What does falling youth employment mean for the tourism and visitor economy?

Youth unemployment has fallen to its lowest level in nearly six years. While on the face of it this is good news for the economy, what are the implications for the tourism and visitor economy sector given its reliance on a young workforce?

Young people are popular with sector employers because they are often keen to learn, happy to work flexible hours and can handle a physically demanding job. Currently, 33% of the tourism and visitor economy’s workforce is under 25, which is three times the rate across the population as a whole. This dependence on young people not only poses current challenges given falling rates of youth unemployment, but demographic changes also mean that there will be fewer young people in the UK population to target in the future. Recent research from the European Commission suggests the UK’s workforce growth will turn negative by 2023.¹

With the sector’s main recruitment pool shrinking can we realistically meet our future recruitment needs? In all likelihood we can’t; by 2020, the tourism and visitor economy is projected to recruit a further 843,000 employees. Sector employers are already reporting hard-to-fill-vacancies for front facing, operational roles that young people typically fill and if it weren’t for migrant workers (see August’s Research Insight report), we would likely have a major recruitment problem.

Tourism and visitor economy businesses need to broaden their recruitment pools – older workers and women returning to work being two good starting points. Yet we need to focus much more on retaining the young people we attract in the first place. Most employers have a good story to tell about a young person that fell into the sector after working casually in their business, yet it is surprising that more businesses don’t promote the career pathways and broader opportunities that can be found in the sector to those working casually for them.

With falling youth unemployment, some social commentators have expressed concern about the quality of jobs that young people are filling and whether this is beneficial for the economy as a whole. In reality, many of these jobs, which are lower paid, part-time work, are found in our sector. However, at the same time, we need to fill a significant number of skilled and management positions. If filled these types of roles would be likely to lift productivity, which would benefit individual businesses and the economy as a whole. So there is a real incentive to retain young people.

Falling unemployment is not necessarily bad news for the sector and while it would be tempting to call for a renewed careers assault, I think it would pay greater dividends to look afresh at whether we are doing all we can to retain the young people we attract in the first place.

[1] Growth potential of EU human resources and policy implications for future economic growth, (2013), European Commission

The emerging disruption on the back of the sharing economy

We are at the forefront of major economic and social change, which has the power not only to disrupt a company’s business model, but also that of an entire industry.

The retail and travel industries have had to respond to the way the internet has changed how consumers buy and make purchasing decisions. The rise of 3D printing makes it look like manufacturing will face similar challenges and it’s clear that sites like Napster altered the way we listen to and buy music. It literally changed the business model and operating assumptions in the music industry.

Yet Napster is just one example of the growing sharing or collaborative consumption economy, which is also making its presence felt in the tourism and visitor economy. The rise of bike and car sharing is reducing the dependence on public transport and, similarly, the growth of accommodation sharing sites such as Airbnb and Couchsurfing are rivalling traditional accommodation providers.

According to Jeremy Rifkin in his thought-provoking book, ‘Zero Marginal Cost Society’, this year Airbnb will surpass Hilton and InterContinental by filling more rooms globally. To date, 3m guests have booked 10 million nights in 33,000 cities across 192 countries using this site.

If you’re thinking that this phenomena is limited to a dedicated group of ‘liberal, communitarians’, think again! Rifkin points out that this trend is part of a move away from people wanting to own a product to having the opportunity to just access it instead. He believes that young people in particular, who have grown up with free access to the likes of Google and Facebook, have a very different perspective to their parents and grandparents when it comes to the need to purchase things.

So what does it mean for operators? Well, first of all, it doesn’t look like this trend is going away and so it should not be ignored. Sites such as ParkatmyHouse for people renting and buying garage or drive space or Thredup, which provides a platform for recycling clothes, highlight the range of opportunities for consumers.

At the heart of this move is the power of peer-to-peer reviews and the influence this has on buying decisions, rather than the traditional weapon of slick marketing.

Some operators have woken up to the potential threat this new model poses, making the case that the likes of Airbnb are not subject to the same legislation that they have to follow. In response, Airbnb has argued that it is opening up the market rather than taking away existing business.

