Sector Skills Insights: Tourism

1. Sector Skills Insights: Tourism

2. Introduction The UK Commission is working to transform the UK’s approach to investing in skills to help secure jobs and growth. Key to our ambition is the need to encourage greater employer ownership of skills, working to secure long term sustainable partnerships. This slide pack and accompanying evidence report present the case for more employers in this sector to invest in the skills of their people. It does so by presenting real-life, skill-based business solutions that have been used by leading employers to tackle the performance challenges they face and by drawing on examples of the investments being made by the UK Commission through its investment funds. There are several determinants of employers’ skills needs and training behaviour including firm size, strategy and location but it is by sector which the strongest variations appear. Hence this work focuses on the Tourism sector. Slide packs and reports are also available for a number of other sectors from: www.ukces.org.uk. Each of the sectors are important to the economy in terms of employment, productivity or their future potential. For information about this slide pack and accompanying report please contact: info@ukces.org.uk/01709 774 800 Source information can be found in the notes section of each slide

3. Storyboard Tourism matters:the importance of the sector today Tourism matters: the sector tomorrow What are the key skills challenges in the tourism sector? The performance challenge: Employee engagement The performance challenge: Employee turnover and retention The performance challenge: Productivity The performance challenge: Investment in workforce skills Growth through skills: Securing future success Benefits to business Benefits to business 3

4. What is the tourism sector? Hotels and other accommodation Restaurants and bars Travel agencies and tour operators TOURISM Gambling and betting Sport and recreation activities The sector includes many businesses that are not solely driven by tourism, and may not self-identify as being part of the sector

5. What are the key skills challenges in the tourism sector? The UK tourism sector is large and growing. Output has increased by over 5% per year for the last decade, and will increase by a similar amount over the coming decade. Major sporting events provide an incredible opportunity to promote the UK visitor economy . Customers are becoming more demanding, driving up the level of service expected. Managers and staff need to develop a culture of continuous improvement to meet these increasing expectations. The sector needs to improve productivity and attract and retain talent . Poor perceptionof parts of the sector (low pay and unsociable hours) can make it difficult to attract staff. Tourism has the highest labour turnover rate of any sector. There is a high proportion of transient workers which can be useful in matching staffing levels to demand, but makes long-term workforce planning more difficult. Not enough employers invest in the workforce. The sector has a relatively high level of spend per employee on training, but much of this is the cost of training new recruits as a result of high labour turnover. Employers need to invest in staff and increase employee engagement. A more motivated workforce will lead to improved customer satisfaction, increased revenue and profits, and reduced staff turnover. 5

6. Tourism matters: The sector today • Tourism is an important contributor to the UK economy. Sector output was £62 billion in 2010 (2006 prices): 5% of total GDP • Businesses in other sectors sell to and purchase from the visitor economy, contributing as much again to GDP • It employs around 2.5 million people (1 in 12 UK jobs). Half work in restaurants and bars, while a fifth work in the sports and recreation activities sector. • Over a third of workers are under 25, compared to the average across all sectors of 13 per cent. • Output has increased by 5.6% per year, and employment by 0.6% per year, over the last 10 years. • The proportion of small and micro operators is very high • There is a high proportion of elementary and customer service occupations and workforce qualification levels are lower than average • The visitor economy plays a particularly important role in rural economies and communities • The sector is a major provider of leisure activity

7. The sector today The top visitor attractions in 2011 were the British Museum, the National Gallery, the Tate Modern. the Natural History Museum and the Science Museum, with almost 24 million visitors combined. In 2011, British residents took 58.4 million domestic holidays, spending £13.0 billion The Tower of London was the most visited attraction with admission charges (2.4 million visits) The Golden Decade of Sport (2010-2020) sees the UK host major events including the 2012 Olympics and Paralympics, the Commonwealth Games and Rugby World Cup. Over eight million adults participate in sport and active recreation (21 per cent of the adult population) The UK is currently the seventh leading destination in the world (revenue from inbound tourists)

8. Tourism... matters: Imagine where it could be tomorrow • The UK is a Top 5 world destination (tourism revenue) • We attract an even greater share of the international tourism market • More than half the tourism expenditure of UK residents is spent in the UK rather than overseas • The sector capitalises on the opportunities provided by the “Golden Decade of Sport” – major sporting events from the Olympics to the Cricket World Cup – to promote the UK visitor economy • Employment, output and productivity all continue to increase • The sector recognises talent as a source of competitive advantage • Firms and individuals invest optimally in their skills • Employers collaborate on, lead and own skills solutions to the sector’s skills issues

