Scotch Whisky and Tourism
July 2011
Report by
4-consulting
15 Palmerston Road
Edinburgh, EH9 1TL
Embargoed until 00.01 hours on Thursday 7 July 2011
1
EXECUTIVE SUMMARY .................................................................................... 2
1 INTRODUCTION .......................................................................................... 6
2 DISTILLERY VISITOR CENTRES ............................................................... 7
3 SCOTCH WHISKY: EMBASSY NETWORK ............................................. 11
4 CULTURAL AND TOURISM CLUSTERS ................................................. 14
5 SCOTCH WHISKY AND OVERSEAS TOURISM ..................................... 17
REFERENCES .................................................................................................. 21
WEB LINKS................................................................................................................ 21
APPENDIX ........................................................................................................ 22
2
Executive Summary
Distilleries, Visitor Centres and Tourism
Around 1.3 million visitors visited the 52 Scotch Whisky visitor centres and distilleries open to
the public in 2010. An estimated £26.9 million was spent by visitors last year. Nearly nine out
of ten visitors (86.1%) come from outside of Scotland and nearly two thirds (62.3%) come
from outside of the UK. This suggests that spending and jobs associated with visitor centres
inject new money into the Scottish economy by drawing visitors into Scotland.
Estimates of Visitors and Associated Spending
Visitors Spending (£m)
2010 1,283,000 £26.9
Scottish suppliers are strongly favoured by visitor centres with the vast majority of operating
expenditure (91%) falling within Scotland. This proportion is more than double the average
for the hospitality sector in Scotland (45%) and more than three times the average for
recreational activities in Scotland (27%).
Visitor centres and distilleries provide 640 jobs, and £30.4 million in value to the economy
(GVA). Nearly £14 million is generated in income for employees across Scotland with overall
turnover of £47.7 million.
Total Economic Impact (£ million and jobs)
Direct Indirect and induced
Total
Turnover impact £26.9 £20.8 £47.7
GVA impact £19.7 £10.7 £30.4
Income impact £8.1 £5.7 £13.8
Employment impact 460 180 640
Embassy network
ScotlandWhisky operates an embassy network with 90 hotels, golf courses, bars and
restaurants recognised as Scotch Whisky embassies. Organisations need to meet specific
quality criteria to gain recognition as an embassy, including staff trained in Scotch Whisky
appreciation.
3
Nearly three quarters (71%) of embassies stated that Scotch Whisky played an important or
very important role in attracting people to their establishments. Most embassies rated tourism
associated with Scotch Whisky as important for their business. Nearly half of embassy
network members suggested that their visitors usually also visited distilleries. This suggests
that distilleries and embassies provide a complementary offer to visitors.
The ScotlandWhisky embassy network was estimated to have received just over 2.2 million
visits from the rest of the UK and just under 2.3 million visits from abroad. The total economic
impact of the embassy network generated nearly 1,400 jobs and added £43.2 million in value
(GVA) to the economy.
Total Economic Impact of Scotch Whisky Embassy Network (£ million and jobs)
Direct Indirect and induced
Total
Turnover impact £50.3 £28.0 £78.3
GVA impact £28.9 £14.3 £43.2
Income impact £18.9 £9.4 £28.3
Employment impact 1,100 270 1,370
Tourism and cultural clusters
Clusters of tourism and culture related activities have developed around whisky distilleries
across Scotland. The distillery effect was found to support an additional 60 jobs in the local
community in sports, recreational and cultural industries and an additional 70 jobs in
accommodation around each distillery. This suggests on average an additional 130 jobs
clustered around each distillery.
These additional jobs are not generated through supply chains or other financial relationships
with distilleries. Instead the cluster appears to be developed around shared tourism, cultural
and natural assets such as the natural environment. Based on the 52 distilleries that are
open to the public, an additional 6,750 jobs are sustained in tourism and cultural clusters in
communities across Scotland.
Link between Scotch Whisky and Other Activities
Additional Jobs per Distillery
Total Jobs
Sports, recreation and cultural 60 3,100
Accommodation 70 3,650
Total 130 6,750
4
Promoting Scotland
VisitBritain (February 2010) suggests culture and heritage is responsible for more than a
quarter of spending in the UK by overseas tourists. Scotch Whisky is an important part of
Scottish culture and identity and is cited by VisitBritain as a distinctive and important part of
Britain’s food and drink offer.
China represents one of the fastest growing tourist markets for Scotland and whisky was the
Scottish product most commonly cited among potential Chinese tourists. Scottish
Government research found Johnnie Walker was the only Scottish brand widely identified by
United States residents and was cited as frequently as Robert Burns (12% of respondents).
More generally, Scotch Whisky (31%) was cited more frequently than the Edinburgh Festival
Fringe (17%).
Adding Value to Tourism
There is a broader macroeconomic story linking Scotch Whisky and tourism. Scotch Whisky
is an ambassador for Scotland, helping the country to stand out in a crowded international
market place for tourists. International exports of Scotch Whisky often rely heavily on
marketing heritage and each bottle is a potential advertisement for towns and villages across
Scotland.
