about career opportunities. Businesses need to understand where labour is essential, where digital efficiency plays its part and where overall business efficiency plays its part. We need to make sure that the people we employ enjoy their work, are well-rewarded through that fair work agenda for their work and see their future in tourism as one that is challenging and enjoyable but gives them a successful career across all parts of Scotland. Tourism has to compete with other sectors in Scotland and beyond to attract people. That is a significant challenge for us, but I would not wish to shy away from the long-term challenge that is presented here and the demographic challenges that we face in terms of working-age population in Scotland generally. However, those are extreme challenges in some parts of Scotland, particularly rural parts, and it will hinder economic development generally, but tourism is well. We need to have a well-coordinated, long-term public sector response to this that ensures that year on year we are making the difference that needs to be made for our working-age population. Given the demographic challenges that you highlighted that we have, would you be supportive of the calls for either a hospitality visa or devolving the immigration system? There are not issues that Visit Scotland is focused on. Those are parts of the wider picture. I think that there is a wide range of issues that can play a part. Those may be part of the resolution, but it is crucially important that we understand how each of those elements complements each other and what part they can play. If they are the right things to do and the industry believes that, then I am sure that Visit Scotland would be supportive of them. However, we need to be certain that we have long-term solutions in play here, and that they can each play a valuable part in what we do. Thank you, Jamie Halcro Johnston, to be followed by Maggie Chapman. Can I just ask, Rob? You mentioned that budgets are back to pre-pandemic levels. In 2018-19, the budget was £50 million. In 2019-20, nearly £60 million. It is now down to £49 million, so it looks like a reduction and it has obviously been cut this year. Given that, as we looked at some of one of our competitive nations in terms of Ireland, it has increased spending by, I think it was, €69 million, €67 million, increased it by that amount, which was greater than the total budget for Visit Scotland, how does that impact on your ability to promote tourism and support it across the country and, as I say, promote it internationally? Rob, do you want me to pick this one up? Yeah, I think so, Vicki. I think that there will be, looking at the budget figure that you mentioned, there will be an element of ring-fenced budget in those numbers, which is possibly where the, you know, you're seeing that at that discrepancy. What I would say on the marketing side yet, absolutely no doubt that Ireland has significant budgets and they are indeed a competitor. The offer, I guess, in terms of that outdoor product is very similar. I would argue that Scotland has a better proposition. It certainly means that we need to be more smart with our targeting and it means that we need to work collaboratively as Team Scotland. Our activity needs to be not just to direct to the consumer but also to work with, particularly internationally, if we want to grow our share of outbound tourism. That is where there is a huge opportunity, because Scotland's share of outbound tourism in some of our key markets is less than 1 per cent. The opportunity to grow that, even by a small amount, would make a significant difference to the Scottish economy. Through consumer marketing is one way that we can do that with very smart targeting, so getting to the audiences that have the right fit for Scotland and getting to the audiences that are in the market to travel now will be particularly important for short term. What was at Scotland has also put in place as market specialist teams, who work very closely with the international travel trade to educate them on the Scottish product and to get them selling Scotland. For example, this year we will have undertaken over 40, albeit virtual, in normal times. Those would be in-market events, face-to-face with travel trade, including connecting businesses with those two operators to get them selling Scotland and increasing the number of Scotland programmes that are for sale through travel intermediaries. We have also been involved in delivering over 5,000 training sessions with travel agents right across the globe. That business-to-business strategy is very important. We also have an in-house PR team. They are also split into markets and market specialists. Through earned opportunities, capitalising on events, capitalising on film and TV in our key markets and working with Team Scotland SDI, we are activating our global networks to do a really good advocacy job for us. It is about being really smart with the resources that we have and being very targeted where we are, directly targeting the consumer with our marketing. It is also that expert resource that we have invested in that means that we can, I guess, punch above our way and extend our reach. There is absolutely no doubt that investing in more marketing to grow our share of global outbound travel would make a huge difference, particularly because of the share that we have at the moment and the low awareness that we have in some markets. I imagine that our competitors will be saying that they will be doing innovative and new ways as well. I appreciate that and welcome that. There is a big discrepancy in the budgets. Very quickly, you talked about investment in rural areas. I think that Vicki has well mentioned making sure that we look at areas that promote irresponsible tourism and that we look at areas where we can increase tourism. There is huge pressure in some of our most remote and rural areas in terms of tourism infrastructure. That is not going to be helped by budgets being cut for local councils that might be putting in some of that infrastructure such as toilets and better road infrastructure. How do we do that? How do we increase tourism to that area if that is what we are looking to do while also making sure