The following is offered as evidence in connection with this inquiry by the Scottish Affairs Committee of the House of Commons. It also relates to the testimony of Matthew Hudson scheduled for 3 June, 1998 in the matter of Regional Aviation Services—which is being investigated by the DETR. Understandably, our interest is largely concentrated on some of the issues raised by the fourth of the main questions posed by the Scottish Affairs Committee viz. Whether and What changes could be made to encourage people from abroad and from the UK to take their holidays in Scotland?

  We recognise that the other questions posed by the Committee are inter-related to the fourth question and accordingly we have responded to each of them.

Question 1

THE VALUE OF TOURISM

  As Scotland's biggest industry the value of tourism to the Scottish economy is self evident in terms of financial benefit. The hundreds of millions generated in tourism is one of the key gear wheels of the Scottish economy. It is however a gear wheel which should be turning more quickly and efficiently. As the industry which employs more people directly and indirectly than any other it is remarkable that the jobs themselves are often not even recognised as being tourism related.

  Governments normally recognise the industrial logic of attracting inward spending in order to create employment. When that spending is done by a multi-national corporation it is called "investment" and the Scottish Office through Locate in Scotland quite correctly spends substantial sums to secure such spending. In the same way export sales are encouraged by government, either directly through the guarantee of export finance or indirectly through government to government contacts.

  Tourism is the world's number one industry. It is the best form of export sales. Instead of moving a small number of our goods and services to the foreign customer, Tourism is the business of moving the foreign customer to all of our goods and services.

  When inward spending is done by a multitude of individual foreigners (tourists), we seem not to regard this spending in the same way as the "investment" spending performed by the single corporate foreigner. Yet surely spending by tourists enables a job creation process which is a more efficient way of creating employment from foreign spending than the corporate investment. The same spend clearly produces more jobs—doesn't it?

  Common sense tells us that:

—  tourist spending tends to be injected at ground level - it is paid to the worker or to the worker's direct employer

—  all of the tourist spend is injected directly into the host economy, none goes to the Inland Revenue; or for the rates; or for National Insurance; or for legal fees; or audit fees; or advertising; or the middle, upper and senior management; or executive travel; or directors fees; or license fees to the parent corporation; of for dividends to the shareholders; etc, etc.

—  tourist spending is distributed throughtout the economy, not concentrated in just a few industrial and perhaps overcrowed locations with attendant stress on infrastructure, school systems and so on

—  in-country tourist spending is gross - i.e. 100p. on the £. It is not net of the costs of government as is the factory pay packet

—  tourist spending is environmentally sustainable

   If the Scottish Office regarded Tourism as a good industrial investment, and therefore worthy of targeted, project oriented financial assistance, it would be possible to develop mechanisms to substantially enchance Scotland's earnings and employment from tourism on a sustainable basis.

Travel—the Barrier confronting Scottish Tourism

  For our three largest markets, North America, Europe, and the rest of Britain/Ireland, the cost of gaining access to Scotland by air has not only been expensive but also uncompetitive when compared to the travel costs on offer from these markets to other holiday destinations.

—  When Scotland is not competitive in terms of the cost or convenience of air travel, the holiday sale goes to a competitor.

—  When Scotland and other competitors suffer equally because the transport costs relating to air travel are prohibitive, the choice is normally made to travel via surface mode. Scotland will almost always lose out in this case, because Surface travel to Scotlands is

(a) impossible;

(b) relatively expensive or time consuming (usually both); and/or

(c) at the end of a journey which offers attractive intervening opportunities.

  A corollary problem is that the air traveller finds internal road transport costs to be very expensive, particularly when compared with North America. Car rental and operating costs in Scotland may be two to three times as expensive as those in Canada or the USA.

What then is a positive approach to the problem of selling "`Scotland the holiday'"

  The constituent elements of the tourism "sales trail" might be seen as:

—  marketing—bringing Scotland's Unique Selling Points to the attention of a potential client;

—  value comparing—the process whereby the client undertakes an assessment of what is on offer from dirrerent regions in the world versus the cost and inconvenience of getting there and being there;

—  selling—the ease or otherwise for client in purchasing the component parts of the holiday on a basis which gives confidence that "all will be well";

—  delivery—on time every time delivery of the "product" whether this is the air travel, the in-country travel, the rooms, the meals, the waitress, the front desk clerk and so on;

—  the follow—life cycle service. These guest are potential long term repeat clients. The creation of a life long relationship will lead to additional business from them, their families, friends and acquaintances. The first sale is the most difficult. We must build on the relationship. We must show that we care after our guests have returned home.

