Why does the UK Government prefer businesses to stay small?

This week will see Britain’s new Chancellor of the Exchequer, Philip Hammond, present his first ever Autumn Statement. I suspect the word ‘growth’ will feature a lot. He will probably tell us the economy will grow, and that it is largely through the efforts of this Government that this will happen.

The Chancellor will no doubt list a whole raft of measures he and his Government have, or will soon, put in place, allowing businesses to grow, new businesses to emerge, and Britain generally remaining a welcome nation to businesses locating here from outside. Whether we’re in the EU or not. Rumour has it Corporation Tax will be reduced.

The Chancellor may even single out ‘my’ industry, tourism, as a major vehicle for his growth plans, and outline all the ‘fantastic work’ they are doing to help us. I am thinking LEP’s, (possible) infrastructure investments, support for VisitEngland, etc. And no, I won’t knock any of that, or indeed deny that these are important. They are!

Yet, no matter what initiatives we can welcome, and what possible investment(s) we can expect, the impact small businesses - of which there are many in tourism! - can make on the UK economy will remain stifled, unless one huge barrier gets taken away, or at a very minimum, changed significantly: the VAT threshold!

As long as the UK keeps maintaining a VAT system where there is a threshold, and that as soon as a business breaks through this threshold, it becomes liable not just for the amount over the threshold, but for all of its turnover (so the £83K included), many small businesses will make a conscious decision to stay small. Because unless you are confident enough that you will grow well beyond the level needed just to pay this additional taxation, why take the risk? A quick sum shows that a business needs to jump from £83K (current VAT threshold) to well over £100K in turnover just so it can fund this (new!) VAT bill. Assuming the average business to operate around the 5% profit margin, it becomes clear that for many, to make paying VAT a viable prospect, they would be looking at growing well beyond £150K in annual turnover, even taking into account scale advantages, etc. Many won’t be able to do so, or indeed be prepared to take that risk.

So in summary: the VAT threshold as it stands is a massive hurdle, effectively preventing many thousands of enterprises from reaching their full potential, as both the cost and risk are just too big. What a waste! And the solution, other than scrapping the threshold all together, is straightforward: just remove VAT liability below the threshold all together, for all businesses. If that means the threshold needs to drop somewhat, or for Corporation Tax to reduce less, then so be it, but it will mean that growth becomes attractive to all, opening a potentially huge pool of additional economic activity to the UK economy overnight.

And sadly, it doesn’t stop there, as the Government is just about to score its second own goal effectively stopping the opportunity for growth for many: abolishing business rates for small businesses. Where I am all for a major overhaul of business rates (Britain’s most confusing and unfair tax?), what George Osborne announced in his final budget earlier this year, to take some small businesses out of rates altogether, yet keep in the ‘slightly less small’, is likely to repeat the mistake which is the VAT threshold: a business may make the conscious decision to stay small! Looking at what constitutes a business likely to qualify for the 100% Business Rates discount, we are likely to see a group very similar to the ones (just) below the VAT threshold. A double whammy if ever there was one. Why try and grow your £80,000 or so a year business to £90K, £100K or even £125K, when running it at £80K is more profitable? 

Now just pause, and think of how many 1,000's of businesses are in this situation? Crazy, indeed!

Ruud Jansen Venneboer

Owner, Mazzard Farm holiday cottages (a small business above the VAT threshold)

www.mazzardfarm.com 

The Ghost of Michael Gove

Ask anyone whether attending school is good for children, and few will disagree. Check whether there is a correlation between school attendance and performance, and we all expect to find a positive outcome. Our children benefit from being at school, there should be no doubt about that. Yet, every so often a child may benefit from something else too: grandma's 85th birthday celebration, a family wedding, a long weekend with family or friends who live afar, or - dare I say it - a trip to London or Paris. Is any of this going to negatively affect the child's future prospects? I would argue it isn't. Quite the opposite in fact.

Until just over two years ago, scenarios as described above were generally accepted, and 'watched over' by School Heads who had the authority to make common sense decisions about requests for absence (taking into account parents' reasoning, as well as the child's general attendance levels and educational progress made). A system that to all intents and purposes worked well. Or did it? 'Not so' decided then Education Secretary Michael Gove, and from one day to the next, all UK Heads of Schools were given a clear message: absence during school time is no longer permitted, no matter what the reason for the request, and only a handful of exceptions would still apply. In a nutshell, your child can still attend granny's funeral, but please don't ask for time off when she celebrates her 85th...