As the sharing or collaborative consumption economy grows, these arguments will no doubt become more common. It is likely to become more commonplace and has the power that other trends have shown before to disrupt the business models we currently take for granted.

The fight back in the travel industry: harnessing, not competing with, technology

The Institute of Travel and Tourism conference earlier this month had an impressive array of speakers, including Lord Adonis, Mary Portas and – controversially – Nigel Farage. However, it was two separate speakers from TUI and Thomas Cook talking about integrating technology and skills that left the biggest impression with me.

Johan Lungren, Deputy CEO, TUI UK & Ireland talked about how TUI had been trialling their new ‘Generation Centres’; travel shops where digital technology has been fully integrated, and John Straw, Head of Digital, Thomas Cook, talked about how they are maximising the best from the web with their agent’s knowledge and customer service through their new digital approach.

It really highlighted the cutting edge of travel and technology, and the importance of having a skilled workforce.

There were some interesting stats flying around:

• 20% of Thomas Cook bookings are made on  tablets
•  Tesco sold 450,0000 of its low-cost tablets over Christmas, meaning that they are becoming much more common
•  44% of people search for travel in an average month. They do it over 17 research sessions and start 73 days before booking
•  The closing ratio in Thomas Cook’s shop was 50% and on the website it was less than one percent.

While the web offers choice, its problem is that it offers too much choice. How does a consumer really pin down their choice? How do they trust what they are seeing and reading?

Both companies talked about how, in their different ways, they were using the power of their agents to help clients cut through the choice by fully integrating the advice and guidance in a travel shop with the information on the web. It’s had a real impact on business and, of course, on customer satisfaction.

Bringing out agents’ skills and knowledge has been critical; as has ensuring that they can use and harness the technology. It all helps to explain the huge changes we’re seeing in travel. Investment in training and development has increased by 54% in travel agencies and 234% in tour operations and, as a result, the number of employers reporting that staff are not proficient to work in their business has fallen. No wonder then that productivity levels have increased significantly year on year since 2008, which isn’t bad given this was during the economic downturn.

After a difficult period of contraction the travel industry is on the up and its workforce is now set to grow to 94,145 by 2020. The emphasis on having skilled staff is critical, as is the ability to get the most out of them. As another presenter, David Speakman, Group Chairman, Traveller Councillors, summed it up as the move from a transactional relationship with the client to one that’s relational. It’s also about skills and good people!

You can find more travel figures in our recent research insight report at http://bit.ly/T75o5t

Despite the criticism, we are likely to need to recruit more EU migrants

Few people can have escaped the debate, prompted by the European elections on whether there should be tighter controls on other EU citizens coming to work in the UK. If tighter restrictions were imposed, what impact is it likely to have on the tourism workforce?

Just over a quarter of the tourism workforce were born outside of the UK, with 12% of these coming from other EU member states.

Recent figures show that nearly 11% of all EU migrants end up working in the sector. Kitchen assistants, retail assistants, chefs and waiting staff are all popular roles to end up working in, but nearly 13,000 EU migrants are working as restaurant and catering managers.

In real terms the percentage of EU migrants working in these positions is low – on average between one and three percent, with larger urban areas more likely to have a higher percentage than rural or coastal areas.

But with the sector needing to recruit an additional 660,000 staff by 2020, are we likely to recruit more EU migrants? Looking at the UK population, the fall in unemployment means that it is getting harder to target the unemployed. From our own experience having helped 3,500 unemployed people into work over the past two years, it is getting harder to ensure that clients get the quality candidates they are seeking as the people still looking for jobs need a lot of support and have generally been unemployed for a while. The labour market is obviously getting more competitive as the economy hots up, and in all likelihood the sector will once again find it more difficult to attract the calibre of people it’s seeking faced with stiff competition from other sectors.

So it is highly likely that we will need to recruit more EU migrants. This isn’t a new phenomenon and in some respects we are returning to the situation we faced before the economic downturn in 2008, although we are now more likely to be welcoming Spanish migrants (numbers increased by 262% between 2012 and 2013) than those from Eastern Europe. In the early 2000s the sector was highly dependent on recruiting workers from places like Poland and the Czech Republic to come and work in the sector, just like in the 1950s and 60s when it was waves of Irish and Italian immigrants filling key roles.