  Let us address value comparing and selling with a focus on Value in the North American market.

  It is perhaps a truism, but worth stating, that without a valuable product one has very little to bring to the attention of potential clients. Therefore marketing must be predicated upon value. The creation of value must procede marketing.

  If marketing Scotland is a proper function of the Scottish Office—(Locate in Scotland/the Scottish Tourist Board)—it follows that the creation of value is also a proper function of the Scottish Office.

  However it can be argued that the creation of holiday value (as opposed to industrial value) has not received an equal degree of support. Yet Travel and Tourism is the world`s largest industry!

  The threshold issue for perceived holiday value is the entry cost.

"How much will it cost us to get there?"

  In the case of air travel this means

"Can we fly direct?"

  If Scotland passes these hurdles it will then go into competition with other potential destinations that have also passed the first "sort". In this comparison of value, the USPs of each destination (here is where marketing effectiveness is very important) are considered. Thus marketing will have the highest cost/benefit ratio when targeted at markets with access to low cost convenient air travel—ie value is available.

  It we don't fall at the USP or marketing hurdle the "selling" mechanism(s) come into play. One of the most important sales questions is

"How easy is it to reliably arrange everything we want before we go?"

  If we are to be completely candid about the North American market, a holiday in Scotland is hard pressed to surmount these hurdles. People come here in spite of the answers, not because of them. But it need not be so.

What does Scotland Need?

—  inexpensive seats flying direct from a large number of North American conurbations;

—  a mechanism for delivering those holidays that include everything the client wants whether that be a little or a lot;

—  a mechanism that will provide the client with one stop shopping in a way which at the time of the booking instils confidence that all will go well.

  All of this is possible. Here is how.

Seats

  Scotland has always been passive when it came to air services. We have never controlled our own airline (pace Highland Express) nor until very recently our own airport. We have encouraged, cajoled or pleaded with scheduled airlines—foreign flag carriers all—but have we misunderstood the need?

  Scotland's need is not to fly daily direct "scheduled" (expensive) services to less than a handful of North American cities.

  Scotland's need is to create low cost, regular, dependable weekly or twice weekly servics from at least two dozen Northe American conurbations.

  Tourists are coming for one or two weeks. "Daily" services are not critical to the successful provision of personal travel.

  "Schedule" means high overheads, high prices and low value and is not what we need—a large range of reliable and predictable (every week, every season, every year) services at low cost. We want value and so do our clients, the holiday makers.

  City Centres are not important. We are not business travel market. Tourism is all about personal travel. Tourists travel to and from homes. We need conurbation links with easy to reach and easy to use airports. Airport that cater for personal travellers and their families.

  We need direct services that are low cost, scheduled, predictable and reliable.

  The problem as first presented is the need to fly North American tourists from an airport near their home to Scotland, and Scots/other Europeans to a relatively large number of airports serving the broader range of American and Canadian tourist industries.

  However there are 52 Americans and 5 Canadians for each Scot. It seems axiomatic that the solution lies in servicing the almost 300 million, not the less than 6 million. Thus Stagecoach Aviation Group ("STAG") seeks to promote Scotland as a wayport or holiday hub accessing the regional airports of Europe and providing direct low cost links between the North American and the European markets which are of the same order of magnitude.

Selling

  Given the establishment of direct services to/from a large number of North American conurbations at competitive prices we still need to overcome the problem of selling. We need to make it easy for the client to arrange all of the important holiday details with one stop shopping—and we need to offer value, custodial care and reliability.

  In fact we need to offer the holiday client the same service advantages that Federal Express offers to its clients versus the "take a chance" mechanism of belly cargo. We need to offer "door to door custodial care" or as close to it as possible. The difference is that whilst FedEx charges more for its sophisticated service, we will charge less than the alternative—the high overhead "scheduled" carrier which relies on corporate tax deductible travel to overpay for what is on offer to the business traveller.

  "Door to door custodial care" translates realistically as "holiday custodial care" from the North American or European airport throughout the holiday and back to that airport.

  This is possible.

  We have a very efficient industry that does the same thing for Scots.

  The product is called a package holiday. It provides excellent value for money and is responsible for pumping more than a hundred million pounds of Scottish sterling abroad every year.

  The constituent elements of the British Package Holiday Industry are the:

—  Tour Operator, who contracts with the

—  Accommodation Operator, and with the

—  Charter Airline, and with the

—  U.K. based sales organisations

  We need therefore to create our own mechanisms focused on bringing North Americans to Scotland and providing opportunities for Scots and other Europeans to travel conveniently and inexpensively to North America.