9. The performance challengeProductivity Labour productivity is lower in service sectors than other sectors of the economy, and also varies more across the sector. Labour productivity performance is highly linked to demand, as employers need to retain core staff even when demand falls. Accurately predicting demand and improved staff scheduling reduces downtime and increases productivity. This requires effective and efficient management. Motivated employees, who are happy in their jobs, are more likely to provide good customer service, which leads to satisfied customers and ultimately greater profit. Satisfied customers are more likely to become repeat customers/visitors and recommend a business to others. Excellent customer or guest service is essential for repeat business and maximising the ‘Lifetime value of a guest’” (Sandy Balls Holiday Centre) High sector turnover means that relatively high proportions of employees are new to their job at any one time. Reliance on transient workers also means employers limit investment in employee engagement. This results in low productivity. Employers need to invest in their workforce and allow workers increased task discretion. This will raise motivation and productivity.

10. Case study: productivity The challenge The sector has tight margins and relatively low productivity. Businesses need to make sure costings are accurate, cut down on errors and know their suppliers. Trinity Conferences, a venue-finding agency, wanted to make sure its 23 employees were working as effectively and productively as possible and providing an excellent level of customer service. The Approach The business decided to work towards Investors in People accreditation. “Going for Investors in People was pretty counter-intuitive when the sector was being hit hard by the recession,” says Jacqui Kavanagh, MD. “Investors in People has enabled us to respond ... and gives us an infrastructure for communication and measurement of performance for our staff to allow them to deliver at a very high level. Trinity achieved Investors in People Gold in 2010. The benefits Jacqui sees the effect of Investors in People on her team: “It’s really important. It’s really raised the game for the team. The structured approach ... has meant internal promotions”. Jacqui adds “All this means that [staff] can really add value.” Turnover has increased by 27% in 18 months, and sales are up by more than 30% on pre-bookings over the coming two years. Trinity Conferences won the ‘Promoting Excellence within the Industry’ Award at the 2011 annual conference of the Hotel and Booking Agents Association (HBAA). Jacqui firmly believes that Trinity’s Investors in People recognition enabled them to achieve the HBAA award. 10

11. The performance challenge:Employee engagement Employee engagement is critical in helping businesses maximise the potential of their staff, and excel at customer service.Three quarters of businesses feel their employees are quite engaged or very engaged at work.However, some businesses do nothing to engage their staff, as they don’t believe their employees intend to stay in the job. Employee engagement interventions include flexible hours or working patterns, employee involvement practices such as appraisal and consultations, and financial incentives and bonuses. “We’re selling more than just a holiday … we want it to be something that will long be remembered because it was so special … we place a tremendous amount of investment in making sure our staff have the skills to be able to deliver the highest possible service” (Vivienne Thorne, HR Director, Bales Worldwide). Malmaison & Hotel du Vin found customer complaints fell, staff turnover fell, and sales rose after introducing an employee engagement strategy [case study]

12. Case study – Engaging employees The challenge Sister hotel groups Malmaison and Hotel du Vin were, like many others in the tourism sector, affected by the economic downturn. They decided to “put customer service back on the agenda”, to differentiate themselves from competitors. The Approach Malmaison and Hotel du Vin developed an employee engagement strategy, focused on happy staff at all levels, engaged in their jobs and providing excellent customer service. Staff focus groups identified the five behaviours of engaged employees : • strong relationship building with customers, managers & peers • attention to detail, and giving the extra ten per cent • energy and drive • resilience and passion in one’s work • shaping each working day into one’s own, and being achievement-focused The new approach was supported through a manager development day, appraisal system based on the five behaviours, training opportunities, and improved communication between management and staff. Its key principles are: • ‘win-win’ approach – employees are offered training to support career progression and the business can expect excellent performance • ‘keep it simple’ – staff are given the freedom to be themselves in providing excellent customer service. The Benefits Customer service complaints have decreased by 15 per cent; staff turnover has declined by 17% year on year; and average customer spendincreased in hotel brasseries by 11%.