Countries to which Scotland exports Scotch Whisky, tend to spend more as tourists in
Scotland. On average every £100 million of Scotch Whisky exports are associated with £20.6
million of direct tourism spending. Therefore overall Scotch Whisky exports of £3.1 billion
suggests around £640 million of direct tourism spending may be associated with Scotch
Whisky.
The strong link between Scotch Whisky and tourism was found to hold even after accounting
for wider economic conditions and the influence of the United States (both a key Scotch
Whisky export market and source of tourism for Scotland). The above estimate supports the
VisitBritain research showing that culture and heritage accounts for around one quarter of
tourism in the UK.
Adding Value to Scotch Whisky
In the Champagne-Ardenne region tourism was found to raise the willingness to pay for a
bottle of champagne. It is reasonable to suggest that the availability and quality of tourism
facilities associated with Scotch Whisky may also impact on the average price of a bottle.
This may be a particularly effective way for smaller producers to add value to their product.
Stimulating memories of Scottish holidays, and perhaps drawing on ancestral connections,
there is a clear link between tourism and the average value of Scotch Whisky purchased
when tourists return to their home countries.
5
When the number of tourists to Scotland increases from different countries, there is a
corresponding rise in the average price of a bottle of Scotch Whisky exported back to those
countries. The average price of a bottle of Scotch Whisky exported abroad has risen more
quickly among countries where tourism to Scotland has also risen more quickly.
Summary
The role of Scotch Whisky in Scotland’s tourism offer is significant, but this role has not been
fully recognised. Distilleries and Scotch Whisky embassies sit at the heart of cultural and
tourism clusters across Scotland sustaining several thousand jobs.
There is a strong link between Scotch Whisky exports and direct tourism spending of £640
million. After accounting for tourism multiplier effects, the overall impact is likely to exceed
one billion pounds each year.
A key question arises from this report, does Scotch Whisky drive tourism or does tourism
drive Scotch Whisky? Most of the quantitative evidence laid out in this report shows a strong
and valuable relationship between two of Scotland’s most important industries but it is difficult
to assign cause and effect.
It may not matter. The tourist who visits Speyside to watch the wildlife and visit a distillery
may take a bottle home. Having a reminder of Scotland sat on the shelf may encourage
them, or friends and family, to return in future years. In this sense Scotch Whisky and tourism
are a perfect blend and likely to complement one another.
6
1 Introduction
1.1 4-consulting was commissioned by the Scotch Whisky Association (SWA) to
undertake a study of the contribution that Scotch Whisky makes to tourism in Scotland.
Previous studies have focused on the economic impact of Scotch Whisky production (DTZ
Pieda Consulting, January 2003 and Verso Economics, May 2010).
1.2 The link between spirits and wine businesses and tourism are less well researched in
Europe compared to the new world. This report seeks to establish the economic impact of
tourism derived from visitor centres and the network of Scotch Whisky embassies. This
report also investigates the clustering of tourism, culture and heritage activities around
distilleries and considers the wider macroeconomic role of Scotch Whisky and tourism.
1.3 Survey information covering 37 of the 52 Scotch Whisky distilleries and visitor centres
open to the public was collected through the SWA (this includes members and non-members
of the SWA). Survey information was also collected through ScotlandWhisky on the embassy
network with responses from 18 members. Additional data was drawn from the Scottish
Government, SWA, VisitScotland, Office for National Statistics (ONS), HM Revenue and
Customs and the World Bank.
7
2 Distillery Visitor Centres
Spending, employment and investment
2.1 ScotlandWhisky, the national whisky tourism
initiative, regularly collects information on the number of
visitors to distilleries and their spending. The 2008
ScotlandWhisky data showed 1,236,000 visitors to visitor
centres and distilleries, spending £25.0 million.
2.2 As part of this study a further survey was
undertaken with distilleries and visitor centres covering
the year 2010. Information was supplied by 37 of the 52
visitor centres and distilleries open to the public. The 37
responses were weighted to provide estimates of visitor
activity across all 52 distilleries and visitor centres.
2.3 Table 2.1 shows the number of visitors and visitor spending for 2008 based on
ScotlandWhisky figures. The 2010 figure is based on the 37 responses from the survey
undertaken as part of this study. This shows 1,283,000 visitors with estimated turnover of
£26.9 million across the visitor centres. These figures seem reasonable and broadly in line
with previous estimates from ScotlandWhisky.
Table 2.1: Estimates of Visitors and Associated Spending
Year Visitors Spending (Turnover)
(£m)
2008 1,236,000 £25.0
2010 1,283,000 £26.9
SOURCE: ScotlandWhisky (covering 2008), visitor centre survey (covering 2010)
2.4 Table 2.2 provides details of visits by origin for 2010 based on the survey of visitor
centres. Nearly nine out of ten visits (86.1%) came from outside of Scotland with nearly two
thirds (62.3%) coming from outside of the UK.
2.5 This proportion is significantly ahead of VisitScotland’s estimate (see weblinks) of the
overall proportion of tourism trips to Scotland from those outside of Scotland at 38.9%. This
suggests that spending and jobs associated with visitor centres are more likely to inject new
money into the Scottish economy than other parts of the tourism sector, by drawing visitors
into Scotland.