  The machinery will include the Air Tour Operator; the provider of the in-country product (travel, accommodation, tours, golf etc); the Charter Airline; and the North American, Scots and European sales organisations.

  Scotland has its own well established Air Tour Operators with many years of experience in North America and Europe. STAG through Glasgow Prestwick International several years ago established Great Holidays Limited to promote Scotland in the British Isles and more recently Braveheart Holidays Inc. which has recently begun a successful business targeted at the North American market. These concepts can and do work.

Scotland and International Scheduled Services—an endangered species

  The fact that international airlines have developed in such a way as to lose sight of basic travel value is no reason for Scotland to suffer. Given the relative populations of Scotland and the USA it is interesting that Northwest, United, American and BA have cited the lack of Scottish business travellers as the reason why their daily year round services to Boston, Washington and Chicago were not economically feasible. Surely the problem does not lie with the Scottish market. The problem is the product. The market is not business travel—it is personal travel. The market is not Scots—it is others seeking Scotland.

  Traditional airlines would do well to take counsel from Pogo who said — "we have seen the enemy and he are us."

  The loss of the Scheduled flag carrier services with the attendant loss of direct seats to/from America is very significant to the Scottish economy. The former Northwest DC-10 service provided 290 seats year round or some 104,000 seats p.a. At a load factor of 85 per cent, 10 per cent business travel and presuming 60 per cent Scots, the withdrawal of this service alone represents an annual loss of more than 55, 000 occupied tourist seats to the American economy, and 37,000 annually to the Scottish tourist industry.

Some money and some numbers

  Given 30 return services weekly from 20 North American airports utilising a mixture of B757, B767, B747, L1011 and DC10 aircraft let us presume an average capacity of 300 seats. Let us further presume that 25 of these services have Scotland as an intermediate destination, for instance New York-Scotland-Manchester, Manchester-Scotland-New York; or Toronto-Scotland-Newcastle etc; Los Angeles-Scotland-Gatwick (or Luton or Stansted). The continental possibilities are just as important viz. Chicago-Scotland-Warsaw; Toronto-Scotland-Milan and so on. Often but not always Glasgow Prestwick would be the Scottish airport because many programmes may be sensitive to runway length, weather and turnaround times, whilst airfield and airport related charges, fuel prices etc. will always be prime factors.

  Note that Scotland, because of location and because of the innovative approach of Glasgow Prestwick is able to provide best practice to its clients.

  In retail terms Scotland becomes the intervening opportunity.

  The reader being familiar with Scotland's location on the Great Circle Route and knowledgeable about aircraft operating costs will recognise that the intervening opportunity position is of considerable strategic importance not only as to other British destinations but equally as to a large number of Western European airports.

  Returning to the money. Of the 25 services having Scotland in the intervening postion, let us presume that 50 per cent of the seats are filled by travellers to/from Scotland and that one quarter of those seats are taken by Scottish origination traffic. Of the 5 services turning (terminating) in Scotland (100 per cent to/from Scotland) let us presume that 40 per cent of the seats are taken by Scottish origination traffic.

  This means that the 25 flights per week will bring in-bound 2810 tourists and the 5 will bring 900 tourists. A total of 3700 in-bound tourists per week in high season. If we presume: a 22 week season as described (high season); a shoulder season of 18 weeks at 60 per cent of the services/traffic; a low season of 12 weeks at 40 per cent services/traffic; the average holiday is 1.5 weeks of which 10 days and nights in Scotland; and average total spend (excluding air fares) per person per day is £75, then this programme would bring 140,000 tourists spending more than 1,400,000 nights and £100 million in Scotland.

  Said another way Scotland would garner 3,700 tourists a week in high season, 2,200/week in the shoulder seasons and 1,500/week in the low season.

  The European destinations based on similar traffic assumptions from the 25 through flights would attract 2,800 visitors/week in high season whilst the North American tourist markets would garner some 2,500 tourists per week during the high season.

Employment and Quality

  The quality of the employment generated is more than often seen as being low paid and seasonal. And in too many cases, seasonal work is carried out by inexperienced, untrained and unmotivated employees. The danger is that the message might be seen as "The worst workforce is appropiate for our largest industry."

  In other European countries serving the public is considered to be of such a priority that staff appropriately educated and rewarded are utilised. In Scotland it is not given the corresponding status.

  The problem therefore continues with insufficient consistency in terms of staffing and experience. Although progress has been made we need more public awareness in Scotland, more visitors and more profits and higher wages.