Why the sudden mandate? Gove believed there was a large group of parents systematically taking their kids out of school for prolonged periods of time, for example allowing them to benefit from cheaper, term time holidays, and this had to be dealt with. Not that odd an argument per se. Leaving aside the question of the actual size of this group of 'truant parents' (Gove's research used was flimsy, to put it mildly), two important questions remain: 1. are these 'truant parents' really going to be stopped by a 'no absence or pay a penalty' message from their schools (the large number of penalties handed out to such parents since this came into force suggests it doesn't) and 2. why apply the broad brush approach, and rule out even the most reasonable requests for the odd day off? It very much seemed that the 'good ones' were made to suffer because of a few 'bad ones'.

Because let us be absolutely clear: the vast majority of parents totally agree that their children should attend school as much as possible, and that taking them out for a week, just so they can have a 'cheap holiday', is wrong in principle. But there are occasions where keeping them out for the odd day is the right thing to do. We've already mentioned granny's 85th, but there are many more. For example, many of us now live far away from family and friends, and seeing them may involve a very long journey. Is taking a Friday off, once or twice a year, just so as a family you can make the journey to see the kids' cousins, going to scar your children's academic future? Of course it isn't. Family time together, increasingly hard in today's environment where mum and dad may both be working full time, is something the whole family will benefit from, and dare I say it, possibly a touch more important once every so often than that extra day at school.

And some families, for example those working in tourism, or farming, may struggle taking out time when everyone else is on holiday. In the past, such families were allowed a degree of discretion when it came to when they could go away for a week or so. Not any more! Here in the West Country alone, this affects tens of thousands of families, yours truly included.

Most of the debate around this topic, and thankfully there has been quite a bit of late, has concentrated on families 'taking the kids out for a cheap holiday', and indeed the Prime Minister himself has weighed in on the argument by stating 'We won't change the rules to allow people to bunk off school'. Yet as much as I would agree that this is something in need of dealing with, this '0 tolerance' approach is not the way to do it, and it ignores the problem all diligent parents (read: most parents) now have when they are looking for just one or two days absence, for usually very valid reasons.

I am arguing this point as much as a parent (half of our kids' family lives abroad, and we are now encouraged to lie - 'throw a sickie please' - when we make our once a year family trip there), as I am reasoning this as owners of six holiday cottages. Where until two years ago we welcomed many family groups for a weekend stay in Spring or Autumn, often extended families with 3 or more generations having some real quality time together, this market has virtually dried up, with a reduction in weekend bookings since 2013 of no less than 50%! Travelling upwards of 3 hours (times two!) for a stay of less than 48 hours is just not attractive enough for many to make the effort.

And we are not alone. A recent study by the University of Plymouth has found that two thirds of tourism businesses in the South West of England have seen a drop in income resulting directly from what is now known as the 'Gove Effect'. These are not just accommodation providers, but all tourism related businesses, suffering the same effect: if people don't come, they don't visit attractions, eat out, or buy in the shops. Cost to the West Country economy is estimated at £87 million a year.

The irony of all of this, if irony is the appropriate word under these rather serious circumstances, is that holiday businesses (many are small operators, working to very small margins) are going to HAVE TO make their peak season breaks even more expensive, as demand in these weeks means that this is the only place where they can compensate somewhat for the losses made in off-season.

So what is the tourism industry proposing? In short, a return to common sense, moving away from the 'sledgehammer to crack a nut approach'. But there are other proposals too: spreading the peak weeks through regions (as Europe does), meaning demand is spread more (remember, in tourism, supply is usually fixed!), encouraging schools to 'bundle' their Inset Days into a full week (as some schools in Wales already do) and encourage educational breaks, given travel is often highly educational in itself. Here at Mazzard Farm, we encourage people to make the most of their Inset Days, as that does offer scope for out of season shortbreaks without the rush.

So as a nation, we have a choice here: see a major chunk of our treasured UK tourism industry go out of business, or give them a fair opportunity to compete? And allowing us all to go and visit Granny when both you and her still enjoy it. Or do we - as Gove would prefer so it seems - think it is okay to have to wait until her funeral?

