Tourism Public Private Partnership - Report - 25 June 2010

Economic Affairs

Scrutiny Panel

Tourism Public Private

Partnership

Presented to the States on 25th June 2010

S.R.8/2010

CONTENTS

1. PANEL MEMBERSHIP AND TERMS OF REFERENCE....................................2
2. CHAIRMAN'S INTRODUCTION.........................................................................3
3. EXECUTIVE SUMMARY....................................................................................4
4. KEY FINDINGS AND RECOMMENDATIONS....................................................7
5. INTRODUCTION..............................................................................................11
6. THE BACKGROUND TO THE PROPOSALS...................................................13
7. CASE STUDIES ...............................................................................................21
8. STRUCTURE – HOW WILL IT LOOK? ............................................................27
9. ALTERNATIVES AND MODELS......................................................................43
10. STAFF MATTERS............................................................................................47
11. FUNDING .........................................................................................................52
12. CONCLUSION..................................................................................................73

1. APPENDIX 1 – Evidence Considered...............................................................74

2. APPENDIX 2 - JFL - Panel Questions  

To the Minister for Economic Development and Ministerial Response .............76

1. PANEL MEMBERSHIP AND TERMS OF REFERENCE

1. The Economic Affairs Scrutiny Panel is comprised of the following members: Deputy M.R. Higgins, Chairman

Deputy C.F. Labey , Vice-Chairman

Deputy S Pitman

Deputy D.J.A. Wimberley

Deputy J.M. Maçon

2. The following Terms of Reference were established for the Review:

• To review the rationale behind the proposals for a Tourism PPP.
• To identify alternative options to the Tourism PPP that have been considered.
• To consider the implications that the introduction of the Tourism PPP would have on industry stakeholders, public and private.
• To examine any further issues relating to the topic that may arise in the course of the Scrutiny Review and which the Panel considers relevant.

2. CHAIRMAN'S INTRODUCTION

1. For many people, tourism represents a key part of the Island's heritage and cultural identity in much the same way as agriculture. For decades it has been a major contributor to the Island's economy, offering not only considerable direct business and employment  opportunities  in,  for  example,  hotels  and  visitor  attractions,  but  also improving the viability of heritage sites, restaurants, bars, entertainment, shops and transport providers/links, all of which have a symbiotic link with the Finance Industry. It has contributed in no small part to our high standard of living.
2. Whilst  tourism  still  contributes  significantly  to  the  Island's  economy  (£238  million between 2007 and 2008), the declining visitor numbers witnessed over the last decade mean the industry has now slipped into the shadow of the dominant finance sector. To have come to the position where we rely so heavily on a single industry has to be a major concern to us all. Furthermore, it is rather hard to equate this position with the strategic commitments contained in the States of Jersey Strategic Plan 2009 – 2014 (under Priority 2, page 9), to maintain a strong, sustainable and diverse economy and to lay the foundations for a genuinely diverse economy.
3. Given the context, the Panel has given its full attention to the proposals for a Public Private Partnership to replace Jersey Tourism, and we are pleased to present our findings and recommendations in this report. I would like to express the Panel's thanks to all those stakeholders who we have heard from during the course of this Review and place on record our support to see a strong, revived, vibrant tourism industry for many years to come.