  What is required is a campaign to raise the awareness of the key role that tourism plays in the Scottish economy; to make everyone aware of the importance to cater for and deal with tourists with good quality and dedicated staff. If we had more visitors we could and should provide more assistance to tourist-based employment areas than is available at present.

Question 2

THE STRUCTURE

  The structure at present is not efficient. Local tourist boards comprised of locally based individuals appointed and co-opted by local authorities; hoteliers and other individual businesses determining a myriad of tourism stratergies, or none, is not the best method of addressing the requirements of a tourism based economy.

  The Scottish Tourist Board itself is under-resourced and in the minds of many appeared to have lost its way over the years. Under its new Chairman there is great promise of effective leadership. Lord Gordon will undoubtedly ask the right questions, the difficult questions.

  Two of the questions are:

(a)  Why is it so difficult and expensive to fly to Scotland?

(b)  Why is Dublin packed with Americans and Edinburgh is not?

  Local tourist boards such as the Ayrshire and Arran Tourist Board, have a handful of employees determining tourism related initiatives, and are saddled with scarce resources to cater for the needs of the country's biggest industry. They cannot possibly operate efficiently or effectively.

  Dedicated professional organisations operated on entrepreneurial lines, generating their own revenue and creating business opportunities would be more appropriate. They could feed in to a pan-Scottish organisation of the same type, not unlike the Irish system.

  Tourism needs to be professionalised.

—  the traditional Scottish approach deals with either

—  (a) product delivery; or

—  (b) the producer

  But NOT the customer

—  product delivery - traditionally we have been concerned with point of sale product quality - thus training has been a focus

—  the producer - traditionally we have adopted the "institutional" approach to marketing. An example is the previous STB brochure where the general virtues of the producer (Scotland plc) and its facilities are extolled, but no product specific information is provided. There is nothing to buy!!

—  No sale = no revenue = failure.

WE SHOULD FOCUS ON THE CUSTOMER.

  If we did we would see that the Customer needs

—  a general awareness of the opportunity—this already exists [Scotland has a positive and a global, brand image—which is underutilised]

—  specific product specification and price information—difficult to obtain

—  a cost effective, reliable and convenient delivery systemdosen't exist

—  someone to take the order (this at a minimum)—who might this be

  The Sales Trail consists of

—  identify regional markets with pre-existing cultural or other connections

—  create saleable product (packages) and sales material (brochures) appropriate to these connected markets.

—  create individual delivery systems, market by market, linking the product to the customers. Make the physical connection;

—  create the "Away Team" — the regional sales networks in the connected markets;

—  prime the pump with targeted advertising and public relations campaigns but only in the connected markets.

  In the absence of these five steps we don't have a strategic plan and certainly any money spent traditionally does not provide best value nor highest benefit to Scotland plc.

Question 3

PUBLIC AND PRIVATE INVESTMENT

  Both public and private finance is required. Public in the form of training grants and subsidies for employment (job recreation).

  We need a national debate on why Scotland has not suceeded in the same way as Ireland has. Government needs to lead and fund this debate.

  Most of all we need better and more affordable air services. This is an area where the Scottish Public and Private Sectors can properly and profitably work together to produce maximum public benefit.

  Public/Private joint initiatives should be encouraged to deal with key tourist attractions eg golf (we need more courses and the persona of the famous few must be extended to the excellent but unknown courses), skiing, fishing etc.

  At this time there is little structured contact between the public and private sector in respect of tourism.

Question 4

WHAT CHANGES COULD BE MADE

  Tourists cannot get to Scotland easily/cheaply.

—(a)  They come through London.

—(b)  Scotland is usually an "add on".

—(c)  The British Tourist Authority is the English Tourist Authority and London is everything.

  With no meaningful air connections to and from Scotland the problem will continue to be one of small numbers of highly motivated overseas tourists visiting Scotland. Large numbers of tourists clearly wish to visit Scotland, but it is difficult, complicated and expensive for them to do so. So they go elsewhere.

  Direct air links from overseas available at reasonable prices is the simple solution to what is perceived to be complicated problem.

  If a Spanish man and Woman could fly from Madrid to Glasgow Prestwick for £140 return, that Spanish man and woman would come to Scotland for a holiday—simple.

  The same goes for Germans, French, Swedish, Americans, Italians, Portuguese etc.

  As long as everything and everyone is channelled through Heathrow and Gatwick with the support of BAA and BA, Scotland will lose out. As long as everything is London focused, Scotland will lose out.

  There needs to be an awakening to this in Scotland. The lack of direct flights to and from Scotland is a matter of national importance and needs to be urgently addressed at the highest levels—including our new Parliament.

  Tourism should be far and away our most successful industry. It is not.