Ruud Jansen Venneboer
Mazzard Farm holiday cottages
Devon
www.mazzardfarm.com 

Greed? What Greed?

Some hard truths about holiday prices during school holidays

It was some time last week that I found myself involved in debate on twitter, where I actually ended up defending, of all businesses, Centre Parcs, against the accusation they were ‘profiteering’ from the fact some people can only take their holiday(s) during school holidays. What quickly materialised, judging by the comments made by various people contributing to the debate, was an alarmingly low level of understanding of why holiday businesses often use a fee model that has different rates for different times of the year. Or maybe I should say ‘Have to use…’ Having reflected on the debate a bit more, I thought I’d share some insights from within ‘the industry’.

What may be a good starting position is to state that most holiday businesses would much rather have a flat charging structure all year round. Yes honestly! Yet, very few do, and there are good reasons for that. For the record, ‘greed’ isn’t one of them! When we started Mazzard Farm some 6 years ago, I for one was adamant that we would keep price differences between low, ‘shoulder’ and peak season to an absolute minimum. As a result, our very first set of rates saw summer peak rates at just 40% or so above the lowest rates in winter. It didn’t take us long to realise it was going to cost us dearly: the small number of peak weeks (6 out of 52) literally flew off the shelves, yet we saw almost no-one booking any of our breaks in winter, spring and autumn! You could say we learned the hard way. But we learned!

So why – you may ask – is a carefully designed fee structure, which may include some large differences for the same cottage from one week to another, essential in your business? Aren’t you just ripping off families with school-age children? Allow me to try and explain:

• Supply and demand – in Britain, there are just 10 weeks in the year (indeed, the main school holiday weeks in Spring, Summer and Autumn), where demand usually outstrips supply. It is in this very short period where a large number of businesses in our industry will have to earn as much as 50% of their annual turnover, simply because these are the only 10 weeks of the year where this opportunity exists. Without these 10 weeks, most of us would not have a business to run!

• ‘Forcing’ demand – by having different rates in different weeks, we encourage those ‘who can’ to book their holidays outside of the main peak weeks. Just imagine how many more people would be after that lovely cottage in the middle of August if it wasn’t for the fact they can actually book it cheaper in June or in September?

• Running a year-round business – To say that the holiday market in the UK in the 42 weeks outside the key holiday weeks is a competitive market is an understatement! Many of us have quite a few months each year where cash flow is actually negative (meaning: we spend more than we invoice). So to try and make sure we attract an as high as possible level of business in those weeks, we simply have to make sure we are as price-competitive as we can be.

And there are two key factors that have made this worse in recent years: with people having tightened their belts as a result of the recession, far fewer ‘cheeky’ short breaks are being taken by people during Spring and Autumn, meaning the pressure on holiday businesses to ‘make up’ during those weeks less affected by the economic downturn (most people will aim to NOT cut out their man summer break) is even bigger.

The second factor is the mandate from our current Education Secretary, Michael Gove, to ban outright any 'non-school-holiday' time off taken by school children. So where in the past a family may have been able to go for a long weekend break by ‘keeping’ the children off school during a Friday or Monday, this is now no longer a realistic option, which is impacting heavily on people deciding to go away for a weekend (as ‘what is the point as you already have to travel back on the Sunday?’ some argue). Here at Mazzard Farm we have seen a dramatic decline in such breaks, and where people do take them, almost none stay until Monday morning!

It is for all these reasons that we have been advocates for a long time of the spreading of holidays across the country. For the whole of England to enjoy their summer breaks in one or more of the 5 weeks between late July and late August is just crazy. Ask yourself, if a small country like the Netherlands – with a quarter of the UK’s population - sees the need to spread their summer holidays over 9 weeks (across 3 regions), and has done so successfully for many years, then how come this has never been properly debated – leave alone tested – in the UK? I for one am convinced that summer holidays will become cheaper (supply vs. demand!), and holiday areas and main roads less crowded, if such a model was adopted in Britain.