Deputy M R Higgins

Chairman

Economic Affairs Scrutiny Panel

3. EXECUTIVE SUMMARY

1. Jersey's Tourism industry remains an important sector of the Island's economy, with £238 million spent in the Island by visitors between 2007 and 2008, and offering economic diversity and employment opportunities away from the Finance industry. However, there has been a significant decline in visitor numbers over the past decade. Key reasons for this were explained to the Panel as being the increased availability to Jersey's core market of cheap airfares and alternative destinations.
2. Proposals to replace Jersey Tourism with a Public Private Partnership organisation have been developed, primarily by the Economic Development and the Jersey Hospitality Association at the latter's instigation, as a means to seek to address the critical issue of falling visitor numbers, to better harness the marketing and commercial expertise of the private sector, and to secure a funding commitment from it to combine with a substantial States grant to improve marketing spend. However, it is not clear to the Panel that the rationale for establishing a full PPP are necessarily addressed by the creation of such an organisation. Furthermore, the Panel found that there has been inadequate consideration of alternatives to the PPP option; attention has been focussed on looking at different types of PPP.
3. The Panel did find shortcomings in the communication between Jersey Tourism and the Tourism Industry stakeholders, particularly around the development of marketing strategies.  It is clear that the Minister for Economic Development should continue to work towards improved communication with the Tourism industry, however, a full PPP is not the only option to provide better communication between the States and the industry; indeed the Tourism Marketing Panel is a halfway' partnership option that has recently been established to address this issue.
4. There remains significant uncertainty and inconsistency surrounding many details of the proposed PPP. Notable differences in the visions of the operation of the PPP between the JHA and the Economic Development Department were apparent. The Panel formed the impression that the JHA's vision for the role of the PPP appears to be heavily focussed on the advertising aspect of marketing, with concerns raised by other stakeholders about what that emphasis may mean to such things as events programmes. There is also a contradiction between the JHA and the Economic Development Department regarding what authority/autonomy a new Chief Executive and Chairman would have in choosing the structure, and staffing levels, for the organisation, with the JHA seeing far greater strategic freedom than the Minister envisaged. The Minister for Economic Development and his Chief Officer underlined that the Public sector interest, including for example strategic direction and the employment opportunities for existing Jersey Tourism staff, was safeguarded in that the PPP organisation would be subject to an agreed Service Level Agreement (SLA) in order to receive its grant. The absence of this SLA in draft form however has not helped dispel any confusion and has contributed to the discrepancies.

5. There is also significant uncertainty over the funding of the PPP. The level of States grant funding is not guaranteed, with a declining budget trend over recent years and the looming prospect of the Comprehensive Spending Review cuts. Equally, the ability of industry to achieve its proposed levels of funding for the PPP is not guaranteed. The JHA is relying on attracting additional contributors from the retail sector to assist achieving the proposed industry funding levels, but it has not been established that the retail sector will be willing and/or able to contribute funding for the PPP. To further compound funding concerns, this proposal comes at a time of general economic uncertainty. In addition, there are concerns that set up and administrative costs are prohibitive to the successful establishment of the PPP, and its ability to be able to use additional funding for the aim of improving marketing.
6. The Panel also found that the falling trend of the Jersey Tourism budget demonstrates a questionable political commitment to the Tourism industry. It also became apparent that the Economic Development Department is akin to a mothership', and its multi-sector focus has contributed to the JHA opinion that States attention on the industry since Ministerial Government was adopted in 2005 has been diluted. The Panel recommends that the Minister for Economic Development should demonstrate political commitment to the industry by addressing the declining budget and establishing longer term funding guarantees as a platform for stability. The Panel welcomes the Minister's commitment to work towards addressing the shortfall in the TDF budget, which has received only £2.2 million of the £10 million it was proposed to receive, and recommends that the Minister should bring an associated proposition to the States before the end of 2010.

7. In view of the uncertainties and outstanding issues, the Panel has reached the conclusion that the current PPP proposals should not be pursued at this stage, with the case for its adoption not adequately made. Instead, it is the Panel's view that the Tourism Marketing Panel should be given time to establish itself, and its experience used to determine whether full PPP proposals require re-assessment in the future.