—  The tourist industry is extremely diverse consisting of a large number of businesses located throughout Scotland. Most are independently owned and operated. It is the quintessential cottage industry.

—  This cottage industry is "National" with all that word implies.

—  The "product" of this national cottage industry is hospitality.

—  The unit of sale is a unit ot time, usually measured in days.

—  Whether we are selling "short breaks" of two to four days; a week; or a fortnight, we are in competition with many other national tourist industries.

—  By far the largest of available markets is the export market—visitors.

—  Transport for the majority of potential customers is best by air. Either the purchaser of a short break does not wish to consume 2 days in driving or the distances/geography involved in delivering the export buyer (visitor) to our product eliminate other forms of delivery.

—  Our National Business Plan is fatally flawed because we do not have appropriate delivery mechanisms for our products.

—  We do not have sufficient direct air delivery systems which are capable of accessing our prime markets at a cost which allows us to compete effectively with other national products.

—  We do not have a national (Scottish) Aviation Policy. Most, if not all, value added industries in Scotland are thus needlessly hadicapped. This includes not only Tourism but other sectors such as Electronics.

—  Because Tourism is a diverse cottage industry it should be able to rely on government to fulfil its traditional roles—organising and assisting not only the means of production but also the export mechanisms—the selling and delivery of the product. Instead the Westminster government erects barriers against Scotland—not in the form of tariff walls or anything quite so obvious but through the erection of regulatory barriers against effective and cost efficient air transport systems. Even more insidious, none of our competitors, including the English, suffer from such barriers.

—  Scotland is therefore doomed to relative failure in maximising economic benefit from the world's global industries, including Tourism, an industry in which Scotland has tremendous inherent advantages due to the world wide recognition of our "brand".

Proof

—  Over the last 10 years the number of international visitors to Scotland has not increased in line with comparable European tourist destinations such as Ireland.

—  Ireland and Scotland make a good "apples and apples" product comparison for the international tourist. Same language, same climate, similar countrysides, great cultural similarity, same outdoor activities (golf, fishing shooting, riding), same delivery distance, same international Gateway (London).

—  In 1985 Ireland's only air connection to London was provided by the two government owned carriers British Airways and Aer Lingus. The route was a shared monopoly with fares to match. Ireland was a distant second for international tourists as compared to Scotland.

—  In 1986 a small private Irish carrier began to serve the Ireland/London route with a fare of £99 return. The route grew to 900,000 passengers that year. Eight years later that carrier had reduced its fare to £59 return, there were five carriers and three million passengers on the route, and in the Tourism contest Ireland was in first place.

—  Scotland still suffers the same financial remoteness from the Gateway. The cost of air fares between London and Scotland still handcuffs the Scottish economy just as Ireland was handicapped 10 years ago.

  There is nothing to choose between the Irish and Scottish tourism products except for the delivery mechanism. Ten years ago the delivery mechanisms were similar and Scotland outsold Ireland. Ireland improved its delivery mechanism and now outsells Scotland.

  For more proof of the direct relationship between air fares and economic activity here is a Scottish example.

—  Scotland/Ireland was served by Aer Lingus and BAA (Glasgow Paisley). The route was an effective monopoly. Fares reflected the lack of competition. By November of 1993 traffic had been in decline on the route for several years. Using passengers in November 1993 as 100 per cent, one would have anticipated a fall in Aer Lingus passenger loads to 97 per cent or less in November 1994.

—  However in May of 1994 Glasgow Prestwick International inaugurated a new service with Ryanair as its service partner. Return fares from £55, as little as 25 per cent of many of the Aer Lingus fares. By November 1994, six months into the new GPIA/Ryanair service, Aer Lingus/BAA had increased traffic to 103 per cent of November 1993. On the other hand the new GPIA service starting at0 per cent reached 154 per cent of the November 93 Aer Lingus loads in only six months.

—  Said another way, after only six months of operation the new low cost air service had increased total traffic on the Scotland/Ireland route to 257 per cent—in what had been a declining market.

—  By February 1995 the year on year total market size was more than 300 per cent of the previous year—and this after less than 12 months of the new service.

SCOTLAND'S TOURIST INDUSTRY NEEDS LOW AIR FARES SUPPORTED BY TARGETED (ROUTE BY ROUTE) FOREIGN MARKETING

—  In the case of the new, successful, low cost Ireland/Scotland service from Glasgow Prestwick, the only marketing spend that has taken place in either country was that funded by Glasgow Prestwick in Scotland. No money as been spent by others in Ireland promoting either Scotland or the new Service.