Or maybe, if we do feel we need to be so hard-line on school attendance, just give every child one or two days a year ‘off’ at a time of their (parents’) choosing? Surely all schools now have the hardware in place that records attendance, so keeping a tab on this would be easy, and families can have some real quality time at a time when a weekend break doesn’t cost the earth. At Mazzard Farm we often welcome extended families on a family weekend, with young and not-so-young having a great time together. I don’t think anyone will ever convince me that a get-together like this every once in a while is less important than being present during all 40 or so Monday morning assemblies at school….. And for the record, I make this comment first and foremost as a parent, and much less as someone who happens to be running a set of holiday cottages!

So I hope this has helped clear up a few misunderstandings, and that the price of your holiday is based on hard economic facts, rather than greed. And that there are things we can do as a nation to somewhat alleviate ‘the pain’, if only there was the willingness to do so! And finally, there is of course a silver lining: most families only ‘suffer’ from this issue for about 10 – 15 years in their lives, meaning there are many years left to benefit from those great, low, off peak rates. Well, unless you are a teacher I suppose…..

Ruud Jansen Venneboer

Owner, Mazzard Farm holiday cottages

www.mazzardfarm.com

When Being Green is Just Not Enough

I can still picture him today, the man appointed to assess Mazzard Farm for the UK’s main Green Tourism grading scheme, now almost 5 years ago: twenty-something, a tad introvert, probably an environmental science degree, and clipboard in hand. Of course he had a clipboard in hand. On it a set of forms, each with endless rows of questions and obligatory check boxes. Questions about the number of light bulbs, shower head flow rates, our recycling habits, whether we grew our own veg, and many more. Main purpose in the man’s life was to try and tick as many boxes as he possibly could. Had he ticked a sufficient number, he would tell us we had achieved ‘Gold status’, and everyone was happy.

We’ve had him back here once more, but having realised he was still ticking the same old boxes behind the same old questions, we decided not to bother again. Some risk I should add, because without an ‘official green grading’, we could run the risk of losing out on awards, specific green (promotional) listings, and dare I say it, bookings. But thankfully that concern could be laid to rest when bookings kept coming in just as before, and we were crowned most sustainable Devon tourism business in 2010 and again in 2012, leaving behind us quite a number of businesses who could (still) show their official gold status in green tourism.

So what do we think is wrong with a set of questions and tick boxes when it comes to striving to be ‘as green as possible’ you may ask? Not a lot, especially if ‘being green’ is your key objective. But it is 2013 now, and what we aspire to is not just being as environmentally sound as we can be; we want to be as sustainable as possible. And being a sustainable tourism business takes a lot more than a recycling policy, LED lighting, a compost heap, and a few Renewables on site.

For us, key to being sustainable is that we are firmly rooted in our local community. And that we work hard to try and make our guests appreciate, support, and engage with this same community too. We do this by informing them we ‘buy local’, why we do so, and why we think they may have a much richer holiday experience if they do so too. We spend a lot of time promoting local things to do, and enthusiastically telling our guests about all the beauty they can find (almost literally) on their temporary doorstep. Doing this hits two birds with one stone: they help support our local community, and they significantly cut down on car miles whilst here at Mazzard Farm. Oh and by the way, they tend to have a much more enjoyable holiday too.

In addition, we try and involve our community in what we do. We invite local groups to enjoy our orchard and woodlands, we build fires with Brownies, juice apples with school children, and we get actively involved with schools and in local initiatives.

But there is more: we believe that a sustainable business is a completely transparent business, and for us that includes total transparency, and dare I use the word, fairness, when it comes to our pricing policy. For us this means no late booking discounts, no negotiating for a better price, but awarding loyalty, direct referrals, and early booking. We know this sometimes ‘costs’ us a booking, but we accept this, knowing that in the end everyone can be assured that the price they have paid for a stay at Mazzard Farm has been a fair price, and that the people staying in an identical cottage next door have paid this price too.

And I could continue for a bit, but to keep this article a ‘sustainable’ length, I probably better leave it at this. What I will do though is invite anyone who wants to know more, see what we have done, tell us about their experiences, or for whatever reason wants to chat with us, to contact us, and we’d be delighted to engage. Because sharing is also sustainability, as is learning. A very big part of it in fact!