4. KEY FINDINGS AND RECOMMENDATIONS

1. KEY FINDINGS

1. Tourism remains an important sector of the Jersey economy, offering direct and indirect employment and business opportunities, and contributing to diversification from the Finance Industry. (6.1.10)
2. There have been shortcomings in the communication between Jersey Tourism and the Tourism Industry stakeholders. (6.1.19)
3. The Economic Development Department and Industry do not appear to have taken into consideration the high cost of living in Jersey, and the resultant high cost base of the industry, as part of the rationale given for PPP. (6.1.20)
4. It is not clear that the rationale given for establishing a PPP, including declining visitor numbers and a greater choice of holiday options available to Jersey's traditional core market, are addressed by a PPP. (6.1.23)
5. The Jersey Conference Bureau appears to be successful in bringing together and marketing the Conference sector. The option of creating smaller sectoral organisations which might be PPP's, has not been formally investigated (7.1.10)
6. There is no single off-the-peg solution which can be copied from elsewhere as direct comparisons are difficult and have not been made. (7.2.6)
7. There are differences in the visions of the PPP structure between the JHA and the Economic Development Department. (8.3.16)
8. Whilst the JHA leadership's commitment to a PPP is clear, the commitment of its broader membership and other businesses outside its membership is not as clearly established. (8.4.8)
9. The JHA vision for the role of the PPP appears to be heavily focussed on the advertising aspect of marketing. (8.5.7)

10. Although the Economic Development Department state the requirement for a Service Level Agreement, there is no such draft available. (8.5.8)
11. Alternatives to pursuing a PPP have been inadequately considered; attention has been focussed on the different types of PPP. (9.3)
12. A full PPP is not the only option to provide better communication between the States and the industry; the Tourism Marketing Panel is a halfway' partnership option that has recently been established to address this issue. (9.10)
13. There is a contradiction between the JHA and the Economic Development Department regarding how many of the existing Jersey Tourism staff it is anticipated will work in the PPP. (10.2.6)
14. Issues around the terms and conditions of employment of present Jersey Tourism staff who may move to the PPP have not been resolved. (10.3.6)
15. Jersey Tourism's annual net revenue expenditure between 2003 and 2009 shows a declining trend. (11.3.4)
16. The section of the Jersey Tourism budget attributed to Research and Planning is not ring-fenced for Jersey Tourism, but is available for use in relation to all sections of the Economic Development Department. (11.3.5)
17. The level of States grant funding is not guaranteed. (11.3.10)
18. The Economic Development Department is a mothership'; its multi-sector focus has contributed to the JHA opinion that States attention to the industry since Ministerial Government was adopted in 2005 has been diluted. (11.3.15)
19. The falling Jersey Tourism budget demonstrates a questionable political commitment to the industry. (11.3.16)
20. The JHA is relying on attracting additional contributors from the retail sector to assist achieving the proposed funding levels from industry. (11.3.24)

21. It has not been established that the retail sector will be willing and/or able to contribute to industry funding for the PPP. (11.3.25)
22. The ability of the industry to achieve its proposed levels of funding for the PPP is not guaranteed. (11.3.32)
23. There are concerns that set up and administrative costs are prohibitive to the   successful establishment of the PPP, and there would be less funds available for marketing. (11.3.38)
24. The case for the adoption of a full PPP has not been adequately made, with uncertainty surrounding too many details. (11.3.39)
25. The proposed £10 million Tourism Development Fund budget has never materialised. Only £2.2 million has been made available to the Fund since the £10 million budget was agreed in principle by the States in 2001. (11.4.11)
26. The Minister for Economic Development has committed to work towards addressing the shortfall in the Tourism Development Fund budget. (11.4.12)

2. RECOMMENDATIONS

1. The Minister for Economic Development, and Ministers in general, should ensure that demonstrably sufficient analysis is given to alternatives, before resolving to pursue a particular model. (9.4)
2. The Tourism Marketing Panel should be given time to establish itself, and its

experience used to determine whether full PPP proposals require re-assessment in the future. (9.11)

3. The Minister for Economic Development should demonstrate political commitment to the Tourism industry by addressing the declining budget and establishing longer term funding guarantees as a platform for stability. (11.3.17)
4. The Minister for Economic Development should continue to work towards improved communication with the Tourism industry, and to harness the valuable knowledge and experience contained within it. (11.3.40)