—  As a result traffic on the route is 75:25 in favour of Ireland. That is 75 per cent of the passengers originate in Scotland, and only 25 per cent originate in Ireland. Even on a pro rata population basis the split would be 60:40.

  The Irish market required nothing from STB/Scottish Office in order to create the delivery mechanism (low cost air travel) because the subsidy provided by Glasgow Prestwick International Airport is relatively much larger for a very short flight. The aviation expertise of Scotland's Independent Airport, plus its commitment to provide relatively large journey subsidies has been sufficient to more than triple the size of the air travel market between Ireland and Scotland. This success has been based on the low pricing of airport related services (including AirTrain; parking; duty free to name but a few) as well as the ease of use of Glasgow Prestwick and the low cost of the Boeing 737 flights offered by Ryanair the Airport's service partner.

Scotland has a unique airport

  The principles described in this paper are not predicated on the use of Glasgow Prestwick International. Having said this, I must add that the national strategic economic importance of Glasgow Prestwick International to Scotland is not generally understood.

  Fundamental to the Airport's ability to fulfil its community function has been the unusual way in which the Airport is operated.

  Many airport owners collect only the landing fees plus the fees charged to aircraft for parking. For example other than airport fire protection, information desk and passenger search, it would appear that all of the other services at Abbotsinch (Glasgow Paisley) are provided to airlines and the public by the third party businesses operating under licence or lease. These include:

—  Aerodrome Air Traffic Control

—  Baggage handling

—  Ramp services such as aircraft cleaning, toilet, water, push back etc,

—  Aircraft fuelling

—  Aircraft handling

—  Flight catering

—  Security for passengers, hold and hand luggage, cargo and freight

—  Building and electronic security and fire monitoring

—  Freight handling

—  Customs Bond

—  Check-in

—  Passenger handling

—  Car parking

—  Duty free

—  Shopping

—  Restaurants and bars

—  Grounds maintenance

  At Glasgow Prestwick International all of these services are provided by the Airport itself along with a host of other related activities - ownership and operation of the Rail Station; Skye Travel, our travel agency; Great Holidays and Braveheart Holidays our Tour Operators;

  As a result of our multi-disciplinary approach Ryanair, our London Stansted and Dublin service partner needs no employees in Scotland, whilst we have increased our own crew complement by 700 per cent (from 51 to some 400 full time equivalents) since acquiring the Airport from BAA.

  Not only does Scotland's Independent Airport provide one stop shopping for our customers (airlines, tour operators, shippers, consignees etc.) but we are able to effectively control service levels and costs throughout the entire airport based service community. Because of our different "vision" and in part due to extensive and multi-skilling, we have been able to eliminate many levels of overhead and increase profit. The result is a low cost, high service quality Airport, capable of acting as an efficient instrument of regional economic policy.

  This radical structure allows Glasgow Prestwick to offer a unique package of financial incentives to those who are capable of creating low cost airbridges (delivery mechanisms) to Scotland from our important regional markets in other lands.

Problems & Solutions

  London—The International Gateway [but not Scotland]

  —  the lack of automatic common rating with London coupled with the punitive cost of monopolistic air fares on London-Scotland routes combine to greatly restrict Scotland`s international tourism; as well as short breaks originating in South Britain.

  Direct International Air Services [where are they?]

  —  an initiative is needed to provide for the creation of a wide enough (number of foreign airports) and long enough (normally not less than 20 weeks) programme with frequencies not less than once per week for each service and more frequent services in season for major areas such as the New York/New Jersey conurbation.

  —  Who will build and maintain the structure of each delivery mechanism, the network consisting of the Scottish airport operator; the American airport; the airline; the air tour operator and in some instances the "beyond" airport in Europe and a "beyond" air tour operator?

  Good Products Need Packaging

  —  creation of an inventory of complete Scottish holiday packages sold in the originating market (and beyond markets where applicable);

  —  creation of a data base offering the building blocks to allow the client to create bespoke personalised packages.

  Foreign Sales—the EuroScotland network

  —  creation of a passive data base listing all of the pre-packaged holidays in Scotland and the beyonds;

  —  creation of an interactive data base to allow "build your own" package holidays;

  —  assembling the networks of travel agents and others to sell; or consult, build and sell, the packages;

  —  the on-line capability to book the air travel and the ground arrangements;

  —  ownership of the data bases ("dbs"); inclusion in the dbs; operation of the dbs; capital and running cost of the dbs.

  Delivery Of The Product

  —  who will deliver the product, monitor quality, supervise training, handle complaints?

  —  who will pay for this?

