Paying the price for quality and growth

First published Friday, February 28, 2014

Today, I have been out with Dennis, our Membership Officer for the south of the county, meeting with existing members, and stopping by some potential new members. It has been an interesting and varied day, and a number of important and thought provoking points have been made, some which will have an immediate impact on the work we do for and with our members, some which need a broader discussion.

With that in mind, I have some questions. The current strategy for tourism in Wales, referred to as “Partnership for Growth” sets out amongst other things a desire to see an improvement in the quality of the tourism offering, and by association growth in the industry. Both of these things are laudable, and there will be many throughout the trade who agree that these are valid aims.

However, there is, it seems, a catch. Whilst there are currently a fair number of businesses in the sector able to access Small Business Rate Relief, there are others who cannot. This is where things get a little more interesting. From time to time valuations of businesses for rating purposes are reviewed. From some of the conversations we have had today, it would seem that where a business has invested in the basic fabric of that business (i.e. in the bricks and mortar) and improved it, raised the quality and set out to grow, it is then promptly stung by a hike in business rates.

The very nature of the tourism industry means that margins are frequently quite tight, with many businesses heavily reliant on a good peak season to provide the cash-flow for the quieter winter months. There is little scope to adjust to the impact of large rises in rates, especially when other expenses (electricity, staff, food etc) are also continuing to rise. For some businesses, significant changes in business rates has been the final straw, resulting in the ‘death’ of the business.

Whilst it is all well and good to make grant schemes available to support capital investment in a business and encourage upgrading and expansion, if that then results in a business being expected to pay more in rates, why would the business owner make the decision to invest in the business at all? Just because a business decides to invest, improve quality and so on, that doesn’t mean that they have an endless supply of cash to meet increased rates bills as well.

If there is a genuine desire to raise standards, improve quality and grow the industry, surely there should be some incentive to do so? Many businesses chose to invest as they are proud of what they do, passionate about offering a good quality experience, and want to continue to up the standard. There are others however who do not invest, either because they can’t access funding or simply have little desire to do so, and sadly the fabric of those businesses tells the tale. This in turn affects the broader trade – a customer who receives a poor quality experience may chose not to return to that area, taking their potential spend in the local economy somewhere else instead. If that happens on a sufficiently large scale, all businesses in that area start to suffer, and the incentive to invest and develop the offering becomes even less obvious.

For the Partnership for Growth strategy to deliver the desired improvement in standards and quality, there has to be some collaboration within the Welsh Government, and further afield with Westminster too. It is accepted and understood that rates have to be paid to facilitate investment in infrastructure and so on, however why should those businesses that seek to add value by improving their own infrastructure be ‘penalised’ for doing so?

The whole topic of business rates is likely to be a contentious one for a good while yet. There will be no quick fix, or a sudden reduction in the rates being paid. However, I do feel that there needs to be some discussion around how the rates are determined, and why businesses who make a commitment to improving quality and standards then become a target for significant increases. If you have had experience of this, I’d really like to hear from you to gather more evidence together to enable us to challenge this further. Please email me (maudie@holiday-pembrokeshire.co.uk) or get in touch with the office on 01646 622228.

 

Posted on The Pembrokeshire Tourism Blog

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