TOURISTS from overseas are returning to Scotland in “promising” numbers. But rising costs and a “significant” fall in domestic visitors means many Scottish tourism businesses are struggling to make a profit, a new survey has found.

A “very welcome” increase in visitors from overseas, notably from North America and Europe, has been highlighted this morning by the Autumn Industry Survey published by the Scottish Tourism Alliance, which declared that the recovery in the foreign tourist market was “critical” to its future.

However, the survey highlighted the impact of continuing cost pressure on the industry and a “most concerning” drop in visitors from the domestic market. The UK market accounts for around 65% of the Scottish tourism industry.

The survey, which is based on the views of 218 tourism firms, found nearly half (48%) of respondents reported decreased profits, and in most cases had experienced year-on-year declines of 10% or more.

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Around nine out of 10 tourism and hospitality businesses reported higher energy and supplier costs, while staffing costs increased for 69%. These rising costs are having a knock-on effect on investment in building maintenance and improvements, marketing and promotion, and staff training and development, the STA said.

The organisation added that levels of business confidence remain low, particularly among smaller firms and within the serviced accommodation sector.

On the plus side, the tourism sector experienced a 30% rise in visitors from Europe and a 29% increase from America over 2022 and 2023.

However, respondents reported decreased volumes in visitors from Scotland (-16%) and other parts of the UK (-20%). Businesses cited a number of economic factors which are impacting the choices being made by domestic consumers: 83% said the higher cost of living is a barrier to taking a holiday, 77% cited inflation, and 71% noted higher energy and fuel costs.

The new survey comes on the heels of a separate report by the Scottish Licensed Trade Association, which reported in September that 57% of outlets have been experiencing a year-on-year decline in bottom line performance. Based on feedback from 340 pubs and restaurants, it also found 67% expect the Scottish economy to decline in the next 18 months.

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Marc Crothall, chief executive of the Scottish Tourism Alliance, said: “The growth of the international inbound market is very welcome news and significantly important for Scotland’s tourism industry; this will be critical for our long term, sustainable recovery. Scotland has also outperformed the rest of the UK in terms of growth in volume and value of inbound tourism in Q1 and Q2 of 2023 and we hope this will continue to be an upward trend.

“However, the UK domestic market accounts for around 65% of tourism in Scotland and our industry is dependent on this tourism spend. The decline in domestic visitors, both from Scotland itself and other parts of the UK is most concerning. With factors such as the higher cost of living, inflation and increased energy and fuel costs influencing consumer choices and holiday decisions, we can no longer rely on our domestic market as a key driver for Scottish tourism.”

He added: “The reality is that healthy trading is all about the bottom-line performance of the business; while revenue may be strong for many businesses, the key to commercial success lies in the ability of that business to convert profit into sustainable recovery and growth.

“The STA’s research findings are very clear that Scotland’s reputation as an attractive and competitively healthy global destination is most definitely at stake unless governments exercise more financial levers to support the sector.”