8
Table 2.2: Estimates of Visits by Origin (2010)
Scotland Rest of UK
Rest of World
Total
Number 178,000 305,000 799,000 1,283,000
% 13.9% 23.8% 62.3% 100.0%
SOURCE: Visitor centre survey
NOTES: Figures rounded to nearest thousand visitors
2.6 Visitor centres were asked a number of questions in addition to visitor numbers and
turnover. Table 2.3 shows the weighted results for operating costs, employee costs, capital
investment and the number of workers employed during 2010, and the respective proportions
sourced in Scotland. Visitor centres were also asked to provide information on capital
investment over the last five years.
Table 2.3: Visitor Centre Activity 2010
Overall (£m)
In Scotland (%)
In Scotland (£m)
Turnover £26.9 100% £26.9
Operating costs £7.2 91% £6.6
Employee costs £8.1 100% £8.1
Capital Investment £2.5 52% £1.3
Capital Investment (over 5 years) £16.0 52% £8.3
Gross Value Added (GVA) £19.7 100% £19.7
Workers 460 100% 460
SOURCE: Survey of Scotch Whisky Visitor Centres
NOTES: Figures rounded to nearest 10 workers and £0.1 million
2.7 Gross Value Added1 (GVA) can be measured by subtracting operating costs (inputs)
from turnover (outputs). The turnover and operating cost figures from Table 2.3 suggest GVA
of £19.7 million based on turnover of £26.9 million and operating costs of £7.2 million.
2.8 Scottish suppliers are strongly favoured by visitor centres with the vast majority of
operating expenditure (91%) falling within Scotland. According to the latest Input-Output
tables published by the Scottish Government (see web links), this proportion is more than
double the average for hotels, pubs and restaurants in Scotland (45%) and more than three
times the average for recreational activities2 in Scotland (27%).
1 Gross Value Added (GVA) is a measure of production used to measure growth and developments in an economy and individual industries. The UK Office for National Statistics (ONS) and the Scottish Government both provide a short summary of GVA (see web links) and how it can be used to benchmark different activities. 2 Defined as Standard Industrial Classification (SIC) 2003 class 92; motion picture and video, radio and television, news agencies, libraries, archives, museums and other cultural activities and sporting activities.
9
2.9 The specialist nature of capital equipment helps explain why a lower proportion of
capital items (52%) are sourced from within Scotland. Capital items like machinery and
vehicles are less likely to be produced in Scotland. However, the proportion of capital items
sourced from within Scotland is still markedly ahead of the average for the Scottish economy
(31%).
Wider impact of visitor centres
2.10 The £8.1 million of employee costs, £6.6 million of operating costs and £1.3 million of
capital outlays in Scotland will generate income and jobs elsewhere in the Scottish economy.
Scottish Government Input-Output tables were used to quantify further multiplier effects (see
web links). These Input-Output tables show the multiplier effects across more than one
hundred different goods and services.
2.11 For example, the employee costs of £8.1 million (outlined in Tables 2.3) were
comprised mainly of wages and salaries paid to workers. Other employee costs included
items such as pensions. Wages and salaries are paid to workers and then spent by
households. Overall spending by households was estimated as 64% of income, shown in
Table 3.3 below. The other 36% can be accounted for by taxes and initial spending on goods
and services from outside of Scotland.
2.12 To estimate the supply chain impacts the operating expenditure needed to be broken
down into specific goods and services. The visitor centre survey found that goods for selling
in gift shops accounted for around half of operating expenditure and this was likely to be
dominated by Scotch Whisky. Therefore, half of the operating expenditure was allocated to
the spirits and wines industry in the Input-Output tables. The remaining half of operating
expenditure was allocated to the Scottish goods and services typically purchased by the
hotels and restaurants industry (based on the Input-Output tables).
2.13 Based on these allocations the wider economic impact is shown in Table 2.4 below.
Table 2.4: Wider Economic Impact (£ million and jobs)
Household spending
Supply Chain
Investment Total
Initial impacts £5.2 £6.6 £1.1 £12.9
Indirect and induced turnover £3.1 £4.1 £0.8 £8.0
Total impact on turnover £8.3 £10.6 £1.9 £20.8
Total GVA impact £4.5 £5.4 £0.8 £10.7
Total income impact £2.3 £2.9 £0.5 £5.7
Total employment impact 85 77 14 176
SOURCE: Visitor centre survey and Scottish Government Input-Output tables
10
2.14 Table 2.5 provides a summary of the direct economic impact from Table 2.3 and the
wider economic impact from Table 2.4. The overall impact of visitor centres and distilleries
provides 640 jobs, and £30.4 million in value to the economy (GVA). Nearly £14 million is
generated in income for employees across Scotland with overall turnover of £47.7 million.
Table 2.5: Total Economic Impact (£ million and jobs)
Direct Indirect and induced
Total
Turnover impact £26.9 £20.8 £47.7
GVA impact £19.7 £10.7 £30.4
Income impact £8.1 £5.7 £13.8
Employment impact 460 180 640
SOURCE: Visitor centre survey and Scottish Government Input-Output tables
11
3 Scotch Whisky: Embassy Network
Embassy network
3.1 ScotlandWhisky operates an embassy network with 90 hotels, golf courses, bars and
restaurants recognised as Scotch Whisky embassies (see web links). Organisations need to
meet specific quality criteria to gain recognition as an embassy, including staff trained in
Scotch Whisky appreciation. A short survey was undertaken with embassy network members
with 18 members providing information on employment, turnover and the role of Scotch
Whisky within their business.
