It’s one of the biggest sectors in Wales employing more than 172,000 people and adding over £6.2bn annually to the economy, but with inflation and the cost of living crisis impacting people's finances, how is the tourism industry faring?
The latest Welsh Government Wales Tourism Business Barometer for May 2023, which assesses business confidence in the sector, reveals a mixed picture as operators enter the critical summer trading season.
It found that 18% of businesses have had more customers to date this year than in the same period in 2022, while 38% record the same level and 44% are down. It has also been a slow start to the year in terms of holiday operators taking advanced bookings as cost of living pressures subdue levels.
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Only 13% of accommodation operators are up on last year, whereas 46% are down. While current mean occupancy levels for accommodation operators in Wales are around 60% for each of June, July and August.
What tourism businesses in Wales are saying on the ground
Many businesses have noted a surge in last-minute bookings, driven by the recent hot weather and customers opting to book holidays when they know what they can afford.
Ed Glover, associate director of Salop Caravan Sites, said bookings for his holiday cottages in mid-Wales were looking strong for the summer period.
“It was a slow start to the year in March,” he said. “We were 40-50% full but as it stands we are 100% full now until the end of August for all three properties.”
This was higher than expected for the holiday provider, with the firm noticing more people booking last-minute trips.
“Around 75% of guests booking this year are new customers,” said Mr Glover, “with visitors coming from all over the UK but mainly within two to three hours drive away.”
He added: “In general, across the year the properties are letting to similar levels to the Covid boom, which is a shock considering people are now able to holiday abroad easier.”
Major Welsh visitor attraction Bluestone in Pembrokeshire has seen an increase in online searches for its resort as a result of the sudden hot weather.
“Bluestone has seen a surge of summer bookings,” said its chief executive William McNamara. “We have seen people heading to the coast in Wales rather than abroad, ensuring they can avoid airport delays and unpredictable strikes.”
The resort, which employs 800 people and spends £7m annually with Welsh suppliers, has also seen a high number of repeat visitors and growing numbers of new guests.
“Despite challenges like the cost-of-living crisis, we’re still seeing a strong market. We attract 150,000 visitors annually and we estimate our new developments could bring a further 50,000 every year,” said Mr McNamara.
“We’re heavily investing in the future through our sustainability initiatives, in our fresh developments, and are confident in our ability to attract even more visitors to this corner of Wales, in the heart of the National Park."
Bookings for the summer holidays at UK-wide holiday-let company holidaycottages.co.uk are up 20% year-on-year, with last-minute bookings for holidays in June up by 31% across the UK. In Wales, its bookings were up 9% year-on-year, with Tenby the number one most searched destination in the UK.
For Tenby-based Elm Grove Country House, trading has returned to pre-pandemic levels after a very slow start to the season. This, again, was helped by a surge in last-minute weekend bookings.
“It was a worrying start to the season and didn’t really get going until Whitsun," said the operator. "The cost of living (or running a business) is hitting more this year and is more noticeable with significant bills for everything."
A significant number of Elm Grove’s guests are European, mainly from Holland and Germany, while 20% are returning guests.
However, this is the exception rather than the norm, as the domestic market is still the biggest market for Welsh tourism, with the majority of visitors coming from Wales and wider parts of the UK.
Wales Tourism Alliance (WTA) chair Suzy Davies said: “Wales has always fallen behind other parts of the UK when it comes to attracting overseas visitors, yet those who do come are surprised and delighted with their experience. They spend less than in other parts of the UK, so there is still a lot for Wales to do in terms of making the most of overseas visitors.
“While domestic visitors are prompted by good weather, they still tend to go to the hotspots when there is so much more to Wales that they are missing. We would love to see visitors visit outside peak times and outside the usual places."
Aside from an increase in late or even same day bookings, many operators are also seeing visitors booking shorter trips. Mid Wales Tourism said it has seen a reduction in booking duration amongst holidaymakers, with some of its business members reporting that customers are opting for three-to-four night stays instead of week-long reservations.
This may be the result of the cost of living crisis, according to Mid Wales Tourism's operations manager Zoe Hawkins. “These changes make it challenging to anticipate how things will look at the end of the season,” she said.