If tighter immigration was imposed from within the EU it could have significant implications for the sector. If you want to know what it might be like you don’t need to look too far, as the Asian and Oriental restaurant sector is finding it difficult to fill key posts on the back of the changes to UK immigration policy. Its true impact is yet to be felt, but it’s already hampering growth and some businesses have been forced to close.

The debate is not likely to go away and individual sector businesses will probably continue to come under fire for recruiting non-UK workers. However, the need to hire EU nationals will become increasingly urgent as employers find it difficult to recruit from the UK population.

The productivity problem – lessons from the tourism and visitor economy sector

Amid better economic figures, the productivity problem continues to receive significant media attention. The problem is this; if the economy is getting better and unemployment is going down, why is productivity so low compared to other countries that are not doing so well economically.

While it is a fresh problem for the economy as a whole, productivity levels in the tourism and visitor economy sector have traditionally been lower than, say, the US and France, and the reasons for this may help explain what’s happening more broadly.

Productivity is obviously about maximising outputs from inputs.  We’ve seen how technology and innovation have played a major role in raising productivity levels in manufacturing and engineering. However, the very nature of the service sector and the necessary interaction between staff and customer means that productivity levels are naturally lower. That’s not to say that technology doesn’t play a role; it obviously does and the rise of online shopping, booking and reservations have changed the interaction between a business and its customers, and reduced the number of staff required.

But if we go back to our inputs and, in particular, the most significant one, which is the workforce, we need staff that are fully skilled and empowered to respond to customer needs. We also need managers that can get the most of out of their staff and who can position their businesses to respond to customer needs.

And here we have the problem. The number of employers that report that their staff lack the required skills is rising and managers come out high in this category. Figures currently suggest that there are 408,500 staff working in the sector that do not have the full range of skills required.[1] High labour turnover continues to mean that staff are not in post long enough to develop the skills they need and that not enough operational staff are progressing to management roles. To top it off, despite the high levels of training in the sector, a lot of it is focused on initial training to deal with the constant recruitment that takes place to address labour turnover rather than at those skills and occupations that have the highest skill gaps.

The continued recruitment of low skilled, transient staff in the UK tourism and visitor economy sector is very different to that found across the rest of the EU, where in varying degrees they rely on a stable, professional workforce.

A significant part of the UK sector is increasingly crying out for a skilled, professional workforce and over the next decade we are going to see greater polarisation between this more skilled workforce and the low skilled, transient one that has grown in size over the past twenty years. However, despite this development, it will only be when we can get out of the mindset that a flexible workforce can only be achieved through transient recruitment that will we see productivity levels significantly increase.

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[1] People 1st analysis of the Employer Skills Survey, 2011, UKCES

2014 is all about recruiting skilled professionals

2013 was the year to shout about job creation. It saw sector employers pledging jobs and work experience, and highlighted the importance of tourism and the visitor economy as a job creator and critical player in the UK economy. Currently, the sector employs one in five of the working population and by 2020 it is projected to need a further 1.7m people.

This week the latest unemployment figures showed a drop of 7.1 percent and all the statistics show that it has never been easier for sector employers to recruit. Looking at the latest Hospitality Employment Index, which we produce jointly with Caterer.com, it shows that there are currently 21 people applying for each advertised role on Caterer.com, an increase from 19 applications per job last year. This is a far cry from the situation ten years ago where the ratio was something nearer one applicant for every two jobs. Similarly, the number of employers reporting hard-to-fill vacancies is no worse than that of any other sector, although employers in seasonal and rural areas do find it much harder to recruit.

So given the sector is not finding it particularly difficult to recruit, why is it continuing to make so much noise about job creation?