5. The Panel believes that the PPP as currently proposed is flawed. If a PPP proposal is brought forward in the future, the Minister for Economic Development should ensure that, unlike the current proposal, there is a clear vision with all objectives and key operational details agreed by stakeholders. Furthermore, there should be commitment to achievable funding strategies from both the public and private sectors. (11.3.41)
6. The Panel supports the Minister for Economic Development's commitment to work towards addressing the shortfall in the Tourism Development Fund budget. The Minister should bring an associated proposition to the States before the end of 2010. (11.4.13)

5. INTRODUCTION

1. The previous Economic Affairs Scrutiny Panel (2005 – 2008) was notified in November 2008 by then Minister for Economic Development Senator Philip Ozouf , that following the 2006 Locum Report on tourism in Jersey and subsequent work undertaken by his Department, a proposal paper for a PPP PPP Discussion Document Version 5' would shortly be taken to the Council of Ministers for consideration as was available for Scrutiny. As there were States elections that month, it was passed on in December 2008 to the newly constituted Economic Affairs Scrutiny Panel, with its current membership, to consider the proposals for Economic Development Department based Jersey Tourism to be replaced by a Public Private Partnership outside of the States, funded by a States grant and by industry contributions. After consideration of the draft proposals, the Panel recognised the significance of the potential changes and, having also identified a number of areas of concern, agreed to undertake a Review.
2. The Panel began its Review in March 2009, and set about gathering the views of stakeholders and the public, starting with an advertising campaign in the Jersey Evening Post. The Panel was grateful to the Jersey Hospitality Association (JHA) for its assistance in circulating a submission invitation to all of its membership, and to Jersey Tourism for undertaking the same task via its Tourism Weekly newsletter. The Panel also wrote directly to the main passenger air and sea operators for their views. Public Hearings were held with the Minister for Economic Development on two occasions, as well as with the Jersey Hospitality Association, Jersey Tourism Staff, Jersey Conference Bureau and the Tourism Development Fund representatives.
3. The proposals seek to address the critical issue of falling visitor numbers through better harnessing of the marketing and commercial expertise of the private sector, and by securing a funding commitment to combine with a substantial States grant to improve marketing spend. Whilst the principles have remained constant, the proposals have changed somewhat since this Review began, over such details as costs associated with establishing and administrating the PPP outside of the States infrastructure and personnel issues such as terms of employment of existing Tourism staff. The re-drafting of the proposals by the Department has led to some delays in the Panel's work, but having received the final proposals Discussion paper on the development of a Tourism PPP – Version 7 in January this year, it

has now been possible to complete our work and present our findings and recommendations, with the evidence that led to them, in this report.

4. The Panel begins the body of its report in Section 6 by examining the rationale behind the proposals, before moving on in Section 7 to set out examples quoted to it in support of a PPP, from within Jersey and from outside. In Section 8 it looks in further detail at what the new PPP would look like, and does so initially by setting out the current operations of Jersey Tourism. When looking at the structure, the Panel examined the visions as outlined by both the private sector and the Department, and we explore some of differences that those visions appear to contain.

Section 9 looks at the options and alternatives that were considered to the PPP. The Panel was very concerned from its initial consideration of the proposals about the impact on existing Jersey Tourism staff of the uncertainty over the PPP and its impact on them if adopted. In Section 10 the Panel covers the evidence it received on those staff concerns, including consideration of terms of employment and redundancies.

5. 5  The Panel was also concerned by the crucial matter of funding, which if it is not forthcoming in the levels prescribed would raise serious questions as to the merit of forming a PPP with the associated upheaval. For instance, in the face of the Comprehensive Spending Review and historically declining budget, can the level of the States grant be adequately guaranteed? Equally, is it realistic to expect the private sector to increase its contribution to a central pot, particularly in the current economic climate and in the context of a struggling' industry? There are also concerns explored over the impact of set up and IT/administrative costs negating the value of any additional funding that may have been contributed. The Panel addresses these questions and concerns in Section 11.
   6. All of the evidence that the Panel has gathered and considered, the background information, the public hearing transcripts and written submissions that lead to its findings and conclusions outlined below can be viewed on the Scrutiny website at www.scrutiny.gov.je or by contacting the Scrutiny Office.