3.2 Embassies were asked questions about the role of Scotch Whisky in their business
with the results shown in Table 3.1. Nearly three quarters (71%) of embassies stated that
Scotch Whisky played an important or very important role in attracting people to their
establishments.
3.3 Most embassies rated tourism associated with Scotch Whisky as important for their
business. Nearly half of embassy network members suggested that visitors usually visited
distilleries. This suggests that embassies and distilleries form a complementary tourism offer.
Table 3.1: Role of Scotch Whisky in the Business of Embassies
Role of Scotch Whisky Average response
(score)
Proportion reporting scores of 4 or 5
Role of Scotch Whisky in attracting people from outside of Scotland to establishments
Important role (4.3) 65% important or very
important role
Role of Scotch Whisky in attracting people to establishments
Important role (4.2) 71% very important or
important role
Importance of tourism associated with Scotch Whisky for business
Important (3.8) 71% very important or
important
Likelihood of guests visiting local distilleries or Whisky focused heritage centres
Sometimes (3.1) 47% nearly always or
usually
SOURCE: 4-consulting survey of Scotch Whisky embassy network members
3.4 The survey of embassy network members was used to estimate the number of visits
during 2010, shown in Table 3.2. The overall figures are expressed in terms of visits as they
are likely to include visitors counted more than once. Therefore the most useful figures in
Table 3.2 show the number and proportion of visits from the rest of the UK and the rest of the
world.
12
3.5 Embassy network members were estimated to have received just under 10.4 million
visits during 2010, shown in Table 3.2. Just over 2.2 million visits were from the rest of the
UK and just under 2.3 million visits from abroad. Visitors from outside of Scotland accounted
for 43.0% of visits to Scotch Whisky embassies. This proportion is ahead of VisitScotland’s
estimate (see weblinks) of the overall proportion of tourism trips to Scotland from those
outside of Scotland at 38.9%.
Table 3.2: Estimates of Visits to Scotch Whisky Embassies by Origin (2010)
Scotland Rest of UK
Rest of World
Total
Number 5,911,000 2,205,000 2,253,000 10,369,000
% 57.0% 21.3% 21.7% 100.0%
SOURCE: 4-consulting survey of Scotch Whisky embassy network members
3.6 The direct economic impact of the Scotch Whisky embassies is shown in Table 3.3
The survey of Scotch Whisky embassies also provided information on the number of workers
and turnover among members. Table 3.3 shows 1,100 workers were employed across the
Scotch Whisky embassy network with a turnover of £50.3 million. The latest Input-Output
tables for Scotland, published by the Scottish Government, were used to estimate operating
costs, employee costs and GVA (shown in Table 3.3) based on turnover.
Table 3.3: Direct Economic Impact of the Embassy Network (£ million and jobs)
Indicator Impact
Visitors 10,369,000
Workers 1,100
FTE Workers 790
Turnover £50.3
Estimated operating costs £18.2
Estimated employee costs £18.9
Estimated Gross Value Added (GVA) £28.9
SOURCE: 4-consulting survey of Scotch Whisky embassy network members
3.7 The latest Scottish Government Input-Output tables were used to develop multiplier
effects (indirect and induced effects) which were applied to the indicators shown in Table 3.3.
The total economic impact of the Scotch Whisky embassy network is shown in Table 3.4.
The embassy network generated nearly 1,400 jobs and added £43.2 million in value (GVA) to
the economy.
13
Table 3.4: Total Economic Impact (£ million and jobs)
Inidicator Direct Indirect and induced
Total
Turnover impact £50.3 £28.0 £78.3
GVA impact £28.9 £14.3 £43.2
Income impact £18.9 £9.4 £28.3
Employment impact 1,100 270 1,370
SOURCE: 4-consulting survey of Scotch Whisky embassy network members and Scottish Government Input-Output tables
14
4 Cultural and Tourism Clusters
4.1 The previous sections outlined the role and value of direct tourism operations
associated with Scotch Whisky and the knock-on supply chain effects. Scotch Whisky
production has played an important role in communities across Scotland providing well-paid
jobs and is often strongly aligned with wider tourism activities.
4.2 The wider linkages often fall across cultural, social and recreational activities. For
example the Spirit of Speyside festival was promoted to showcase “the best of Scotland;
whisky, food, landscape and music” (EventScotland, 27 October 2010). These linkages are
often difficult to quantify as they are not captured within commercial relationships with Scotch
Whisky distilleries or visitor centres.
4.3 Some of these wider
relationships may be captured
through the Scotch Whisky embassy
network. But themes such as
heritage, culture, the natural
environment and wildlife may
provide a bond across activities
without a direct commercial link
between organisations.
