TO the outside world, Scottish tourism projects a romantic image. Of rugged mountains and pristine rivers, fairytale castles, and country hotels.

Inside the industry right now, it is a world of tumult.

An organisation representing thousands of self-catering businesses in Scotland has been warning for some time that a new licensing regime due to take effect from October will cause hundreds of people to exit the industry. Now, following a report by the City of Edinburgh Council this week, it is claiming that its worst fears have been realised, at least as far as the industry in the Scottish capital is concerned.

Last week Fiona Campbell, chief executive of the Association of Scotland’s Self-Caterers, told The Herald that the demands of the scheme as it stands would “sink” the Scottish tourism industry, declaring that the costs and bureaucracy involved are simply too much for many small businesses such as guest houses to bear.

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Her comments followed a survey of around 1,270 businesses by the ASSC, which found that more than 60% of operators had still to apply for a licence amid concerns over the costs involved. Ms Campbell said the new system was overly “bureaucratic” and expensive. She noted that while in some council areas fees are reasonable it is the opposite in others, with some small business owners being asked to stump up thousands of pounds to secure retrospective planning permission for premises they have run for decades.

In Edinburgh, she said, it will cost the owner of a large, short-let property nearly £6,000 to secure a licence.

While the situation appeared concerning enough for the self-catering industry last week, things became even more bleak on Tuesday.

A report presented to City of Edinburgh Council by its policy and sustainability committee on a proposed visitor levy – more commonly known as a tourist tax – suggested that a combination of this measure and the new licensing scheme for short-term lets led it to the “assumption of an 80% reduction from the Edinburgh 2021 number of active listings as reported on Airbnb, as a proxy for the size of short term lets”.

The report sparked a furious response from the ASSC, with director Louise Dickins declaring: “Our worst fears have not only been realised, they have been exceeded. City of Edinburgh Council is happily pursuing an agenda that will close eight out of ten self-catering businesses and bed and breakfasts, decimating the tourism industry across the city and the country. Our industry is pro-regulation, but this legislation hasn’t been designed to regulate – it has been designed to destroy small businesses.”

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Cammy Day, leader of City of Edinburgh Council, noted that the authority, in arriving at its forecast, aimed to “make sure that we don’t over-anticipate the level of income that can be generated from the visitor levy”, adding: “As noted in the report the 80% reduction also takes account of the potential for double counting between listings that can appear on multiple registers.”

But any hope that such words would soothe worries in the tourism sector have been dashed, and not least because so many businesses are struggling to recover from the pandemic in the face of soaring costs and fragile consumer confidence sparked by high inflation and interest rates.

Marc Crothall, chief executive of the Scottish Tourism Alliance, told The Herald: “The City of Edinburgh Council report is further evidence of the impending damage to our tourism product, Scotland’s global reputation and our international competitiveness. There are very deep and intensifying concerns from those who lead a whole variety of business organisations in Scotland beyond ‘pure’ tourism, for example those representing the finance sector, small retailers, events, and directors of business in numerous sectors, around the level of economic harm which will be felt as a result of the Scottish Government’s STL legislation.

“The timing of this policy, given the context of a sector struggling with a fragile recovery, is difficult for many to understand. The economy is teetering with recession, while coping with enduring inflation and cost risks. A more workable and agreeable solution needs to be found: an extension of the September 30 application deadline would assist all parties – local authorities, the industry, and small businesses.

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“We continue to urge the Scottish Government to agree to this to avoid a situation where potentially thousands of accommodation providers across the country are unable to trade legally and take and offer bookings with assurance to tour operators, due to their applications either not being able to be submitted with all supporting documentation or processed in time.”

It is understandable why the Scottish Government has in recent years passed legislation which allows local councils to set visitor levies and run licensing schemes for short lets. Major tourist destinations in Scotland such as Edinburgh have become awash in recent years with so-called Airbnb-style properties, which has had an impact on the supply of housing available for local people. The development has also brought concern among residents over anti-social behaviour.

The impact of huge numbers of visitors descending on a town or village, moreover, will naturally put pressure on local infrastructure and resources, so by adding a small surcharge to the cost of a room councils can raise funds that can be used to offset such pressures. Or so the argument goes.

But while a case may be made for mechanisms to regulate the tourism industry in bustling cities like Edinburgh, they surely have to be measured and cognisant of the pressures of the time.

And the tourism picture varies greatly across Scotland.

When it comes to licensing for short-term lets, the scheme will be mandatory for self-catering businesses of all kinds, so as well as holiday apartments in major cities, tiny enterprises such as B&Bs, guest houses, lodges and yurts scattered across rural towns and villages will fall into its scope.

In many cases, the owners of such small businesses, the ASSC notes, make very little profit and often juggle them with other jobs to make a living. Now they are having to pay for licence fees and in some cases spend thousands of pounds to draw up new layout plans and apply for retrospective planning permission for businesses that have been running for many years. Worse still, Ms Campbell said the new regulations could “criminalise hard-working Scottish people trying to make ends meet”.

“We are not saying 'don’t legislate'. We are saying make sure it is proportionate, reasonable, justifiable, and non-discriminatory, and doesn’t shut us all down or criminalise us by the first of October,” she said.

The Scottish Government, it should be noted, has expressed its confidence that preparations for the licensing scheme are going well. It says local councils around Scotland are already operating licensing schemes for short-term lets and that, based on data published by 18 councils, nearly 2,700 licences have been granted and no applications have been rejected. “A further 2,600 applications are under consideration, and councils are receiving more applications every day as the deadline for existing hosts approaches,” a spokesperson added.

“After October 2023, regulation will provide councils with a clearer picture of the number of short-term lets in Scotland, as there is currently no reliable source of this data.”

As far as the tourism industry is concerned, the outlook is a good deal cloudier than the sunny picture envisaged by the Scottish Government.