that that infrastructure is in place? That is a big issue in some of the islands. It is a big issue on the sky and around north coast 500. I think that Visit Scotland has, by utilising the Government funds and the rural tourism infrastructure fund, responded to that pressure in recent years. There are now four years of rural tourism infrastructure funding in the course of the pandemic. One of the things that we have been able to do is to support councils in developing strategic infrastructure plans, which we hope will develop a more solid pipeline for applications to the rural tourism infrastructure fund. We genuinely believe that that fund and the scope and the way that it operates is a very effective response to the challenges that you highlight. Crucially, what it allows councils to do is to work with private sector communities and other interests in providing the infrastructure both to deal with the pressure points but also where it is most needed in terms of the potential of increasing tourism in certain areas. I think that continuing to support the rural tourism infrastructure fund and making sure that we provide behind-the-scenes support to councils and businesses in how that can best be accessed is crucially important in responding to the very clear pressure that you identify. Maggi Chapman, to be followed by Colin Beattie. Thank you very much, convener, and good morning, both Rob and Vicki. Thank you for joining us this morning. We heard this morning in the earlier panel about the entrepreneurship, the diversification and the innovation that is happening across tourism to create post-Covid and post-recovery what will probably look like a very different industry, a very different sector than pre-Covid. One of the things that is clear to international experts is that full recovery will not happen for at least another two years. In the comments that we have already heard this morning, there is that tension between trying to go back to what we had because we knew that and the comments that you have already made about making sure that we make the most of seasonal and regional spread. There is something in here for me around long-term resilience and sustainability. There is a lot of focus on long-haul flights and on bringing more people into Scotland. With rising fuel costs and with rising air travel costs that we are likely to see and people may be moving away from that because of the climate emergency, is there work that we need to be doing to make tourism more sustainable in all senses, how people arrive here and how people with lower incomes, especially families, can afford to take part in their activities, how accessible destinations are, different models of ownership, how costs can be made from smaller spends, but more smaller spends. Can you say just a little bit about the longer-term sustainability that we need to be thinking of given both the changes that we know will be happening in aviation and the diversification entrepreneurship that we have heard about? Rob, do you want to start and then Vicky? I'll make up maybe on the international and the aviation end. Visit Scotland's focus on responsible tourism is growing by the day and by the week. I think that we recognise the challenge that the transition to net zero presents to the tourism sector in Scotland. I think that it's very clear and I think that Mark touched on that in the previous conversation that businesses are hugely challenged by the agenda but are hugely challenged by the competing pressures of recovery from Covid and addressing the agenda. It follows that, for Visit Scotland, we must get the short and medium-term priorities in a proper sequence in order to best support business. The work that was done through Sturg and the way that funding was provided through Sturg which balanced both business support requirements and a guest destination net zero programmes was the right way to go about it. On the one hand, we need to make sure that businesses in a true business centre are as effective as they can be, as competitive as they can be, that their digital offer, particularly to international visitors but also for domestic, are as strong as possible. That's a huge focus for us in terms of the business support that we provide, but we also need to provide the best support that we can in respect of that transition to net zero. What does that mean for businesses that are building-based? What does it mean for businesses that are more outdoor-focused? Transport is a common theme there. I think that the challenge in Scotland is presented in terms of how we move people around Scotland, how public is as best as it possibly can, the demands of tourists as well as domestic travellers are all significant issues. Those were recognised as significant issues two years ago, pre-Covid, when Outlook 2030, the strategic vision for tourism in Scotland, was launched. I think that probably what has happened in the course of the last two years is that we have rightly had to focus on the Covid response. We need to pick up and re-prioritise the focus on net zero in order to make sure that that transition takes place. Arguably, if we are going to hit the 2030 target, it is not over the 10 years that we would hope for, but over the eight remaining years that are left. I would re-emphasise what I said earlier. The response needs to move to recovery. The recovery needs to look to the 2030 focus. Destination net zero needs to come to the fore in the business support that we provide, but I would be clear that we are already doing that through, for example, the start-up work that is providing EV charging grants to more rural businesses, certification for businesses in terms of their energy consumption, climate change target attainment. Those sorts of very practical tools will be helpful in the years ahead. I think that we are going back to what we have already touched on. We absolutely need a balance of visitors, both domestically and internationally, for a sustainable recovery to achieve our objectives of seasonal and regional spread. The UK market is really important for that all-year-round visitation. More of a short-braid market, the opportunity there is obviously to encourage people to take longer holidays from the UK in Scotland. I