A sense of relief enveloped not just the UK government but a far wider community, as the Scottish people voted by a small but decisive majority to stay within the United Kingdom in a vote on September 18.
The uncertainty ahead of the vote – combined with impassioned campaigning from the two sides of the argument – led to a hiatus in business activity, felt keenly within the hospitality sector alongside several others. According to the British Hospitality Association, around 15% of the Scottish population work in hospitality and tourism, while England remains Scotland’s most important source market for tourism.
As the vote moved ever closer, it appeared that key economic issues remained unresolved. The most disconcerting for business was around which currency an independent Scotland would use: the English government said it could not have the pound, while there were suggestions Scotland would fail the economic tests required to adopt the euro. Several major companies and big employers with offices in Scotland declared they would have to move to England, were the vote to be in favour. Lining up against the split were first Standard Life, then Royal Bank of Scotland; they were followed by oil company BP and supermarket chains Sainsburys and Asda.
Those promoting independence included Scottish tourism minister Fergus Ewing, who held out the promise of lower VAT rates for tourism and leisure businesses, while there was the also the hope of a reduction in the UK departure tax – Air Passenger Duty – at Scottish airports.
Leisure and tourism businesses were, however, largely concerned about the economic downsides, worried about the administrative complications of differing currencies and changing tax rates, and the consequences of a wider loss of economic confidence on their businesses. One lone voice in the tourism space was British Airways chief Willie Walsh, who said independence could be a “positive development” with the promised cut in APD being “marginally positive”. His comments in a media interview were immediately seized by the Yes campaigners as a ringing endorsement for their approach.
Key business decisions were put on hold, until the outcome of the vote was clear. One of the first hotel deals waiting on ice until the vote was in, was Redefine International’s decision to buy the Hilton DoubleTree in Edinburgh. “The transaction was structured on a conditional basis, subject to a no vote in the Scottish referendum,” said Redefine chief executive Mike Watters. “Now that the uncertainty surrounding this has been removed, we are very pleased to have secured this opportunistic investment in Edinburgh, which complements our existing hotel portfolio and plays well to the management skills of Redefine BDL.”
The REIT paid GBP25.27m for the 138 room property, reflecting an initial 6.9% yield. The five storey hotel has been refurbished recently, and a lease has been drawn up which will see associated management company Redefine Hotel Management in charge of day to day running.
Travel booking website Trivago noted a substantial knock-on effect, as both English visitors opted to stay away from Scotland, and vice versa. In mid September, it said travel interest from the rest of the UK to Scotland was down 29% compared with the same period of 2013. The Scots, too, appeared hunkered down pending the vote, with Scottish travel interest in the rest of the UK reduced, showing online searches down 19% compared to the same period a year earlier.
“It is interesting to see that Scotland has already seen a decline in travel interest from the rest of the UK,” said Trivago’s Denise Bartlett. “Despite the Ryder Cup, which was expected to boost Scottish tourism, searches for accommodation in the country have decreased in comparison to last year.”
HA Perspective [by Chris Bown]: Many hope that the campaign for a separate Scotland is now done, and will not resurface – most businesses will be keen for things to return to normal. The worst case scenario, in this view, is that now that the losers will keep the campaign alive, as happened in eastern Canada.
There, the province of Quebec became mired in “neverendum”, as a first vote in 1980 was followed, ultimately, by a second in 1995; both were no votes, though by a tighter margin than seen in Scotland. The uncertainty meant Royal Bank of Canada, Sun Life Financial and even much of the Bank of Montreal’s operations left Quebec’s largest city, Montreal, for the fiscal safety of Toronto.
Had the Scottish vote gone the other way, it would have fuelled nationalistic fervour elsewhere. From the Catalans of Spain to Italy’s separatists and to Belgium, where two languages are required, Europe is full of groups with grievances and intermittent demands for self-rule. And in the UK, which has always had a love-hate relationship with the European Union, the rise of the UKIP political party echoes the earlier rise of a nationalist movement in France.
Such splits – even the threat of them – are nearly always bad for international businesses, as they hurt confidence. The hotel sector, which feeds off both commercial travel and leisure activity, suffers a double whammy. Here’s hoping Scotland can settle as it is.