Ruud Jansen Venneboer & Jacqueline Parker

Mazzard Farm holiday cottages, Devon, UK

http://www.mazzardfarm.com/home/mazzard-farm-and-the-environment/

info@mazzardfarm.com

01404 – 815492

Twitter: https://twitter.com/MazzardFarm

Facebook: www.facebook.com/MazzardFarm

Forty Shades of Green - Sustainable Holidays at Mazzard Farm holiday cottages

Take a holiday anywhere and you will most likely see claims that your accommodation ‘strongly cares about the environment’. Examples of what it does will range from a ‘towel policy’, ‘we recycle’ statement, low energy lighting and / or activity responsive controls, to local sourcing arrangements. All good of course, irrespective of whether these steps were actually taken with sustainability in mind, or ‘just’ plain old cost saving measures.

Increasingly however, operators in the tourism industry go well and truly beyond the ‘please hang up your towel if it doesn’t need washing’ statement, and here at Mazzard Farm cottages on East Hill (Ottery St. Mary, Devon), we believe we do as much as we possibly can to keep up with these developments. And dare we say so, we may have even developed one or two initiatives ourselves!

In broad terms, we distinguish between two major elements: the actions we have taken ourselves / behaviours we show, and guest behaviours we hope to influence, trying to make sure our guests have a great holiday, and one which is as sustainable as possible.

Looking at the former, besides all the obvious ones (i.e. materials used when converting our barns into cottages, energy and lighting, green cleaning solutions, appliances, recycling, biomass boiler, solar PV panels), we provide discounts to guests arriving by public transport and encourage guests to enjoy local wildlife (we are in an AONB). Furthermore, we are very active locally (schools, business forums, green networks), and we regularly offer Mazzard Farm as an ‘educational playground’ for local groups such as the school, nursery and Brownie packs.

It is in regards to influencing our guests’ behaviours where we believe we have discovered new and innovative approaches. Innovations which are easily transferable to other tourism businesses. For example, ahead of guests arriving at Mazzard Farm we e-mail them two documents: a comprehensive Guide to ‘what to do in the area’ and a ‘Shopping Locally in Ottery St. Mary’ 2-pager. Both have a number of objectives: ensuring our guests have the best possible time at Mazzard Farm of course, but other aims include supporting the local economy, keeping food-miles down and reducing the use of a car during people’s stay. We estimate that the East Devon Guide alone reduces guests’ car use by as much as 75%, and since we launched the local shopping 2-pager, supermarket deliveries have virtually ceased.

We very much believe in the carrot rather than the stick, and that is why our approach works. And what is more, we know that some aspects of the ‘Mazzard Farm experience’ can lead to changing behaviours at home too!

www.mazzardfarm.com / 01404 815492

Who would argue with Stephen Fry?

Not many, I hear you say? Well until this week that was, when Fry was presented as one of the figure heads of a brand new Enjoy England Campaign aimed to try and persuade the English to holiday at home in 2012. ‘Make it a Great 2012’ the 90 second commercial tells us, and in it, Fry, Julie Walters, Rupert Grint and Michelle Dochery (of Downton Abbey fame) try and convince the millions of English presently considering a holiday abroad that there is really no need to get a passport, currency, jabs and flight tickets, and to holiday in England instead.

As could be expected, the campaign has come in for quite a bit of stick, with Telegraph Travel writer Nigel Richardson being particularly outspoken. So much so in fact, that the clip – so he claims – has helped him decide to holiday in Greece instead! No doubt hugely appreciated by cash-strapped Greece, but not quite what the people at Visit England had in mind I suspect…

And of course, if you are so inclined, the campaign isn’t hard to knock. Is any campaign? £4 million spent on what we already knew? No rain drop in sight? Over-romanticising of ‘chocolate box England’ again? And of course the ultimate question: “So where do the actors holiday themselves?”. Arguments galore!

What should probably be pointed out is that most people in UK tourism, myself included, didn’t want this campaign. We didn’t want any campaign. In a rare moment of industry unity, we asked for just one thing: a fair trading climate, meaning that tourism and leisure related VAT would be reduced to 5%, bringing us in line with most other countries in Europe. This would allow for significant investments to be made, and help the industry deal with one of the common (mis?)perceptions that tourism in the UK is overpriced. Or in other words: help us compete on a level playing field.