I think there are a number of reasons for this. The first is that it was one of the few sectors to recruit during the economic downturn and many employers wanted to take the opportunity to show the Government the industry’s size and importance. Another reason is that some employers have made a deliberate decision to recruit jobseekers as part of their corporate social responsibility, so naturally enough they are shouting about their commitment. And all credit to them. This last year we helped 3,500 jobseekers into employment in the sector, and our experience has shown that it can often be easier to recruit elsewhere. Yet most of these employers are passionate that recruiting previously unemployed people is the right thing to do and part of their investment in local communities.  Third, sector employers have used the debate about job creation to try and tackle the persistent, negative perception of careers in the sector.

Going forward however, the challenge a single focus on job creation produces is that it removes the focus from the real problem; recruiting people into skilled jobs.

While the number of employers reporting hard-to-fill vacancies is relatively low, those reporting difficulties finding skilled staff remain higher in our sector than across the economy as a whole. This is likely to get much worse as a third of the new jobs projected to be created in the sector are in higher skilled and management positions.

So if 2013 was the year of shouting about employment potential, let 2014 be about bringing attention to the large number of skilled roles that need to be filled. This means that:

• We need be supporting the further education colleges and making sure that funding cuts don’t hamper their ability to produce quality students that enter the sector
• The sector takes responsibility for its own destiny as part of the apprenticeship reforms and that the changes address those occupations that have skill shortage needs
• There is support for the new centres of excellence that are being created. Already, for the first time in a decade, we will have skilled front of house students going into the hospitality industry (if you haven’t seen the video – you’re missing a treat! Check it out at http://bit.ly/19ovEdI). Other centres of excellence in patisserie and confectionary start soon and we want to see similar ones set up for travel and aviation.
• There is a sensible and constructive debate about how the sector can have a flexible labour force without chronic labour turnover. We currently have one of the highest labour turnover rates of any sector; as a result most training goes on initial teaching and not towards skill gaps.

Undoubtedly the recruitment of people into skilled roles is a more challenging conversation to have, but one that we should not put off as it is critical for the future competitiveness of the tourism and visitor economy sector.

Another year, another qualifications review!

The Whitehead Review into adult vocational qualifications reported earlier this month and, like previous reviews, it seeks to address the impact and relevance of training and reduce the growth of unnecessary qualifications. Why do we have so many qualification reviews and why don’t any of them seem to address the issues they are seeking to resolve?

Qualification reviews come along pretty regularly and most have similar aims to increase:

• The take up of qualifications
• The skills of the workforce and;
• The competiveness of UK plc.

There are two problems around qualifications. First, despite the large take-up of qualifications, skill needs remain stubbornly high. Second, in some areas of the economy qualification take up is low and some people believe this impairs the professionalism of certain occupations or industries.

Looking closer to home, the take up of qualifications across the tourism and visitor economy is low. Ten percent of the workforce has no qualifications and only 42 percent has one at level 3 – the level that the government is increasingly focusing on.

Yet, despite the obsessive focus on qualifications, the link between skills acquisition and qualifications attainment is spurious at best. Qualifications have often been used as a short hand for skills and there are obviously many skilled and experienced people with no qualifications. Similarly, having a qualification doesn’t mean a person is skilled.

Since the introduction of competence-based qualifications in the early 1990s, the focus on training and assessment has largely taken a back seat. It goes without saying that it is the training that leads to a qualification that develops the skills employers are seeking. Equally important, the assessment should be sufficiently robust to test the transfer of knowledge and the use (however limited!) of those skills.

Possessing a qualification itself should tell an employer that someone has the relevant skills. This was the case twenty years ago when employers could name the qualifications and had confidence in them; and as a result, specific qualifications were requested in job advertisements. These days are long gone. The stream of qualification reviews means that many employers do not recognise qualifications because they are not around long enough for employers to get used to them. It’s a sharp contrast to what happens on the European mainland, where employers largely recognise the qualifications because they themselves went through a very similar system.

The latest review, like many of its predecessors, is likely to have very limited impact as it lacks bite and doesn’t really address the core issue of training or assessment. On the contrary, Doug Richard’s review of qualifications is likely to have a greater impact.