4.4 The Office for National Statistics (ONS) provides employment estimates at a detailed
electoral ward level across Scotland through the Business Register and Employment Survey
(BRES). The BRES data was used for the Highland Council area to identify distilleries and
show the patterns of employment within the same ward. Urban areas, as defined by the
Scottish Government, were excluded from this analysis as city centres exert a strong
clustering effect across a range of activities.
4.5 Table 4.1 shows the correlation coefficient of employment by industrial sector for
wards with Scotch Whisky distilleries. The correlation coefficient shows the extent to which
changes in one indicator may explain changes in another indicator. A correlation coefficient
of 100% suggests changes in one indicator may be wholly explained by changes in another
indicator whereas 0% indicates no linear relationship between two indicators. A t-test was
also undertaken which tests whether the relationship is statistically significant or not. The
relationships are called statistically significant if they are unlikely to have arisen by chance.
15
4.6 The strongest link shown in Table 4.1 was found between sports, recreation and
cultural activities and Scotch Whisky distilleries with just under 60 additional jobs associated
with each distillery. Sports, recreation and culture may include golf, outdoor pursuits and
wildlife associated tourism. These linkages may trade on shared assets such as the quality of
the natural environment.
4.7 Accommodation was also found to have a significant relationship with Scotch Whisky
production with just over 70 additional jobs associated with each distillery. These linkages
are also likely to reflect the accommodation needs associated with the additional sports,
recreation and culture activities that often form clusters alongside distilleries.
4.8 A weak relationship with travel and tourism was found which was not statistically
significant. Travel and tourism activities often serve several communities and are not
necessarily drawn to one particular town or village.
Table 4.1: Link between Scotch Whisky and Other Activities
Correlation Coefficient
Statistically Significant?
Additional Jobs per Distillery
Sports, recreation and cultural 46.7% Yes 59.6
Accommodation 26.5% Yes 70.2
Travel and tourism 21.3% No 2.4
SOURCE: Business Register and Employment Survey (BRES)
4.9 Table 4.2 shows the employment associated with the 52 Scotch Whisky distilleries
and visitor centres open to the public. Travel and tourism jobs are not considered due to the
weaker relationship shown in Table 4.1. In total around 3,100 sports, recreation and culture
jobs are clustered alongside Scotch Whisky distilleries with a further 3,650 jobs in
accommodation. The accommodation figures shown in Table 4.2 extend well beyond the
1,400 jobs sustained through the economic impact of the Scotch Whisky embassy network.
Table 4.2: Link between Scotch Whisky and Other Activities
Jobs
Sports, recreation and cultural 3,100
Accommodation 3,650
Total 6,750
SOURCE: Business Register and Employment Survey (BRES) and 4-consulting
16
4.10 The clustering and tourism effects identified above are well documented elsewhere.
A report provided to Scottish Enterprise (SQW, January 2011) suggested that golf tourism in
Scotland is likely to support £213 million in output across the Scottish economy during 2011.
The economic impact of wildlife tourism in Scotland was recently valued at £65 million
supporting nearly 2,800 Full-Time Equivalent (FTE) jobs (Scottish Government, June 2010).
The clustering effects of Scotch Whisky with 6,750 jobs, is of a similar scale to golf and
wildlife tourism.
4.11 Each of these reports, and the figures contained within this report, refer to similar and
overlapping economic impacts. Indeed, by combining Scotland’s key assets such as Scotch
Whisky, golf and wildlife a more competitive tourism offer can be made in international
markets.
17
5 Scotch Whisky and Overseas Tourism
Culture and heritage
5.1 The previous sections outline the contribution of Scotch Whisky to tourism in
Scotland. Given the locations of distilleries, Scotch Whisky is particularly important in drawing
tourists to remote and rural communities. But Scotch Whisky is an important part of Scottish
culture and identity, and plays a much wider role in attracting overseas tourism.
5.2 The culture and heritage of Scotland and the UK play an important role in attracting
tourists from overseas. Research by VisitBritain (February 2010) suggests culture and
heritage is responsible for more than a quarter (28%) of spending in the UK by overseas
tourists. The same research cited whisky as a distinctive and important part of Britain’s food
and drink offer.
5.3 VisitBritain also highlighted the role of luxury branded goods in attracting overseas
visitors, particularly from Asian countries. Famous brands and local products highlighted in
the report included Burberry, Scottish [sic] Whisky, Vivienne Westwood, Laura Ashley and
Wedgwood.
5.4 China represents one of the fastest growing tourist markets for Scotland with
research suggesting that potential tourists often associated products with Scotland (Scottish
Government, 2007a). Whisky was the Scottish product most commonly cited among potential
Chinese tourists. Whisky was more likely to be cited among those with university education
and those with higher incomes.
5.5 Whisky also plays an important role in Scotland’s largest tourism market, the United
States. Residents in the United States were asked to associate items, brands, famous people
and events with Scotland (Scottish Government, 2007b). Johnnie Walker was the only brand
widely identified by respondents and was cited as frequently as Robert Burns (12% of
respondents). More generally, Scotch Whisky (31%) was cited more frequently than the
Edinburgh Festival Fringe (17%).
18
5.6 Germany is Scotland’s second largest tourism market. A survey of Germans who had
visited Scotland or who would consider visiting the country for holidays identified a number of
“must do” or “must see” activities (Scottish Government, 2007c). These activities included
“whisky trails and authentic music events”.