think that post-pandemic is in a very good place to do that because we have exactly what you mentioned. The family market is looking for lots of fresh air, it is outdoor, it is connected with nature. Working with the sectors, it is about looking at how we are agile to adapt when they offer to meet the different insight that we are seeing from the different audiences that are looking to travel. We are also seeing a younger visitor who is more interested in Scotland, particularly enjoying more adrenaline-fuelled activities. We have a real strong sector there in terms of outdoor activity operators, but we have really been leading the way in offering new experiences. It is unique experiences that our visitors are looking for, so keeping that focus on a drop-set supporting industry to adapt their offer and align to the consumer trend will be really important. Going back to international, 20 per cent of the volume pre-pandemic, but 44 per cent of the actual spend. American visitors spend four times more than a domestic visitor did. European visitors will spend something in the order of twice double what a domestic visitor will spend. If I take core markets like France and Germany, they are also really important for regional seasonal spread. They will also come back to Scotland more than once, so we have a huge opportunity there to get them to do the places, to visit the places that they have never been, to inspire them to travel further and equally do more. American market and some of our other long-haul probably more first-time visitors, but the opportunity there is to work with the lights of the tour operators and the travel intermediaries internationally to show the other side of Scotland as well and the things that are off the beaten track and help them to build product itineraries with the industry in Scotland to promote those lesser known areas. Again, we are seeing some very similar consumer interests in the North American market from getting off the beaten track, being outdoors, wellbeing, et cetera. Again, we are very well placed to pivot and focus our offer to take advantage of these consumer trends by capitalising on data and insight. Thank you very much for that, Vicky. I'll now take Colin Beattie to be followed by Michelle Thomson. Thank you, convener. I'd like to explore a little bit more around competitiveness. I know various members have touched on elements of this. Every destination across the globe has been impacted by Covid-19, and they're all trying to build back their businesses. And they're all investing heavily. Ireland's been highlighted at spending €2.88.5 million in tourism this year. Of course, Ireland benefits from the Brexit compensation fund, which gives it €920 million. That's a nice sum of money to be able to work on. We certainly don't have access to anything like that. Being competitive is obviously of vital importance to the economy. If we're not competitive, our industries will go down, the economy will shrink and we'll all be poorer, so it's really something incredibly important. If we just measure it in money, it seems quite difficult for us to be competitive, but do we measure competitiveness only in money? Or are there other things that we can do more clever to compensate for the fact that we just don't have the sort of cash that other countries are pouring into it? Maybe Robbie could start off there. Yeah, I'm happy to. I'm sure that Vicki will pick up as well on it. I think that Vicki just touched a point about the experience in Scotland. I don't think that anyone on the committee or at Visit Scotland would doubt that we have a product that can stand comparison with any other country in the world. The vision in Ireland 2030 to be the world leader of 21st century tourism is a very striking and ambitious vision, but it's one that I think that the tourism sector was confident about putting in place back in 2020 and I think that it remains confident despite Covid that it can aspire to that position. Our competitiveness has to be based on, for me, two critical things. Firstly, the experience that visitors have in Scotland and that starts in the moment through the businesses that host them, the experiences they have, whether they are outdoor or visitor attractions or whatever they might be, accommodation providers, etc. The business support function that Visit Scotland provides therefore has to be very focused on constantly improving the efficiency and, consequently, the competitiveness financially of that business but also in terms of the quality of the experience. The staples in Visit Scotland's work over a long number of years have been about the quality of the experience and the efficiency of the business, and I think that those are the two routes that lead most effectively to competitiveness. I responded to the previous question around the challenges of net zero and, of course, that also comes to the fore and our competitiveness in terms of what the consumers are looking for and what the consumer experience is. For Visit Scotland, we need to make sure that we are gathering the right data to respond to those pressures in a post Covid era, as well as what we had in the pre-Covid era. Talking about is basically word-to-mouth advertising, which is effective, but if other countries are hard selling their products with more money than we've got, how do we compensate for that? Once you get people here, they have the experience and, hopefully, they will go out and spread the word, but you've got to get the people here first. If you've got the more money that you've got, the better chance you have to spread that word. Do we have enough money and resources to be able to do that in our target markets? Thank you for that question. If I put it in this way, for every pound that we invest in marketing, we deliver £8 back to the Scottish economy. The more we invest, the greater the return, and it can be very immediate. Our marketing works at two levels. It works at that, growing the awareness and the intent for Scotland, which is absolutely needed to grow a fair of inbound tourism into Scotland, but it's also about driving immediacy in terms of bookings into the industry where it's needed most. You get an immediate return on that investment. Where