SUBMISSION FROM SMART CITY HOSTELS

Smart City Hostels is a new £10m invested tourism business in ’s Old Town, employing 42 people through the year and generating in the order of £3m p.a. revenues for Scotland from our guests. We specialize in the youth and student visitor markets.

This is Smart City Hostels’ submission to the Economy, Energy and Tourism Committee’s Tourism Inquiry. We respond to each question in turn as asked by the Committee, but our overall message is that tourism agencies in Scotland grossly underestimate and make little focused effort to target the substantive and lucrative youth and student markets, neither in terms of packaging of Scottish product nor from a marketing and sales point of view. This needs to be revised, with a renewed emphasis on these markets.

We would welcome the opportunity of being called to give oral evidence to the Committee to amplify the importance of these markets.

Smart City Hostels Submission

Smart City Hostels is located In Blackfriars Street in Edinburgh’s Old Town. We opened our doors in December 2006 and are therefore barely a year old. We provide accommodation to young visitors looking for hostel accommodation. We have designed the project for 5 stars and have successfully gained VisitScotland 5 star quality rating.

This development is a £10 investment, being a conversion of an existing building and new build, providing at peak of the summer season of 622 beds in rooms ranging from 2 bed rooms through to 12 beds. The business model includes a 20 year lease with Edinburgh University which provides for 81 student study bedrooms (giving us 274 hostel beds for 8½ months of the year). When students leave for the summer, the study bedrooms are converted back to hostel accommodation. A licensed café is located on site to serve the students, our visitors and the public. We employ 42 people on site. We are operating at c70% capacity throughout the year. We estimate that our guests spend in the order of £3m in the Edinburgh and Scottish economies during their stay.

Our investment is a commitment to and article of faith in Scottish tourism. It is also based on the characteristics and continuing growth of the youth and student market and the longevity and sustainability of this market.

VisitBritain (source IPS) suggest that 16-34 year olds account for: • 36% of all inbound tourist visits to the UK • 45% of all inbound tourist nights spent in the UK • 39% of all inbound tourist spend in the UK

VisitBritain also says that this market acts as a catalyst for the increasing “visiting friends and relatives” market and that young travelers today are the experienced traveler of tomorrow.

Worldwide, this market is remarkably robust and resistant to external shocks, growing at up to 5% p.a. over 2000-04, compared with total market growth rates of 3% for tourism as a whole (Source: World Tourism Organisation). Future projections are that it will outpace overall tourism growth rates to 2020. Francesco Frangialli, Secretary-General of the World Tourism Organisation, highlighted in 2006 that despite this sustained growth in the youth and student market, relatively few countries have a specific policy for this market - JUST over a third of countries have a student or youth tourism policy; less than a third collect statistics on the market; only a quarter have policies for product development, and less than a third have a marketing policy.

It is against these criteria we suggest the performance of Scottish tourism needs to be judged in the youth and tourism markets. We would suggest that despite the efforts of operators and the private sector to develop product for the youth tourism market and to promote this, Scotland would rank poorly if assessed against these WTO criteria for youth and student tourism.

Smart City Hostels’ product is based on what young travelers want from their accommodation – cleanliness, value for money, safety, fun, atmosphere, location and good staff and facilities. We pride ourselves that one of the major global booking engines, hostelbookers, consistently ranks satisfaction amongst our guests booking through them as arguably the highest in Scotland, at 96+% satisfaction (see www.hostelbookers.com/hostels/scotland/edinburgh/7951/).

Smart City Hostels started in Edinburgh - we are now backed by institutional investors with plans for a rollout in the UK and Europe of our brand. Their assessment of the market, as with ours, is that demand is robust and the numbers of young travelers will continue to increase.

We believe that Scotland should be prioritizing this market.

Our specific responses to the Inquiry questions are catalogued below.

Tourism Inquiry Smart City Hostels response Questions How realistic is Tourism’s international competitiveness demands that the proposed government, public agencies and the industry itself set ambition for a targets. With Scottish tourism being such an economically 50% increase in important sector, it is crucial that ambitious targets are set. It revenue in the is also crucial that the targets set are backed up with tourism sector coherent government and agency investment to achieve by 2015? How targets – investment in infrastructure, marketing and

was this business support – and industry operators encouraged to ambition set and play their part in delivery of the targets. on what basis can it be We understand that the 50% target was set jointly by reached? government, agencies and industry some time ago; bearing in mind that we are a new business, we have seen little evidence of how the target was set and whether or not it is achievable.

We argue that the youth and student tourism market is a robust, continually growing, lucrative segment totally overlooked in the strategies and target setting process, and thus Scotland is missing out on a real opportunity to be competitive.

The A Tourism Framework for Change document referred to in the background to the Inquiry makes no mention of the market other than exploring new media to reach younger and more mobile target audiences. (In fact we see little evidence of this happening either, and have never been asked to contribute to such a campaign.)

How can the VisitScotland has done an excellent job in developing the amount of branding for Scotland, but in our experience is now strongly revenue taken focused on tactical marketing opportunities and offers to per tourist be visitors. Our fear is that the wide range of tactical promotions increased by the driven by VisitScotland does not provide a coherent image necessary levels of Scotland either for the customer or for industry to buy into. without prejudicing Our interpretation is that visitor numbers will not be value for money maximized because they do not know what is on offer in and the Scotland – or what is on offer is so difficult to identify within experiences of the large range of tactical promotions i.e. the Scottish the visitor? product has to be promoted first and the accommodation/region/ activity next.

