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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

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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)


Total


GVA impact £28.9 £14.3 £43.2


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.

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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.

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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.

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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.

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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.

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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

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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)


Total


GVA impact £19.7 £10.7 £30.4


Employment impact 460 180 640

SOURCE: Visitor centre survey and Scottish Government Input-Output tables

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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.

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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%


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


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


GVA impact £28.9 £14.3 £43.2


Employment impact 1,100 270 1,370

SOURCE: 4-consulting survey of Scotch Whisky embassy network members and Scottish Government Input-Output tables

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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.

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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%).

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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.

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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


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%


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)


R2






Table A.4: Link between Changes in Scotch Whisky and Changes in Tourism


R2






Table A.5: Link between Economic Growth, Scotch Whisky and Tourism


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)

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