Inflation and minimum wage eat into benefits of capital’s tourist boom

Published on Sunday 29 January 2012 00:00

DOUBTS have been cast over the economic benefit of Edinburgh’s tourism boom amid warnings many hospitality jobs only pay the minimum wage while hoteliers have seen their income ravaged by inflation and competition.

Concerns have been raised in the wake of a high profile strategy launch last week at which Edinburgh tourism bosses hailed a “remarkable transformation” in the scale and nature of the industry.

Wednesday’s meeting of the Edinburgh Tourism Action Group (ETAG) heard that revenues from visitors had risen from £250 million in 1990 to just over £1 billion in 2010.

ETAG said the city now has a “rich, diverse year-round industry, with a very strong, high yield conference and meetings sector” and set out plans to encourage more winter tourists by adding at least one more event to the city’s calendar.

The plan is to bring a third more visitors to the city by 2020 and increase their spend to £1.5bn at today’s prices. ETAG forecasts that will lead to about 11,000 additional jobs.

But hoteliers and hospitality experts argue that the influx of visitors has not resulted in quite the riches tourism bosses imagine, with average revenue per room having risen at a rate lower than inflation since the mid-1990s.

Alastair Rae, a hospitality expert at accountancy firm PKF in Edinburgh, said a recent study showed that room prices and occupancy rates both fell between 2006 and 2010, while inflation accelerated. He said Edinburgh remains “a very attractive place for hotel operators” with relatively high spend per visitor, but that in turn meant that running and property costs were high.

“The hoteliers are not exactly printing money,” Rae said. “They have performed well though a very turbulent time but I don’t think they are finding life easy at the moment.”

He added: “Edinburgh still has a reasonable level of hotel investment but for every new entrant there’s almost certainly an existing operator being pushed towards the door.”

One Edinburgh hotelier warned that intense competition was keeping prices down while operating costs had increased, bringing into question the viability of the industry even as it expanded.

“Hotels are facing huge inflationary pressures on their costs,” he said. “Profitability is falling and economic sustainability is deteriorating.”

Insiders admit that many of the capital’s tourism jobs only pay minimum wage and say much of the extra work created by ETAG’s latest strategy is likely to be filled by migrants.

Ian Tasker, assistant secretary at the Scottish Trades Union Congress, said the organisation had concerns over pay and working conditions in the hospitality sector.

Although he welcomed the creation of jobs, Tasker urged employers to pay at least the “living wage” of £7.20 an hour, therefore “not just by bringing people in to the city but giving the people who work in the sector enough money to spend as well.”

Robin Worsnop, chair of ETAG, said that with a jobs shortfall forecast for the capital the industry should be less reliant on migrant workers in the coming years.

He added: “[The industry] offers opportunities for young people to find work and get on the employment ladder.”

Logged in as:

Comment here. Start typing your comment here:

Post comment

Please adhere to our Community guidelines

Your view

Please sign in to be able to comment on this story.