The creation of professional standards that are set by industry and reflect what someone in a given occupation should be able to do immediately removes the problem of the myriad of qualifications. For the first time it also puts in-house training on the same status as qualifications. Gone is the obsession with qualifications and getting the inputs right; it doesn’t matter because the output is key and meeting the professional standard. These will be independently assessed to determine whether someone has met the standard, regardless of whether they have undertaken a qualification, an apprenticeship or received in-house training.

There is potential to hope that the incessant monotony of qualification reviews will finally come to an end. However, I have a sneaking suspicion that the Government’s control of apprenticeship standards through its trailblazer rollout and the lack of autonomy for sectors to put in place a system that reflects their needs will mean that the familiar cycle of qualification reviews will be with us for many years to come.

The ever changing role of the state in addressing sector skills

So the wait is over and the Government has finally announced how it will implement the apprenticeship reforms in England that Doug Richard recommended earlier in the year. Many employers have been on tenterhooks waiting for the announcement as they have the potential to bring huge changes to the way in which employers use apprenticeships and the role that apprenticeships play in addressing skills for our sector. However, to what extent is the sector dependent on the state to address its skill needs? How do the constant changes in government policy affect how skill needs are being addressed and how employers ultimately engage with the skills system?

Let’s look at the facts. The vast majority of employers are not dependent on the publicly funded skills system; in fact, 85 percent of training delivered is informal and in-house, with very little resulting in formal qualifications across the tourism and visitor economy. The smaller the business, the truer this is.

Most apprenticeships in the sector are at level 2 and therefore do not address the increasingly urgent skill shortages and gaps at higher levels. From a funding perspective, with the demise of Train to Gain in England, apprenticeships are largely the only game in town. Last year 38,442 individuals completed apprenticeships in the sector and the vast majority of these were employed by large businesses. Yet despite this take-up, skill shortages (generally at level 3 or above) remain unaddressed.

Research into Train to Gain, which provided funding for people to gain a level two qualification, suggests that it had limited impact on addressing skill needs because it was being delivered to employed people who already had the required skills. Similarly, there is evidence that a significant percentage of apprenticeships are what has been termed ‘dead weight’; meaning that an apprentice receives the same experience and training as they would have done from normal in-house training. The test will be whether employers continue to offer the apprenticeship when Government announces the need for greater financial contribution from employers. Clearly, if an employer sees the benefit of an apprenticeship over in-house training, they should be prepared to pay for it. It’s not clear which way this will go, but it has been suggested that there could be a drop as much as 70 percent in the number of apprenticeships if employer contributions were to be increased. Yet currently the hospitality industry has the highest instances of employers paying for apprenticeships without any government subsidy.

Employers are likely not to engage with the skills system because it is confusing and costs too much. With the increasing focus on transient recruitment, many employers see little point in investing in a staff member through the skills system if they aren’t going to be in post for long.

The confusion in the skills system is ever present, despite several attempts to hide or remove the wiring. But I think the problem is now so much about the amount of wiring and more about the extent to which the system is constantly changing. The skills system has frequently been the victim of attempts to address wider policies such as worklessness, entrance into higher education or low literacy and numeracy levels. Rather than addressing these at source, the wider vocational system becomes distorted trying to address wider issues and ultimately fails in its core role.

It is unsurprising then that many employers increasingly rely on their own solutions, but too often in-house training has been ignored or dismissed in relation to qualifications. This is crazy and creates an artificial divide between the skills system and day-to-day training.

Doug Richard’s recommendations about creating professional standards for key occupations provides a simple way forward that can address this divide. This would mean that employers set common standards that are independently assessed and focus on the knowledge and skills someone needs to perform their job. It then doesn’t matter how someone develops the skills –informally or through qualifications – but the focus shifts to the quality of skills acquired.

However, the Government’s approach to introducing this system is likely to be less than effective, as while the policy is coherent, the implementation is over-engineered and (once again) is likely to miss what the policy is aiming to achieve. We have already seen this with the introduction of traineeships and through the wider employer ownership agenda.

If the Government were to allow employers in different sectors to take real ownership of the skills agenda and let the policy do what it’s designed to, there is a chance that government interventions can help skills . We have to hope for the future, but the past suggests that the skills system may prove too attractive for governments to leave alone.