13. The performance challengeEmployee turnover and retention Labour turnover in the sector is high and staff retention rates low. Pubs, bars and nightclubs have the highest staff turnover of all UK sectors (23% in 2011 and 31% in 2009).Labour turnover is also higher in urban areas than in rural settings. A key reason for high levels of labour turnover is the historic recruitment of transient labour, such as students and international workers, who are seeking short-term job opportunities rather than long-term careers. Reliance on transient workers reduces the effectiveness of employer engagement activities, which reduces the potential for greater productivity gains. Alternatives to transient workers include female returners and older workers, who may prefer permanently flexible roles. They can provide businesses with flexibility whilst reducing staff turnover costs and the loss of skills and knowledge. Labour turnover costs the sector £33m annually Tourism employers will have to replace over a million employees between 2010 and 2020.

14. Case study - Reducing labour turnover The challenge Red Carnation Hotels, a collection of 13 international boutique hotels with 900 staff in the UK and 2,000 staff worldwide, was experiencing retention problems, with high labour turnover of 80 per cent, potentially damaging the quality and consistency of service and the reputation of the company. The approach The HR and Training Director developed a practical, project based management and leadership training programme (Ambassadors in Management) linked to nationally recognised qualifications. The programme helps staff to identify clear career paths, and the project-based approach links to clear business impacts. The benefits AIM has resulted in significant business benefits: • Labour turnover reduced from 80% in 2001 to 24% in 2009, with improvements at all levels • Saved £500,000 in recruitment costs over the past eight years • Improved succession planning, and increased internal promotion of managers • Improved employee satisfaction “One of the most successful programmes I have seen in my entirecareer ... it has given 256 people an excellent opportunity to grow throughout the company” Jonathan Raggett, Managing Director.

15. The performance challengeInvestment in workforce skills The sector has one of the highest training expenditures per employee (£3,635).However, much of this spend is on induction training for new recruits due to high turnover. One in five employers report skills gaps (where some staff are not fully proficient in their jobs), compared to an average of 13%. Over 8% of staff are not fully proficient, above the average of 5%. Half of all skills gaps are among elementary staff, but managerial and customer service skills are also often lacking. A lack of clear pathways within the sector means staff may not receive appropriate further training, and contributes to high labour turnover. High levels of labour turnover undermine ongoing skills development and reduce employee engagement. Employers who invest in staff can turn this around, and create a virtuous circle where workforce upskilling and engagement results in greater levels of motivation and satisfaction, a more stable workforce, and improved business performance Occupational Distribution of Skill Shortages “Customers are far more demanding, far more enquiring, [they want] services to be delivered as and when they want them not when it suits the provider, far more likely to make comparisons about service standards across sectors.” (David Parsons, Chief Executive, Institute of Customer Service) Customers expect high quality service. Effective raising of customers skill levels requires customer-focused business culture within a business, driven from the top down by leaders and supervisors who have excellent customer service skills themselves and lead by example. Improving management quality has a significant impact on firm’s productivity and output. Excellent management can help reduce turnover and increase productivity, as with Red Carnation Hotels. [case study]. TUI Travel have clear progression routes from apprentices to managers and benefit as a result. [case study]

16. Case study – Growing your own from apprentices to managers The challenge TUI Travel PLC is a large travel group which employs 19,000 people in the UK. The company needed to ensure a sufficient supply of future workers for its posts in the UK and overseas. The approach TUI Travel PLC established an extensive apprenticeship programme. They received 15,000 applications and have a rigorous selection process which includes a “taster day” in a branch. They provide a range of support to apprentices, including a 2-day “Welcome Event”, 5 hours of study time a week, 6 formal off-the-job training days a year, and e-learning support. There are now 450 apprentices working towards the Level 2 Apprenticeship in Travel and Tourism Services and 350 on Level 3 Advanced Apprenticeship (2008). The benefits The benefits of investing in workforce skills include: • Improved sales performance – ex-apprentice Travel Advisors achieve 16% higher sales than non-apprentices, ex-apprentice Retail Managers 13% more • Improved retention – apprentices stay on average two years longer than non-apprentices • Improved progression – 44% of Assistant Retail Managers are ex-apprentices “We are trying to develop people for the future and the progression stages are very clearly mapped out … we’re always looking for them to become managers” Andy Smyth, Accredited Programmes Manager)

17. Growth through skillsSecuring future success • Across the sector, raising skills is key to raising performance, but while there is no silver bullet, a mix of actions which push and pull in the same direction can help. • Employer leadership in the development of solutions and then taking ownership of those solutions is fundamental to their success and sustainability. • Sources of investment are available to support the implementation of solutions led by • business on behalf of the sector. • The Employer Ownership pilots offers all employers in England direct access to up to £250 million of public investment over the next two years to design and deliver their own training solutions. • The Growth and Innovation Fund (£9 million invested so far, £29 million to invest in 2012-13) gives priority to solutions for the sector e.g.: • Employer commitment and investment in Apprenticeships • Creation of employer networks to overcome skill problems • Employer-backed proposals for other skills solutions such as: management and leadership;professional standards;high performance work practices incorporating people development (e.g. Investors in People). • Information and business advice is also important as a solution. • Ultimately this is trying to catalyse sustained investment in the development of the sector’s workforce led by employers which lies at the heart of an enterprising and dynamic nation.

