A presentation to the World Productivity Congress, Edinburgh,
As the Liberal Democrat spokesman on Tourism in the House of Lords, I wrote a Liberal Democrat paper called Tourism Tomorrow in which I set out to explore some of the challenges the industry in the UK will face over the years to come. (Coincidentally the Government very kindly then issued a paper earlier this year called Tomorrow's Tourism so clearly there is no great monopoly on good ideas for titles for tourism topics.)
I am here today actually more as an individual, more as a practitioner in the industry. I want to share with you some of the dangers and some of the opportunities that I see for my industry in the future, and make one or two predictions which I think develop into a series of challenges.
The WTO, the World Tourism Organisation, estimates that the global value of tourism in 1998 amounted to some £270bn sterling. The value in Europe alone is reckoned at £130bn sterling, and for the United Kingdom last year our Government estimated its value at £53bn - so we are talking about big numbers. The world industry has been growing at a rate of 12% per annum for the last ten years and that growth track is expected to continue.
In the United Kingdom, the Department of International Development in a paper on 'Nature Tourism' began one section with this sentence:
'Tourism overtakes oil to claim the crown of the biggest industry on earth'.
Here in the UK it's reckoned to be worth 10% of our GDP: the WTO reckons it's worth 10% of world GDP and employs 10% of the world's workforce. We have 1.75 million in the United Kingdom employed in the industry in some 125,000 businesses. It is the UK's largest invisible exporter. So however you look at the industry, however you choose to define the numbers, it is a big industry. The actual figures do not really matter - this industry is either now, or soon will be, the world's largest industry.
The challenge for us is to look at that industry and see whether we can make it a productive industry, or whether it simply becomes yet another big, bad industry leaving behind environmental damage and social disruption. What matters is not the numbers, but the practices and processes within the industry.
Firstly, I would like to differentiate between tourism and leisure. This may seem like semantics but I actually think it is at the core of how you look at the development of the industry in the future. A statement of the obvious : tourism is an economic process. It is an economic process like those taking place within factories everywhere. The industry simply operates all over a country and all over the world but it remains a process designed to create wealth and, like any other process that's designed to create wealth, it has its down side. Just as you would not locate a Ford factory in the middle of a world heritage site, so you have to be rather careful how you exploit tourism. It has social and environmental implications.
If you take a little Cotswold village of 20 or 30 houses, and then impose on it bus loads of people visiting from all round the UK or the world or wherever, and the inhabitants get only the rubbish when the visitors leave and the disruption of the parking while they are there, what is the benefit to them of tourism? The answer is easy - none whatsoever.
Environmental damage from tourism is growing all the time. Air transport is actually one of the most polluting forms of transport. The growth in cars in terms of both the numbers owned and the amount they are used is highly polluting but people are also a major pollutant. At Sissinghurst (one of the beautiful gardens in the south of England owned by the National Trust) they have had to close large portions of the garden because the grass is worn out from the sheer number of visitors. So, there can be disadvantages to tourism in both environmental and social terms.
Leisure is something rather different. Leisure is something that is very often provided within a community, by a community, for the residents of that community and leisure is something - as the world develops -that we are more and more seeing as something that people have a right to. Tourism, however, is largely something done for others - for visitors from a different community. Although there are overlaps, I think it is important that we don't conflate the rightful aspirations for leisure for a community with the economic process of developing tourism. The proper objective for tourism and tourism development throughout the world should be the maximum economic benefit for the minimum social and environmental disruption. All producers in the industry are going to have to come to terms with this dilemma.
Because of the highly fragmented nature of the business (in this country alone 125,000 businesses), there will be nothing within the industry itself to control and develop a co-ordinated approach. It will require government invention at all levels, and we will start to see - and it has begun already in this country - the development of national tourism strategies.
The first challenge is that in order to put together a strategy one has to understand the component parts, and that means having the ability to measure. How do you measure the damage done by that bus in the Cotswolds? How do you actually come to terms with the damage that people do in the flow country in the north of Scotland, and measure that against the benefit that has come into the community from the expenditure they have made? I don't know but I suspect there are a lot of people attending this Congress who have the intellect and the education and the training to be able to start putting that together, to be able to start telling us how we should measure those things, and I think measurement is a fundamental part of understanding - what we want to do and how we want to do it efficiently. So that is my first challenge to you.
My second great challenge both to you and to our own industry is to square the employment circle. What I mean by that is that our industry traditionally has had a very, very high labour cost. Take a five-star hotel : when I started in the Savoy Group 25 years ago one was talking about 35% of sales as the labour cost. Now with our great squeezing, our redundancies and paying people as little as possible, we have managed to squeeze that down to 29-30%. A good two-star hotel will very often be paying 25-25% of its sales out as labour cost. We are a high labour business. Traditionally we have coped with this in three ways. First of all, we have used young trainees (all of whom hope they are going to be general manager of the Savoy when they have trained, and so will put up with whatever we throw at them while they are being trained, and will take the long hours and the difficult conditions).