we have been very smart is that we have a Team Scotland approach. We do capitalise on our global networks, ancestral networks. If I look at our global Scots network, we do a lot internationally by coming together, presenting Scotland on the global stage, events such as Scotland week in New York are a great example of where we can do that. We can create a lot of noise over a short period of time by being present in the market, with advertising at the time, but also running a number of networking events and using those Scots that are based out in Scotland to do a job for us. We need to be smart and use those global networks. We are very fortunate in that Visit Scotland has built up a significant social media reach greater than any of the other UK nations, and probably we are up there with Australia in terms of the reach that we achieve every day through our social media channels. That advocacy should not be underestimated because people are constantly sharing their cannibality memories and how great their Scottish experience was through those channels. It is also capitalising on the global events that we host in Scotland. That goes back to a point that was made earlier, that having events in Scotland is critical to being able to maximise the global media coverage that it realises. Working with the lightsaw, the international film festival and all the other events that take place across Scotland gives us a unique opportunity to harness those, but going back to your original question, we can give up a guaranteed return on investment and therefore it can make a significant difference if we do invest in marketing. I seem to recall from previous evidence sessions that we have taken on the hospitality and tourism business that Ireland actually receives a multiple of the number of visitors that Scotland does. That would seem to indicate that they are much more successful at attracting tourists in. Do you comment on that? Ireland's numbers are similar to us. They are slightly higher in terms of international, yes, I would agree. Again, they benefit from having those ancestral connections, particularly in North America. I think that it is North America where they have a bigger share of the outbound market than we do. However, we should have a huge reach in America as well. I remember standing in Ellis Island pressing the buttons for where people of Scottish ancestry were, and there was over 20 million scattered across particularly the eastern seaboard. Surely that is something that we should be capitalising on. Absolutely. I think that what you will see coming up actually with this year's Scotland week programme is a more ambitious programme of activity in the market and across the various agencies, Scottish Government, SDI and ourselves in terms of a programme of activity to raise that profile and take advantage of the opportunity that that is likely to be in person again this year. One last question. How do you measure your competitiveness against other countries? We have a variety of insight. Obviously, we are working towards a tourism observatory that will be able to analyse a variety of the real-time information that we have, but also studies that are done with visitors directly in the market. Some of that does that benchmarking job, particularly around the actual quality of the visitor experience and the awareness of Scotland. We have put a number of research sources during the last two years over the pandemic. We have been running a UK and an international two-trackers. We look at sentiment within the UK market and internationally. Those studies have also delved into holiday-taking habits and propensity to visit Scotland or, indeed, visitation to Scotland. We have rich sources of information, but we also have wealth of real-time information through things such as Google search trends, where we can benchmark and look at whether there is any shift in demand for Scotland. We can do that through partnerships that we have with the likes of the OTAs and other travel intermediaries who share their data with us in terms of the search and booking demand for Scotland and how it compares with other destinations. A lot of rich sources of information—one of the roles of the observatory will be to look at how we can pull all of that together and present it in a very visual way that is useful not only to the agencies but to the industry themselves to help them to plan the trends that are coming through in visitor behaviour and the opportunities by market. There are a number of different ways that we can benchmark. Thank you. I will bring in Michelle Thompson, but it might be interesting for us to find out, as a committee, that Ireland has been talked about quite a bit this morning. The percentage of tourism is to Ireland's GDP, which I suspect is higher than Scotland's, but that is something that we can follow up with Spice. I want to ask a couple of questions that I am aware of. First, on the phase 1 projects, I am aware that two are at Amber Destination Net Zero and the Scottish Tourism Observatory. For the record, I want to get a sense of the current status and rationale, and any further thoughts about those before I go on to another question. Whoever is most appropriate is fine. I am happy to pick up on those. It is fair that they have both been impacted by what happened in and around December because of Omicron. They were placed at Amber just because of slight delays in the work. They are well on track now in terms of delivery and, indeed, Destination Net Zero activity was launched just yesterday, I think, with further to follow this week. We will deliver on those programmes. I touched on the EV charging work earlier in the committee's conversations. It is great to see that opportunity for businesses to apply for grants and get support in installing EV charging on their properties likewise on the energy certification scheme, which is now up and running. On the observatory, that one has been more challenging. It is largely capital expenditure. We have had to plan in quite short timescales the work on that. That is now under way. Companies have pointed through procurement. As Vicki indicated earlier, that is going to be an ongoing piece of work for us beyond the end of 31 March. It is