Links between Scotch Whisky and overseas tourism
5.7 Research on wine tourism in the Champagne-Ardenne region (Menival and Charters,
2008) studied the impact of tourism on the willingness to pay for champagne. The results
suggest that tourism is likely to have an impact on the average price of a bottle of
champagne. Additionally, the quality of tourism facilities associated with champagne, such as
high quality restaurants, may also have an impact on the average value of a bottle of
champagne.
5.8 More recent research on wine tourism (Charters and Menival, February 2011)
suggests tourism may be a way for smaller producers in particular to add value to their
product. Both research reports highlight that the link between tourism and wine businesses is
better understood in the new world than in Europe.
5.9 There is a similar broad macroeconomic story linking the sales of Scotch Whisky and
the volume and value of overseas tourism. Scotch Whisky is an ambassador for Scotland,
helping the country to stand out in a crowded international market place for tourists.
International exports of Scotch Whisky often rely heavily on the marketing of heritage and
each bottle is a potential advertisement for towns and villages across Scotland and the
surrounding natural environment.
5.10 Table A.1 (appended) shows the latest annual tourism expenditure data for Scotland
among the top twenty countries outside the UK. Total overseas tourism expenditure was £1.4
billion during 2009 with overseas tourists spending 21,800 nights in Scotland. The top twenty
countries in terms of tourism expenditure accounted for over three quarters (76%) of
expenditure and just over 90% of the nights stayed. The United States is the single largest
source of overseas tourism spending £195 million in Scotland.
5.11 Table A.2 (appended) shows the exports of Scotch Whisky among the top twenty
countries by export value, also covering the year 2009. Total exports of Scotch Whisky were
304.6 million Litres of Pure Alcohol (LPA) with a total value of £3.1 billion. The United States
is the largest export market at £418.7 million closely followed by France at £406.9 million.
19
5.12 Tables A.1 and A.2 suggest a link between the volume and value of Scotch Whisky
exports and tourism expenditure from each country. Countries to which Scotland exports
Scotch Whisky, tend to spend more as tourists in Scotland. To investigate this link further the
top twenty countries for Scotch Whisky exports were compared with their corresponding
tourism expenditure in and visits to Scotland3.
5.13 Table 5.1 shows the correlation coefficient of Scotch Whisky exports by value and
volume correlated with tourism spending and visitor numbers for the top twenty export
markets by country. The correlation coefficient shows the extent to which changes in one
indicator may explain changes in another indicator. A correlation coefficient of 100%
suggests changes in one indicator may be wholly explained by changes in another indicator
whereas 0% indicates no linear relationship between two indicators.
5.14 The correlation coefficient is useful for showing the overall strength of the relationship
between two indicators. The square of the correlation coefficient provides the R2 indicator,
this gives a more precise measure showing how much of the difference in one indicator can
be explained by the other indicator.
Table 5.1: Correlation Between Scotch Whisky and Tourism
Indicators Correlation Coefficient
R2
Scotch Whisky exports by value & tourism spending 68.6% 47.0%
Scotch Whisky exports by value & visitor numbers 77.2% 59.6%
Scotch Whisky exports by volume & tourism spending 57.9% 33.5%
Scotch Whisky exports by volume & visitor numbers 72.7% 52.8%
SOURCE: Scotch Whisky Association, HM Revenue and Customs, VisitScotland & ONS
5.15 Table 5.1 suggests a strong and positive relationship between exports of Scotch
Whisky to individual countries and tourism activity from those countries. Countries which
import more Scotch Whisky are more likely to return tourists to Scotland with the reverse also
true.
5.16 The relationship is strongest between the value of Scotch Whisky exports and the
number of tourists from each country. The R2 figures from Table 5.1 suggests more than half
of the difference between visitor numbers from each country can be explained by the
differences in Scotch Whisky exports to each country.
3 Tourism indicators for additional countries were added drawing on the same source of data used in Table A.1 (Office for National Statistics, International Passenger Survey), data for Panama was unavailable.
20
5.17 There is a reasonable case to support the figures shown in Table 5.1 with Scotch
Whisky playing a key role in attracting tourists to Scotland from around the world. However,
important issues need to be considered before a robust claim can be made. Additional
analysis was carried out to explore the extent to which other factors influence the findings
above and is detailed in the appendix.
5.18 There are also links between the average value of bottles of Scotch Whisky exported
to countries and tourism from those countries. Table 5.2 shows the correlation coefficients for
the link between the change in average value of Scotch Whisky sold and the change in
tourism activity. There are relationships between the number of tourists, tourism expenditure
and the value added to Scotch Whisky exports.
Table 5.2: Growth in Tourism and Growth in Unit Value of Scotch Whisky
Indicators Correlation Coefficient
R2
Change in £ per LPA and change in visitor numbers 48.9% 23.9%
Change in £ per LPA and change in total nights 61.7% 38.0%
Change in £ per LPA and tourism spending 45.0% 20.2%
SOURCE: Scotch Whisky Association, HM Revenue and Customs, VisitScotland & ONS
5.19 In recent years Scotch Whisky exports have grown more quickly in terms of value
compared to volumes suggesting the export value of an average bottle has risen. Changes in
tourism can explain just over one fifth (20.2%) of the rise in the value of an exported bottle
based on tourism spending, rising to over one third (38.0%) based on tourism nights.