18. Growth through skillsSecuring future success The National Skills Academy for Hospitality, backed by leading employers, supports sector employers to develop workforce skills. The Academy runs customer service courses for team members, managers and supervisors; and offers Smiles for Britain, a free online motivational and engagement tool to help staff become more enthusiastic about excellent customer service. The Advanced Apprenticeship Management Development Programme provides the opportunity for newcomers in the industry to develop the right skills, product knowledge and financial acumen to run a successful pub, restaurant or bar; The NSA also supports an online E-Academy which provides the Hospitality industry with accessible, accredited and valuable e-learning compliance training The National Skills Academy for Sport and Active Leisure is led by employers. It provides quality training solutions specifically designed for the sport and active leisure sector; access to a network of over 80 quality-assured training providers, and hundreds of courses; supports employers to access public funding for training; and runs a membership programme, with benefits including discounted online training and specific statutory training offers. New College Nottingham runs Apprenticeships of relevance to the sector. The college works with head chefs in the area to plan menus and lessons to make the courses relevant to local businesses, including the award-winning restaurant Tonic, in Nottingham. The college sources new apprentices and helps the restaurant meet its staffing needs. The Apprenticeship teaches a range of skills including communication, team-working, and business skills (for example, pricing up menus in order to make a profit).

19. Growth through skillsSecuring future success UKSP, a guidance website for careers in hospitality, leisure, travel and tourism aimed at employers, employees and students, provides information on different roles and career paths. It allows employers to post vacancies, search the talent directory to find motivated individuals looking for a career in the sector, and get access to information on the best qualifications and training courses for their staff. Employers offering people a ‘taster’ of the sector is a good way of changing perceptions, and offering a work experience placement through Jobcentre Plus to a young person, or a work experience placement to an unemployed person through sector-based work academies, can help people decide whether the sector is for them. Employment 1st pre-employment training, run by People 1st, is aimed at people looking for their first job in the Tourism sector. It covers a wide range of job roles, including chef and theme park attendant. The training leads to a Level 1 Award in Introduction to Employment in the Hospitality Industry. Employers and sector bodies can improve the talent pipeline into the sector through Apprenticeships, and thinking creatively about potential sources of recruits. Apprentices can help tackle skills shortages and skills gaps in elementary occupations, and employers can develop clear pathways to management roles. The sector relies heavily on transient workers and young labour market entrants. The number of 16-24 year olds will fall by 500,000 between now and 2020. Employers can look to alternative labour pools, including women returners and early retirees

20. Benefits to business • Higher productivity: a fully trained workforce can increase organisational productivity by as much as 24%. • Employers gain 2-5 times more from the increased productivity effect of training than any increase in wages for trained staff In the Transport & Comms sector are twice as likely to fail In the Manufacturing sector are twice as likely to fail Are on average twice as likely to fail Higher survival rates: Businesses that do not train... In the Construction sector are four times as likely to fail In the Hotels & Restaurant sector are nine times as likely to fail Training boosts employee engagement and satisfaction: 70 ideas created by staff were implemented at Malone Lodge Hotel in Belfast . Staff satisfaction increased by 4% as a result. In the Retail & Wholesale sector are twice as likely to fail

21. Key messages • The tourism sector makes a significant contribution to the economy in terms of output and employment and is projected to grow rapidly over the next decade. • Customer expectations are driving up the level of service expected. • The sector needs to address the following challenges: • Low productivity • Increasing employee engagement • Reducing employee turnover • investing effectively in skills • Management skills are key in developing staff and creating an engaged, motivated workforce providing excellent customer service. • Examples exist of where these challenges are being tackled successfully through employer-led skills solutions. If the sector is to realise its potential this action must be scaled-up and employers must play a greater role in developing the skills they need • The UK Commission is looking to work with employers to transform the UK’s approach to investing in skills of its people to secure growth and prosperity. More information about the UK Commission’s investment funds is available here