6. THE BACKGROUND TO THE PROPOSALS

6.1  Rationale

1. Declining Visitor Numbers
2. It is well established that visitor numbers to Jersey have, since the mid-late 1990's, shown a considerable decline. The table below shows that from a figure of 595,428 in 1993, the total number of paying staying leisure (thus excluding a) day trippers and b) business visitors who also stay) visitors had fallen to 356,629 by 2009. From 2008 to 2009, the percentage change in total staying leisure visitor numbers was a fall of 3.8%.[1] Main reasons given in explanation for this decline include the wider options of cheap flights to more destinations available to UK holidaymakers (Jersey's major market) and the increasing cost of living in, and therefore visiting, Jersey.

Staying Leisure Visitor estimates January - Decembe r 1992-2008

700,000

600,000

500,000

400,000

300,000

200,000

100,000

0

93 97 01 05 09 1992 19 1994 1995 1996 19 1998 1999 2000 20 2002 2003 2004 20 2006 2007 2008 20

Year

3. The Minister for Economic Development outlined to us how the downward trend in visitor numbers had led to the exploration of ways to try to address the decline, explaining how over a period of time Tourism has had to deal with a challenging, changing and very competitive market. As such it had been decided that we to look at the structure in the way in which the States delivered support to Tourism and in particular how the Island was marketed. The Panel was told that a number of options were considered and it was felt that a public private partnership was going to be the best way in which to harness the talent of the industry itself and make sure that it was fully involved in the process to provide its input and expertise; effectively marketing Jersey as a holiday destination.[2]
4. In the face of this trend of decline in visitor numbers, the Panel heard from industry representatives from the Jersey Hospitality Association that they had come to the conclusion that action had to be taken, and at the earliest opportunity, to address the matter. They explained to the Panel that the reality was that the core market of the U.K. had become much more prepared to look at more international holidays. Also through the low cost airlines, the cost of travelling much further afield now is much easier for a conventional family in the U.K., Jersey's core market. It was not necessarily that Jersey has performed badly, but that the rest of the world had become available to the core 85 per cent plus of Jersey's tourists. According to the JHA, people had become less uncomfortable with the option of passports, foreign currency, foreign culture, foreign food, whereas before they much preferred a safer' destination. The JHA position on stemming the declining trend was summed up by the Managing Director of Cimandis, who said:

It is not about failing, it is about recognising that here in 2010 if Jersey wants to continue to retain the levels of tourism, economic contribution that we are seeing now, and get back to a growth picture, we have to communicate very, very effectively to our core target market.'[3]

5. This approach to the situation was corroborated to a large extent by the Chief Officer of Economic Development. Addressing the question of why Jersey is not getting as many tourists here as before he also explained how the primary market in the U.K. has changed with the emergence of low-cost air travel which gives people in the U.K. far more options in terms of travelling from the whole network of

regional airports in the U.K. was something that has had an impact upon Jersey. He added that the way the market presents itself to Jersey and the way Jersey presents itself to the marketplace is very different to that which it was 10 years ago and that tourists could not be forced to come to Jersey. It is the Department's view that with a closer collaboration between the private and the public sector there is a probability that Jersey could increase the quality of the promotion of the Island and increase through that the product offering.[4]

6. Addressing the level of more recent decline, which as the graph in 6.1.2 shows has slowed considerably since 2002, the Chief Officer did emphasise that the trend in Jersey compared favourably with other destinations, and that currently the industry was in reasonable shape. He explained:

compared to other destinations; take business visitors out of it for a minute - we performed pretty well last year; 3.8 per cent down, I think, at the end of the year on staying leisure visitors. The PPP, and this is, I think, E.D.D.'s view and it is certainly a view that is shared by the industry and I am sure they have spoken to you about it already, delivers the possibility of being able to improve that. But it is about improving something that is not in the doldrums because we are performing reasonably well. But if there are opportunities to improve it and there are opportunities to bring the private and the public sector - government and the industry - in the Island together and the travel operators as well, then I think it is something that we feel is the right thing to do.'[5]