5.20 Most of the quantitative evidence laid out in this report shows a strong and valuable
relationship between two of Scotland’s most important industries but it is difficult to assign
cause and effect. There is a strong link between Scotch Whisky exports and direct tourism
spending of £640 million. After accounting for tourism multiplier effects, the overall impact is
likely to exceed one billion pounds each year.
21
References
Publications
Charters S., Menival D. (February 2011), Wine Tourism in Champagne, Journal of Hospitality
& Tourism Research
DTZ Pieda Consulting (January 2003) The Economic Impact of the Production of Scotch
Whisky, Gin and Vodka in Scotland
Menival D., Charters S. (2008) The impact of tourism on the willingness to pay for a bottle of
standard quality champagne, Enometrica - Review of the Vineyard Data Quantification
Society (VDQS) and the European Association of Wine Economists (EuAWE)
Scottish Government (2007a) Scotland’s International Engagement and the China Strategy
Scottish Government (2007b) USA Strategy Research Report
Scottish Government (2007c) Scotland’s International Strategy: Research to Support
Scotland’s Strategy For Stronger Engagement With Germany
Scottish Government (June 2010) The Economic Impact of Wildlife Tourism in Scotland
SQW (January 2011) An Assessment of Golf Tourism’s Future Growth Potential to 2020, final
report to Scottish Enterprise, Highlands and Islands Enterprise, VisitScotland and Golf
Tourism Scotland
Verso Economics (May 2010), The Economic Impact of Scotch Whisky Production in
Scotland
VisitBritain, Culture and Heritage Topic Profile (February 2010)
Web links
Scottish Government: Gross Value Added definition
www.scotland.gov.uk/Topics/Statistics/16170/4380
Scottish Government: Input-Output tables
www.scotland.gov.uk/Topics/Statistics/Browse/Economy/Input-Output
Scottish Government: Profile of Scottish Spirits Sector
www.scotland.gov.uk/Resource/Doc/933/0086587.xls
Office for National Statistics: What is Gross Value Added?
www.statistics.gov.uk/cci/nugget.asp?id=254
VisitScotland: Scotland The key facts on tourism in 2009
http://www.visitscotland.org/pdf/Tourism%20in%20Scotland%202009.pdf
22
Appendix
Table A.1: Overseas Tourism 2009
Country Total Visits (000s)
Total Nights (000s)
Total Spend (£m)
USA 344 2,717 £195
Germany 285 2,636 £131
Australia 133 1,522 £92
Canada 181 2,265 £90
Italy 122 1,116 £75
Spain 121 1,421 £69
Irish Republic 156 841 £59
Sweden 131 636 £48
France 144 959 £44
Switzerland 49 351 £33
Netherlands 95 634 £31
Denmark 47 506 £25
Norway 61 276 £25
Poland 53 1,536 £21
India 20 542 £18
New Zealand 33 329 £17
Belgium 43 365 £17
Austria 24 332 £17
South Africa 29 356 £16
Hungary 16 358 £14
SOURCE: VisitScotland and Office for National Statistics (International Passenger Survey)
23
TABLE A.2: Scotch Whisky Exports
Country Volume (MLPA)
Value (£ m) Value (£) per
LPA
USA 29.4 418.7 14.3
France 50.1 406.9 8.1
Spain 24.5 315.9 12.9
Singapore 14.5 167.5 11.5
Greece 8.1 130.3 16.1
Venezuela 9.3 115.8 12.4
Korea 10.1 112.5 11.2
S Africa 14.0 108.2 7.7
Germany 10.1 104.3 10.3
Taiwan 4.5 85.1 19.1
Australia 9.2 63.0 6.8
Brazil 8.4 59.6 7.1
UAE 5.0 58.0 11.6
Canada 3.4 47.2 13.7
Portugal 3.8 46.6 12.1
China 4.5 44.2 9.9
Italy 4.1 44.2 10.8
Japan 2.7 41.9 15.3
Mexico 6.3 41.9 6.6
Panama 2.7 41.6 15.3
SOURCE: Scotch Whisky Association and HM Revenue and Customs
A.1 There is a reasonable case to support the figures shown in the main body of the
report with Scotch Whisky playing a key role in attracting tourists to Scotland from around the
world. However, three important issues need to be considered to support this claim.
A.2 Firstly the strong influence of the United States may skew the figures as both a key
export market and source of tourism. Secondly, the figures are likely to be influenced by
broader economic conditions, for example larger and wealthier countries are more likely to
provide markets for our exports and tourism. Finally, the figures may also suggest that
exports of Scotch Whisky benefit from tourism rather than the other way around. In this last
scenario tourists would continue to buy a bottle as a reminder of their Scottish vacation.
A.3 To isolate the influence of the United States, the country was removed and the
correlation coefficients were reproduced (Table A.3 appended). The correlation coefficients
remain strong when the United States is removed.