The Visit Mid Wales website has seen a 76% boost in traffic to the site in the second quarter of the year.
“It’s yet to be seen how this increase will convert into bookings or visitor numbers, especially given the tendency towards last-minute reservations but we hope to gain a clearer understanding of this as we move through the season,” Ms Hawkins said.
While the surge in last-minute bookings shows positive signs that Welsh tourism remains resilient in the face of inflationary pressures, the outlook is still very uncertain for the sector as cost of living depresses demand.
North Wales Tourism said its members had indicated a 40% decrease in business compared to previous years, while the Welsh Association of Visitor Attractions (WAVA) said many of its members were apprehensive about numbers for the height of summer.
WAVA, which represents over 100 of the main attractions throughout Wales, said 56% of attractions over the Whitsun Holiday period saw fewer visitors than in 2019.
David Thornley, managing director of Thornley Leisure Parks, which operates holiday parks across north and mid-Wales, said trading had slowed down in the last three weeks - though more people were booking at the last minute.
“I’m sure that by the end of August, bookings will be okay,” said Mr Thornley. “Sales have been good but again have slowed down in the last three weeks. We probably have too much stock for the time of year, which will affect our orders for next year. We have seen less interest in rental units since the Covid pandemic, so if we had the same number it would be difficult.”
Another operator of cottage-lets in north Wales, who did not want to be named, said: “For us, bookings are still very slow, last minute and many more short breaks than usual. We are looking at being about 10% down on last year on bookings.”
Ms Davies said all sectors of the tourism industry in Wales have been grappling with uncertainty since the pandemic. “While the good weather has seen a spike in people deciding to take a break here, their visit is last minute, tends to be shorter, and they are not always spending as much as previously," she said.
“This makes planning for any business difficult, especially when there is pressure for more sectors to operate all year round. Regardless of local or national strategy, the reality is everything centres around customer behaviour - and you can only influence that so far, especially when money is tight.”
Firms are also facing cripplingly high operating costs. The Wales tourism barometer reports that almost half (49%) of companies are citing high energy costs unprompted as a concern this year.
Though the controversial tourism tax, which proposes for councils to charge tourists an extra fee for overnight stays, has dominated recent discussions, many business said that was not their most pressing concern.
“The challenges faced by the tourism and hospitality sector are well documented and include the cost and availability of food, energy costs with business stuck in fixed contracts, and beset by supply chain disruptions due to inflation, and recruitment issues," said North Wales Tourism chief executive, Jim Jones.
Recruitment is a big concern for the sector - 14% cited high staff costs in the tourism barometer - which is not only affecting accommodation and attraction businesses but retail shops and cafes which play a crucial role in the tourism economy.
The dilemma for businesses now is whether to raise their prices to cover these increased overheads.
Penrhos Park in Llanrhystud, Ceredigion, is finding that, despite the number of bookings to date being on par with 2022, discounting has meant the cost of these self-catering holidays are not as high as they once were.
“The knock on effect of this is the running costs are higher, which is obviously eating into any profit. Costs such as cleaning, laundry and energy have all increased,” said Penrhos director and chair of Mid Wales Tourism, Rowland Rees-Evans.
“Our hotel is fairing slightly better, but again we are on occasions having to drop prices at the last minute to fill rooms, which is working. The one area that is doing well is food and drink. We opened a new extension in April and it has been buzzing ever since,” he said.
Mr Thornley said: "The biggest challenge in our business at present is getting staff which has eased in the last month, energy prices have eased but I think our customers are finding it hard. The proposed tourism tax is not a problem at present but could be in the future. Some councils will adopt it whilst others won’t, which could make a difference of probably £30 a week on a booking in different counties.”
WTA chair Ms Davies said: “Small business owners themselves experience cost-of-living difficulties as do customers. This year, they also face cost-of-business worries with energy, food employment and, for some self-catering, new taxes."
“Some are opening reduced hours because they can’t find staff or, in some cases, aren’t turning enough of a profit to retain staff. It doesn’t help when the only advice on offer is “cut your prices”.