The trading climate is tough for many in our industry, and most of us always knew that the Olympics were an unlikely force to boost UK tourism. Big events never do. If anything, they scare off potential tourists, added to which the timing of the Games coincides with what is already by far the busiest holiday season of the year: the summer school holidays. In all reality, if you don’t already do well during these weeks, you’re probably in the wrong job. 

So given that a reduction in VAT in the current economical climate is as likely as Lady Gaga being asked to Chair the WI, we ought to be happy with any shot in the arm we can get. Remember that for decades now, UK Politicians have demonstrated a colossal lack of understanding, or indeed interest, in domestic tourism, even though this represents some 9% of GDP. So for them to be willing to invest at least some money back into our industry is surely a good thing. Yes they got the sentiment wrong when they thought they could impose a 20.12% discount on the industry (hugely missing the rather obvious point that 20.12% is virtually the same percentage as the VAT it makes us charge our guests!), but we managed to largely nip that in the bud, forcing Visit England to change it into a 20.12 Offer site instead. It is now up to everyone working in the industry to prove that Stephen Fry was right after all: Why would you want to be anywhere else than in England?

Ruud Jansen Venneboer

Mazzard Farm holiday cottages

East Devon

www.mazzardfarm.com 

When one and one makes three

When we set up Mazzard Farm holiday cottages, almost 4 years ago now, we obviously thought hard about our target audiences. The obvious one was ‘Young Families’, being parents of two young daughters ourselves. And with one half of the Mazzard Farm partnership being Dutch, targeting holiday makers in The Netherlands was an easy decision too. Having invested large sums of money and energy in ensuring our business was a highly sustainable one, we looked into, and spent advertising money accordingly, in the market for people looking for a sustainable holiday, and with Mazzard Farm surrounded by glorious countryside, walkers and cyclists got our attention too.

Four years and 672 bookings later, we have a pretty good overview of who actually comes and stays at Mazzard Farm. That we do indeed get our fair share of young families joining us for their holidays probably doesn’t come as a surprise. We have seen a fair number of walkers, cyclists and runners too, and that the ‘sustainable tourism’ market seems to be a hard one to crack (assuming it actually exists) is something we already elaborated on in an earlier blog.

Yet, we discovered that Mazzard Farm is also very popular with a group we never targeted, a group in fact we never realised was that substantial: families with Twins! It was during last year’s summer, we were preparing for our regular Friday arrival of new guests, when one of our cleaners came to see me and told me we were one cot and a high chair short. Given we already owned 7 of each, and that we only have 6 cottages, I couldn’t quite believe this. “We have two families staying with twins” the cleaner mentioned, "So they take up four cots etc. between them alone." “Two families with twins?” I replied “What a coincidence is that?”

And it was at that stage that it dawned on me that as of late, we seem to have had rather a lot of twins on site. One hour and a bit of analysis of both our database and wikipedia later, and I had the ‘facts’: 7% of previous 12 months' families staying at Mazzard Farm came with twins, whereas in the UK on average, only 1.5% of pregnancies lead to the birth of twins. Knowing a little bit about statistics, I could conclude that this is a significant over-representation!

But why? I hear you ask. Well we asked ourselves that question too, but decided that it was probably best to ask the parents concerned. And their responses were pretty unanimous: they all, so it seemed, had read one or more Mazzard Farm reviews left by parents with twins, and, to quote just one parent we spoke with: “If you think that traveling with one baby is a challenge, just think of what hurdles we face! So if you read that someone in the same position as you has had a great time, then we immediately take notice. The fact that Mazzard Farm provides all the clobber we would otherwise have to bring along – times two! – and for free as well, makes a lot of difference to any parent with young children, and a lot more to those who have two of the same age! That probably explains why you see rather a lot of us, parents with twins.”

So there: for all the targeting and marketing in the world, sometimes you become a firm favourite with a segment of the population you hardly realise existed, and without – seemingly – doing anything different to reach them. Needless to say, we really don’t mind. The more (twins), the merrier! And oh yes, that same day I bought an extra cot and high chair (and a changing mat and a potty, just in case!).

Ruud Jansen Venneboer

Mazzard Farm holiday cottages

Jurassic Coast, East Devon

www.mazzardfarm.com