THE contrast was striking. Just as the country’s major supermarket groups were reporting buoyant trading for the key Christmas period, a major new survey revealed the profound challenges facing the Scottish tourism industry.

In the week Marks and Spencer reported record food sales at Christmas, and Tesco and J Sainsbury raised their profit forecasts after consumers upped their spending on food and drink ahead of the festive season, one in three tourism and hospitality businesses said they are likely to fail this year, in response to a survey by the Scottish Tourism Alliance.

The finding reinforced what has been evident throughout the pandemic, namely that while circumstances such as lockdown and other Covid restrictions have allowed parts of the economy to flourish, other equally important sectors have struggled – and continue to find the going extremely tough.

The STA survey, which canvassed 1,355 business owners across 31 Scottish regions, found more than half of businesses have either zero or one to two months of cash reserves to stay afloat. Some 68% stated they were in financial difficulty, citing extreme concern over increased costs, with rising energy bills highlighted as a particular concern.

More than half of respondents (52%), meanwhile, reported being impacted by staff shortages over the survey period, which ran from December 17 to January 10, with that difficulty felt most acutely within hospitality settings.

That we now appear to have reached the peak of infections of the Omicron variant is to be welcomed, and hopefully it will not be long before more of the current restrictions, such as those imposed on the hospitality sector and nightclubs, are lifted. We should know more today, when First Minister Nicola Sturgeon provides an update to the Scottish Parliament.

Any further return of freedoms will be welcomed. But even when restrictions are lifted, the journey to full health will continue to be long and arduous for the tourism and hospitality sectors.

It is certainly the case that the Scottish tourism industry enjoyed spells of high demand from the staycation market over the last two summers, but it has not been enough to offset the business that was lost during long periods of lockdown.

The absence of foreign tourists for much of the last two years, in large part because of international travel restrictions, has had a massive effect on a sector that for many years has relied on the custom of visitors from overseas. Figures show that in 2019, before the pandemic struck, there were 3.5 million international visitors to Scotland who between them generated 43% of the total tourism spend that year. That spend has all but evaporated since the pandemic struck in March of 2020.

Hopefully, the gradual loosening of rules on international travel will see a return of foreign visitors to these shores this year. But it could be a while before numbers reach their pre-pandemic levels. Tourism is a hugely competitive, global market, and countries around the world will be vying as never before to entice holiday-makers as restrictions on international travel are gradually removed.

“Demand from the domestic visitor from now until May is looking relatively strong, however international bookings remain low and definitely not as healthy as we would like or need them to be at this point in the year, ”said Marc Crothall, chief executive of the Scottish Tourism Alliance.

Perhaps more pressingly, tourism businesses in Scotland face a welter of challenges just to keep going. Instead of heading into a new year with takings from the festive season in the bank, the prospects for the sector have regressed because of Omicron, the emergence of which in November sparked a wave of cancellations as people were encouraged by the Scottish Government to limit socialising.

At the same time, the cost of goods has surged on the back of global supply chain disruption, wage inflation has spiralled amid ongoing labour shortages, and energy prices are going through the roof. There would also appear to be no immediate sign of the conference market bouncing back: so-called “in-person” events were beginning to take place again last year, but to a much lesser extent than before the pandemic. And while the work-from-home advice remains in place in Scotland, the conference market will remain subdued.

Given this unwelcome mix of factors, the tourism industry has a compelling case for continuing support from government. And one call the sector has made that deserves a full hearing from the Scottish Government is for yet further relief from business rates.

In Scotland, firms in the hospitality, retail, leisure and aviation sectors are currently exempt from paying business rates under measures introduced to ease the pressure arising from coronavirus. That exemption stops at the end of the current financial year on March 31, after which the retail, hospitality and leisure sectors will be entitled to 50% relief for the first three months of the new year, capped at £27,500 per rate-payer.

“The extension of the current relief on business rates is critical for the survival of many in the tourism and hospitality sector; this is effectively what will give businesses breathing space to recover in the way both governments would have envisaged much earlier on in the crisis,” Mr Crothall said.

“However, as we have seen, this recovery has been significantly challenged with the impact of the Omicron variant at a time when businesses should have been recouping some of their lost income.

“Businesses now have far less cash in the bank. The three-month business rates relief capped at £27,500, whilst welcome, is not going to be enough and the industry would urge the Scottish Government to revisit this and at the very least go as far as the UK Government in rates relief for the full financial year beginning in April.”

Hospitality and tourism campaigners, meanwhile, are continuing to campaign for value-added tax for their sector to be kept at the current, reduced rate of 12.5%. The VAT rate was cut under measures to support businesses during the pandemic, but it is due to be returned by the UK Government to 20% in April.

While the tourism sector emphasises that it is grateful for the government support it has received so far, it clearly feels much more can be done. With the clock counting down towards the start of the new tourism season, the pressure is on government ministers on both sides of the Border to act and provide much-needed relief to one of the most important sectors in Scotland and the UK.