7. Other figures relating to the contribution of the Tourism industry to the Island's economy also emphasise that Tourism, despite declining visitor figures, remains a significant sector. Jersey In Figures reports that between 2007 and 2008 total on- Island visitor expenditure was £238 million, an average of £327 per visitor (all categories). There were 145 registered accommodation establishments and 12,700 registered tourism bed spaces.[6]
8. Nevertheless, the decline in visitor numbers is apparent, and it was also explained to the Panel by the JHA that there was now a real appetite for change within the industry, which was why the J.H.A. came forward with such a proposal back in

2005. At that time there were changes to the machinery of government, and a degree of uncertainty as to where the Tourism Department would sit in the process. The underlying issue for the JHA was not a criticism of the way Jersey Tourism operates but certainly centred around its position within a government department. The Chief Executive of the JHA explained that:

a PPP organisation would enable Jersey Tourism to be free from day to day government  policies  in  many  respects. Obviously  it  would  enable  the operation of an entity to be more commercial obviously to maximise revenues for reinvestment in the promotion of Jersey as a visitor destination. So one's appetite has changed ... a lack of commercial experience can sometimes limit the ability to react to being fleet of foot and react to situations sometimes because it is constrained by government policy. I think in the context of the PPP working to a structured business plan it would enable a more fleet of foot type of operation and responses in a very quick and efficient way.'[7]

9. This rationale was also supported by the Managing Director, C.I. Travel Group who informed the Panel:

A  marketing  organisation  such  as  Jersey's  tourism  department  must  be allowed to operate free of day-to-day government interference and focus the full  resources  on  creating  increased  demand  for  Jersey  as  a  tourism destination. The lack of commercial experience within the department today limits the ability of the organisation to understand fully the mechanics of the market and respond effectively to the challenges that individual operators and sectors face. The Jersey Conference Bureau and Jersey Finance represent good models of how a PPP can work effectively by creating a closer working relationship between individual members and the central marketing function.[8]

11. Combined Funding
12. Whilst the precise details of the funding structure envisaged are covered in depth in Section 8, it should be noted here that another key aspect of the rationale behind the PPP centres on amalgamated funding, ie the bringing together of the public and private sector funding streams to offer a more co-ordinated and structured funding pool to develop and deliver marketing strategies and other functions of the PPP. In return for funding commitment, it is an approach that offers industry stakeholders greater responsibility for the future direction of tourism marketing and indeed the shape of the industry in general, with the associated accountability that funding commitment carries with it – but ultimately offering the possibility of a more cohesive, holistic approach than previously seen. The Minister for Economic Development explained:

to crystallise it quite simply, it is getting greater involvement.We believe that a partnership arrangement where the private sector is involved and accountable and can put and bring their expertise is going to add significant value. We believe also in the longer term you will be able to draw in additional funding from the private sector that can be more effectively targeted for better results.'[9]

13. From the industry perspective, a view was given by the Chief Executive, Jersey Hospitality Association stressing that there would be a much greater sense of industry voices being listened to in return for the financial commitment, with money

being more effectively spent as a consequence:

I think there is an important issue as well that in the PPP world where you would have a private sector funding structure in place where there are contributions being made from the industry to the entity in order to operate in a true PPP spirit, where the private sector would be channelling that investment through corporate contributions, direct income, joint marketing activities, et cetera, I think there would be a greater need to listen to the private sector and the expertise therein rather than the situation it currently evolves as far as marketing plans are concerned. It is like you are a stakeholder and in that context of being a stakeholder with those 3 pockets of contributions being made from the private sector I believe that a PPP would have a more informed and a more structured communication process for the delivery of a marketing plan that touched all aspects of the industry rather than possibly just reacting to possible niches that do not need reacting to and some that are missed that do need reacting to.'[10]