It is important, having promoted Scotland first, to then offer coherent packages of things to do, activities and regional destinations, in order to increase length of stay and help the visitor identify what they can spend their money on.

Specifically in the youth and tourism market, we can only see limited packaging and collaborative marketing, mostly being done by private operators, without the support of the tourism agencies. This suggests that Scotland is losing an opportunity to present a coherent range of music, retail, bars

and clubs, attractions, ambience, sports and other activities to the youth market. Scotland must be better focused on opportunities to sell positive experiences and activities in this market. How widely We don’t believe that the 50% growth target is well known or known and understood by businesses, nor what they need to do to accepted is the contribute/be involved. Businesses just “get on with their 50% growth job”, without reference to the target. ambition amongst all We’re a £10m invested business and have not been sections of the engaged or communicated with on the target, and what we tourism industry need to do to be involved, by VisitScotland. With some - public and limited exceptions, we don’t find industry communication by private sector - VisitScotland coherent or consistent. and how engaged are all with their role in meeting the ambition? What are the The Scottish tourism industry remains fragmented, with specific smaller businesses finding it difficult to contribute to industry challenges in leadership. The Scottish Independent Hostels Association, Scotland’s of which we are a member, collaborates on joint marketing tourism industry but is too fragmented and under resourced to put good in relation to packages together. skills, training, quality Leadership by the industry is a perennial problem, not standards, assisted by the public agencies determining policy and service levels priorities, with, in our experience, limited reference to the and leadership large majority of businesses operating in the tourism sector. and how can these be We have a continuous problem recruiting Scots to our overcome? company. Tourism and hospitality continues to be a Cinderella occupation at home, whereas many Europeans, Australians etc., see the sector as a worthwhile place to work. The industry, including our own company, is dependent on workers from outwith the UK to provide our service. We don’t have solutions, but perhaps a more focused effort is needed by FE colleges, schools, industry training agencies and public agencies to present career opportunities in the industry more effectively. Where else for instance might a 23 year old be head of department or even a general manager?

VisitScotland quality assurance processes worked well for us (we gained 5 stars) and we are keen to follow the green

tourism standard, although it seems that resources and the focus on green tourism are still inadequate. What are the We believe that there are some real opportunities to other challenges strengthen tourism research and intelligence as well as in meeting the improve communications to the industry. This is crucial for growth ambition operators to understand markets and how to access them, and what can be as well as identify new market opportunities. done by both the public and As an aside, market intelligence in Scotland does the youth private sectors and student market no favours - research into the growing to overcome hostel market is not up to date and Tourism Intelligence these? Scotland’s Opportunities for Growth doesn’t mention the youth market.

We agree that industry leadership needs to be strengthened but so too must the public agencies and government listen to operators. In a fragmented industry, larger businesses inevitably are better resourced to put management time into leadership, networking and engagement with policy makers, government and public agencies. But that leaves smaller businesses with a limited voice. Local collaboration, private sector led marketing and promotion and other forms of industry initiative need to be genuinely supported to encourage leadership and innovation. What are the Overall the Scottish proposition for tourism (“Live it” etc.) implications of works well and must not be eroded. the ’s Tactical marketing activity seems to us to be too plans for fragmented, so any changes planned between VisitScotland VisitScotland, and must seek to refocus marketing how will its role effort on campaigns that make more sense to the visitor and change, for the industry to buy into. particularly in relation to its One particular concern we have over the integration of relationship with VisitScotland and Scottish Enterprise is the loss of the enterprise marketing capability - the enterprise networks have limited network and inherent marketing capability. Scottish Development The Parliamentary Committee’s Inquiry makes no mention of International, the integration of public agency functions with local and its authorities, and we would emphasise too the risk of losing increased marketing capability if the LAs were to take a stronger role in responsibilities the tourism functions of economic development. for attracting international The integration of the enterprise networks and VisitScotland area offices must therefore be fit for purpose, as indeed

visitors? must the Scottish Development International/VisitScotland roles, SDI having as we understand it, limited tourism experience.

Scottish Enterprise’s focus on major companies and prioritised account management leaves many businesses with no or very limited opportunities to work with enterprise networks. Smart City Hostels has been fortunate in having developed a positive relationship with Scottish Enterprise Edinburgh and Lothian, with support and assistance being helpful to us. This would emphasize for us the importance of an account management system within the new agency set- up.

Quality assurance standards are crucial and must not be eroded in any way – indeed resources for green tourism should be strengthened. What can be The youth and student market is continuously growing and is learned from grossly underestimated in Scotland. Although we have an best practice in ageing population, youth and student numbers are growing other parts of across Europe and there is a stronger preponderance for the UK and young people, and older people in work, to take longer internationally in breaks and career breaks. The availability of low cost flights terms of meeting and labour mobility (potentially to help fund such breaks) are the challenges, encouragements to international travel amongst young particularly to people. encourage people to view We only need to look at the success of international (city) the tourism destinations for young people and the occupancy levels of industry as an hostels in these places to see that the market is buoyant. exciting and Equally, low cost flights result in young people routinely viable career taking short breaks away from home. Scotland could be option? doing more than the disjointed city break and activity tourism promotions it currently undertakes to offer a better package for the youth market.

Resources need to be put into international marketing campaigns focused on the youth market and on sustained rather than what appear to be intermittent tactical campaigns. Wales’ sustained marketing of activity tourism (much aimed at young people) is an example of what can be achieved from a limited base.

Smart City Hostels, 19th December 2007