Scotland's tourism industry is suffering from being too city-centric

Set in eight acres of woodland near Newton Stewart, Kirroughtree House Hotel was the seat of the Heron family until the 19th century. Rabbie Burns stayed at the house in the 1790s and is supposed to have recited his poetry at the foot of its staircase.

But now the 17-bedroom pile is for sale (offers over £695,000 for anyone interested). In fact, it’s been on the market since November last year, one of dozens of rural hotels languishing on estate agents’ websites across Scotland. 

Now shift your gaze to Edinburgh. Here, a cool £227m was ploughed into hotels in the first three quarters of this year, according to Knight Frank. That accounted for as much as three-quarters of the entire amount invested in hotels across Scotland. 

This ought to ring alarm bells, for it exposes how Scotland’s tourism sector is rapidly becoming bifurcated between a capital city drawing on the expandable wallets of international visitors and a rural hotel and hospitality sector that’s battling to keep the lights on. 

VisitScotland says there were 4.4 million international visitors to Scotland last year. That was a nine per cent rise on 2023 and 26 per cent higher than 2019, just before the pandemic. 

Edinburgh Airport’s success in adding new international routes, the latest being a regular Reykjavík-Edinburgh service on Icelandair, is one driver. Another is climate change. This year, Edinburgh was one of three destinations added to Austrian Airlines’ network as it expanded its “coolcation” options from Vienna. 

Meanwhile, domestic tourism has been mixed. The Great Britain Tourism Survey shows there were 4.4 million overnight trips to Scotland in the first six months of this year, unchanged from the same period a year earlier.   

In an “election manifesto” launched this month, the Scottish Tourism Alliance points out that Edinburgh is now the only region in Scotland to have more international visits than domestic, “demonstrating the need to disperse international visitors more effectively throughout the rest of the country”. 

As is so often the case with trade association lobbying, the document combines a laundry list of special pleading and needless boilerplate with some sensible policy suggestions. These are based on a common-sense principle that supporting tourism should be an investment in ensuring a “safe return on public money”.

Prioritising the creation of a dedicated cabinet secretary or minister role for tourism, which tops the manifesto, is less important than much of what follows, especially as there is no mention of how that would be coordinated with the UK’s tourism policy machinery.   

But tackling planning reform to spur infrastructure development at the start of a new Scottish Parliament checks out. Access to reliable public transport and better broadband are obvious prerequisites for successful rural tourism. A report by Historic Houses Scotland published last month said that 44 per cent of its members’ properties are over a mile away from the nearest public transport. Infrastructure has to be improved to ensure workforce viability, it said.

There’s also an important link here to Scotland’s ability to attract investment in tourism from overseas. “Good connectivity is the key to unlocking further investment in regions outside the main gateways, so it’s critical that Scotland gets this right,” says Jacqueline Dobson, president of Barrhead Travel Group.

Greater use of the Scottish National Investment Bank is another sensible idea. The work already being done by investee company Highland Coast Hotels in spurring sustainable hospitality around the North Coast 500 tourist route could be a valuable template.

Yet it is on non-domestic tax rates – surely the elephant in the hotel room – where immediate action is needed. 

Rural hotels that are a bit bigger than those qualifying for the small business bonus scheme relief and which are assessed above a £51,000 rateable value cap on business rates relief are suffering, while their counterparts in England benefit from 40 per cent relief.  

The Fraser of Allander Institute estimates that levelling the playing field would cost around £200m. Look at it as an investment with a multiplier effect. Holyrood has allocated up to £500m over five years for offshore wind, hoping thereby to boost private investment by up to £1.5bn. Why not the tourism industry, the largest private sector employer in Scotland? 

Government has commissioned an independent review of the valuation methodology for business rates, “recognising the ongoing concerns raised by the licensed hospitality sector”. That’s due to report by the end of 2026, with any recommendations to be considered ahead of the 2029 revaluation cycle. 

But this will come too late for Duncan McConchie, who with his wife runs a hospitality business called Laggan about a 20-minute drive from Kirroughtree House. They recently stopped using tradespeople for maintenance jobs and now do it themselves.

“We used to be opportunistic and entrepreneurial but we’ve derisked the whole business and the outlook for the next five years because we just don’t see any reward in hospitality and tourism,” he tells me.

Getting policy right, and quickly, matters if Scotland is to punch above its weight in global tourism while not leaving its rural businesses behind.