Scotland's official tourism body has been criticised by MSPs for unwisely spending public money on a website designed to book holiday accommodation online.
It is the second time this week that the organisation has been publicly knocked. Earlier, it was criticised for not promoting Scotland's new chef of the year, Charles Lockley of the Boath House hotel in Auldearn, because his award was presented at a ceremony which the organisation did not sponsor.
Yesterday, Holyrood's public audit committee said the VisitScotland website failed to live up to financial expectations and the organisation had been slow to get to grips with problems.
VisitScotland, which invested £3.25m released by the then Scottish Executive in the project, was found to have overestimated the demand for booking accommodation over the internet.
It was hoped the venture could generate post-tax profits of £1.5m a year after five years. But the performance failed to meet predictions, and by December 2007 it had cumulative losses of £12.4m.
The MSPs' investigation was prompted by a report by the Auditor General for Scotland, Robert Black, on the 2007-08 audit of VisitScotland. Committee convener Hugh Henry said: "It is a matter of regret that the venture failed so significantly in relation to predicted revenue generation. The committee believes VisitScotland should develop a robust business plan for the future operation of the VisitScotland.com website."
Problems spiralled for the website after the private company which ran the enterprise, eTourism Ltd, ran into financial difficulty at a time when VisitScotland held a 36% share in the firm.
In December 2008, VisitScotland decided to buy out the other shareholders at a cost of £1.25m.
Mr Henry said: "We recognise the value of VisitScotland.com to VisitScotland and to Scotland's tourist industry as a whole, but we believe that it might have been possible for VisitScotland to secure its initial aims at a smaller cost to the public purse.
"Given the failure of eTourism to deliver its financial objectives, VisitScotland was faced with the decision of either buying out the other shareholders or purchasing the asset.
"It would appear that the option of buying out the shareholders was possibly the better option, but we are disappointed that external advice was not sought to inform this decision."
Philip Riddle, chief executive of VisitScotland, told the committee in May that he believed there had been a good return on the asset.
He said: "We did not go into the venture to make a profit. Rather we invested because we needed a tourism website we need a gateway to the world."
Mr Riddle said the five main reasons for going into the venture were to have a single contact number for Scotland plus a contact centre, a website, a booking engine, and to "provide rationale for the customer relationship management system".
He added that, overall, the venture had worked "extremely well" and that the stated aims of VisitScotland's approach had been met.
However, under questioning from the committee, he acknowledged that they had overestimated the industry's appetite for online booking.
VisitScotland's total investment in eTourism Ltd is in the region of £4m. According to PricewwaterhouseCoopers the value of the company, now wholly owned by VisitScotland, is between £4m and £7m. The organisation said yesterday that although the venture did not generate the anticipated turnover, VisitScotland.com has brought in £65m and over 500,000 bookings to tourism businesses since its launch in 2002.
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