14. Consultation
15. It was brought to the Panel's attention by the JHA that it had also become concerned about the approach of the Tourism Department to consulting with the industry, particularly in relation to marketing strategies and ideas. It felt that there was a lack of meaningful consultation which marginalised the expertise within the industry, something that could be addressed by a PPP.
16. The Chief Executive of the JHA told the Panel how consultation had not been very strong. Using the 2010 programme as an example of that he explained that the J.H.A. submitted a 2-page paper of ideas for marketing, but very few of those had been incorporated. He argued that when so many businesses depend on a strong marketing and promotional campaign it was wrong to exclude those industry views. In support of how the PPP could promote better consultation, he explained:

We know there are budget constraints and we know there are pressures on finances and everything like that, but we strongly believe that if that had been a PPP the consultation process with industry would be strong, it would be direct. I would not say it would be unanimous in everything that the industry wanted you were able to do, but I think there would be a greater consultation briefing rather than: "Oh, leave it to us, we are the marketers, we know what is best." Well, sometimes it is good to consult, as you are doing today, and the end result I think would be a much different end result.'[11]

17. Also representing the JHA, Mr P Luxon, Managing Director, Cimandis emphasised the improved consultation that the PPP could provide to harness industry experience and expertise. He told the Panel that an inherent part of the PPP is that engagement and consultation between the industry and those operating the P.P.P would become much deeper and much closer, and would therefore get the benefits of both sides, in terms of best place to spend the money. He explained how, until recently, there had been a top down approach to marketing strategies:

That is how it has been up until now and we believe that the PPP would allow that line to move to where it is a much more collaborative process. There have been genuine efforts by J.T.D. to become more collaborative but at the end of the day, at the moment, the way the relationships are structured, that tends to be developed and then presented.'[12]

18. Addressing  the  concerns  of  the  JHA  around  the  current  and  recent  levels  of consultation between the Tourism Department and industry on such things as marketing strategies, the Minister argued that the industry did have the opportunity to be heard and input into the process, explaining that the Marketing Panel', with 6 members of the private sector, together with 2 from the Tourism Department, had been  set  up  precisely  to  assist  the  formation  and  delivery  of  the  marketing strategies for the future. He continued:

I think that type of structure is a step in the right direction and a first step towards a formal P.P.P. It was one of the suggestions that was raised as part of Locum's thoughts as to how you could progress to a full PPP Aside from that, we had the experience of the Tourism Task Force that was set up in response to the global financial crisis and the effects it was appearing to have  at  the  very  early  stages  on  the  tourism  industry  Again,  you  are involved in the industry and the decision-making process and pulling in the expertise that they have. I think it is essential. I am delighted with the way it has come together. I am delighted, in particular, with the individuals that have come forward and are prepared to contribute towards it.'[13]

21. The PPP Objectives

22. The objectives of the proposed PPP organisation are set out in the in the document Discussion paper on the development of a Tourism PPP – Version 7, Jan 2010.

They are:

• To provide a comprehensive marketing and promotional service to drive increased  profitability  and  productivity  of  Jersey's  visitor  economy.  This service will include providing a range of visitor services, brand management, destination  marketing,  festival  and  events  programming,  publishing  and information provision.

• To harness, via the Board of the PPP, industry leading expertise from both within Jersey and our key UK market.

• To work with EDD and other States departments to ensure that government policy, strategy, legislation and regulation fully support the growth of the sector.

• To generate, through a Private Sector Funding Structure, industry funding to add to Government investment.

• To operate more commercially and, in doing so, maximise revenues for reinvestment in the promotion and marketing of the Island.

• To  enjoy  increased  support  from  the  industry  who  would  have  an involvement  in  the  decision  making  process  thus  generating  a  stronger sense of partnership.