24
A.4 To address the issue of broader economic influences, the percentage changes in
Scotch Whisky exports and tourism was investigated using five years of data (2005 to 2009).
The results are shown in Table A.4 (appended) with reasonable linkages still evident. This
shows that the value of exports still has a strong correlation coefficient with tourism spending
(56.2%) and visitor numbers (55.0%). The link between export volumes and tourism is
considerably weaker with a correlation coefficient of just 20% for both spending and visitor
numbers.
A.5 Changes in Scotch Whisky exports and tourism activity from 2005 to 2009 were
compared with changes in Gross Domestic Product (GDP). GDP figures published by the
World Bank (see web links) were used. Table A.5 (appended) shows the correlation between
economic growth (changes in GDP) for the top twenty countries (Table A.2).
A.6 The links between economic growth and Scotch Whisky exports and tourism activity
are generally weaker than links between Scotch Whisky exports and tourism. The indicators
in Table A.5 suggest weaker linkages with a negative relationship in some cases. The
relationship between economic growth and visitor numbers is reasonable; nearly one third of
differences in visitor numbers to Scotland (31.6%) across different countries can be explained
by the economic growth of each country.
A.7 To further account for broader economic conditions, a regression analysis was
undertaken to show the relationship between tourism spending from different countries,
Scotch Whisky exports to those countries and their respective economic growth. Table A.6
(appended) suggests that combining the value of Scotch Whisky exports and the size of the
country’s economy provides a strong explanation of the tourism spending from each country.
A.8 Both Scotch Whisky exports and the size of the country’s economy are significant
explanations of tourism spending in Scotland from each country. Taken together, Scotch
Whisky exports and the size of the economy (from which tourists originate) are able to explain
over two thirds (68.1%) of the difference in tourism spending from each country. This link is
stronger than those shown in Table 5.1.
A.9 The coefficient for Scotch Whisky exports from Table A.6 suggests that (on average)
every £100 million of Scotch Whisky exports is associated with £20.6 million of tourism
spending. This suggests around £640 of direct tourism spending may be associated with
Scotch Whisky, given that Scotch Whisky exports were £3.1 billion during 2009.
A.10 It is worth noting that an adjusted R² (a measure of how well the model performs) of
55.7% was found for the Champagne-Ardenne region model (Menival and Charters, 2008).
The adjusted R2 for the Scotch Whisky model (Table A.6) is 63.6% suggesting the model for
tourism spending, based on economic conditions and Scotch Whisky, performs well both in
absolute and relative terms.
25
Table A.3: Link between Scotch Whisky and Tourism (excluding United States)
Indicators Correlation Coefficient
R2
Scotch Whisky exports by value & tourism spending 45.3% 20.6%
Scotch Whisky exports by value & visitor numbers 64.0% 41.0%
Scotch Whisky exports by volume & tourism spending 49.5% 24.5%
Scotch Whisky exports by volume & visitor numbers 68.5% 46.9%
SOURCE: Scotch Whisky Association, HM Revenue and Customs, VisitScotland & ONS
Table A.4: Link between Changes in Scotch Whisky and Changes in Tourism
Indicators Correlation Coefficient
R2
Scotch Whisky exports by value & tourism spending 56.2% 31.6%
Scotch Whisky exports by value & visitor numbers 55.0% 30.3%
Scotch Whisky exports by volume & tourism spending 20.2% 4.1%
Scotch Whisky exports by volume & visitor numbers 20.0% 4.0%
SOURCE: Scotch Whisky Association, HM Revenue and Customs, VisitScotland & ONS
Table A.5: Link between Economic Growth, Scotch Whisky and Tourism
Indicators Correlation Coefficient
R2
Economic growth & Scotch Whisky exports by value -1.4% 0.0%
Economic growth & Scotch Whisky exports by volume 29.5% 8.7%
Economic growth & tourism spending -18.1% 3.3%
Economic growth & visitor numbers 56.2% 31.6%
SOURCE: World Bank, Scotch Whisky Association, HM Revenue and Customs, VisitScotland & ONS
26
Table A.6: Regression Analysis; Tourism Spend, GDP & Scotch Whisky Exports
Regression
Statistics
Multiple R
82.5%
R Square
68.1%
Adjusted R
Square
63.6%
Standard
Error
37.34058
Observations
17
ANOVA
df
SS
MS
F
Significance F
Regression
2
41743.58
20871.79
14.96917
0.000333
Residual
14
19520.46
1394.319
Total
16
61264.04
Coefficients
Standard
Error
t Stat
P-value
Lower 95%
Upper
95%
Lower
95.0%
Upper
95.0%
Intercept
-0.19432
13.33091
-0.01458
0.988576
-28.7863
28.39765
-28.7863
28.39765
SW exports
2.06E-07
8.59E-08
2.399775
0.030882
2.19E-08
3.91E-07
2.19E-08
3.91E-07
GDP
9.57E-12
3.2E-12
2.992058
0.009703
2.71E-12
1.64E-11
2.71E-12
1.64E-11
SOURCE: World Bank (GDP), Scotch W
hisky Association, HM Revenue and Customs (Scotch W
hisky Exports), VisitScotland & ONS (Tourism spend)