Then, we use students who work in the industry to pay their way through college - they are usually good people to have around because they are trusting, they can't get much else in the way of work, and they are usually way above the intellectual level that we would otherwise get.
Then, finally, the bulk of the workers in the industry tend to be made up of people for whom the industry is seen as providing employment as a last resort.
There are not many people who leave school with the ambition to be the best kitchen porter in the world. People end up working for us when other things have failed - and it is not something I am particularly happy about. Indeed in the Financial Times a week ago last Friday, a report on the British Labour Force survey published the previous day pointed out that the hospitality industry in the UK had the highest preponderance of firing people of any industry, and the highest incidence of people resigning. It had the highest turnover by a factor of 4 of any industry and, not only that, an employee was four times more likely to have an industrial accident in the hotel business than in the construction industry. This is really quite shocking. Now at the moment there is an immense effort in the tourism industry to convince young people that we are an industry with a great future. The challenge I have made to my colleagues, and that I take on myself, is to turn that into a reality and, to return to squaring the employment circle.
How - if we need all of these people, How - if we have a fixed amount we can pay in labour, How do we actually achieve that? How do we achieve jobs with high satisfaction, with good remuneration, with good conditions? If we cannot pay more in total, we have to pay more to individuals and have fewer individuals in the industry. This will mean radical, and I mean radical, re-engineering of the processes that put together the industry at all levels.
I have deliberately used the word 're-engineering' and I am here to challenge you : it must be people here in this Congress who are going to help us, who are going to come into our industry and show us how it is that we can achieve those aims. I do not believe in our industry that people should be paid a low wage on which they cannot survive. I do not believe that my industry benefits from having a lot of low paid people. What I want to see in our industry, and the challenge that we have for the future, is to staff it with people who want to be in it and who are well rewarded for being in it.
Let me give you two examples which I think touch on that. The first is to do with budget hotels. Budget hotels are a very new concept in this country. At the end of the '80s there were very few. In 1992 there were 5,000 bedrooms and now there are approximately 25,000 bedrooms. This represents a five-fold increase in the number of bedrooms in some six or seven years. The concept was remarkably simple (as all great ideas are). The cost of running a hotel is people. Take as many of the people as you can out of the process and make the consumer carry out some of the trivial tasks him/herself. This delivers value.
Consider the process of providing food in a restaurant or a hotel dining room. At the moment it is broken up (in our very traditional, square minds in the industry) into a process of buying raw food, a process of cooking raw food done by people called chefs in whites, and a process of giving it to people called waiters who carry it through and deliver it to the people called clients at the table. It has always been like that. Yet, all the customer wants is good food quickly and a nice human being to deliver it. The only point in that chain where you actually are obliged to have a human being, is at the point of delivery - the waiter.
We have the technology today to achieve this : we could have one man, a very highly paid technician who could take days to prepare one dish; he would get it absolutely spot on, he would turn the carrots the way he wanted them turned, he would polish the potatoes the way they had to be done; he would present it on the plate just the way he wanted it and he would then have the technology - which I am sure exists - to 'scan it', measure it, feed it into a computer and use a 'reproduction engine' to produce that dish again and again and again at the touch of a button. You then have a fully robotic kitchen. The waiter takes the order and enters it into the system which produces the perfect copy. The waiter then delivers the food to the client. The point is that at some time we may well say, creating the food is not actually that important provided it is of high quality.
It is the contact between the client and the waiter that becomes the most important part of the process.
So we shift our labour cost from paying lots of chefs in a very artistic, very skilled way but nonetheless potentially redundant way, and we start paying the waiter who has the client interface. Is this possible?
I suspect you have on your faces the same look of incredulity that people at Ford did at Dagenham in the 1950s when somebody stood up and said . do you realise that in 30 years times most of these men will not here because these cars will be made by robots, they will be of higher quality, they will go faster, stop quicker and be more reliable. If it worked for cars, why can it it work in our industry?
I think that the industry will be characterised by two broad levels of service. At the luxury end, there will be a lot of very highly paid people delivering high levels of service. At the budget end, there will be very few people but they will also be highly paid. At the budget end you will help yourself; at the luxury end we will help you because the three great luxuries of the next century are going to be time, space and human contact.
We need to re-engineer our business around those concepts.
We are an industry which has very low barriers, economic barriers, to entry. Two things usually happen when industries are like that. Firstly, it spawns entrepreneurs, but secondly it inhibits large investment. Now, if what I have just said turns out to be true, somewhere along the line somebody is going to have to make some very big investment. So my third prediction is that someone, somewhere will be the first to work out how to do this : that person will take a step change in the delivery of products and services in our industry, and by doing so will make a vast amount of money. So when you spot somebody coming to the AIM or Nasdaq markets with an idea for a robotic kitchen, my view is that you should put a lot of money on it because I think they are going to make a great deal of money.
I would like to close with this challenge to you. Tourism is an industry to which the skills of those attending this Congress have rarely if ever been applied. I hope that I have stimulated and challenged you to get into the biggest industry in the world to help make it more productive and more efficient. The future of tourism is secure. It will be big.
The question is whether it will simply be a big industry or whether it will be a great industry.
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