something that will be developed in the coming months and, I would hope, years. If there is a fundamental building block for our future that we are putting in place, not just a programme that is going to stop and start in the current financial year, I hope that that helps on those two. It certainly does. Vicki, I do not know if you have got anything to add to that, or shall I move on to my next question? Just on the observatory, I would say that the progress that is being made is particularly around the industry consultation piece, to understand the data and insight that the industry is looking to help to inform its planning. There has now been an industry panel or steering group, if you like, to set up to guide that project, which I think will be very helpful in focusing on its priorities. Okay, thank you. Going back to Rob, you mentioned something there about CapEx, the other area that I wanted to ask about. The comment in the Stergs last minute notes that the investment models have been challenging. You comment about the financial accountability rules and the fact that the Scottish Government cannot offer any flexibility. Is my understanding correct that that is simply a matter of the fact that the Scottish Government, by the rules by which it is bound in terms of the fiscal framework, cannot carry forward? That is the implication of that. We are, in effect, by law, not in a position to offer flexibility. Therefore, if that is correct, the issue around investment models and structuring them, are you any further forward with this real kind of blocker? Perhaps Rob follows on what you were saying about CapEx. Sorry, my connection may have just broken in the middle of that, but I think that I understood the question. The rules apply right across the UK in terms of 31 March. On capital expenditure, it is therefore crucially important that you make sure that you have the plan in place and that you can utilise the full extent of any 12 months in a financial year to deliver the planned expenditure. I referred earlier to the rural tourism infrastructure fund and the work that we have been doing in the past 12 months is to precisely try and make sure that projects are able to start on 1 April. They have the full 12 months to spend the capital monies that are available and are not developing the projects during the course of that financial year and certainly when it comes to capital expenditure. In all my years of experience, both within local authorities and other public agencies, that is by far the best way of making sure that you can operate effectively in what are long-established and well-understood rules that you refer to in terms of capital expenditure. Does that respond to what you asked for? I did miss a bit in the middle of the question. What you are describing to me is careful management of the limitations where that sort of money cannot be carried forward, but it does strike me that that seems—if I was running a business, as I have done, not being able to particularly in CapEx with all the implications that come with it. That sounds like there is quite a lot of work associated with managing that limitation. I suppose that that is what I am trying to explore. Is that the case if you just got used to the idea that you are having to manage around that limitation and you are incurring effort and therefore expenditure to do that? I am not sure if that is a commentary on my career that perhaps I have just got used to it and accept that that is the way that you need to operate in order to make sure that you make the best use of the funds that are available. Is there any other—I am around the comment that there are no easy investment solutions? Is there anything else that you would want to put on the record? Obviously, a lot of what we have seen has been exacerbated by the pandemic and free flow of funds. Is there anything else that you want to put on the record? The reality for businesses in Scotland, not just in the tourism sector, is that the impact of the pandemic has been significant in terms of draining their cash reserves, giving them confidence about revenue streams and cash flow, and therefore their ability to trade and be efficient is more challenged than it has been at any point in recent years. Even if I would go as far as say that perhaps more challenge than was the case in some of the immediate consequences of financial crash in 2008, trading out of that with confidence will, I think, be the most important thing. That is why the recovery focus for the next 12 to 24 months is so critical. We have to make sure that we understand where businesses are doing well and it is important to be clear that even in the course of a truncated season last year, many businesses did well, but where are businesses challenged? What support can we best put in place? How do we support their marketing efforts? What are the issues that need to be addressed? Some of that will be around investment in their own business, some of that might be around national infrastructure and investment in infrastructure. Public transport ferries, for example, were mentioned earlier. Those are all critically important parts in underpinning the national infrastructure to the success of businesses in remote and rural locations, as well as in the cities themselves when it comes to transport. I think that getting that balance right and understanding what will make the difference to those businesses in the next year or two is crucially important. Okay. Thank you for that. Vicky, do you have anything to add? I mean, obviously, I know that Rob and I were focusing on capex and not being able to carry that forward, but you can carry forward revenue. Around the area of investment, is there anything else that you want to add before I move on? Obviously, time is off the essence for the panel. Thank you for the question. Going back to what I said, we need a year-round approach to marketing Scotland and supporting things such as connectivity, working with the airlines collaboratively, particularly in relation to marketing, so that we are restoring their confidence that we are building demand for Scotland and that helps to maintain the routes. That requires a year-round approach and requires investment in both the domestic