  The Follow Through

—  who will follow the product providers to ensure

—  that complaints are dealt with swiftly and correctly;

—  that new product ideas are considered and implemented where appropiate;

—  that capital investment is made where required;

—  that the in-country infrastructure is constantly kept competitive, including the provision of relevant and motivational training;

  —  that correct marketing is pursued on an on-going and strategic basis?

—  who will follow the client to ensure positive peer recommendation and facilitate repeat business?

Direct air services—some details

  In the case of North American tourism the Air services should be direct services from North America to Scotland and a European "beyond" destination—whether this be Birmingham or Brussels, Liverpool or Lyons, Manchester or Milan.

  Scotland and its airports are on the Great Circle Route so that Scotland constitutes an intervening opportunity for North American—European air travel both eastbound and westbound. Scotland is also on the Polar Route providing a short route for Far Eastern tourists inbound to Europe.

  Glasgow Prestwick has the advantage of very quick turnarounds—due to our control of all functions from security through check-in; baggage handling through ramp services; aircraft fuelling to air traffic control. Glasgow Prestwick also has Scotland's only underground fuel hydrant system which allows for faster and safer aircraft refuelling than the use of tankers - so important for long haul flights particularly those being refuelled with passengers on board.

  At Glasgow Prestwick we can offer a 20 minute stop Eastbound and 45 minutes Westbound/Northbound—the difference being caused by the larger fuel loading required for the intercontinental flights.

Let's look at different air service scenarios assuming a mean aircraft configuration of 300 seats

  1.  USA to Scotland to USA. 50 to 100 Scots—200 to 250 Americans.

  2.  USA to Scotland to beyond, say Birmingham. Birmingham to Scotland to USA—50 Scots and 100 Americans destined Scotland; 50 English and 100 Americans destined Birmingham. Initially 150 seats fly Scotland/Birmingham and Birmingham/Scotland.

  3.  Same routing as 2 except the beyond is Paris. 50 Americans disembarking Scotland spend second week Paris and make use of some of the low cost empty short haul seats Scotland/Paris and Paris/Scotland. Same for 50 Americans disembarking Paris who spend second week in Scotland. Now only 50 seats fly empty on Scotland/Paris legs.

  4.  Same routing as 3. Some French visitors use low cost empty Paris/Scotland seats to vacation in Scotland.

  5.  Some Americans leave America for two weeks or three on an Air Service Phoenix/Glasgow Prestwick/Paris and disembark Glasgow Prestwick. Later in vacation they travel Glasgow Pretswick/Munich, returning Munich Glasgow Prestwick and then later still Glasgow Prestwick/Phoenix. This makes use of two Air Services—Phoenix/Glasgow Prestwick/Paris and Newark/Glasgow Prestwick/Munich. Since there will normally be empty seats on the short haul legs (Scotland/beyond and beyond/Scotland), the flexibility of a split vacation can be offered for very little additional cost, so long as the outward (home to Scotland) and return (from Scotland to home) legs are enough days apart to allow other flights offering the preferred "beyond" to operate outbound and return to Scotland.

  6.  In summary and from the purchaser's viewpoint, the product range is:

—  USA to Scotland; and return home.

—  USA direct to England, Wales or Western Europe via Scotland.

—  USA to Scotland visit; then beyond visit.

—  USA to beyond visit; then Scotland visit.

—  Beyond visits to Scotland and return.

—  USA to Scotland the hub, for a choice of beyonds combined with Scotland.

  All these Air Services are product and value driven. They are not cost effective vehicles designed to deliver tourists to Scotland; not overly expensive chariots hoping to take Scots business travellers to America.

Air Services - the present market failure

  Let us presume that each tourist will spend £750 in Scotlsnd and that the average air fare is £300 for these new Air Services. Presently we do not get the £750 because the air fare is much higher (no common rating with London); because we lack direct flights from airports near to the prospective tourists homes and because the other elements are not in place. We thus suffer from market failure. Why do I say this?

  Since the bulk of the infrastructure supporting the £750 spend is already in place, the incremental cost to our national industry and its providers of goods and services is less than £750. The hotels, restaurants, ships, trains, taxis etc. are already built, purchased, equipped and staffed. If incremental product cost is, say, £200 (mostly consumables) then the balance of £550 is a net "contribution" to Scotland's economy by way of business profits; wages; taxes etc.

  [To make the example clearer let us take the case of Caledonian MacBrayne. Presume it receives a marginal subsidy which represents 25-30 per cent of its total costs from the Scottish Office. If our incremental tourist spends £25 of his £750 on CalMac, the public purse the following year will benefit by a reduction of the subsidy by £25.]