and international market. My team is clearly focused on that. That is very much a priority in terms of our core budget. Going back to what I said, if we have more, then there is more that we can clearly do with it. We can extend the reach of what we are able with our core. Okay. Thank you very much, convener. Thank you. I now move on to Alexander Burnett. Thank you, convener. I know my register of interests around tourism. With a meeting with your chief executive the other day, I explained how you would be able to pivot your budget to be more focused on capital expenditure in readiness for return of tourism, which is obviously good for laying the foundations for long-term recovery. The budget is slightly down. It shows a 50-50 split between resource and capital. I am guessing that this might be a battle between destination development and marketing. I am sure that it is an amicable battle between yourselves. Can you maybe comment on that 50-50 split? Given that CapEx has had the lion's share in the last year or so, should the pendulum have swung more of the other way to marketing? I think that it might be helpful if we provide just some clarity about the numbers over past years so that we can get a clear understanding of what capital and revenue has been because there has been such changes in the past few years. Like any public sector organisation, I joined VisitScotland in August last year. I think that it is challenged about where, at a point in time, it places most emphasis and highest priority on the resources that it has available. I have made clear in the comments earlier that capital investment requires careful long-term consideration, built out over perhaps three, five or seven years. The Rural Toism Infrastructure Fund allows us to do that most effectively. Where capital investment is required in respect of VisitScotland's operations, you would expect us to be efficient in the use of that capital to invest that capital effectively, whether it is in digital and IT infrastructure or whether it is in the buildings and resources that we have out and about throughout Scotland in the eye centres. I think that that has done that pretty carefully and pretty effectively. The revenue investment is much more about the moment and the programmes that we need to run. I think that, again, the recovery piece will drive those priorities in the short term and probably 2030 in the medium term. I do not know if Vicky May want to just say something more about how that has happened historically. I appreciate that my backward look is only to August last year, but that is what I have experienced since then. That is correct, Rob. I think that the thing that I would pick up is on the capital investment. A key area of investment for us has been our digital transformation programme. That has been about absolutely building capability, being able to get advice to industry in new ways but also to reach consumers in new ways. We have been able to, despite our focus being on funds and work such as the Rural Tourism Infrastructure programme, while we have not been able to maybe accelerate some of that digital transformation activity as quickly as we would have liked, we are in a good place. There is a lot that we have done and put in place pre-pandemic, which allows us now to turn our focus back to that. We have, for example, on-boarded at what we call a marketing automation platform, so that allows us to tailor content and communications to visitors based on their interests and real-time on the website but also through our email programme. It allows us to be very efficient, to make our channels much more efficient and effective in delivering for Scotland. That has been a key focus for the organisation over the past few years with its capital programme. I asked you questions earlier on phase 1 of the recovery programme and progress with that. You will appreciate that there is a phase 2 of the recovery programme. That was an issue that the committee raised with the cabinet secretary on the next year's budget, but there is not a commitment for funding for phase 2 in the budget for next year. The cabinet secretary has indicated that she is supportive of the phase 2. I wonder if you are having discussions with the Government about where any additional moneys might come from, whether that is in-year budgets or what we can expect in terms of trying to find resources to fund phase 2. I don't know if you might want to address that. I am happy to address that, convener. I chair Sturgh, so it is a constant conversation at present about how we balance the programme that was set out for year 2 of Sturgh that Mark Rathall referred to earlier on against the position of currently not having funding. It is clearly encouraging that the cabinet secretary has indicated that she is minded to provide resources if that is possible. I appreciate that that might happen in the course of the budget decisions that might happen in the course of the financial year. Either way, it is important that we understand what the priorities are at any point in time. Assuming presently that there will not be any funding, I think that it has been important through the external conversations that the national agencies prioritise their work quite clearly in relation to that programme. There was emphasis placed on things like international marketing, labour market shortages, visitor management earlier on in this morning's conversations, and the agencies that make up Sturgh are committed to making sure that work is taken forward. There are conversations tomorrow and again next week with Government to consider how that programme might best be delivered. It feels, from my perspective, in sharing the group that there is a fluid situation at present. I do not doubt the commitment of Government and all the agencies and all local authorities to do the best they can in response to the challenges that we face. We all understand that public finances are tight and challenging, and we must prioritise the resources that are available. Does that give an indication of just where we are at this point in time? Yes, that is very helpful. I thank both of you for coming along this morning and speaking to us. I will now move the meeting into private session.