  Therefore if we lose a net national "profit" of £550 because the tour operator/charterer fears a loss of £250 on the airline seat (versus his potential profit of £50) and so does not provide the air service, then the market mechanism has failed. This failure arises solely because the seat risk taker does not share in the greater available gain—ie the £550 profit available to Scotland.

  The risk to the national industry is that the visitor will choose not to come because we lack a convenient cost competitive delivery mechanism. Said another way, we cannot afford to lose a sale of the national hospitality product because we are asking the delivery sub-contractor to assume the entire transaction risk, in return for only a very small part of the total gain available. But of course this is the situation which prevails at the moment. It means that our visitors for the most part are "pilgrims". They are highly motivated; visiting friends and relatives; mostly empty nesters they are not travelling with children; and they either have high disposable incomes or are making a rare trip for which they have saved for a year or more.

  On the illustrative figures presented, the arithmetic tells us that we are better off to make common cause with the delivery sub-contractor so that he receives whatever assistance is actually and prudently required to establish his delivery service, so long as there is a net gain for Scotland.

  It follows that at the inception of each new air service and until it is well established, there will clearly be a gain available to Scotland which can be obtained by supporting the establishment of the service (delivery mechanism).

  How might this be done, carefully, effectively and prudently?

  Whilst we must admit the future fallibility of grant funded organisations, we should also take on board the past experience and present leadership of the STB. Against this one must also acknowledge the paucity of its funding and its reliance on the British Tourist Board. Both are unhelpful.

  Whilst the STB doen not have an "industrial" heritage the new Chairman is a seasoned and successful entrepreneur. Is this not a recipe for joint action? Why should this not be a win-win?

  A joint venture of the STB and the private sector could own the proposed network which should make a "profit" in the following way — the creation of a self funding programme in which each transaction using the network would pay a levy. Sellers of goods and services through the EuroScotland network would pay an annual membership fee and a success fee or levy on each transaction based on a % of the value of the sale.

  The fund created by these fees/levies could be used to create an "insurance" mechanism to fund empty seats and/or to buy down the cost of seats to allow even cheaper last minute bookings — this being much preferable to flying an empty seat which results in no £300 for the airline and no £550 net contribution for Scotland. Better to spend/subsidise £150 for the seat, gain £150 for the airline and gain £400 (£550-£150) net profit for Scotland. The present alternative is to spend nothing and get nothing.

  In the beginning the STB/private sector joint venture might need assistance from the Scottish Office or our new Parliament, but as the programme grows the initial funding can be recaptured and the fees/levies should create a money spinner which can then be used to fund additional foreign marketing, BUT ONLY in those markets which have the benefit of an efficient delivery mechanism.

  If I may leave the reader with one final thought.

SCOTLAND AND SCOTLAND'S TOURIST INDUSTRY NEED TO SUPPORT LOW AIR FARES WITH TARGETED FOREIGN MARKETING ON A ROUTE BY ROUTE BASIS

—  In the case of the new an successful low cost Ireland/Scotland service from Glasgow Prestwick, the only marketing spend that took place in either country originally was that funded by Glasgow Prestwick in Scotland.

—  As a result traffic on the route is 75:25 in favour of Ireland. That is 75% of the passengers originate in Scotland, and only 25% originate in Ireland. Even on a pro rata population basis the split would be 60:40.

—  We must put in place the means to provide for low cost delivery mechanisms on each important international route. Then, before activating the mechanism (starting the flights), we must mount a targeted and effective marketing campaign in that market.

—  Where necessary in the early days of new air services we must have the ability to smooth out the cash flow implications of uneven loads, otherwise the "delivery man" won't operate the aircarft — which leads us back to market failure.

Question 5

CREATION OF THE SCOTTISH PARLIAMENT

  A Scottish Parliament will provide an opportunity for this subject to be examined afresh.

  Communications (or the lack of them) between the rest of the world and Scotland must be given the highest priority. The lack of air links to and from Sctotland is a national disgrace. No other advanced western country is so isloated in aviation terms. Resources must be offered to encourage operators and/or carriers to examine the problem and address it.

  The new Parliament will surely be free to contemplate a non London gateway strategy which Scotland so desperately requires. The new Parliament will be free to look at the joint venture of the STB and the private sector.

  The new Parliament may be our last hope of properly utilising our great brand to benefit future generations of Scots — the ones that stayed home.

  In the same way in which Glasgow Prestwick was brough back to life and now breathes strength into the Scottish economy, so must the Tourist Industry be revived.

  It can be achieved by making brave decisions, ignoring the pessimists and cherishing national pride.