• To deliver the visitor economy elements of the States Strategic Plan and therefore contribute to the long term economic success of the Island.

• To  operate  with  a  private  sector  culture  and  deliver  quicker  and  more effective decision making.[14]

7. CASE STUDIES

1. Inside Jersey

The Panel heard from the Minster for Economic Development, the JHA and other stakeholders, such as the Managing Director, C.I. Travel Group, that the Jersey Conference Bureau in particular with its clear industry comparison, and Jersey Finance Ltd represent good models of how a PPP can work effectively, by creating a closer working relationship between individual members and the central marketing function.

2. Jersey Conference Bureau
3. The JCB was established in 1996 and was the first Public Private Partnership in the Island, with the purpose of promoting the Island as a conferencing centre for meetings' destination. It operates as a corporate entity with issued shares organised as a Not for Profit Purpose Trust. It has a rolling 3 year budget under the management of its members. Current funding is approximately £320,000 with an approximate public to private sector ratio of 3:1. Public sector funding comes from the Economic Development Department and is accounted for in the Tourism Marketing element of the Department's budget.
4. The JCB Board is elected from and by its members. The Chairman is approved by the Minister for Economic Development and non-voting representatives from Jersey Tourism and the JHA who act as advisers. This has enabled the JCB to market the sector with members deciding policy and strategy.
5. The PPP proposal includes the integration of JCB into the new organisation. It is proposed that many of the lessons learned and good practices adopted by the JCB can add significant value to the PPP, particularly during the start up phase. Integration would also generate cost savings by eliminating duplication in areas such as membership management and financial accounting.[15]
6. The background to the JCB was explained to the Panel by its General Manager:

There was a Conference Bureau within Jersey Tourism. The industry as a whole felt that the conference and meetings incentive issue is quite a niche market. It needs quite specialist marketing.So, they felt that if they could have more input into how it should be marketed, it would work better. Jersey Tourism were very happy to give the money towards it. They gave the funding they were giving to the Conference Bureau within Jersey Tourism to the new body A lot of changing of laws to allow it to happen, and we have various things like service level agreements for that funding. It also meant that the private sector was able to put money towards that body. Therefore we have to be a purpose trust that limits everybody's liabilities as such. But it was there because it was a niche market within an overall tourism spend, and the industry felt that it could be better marketed if they were able to at least co-ordinate that activity.'[16]

7. The Panel was told by the General Manager that the JCB membership spanned a broad spectrum, and stood at about 50 partners including a number of hotels, restaurants, activity providers and travel companies. However, he explained that membership fees are not cheap, but partly the reason for that is to make sure that the membership does not become too large and diluted, ending up with a brochure that to any potential conference organiser becomes too difficult to go through. He explained:

So, we never say no to membership, but the way it is priced and the way it is categorised, it does mean we will always tend to end up with those hotels that either host a lot of conferences and meetings or get a lot of the overflow accommodation.'[17]

8. He also elaborated on the level of business activity it has been able to bring to the Island:

The last few years it has been round about 35,000, 36,000 room nights. This year we are hoping for a small increase on that, which equates to somewhere in the region of about £7 million to £8 million pounds depending on how you value it.'[18]

9. The JCB has been seen as a very successful model, to such an extent that the Panel was told by the Director, Jersey Tourism, that:

The  PPP  proposal  is    almost  a  mirror  of  the  Conference  Bureau, effectively.'[19]

11. Jersey Finance Limited
12. Jersey Finance was formed in May 2001 and is a non-profit making organisation whose  key  objective  is  to  promote  and  develop  the  benefits  of  Jersey  as  an international finance centre. It is jointly funded by members of the local finance industry and the States of Jersey, the States grant in 2010 being £1.8 million.
13. It actively represents the finance industry's needs and concerns with regards to legislation, regulation and other key areas of innovation that can enhance our jurisdictional product offering as well as providing tools and resources to create opportunities  for  finance  industry  professionals  to  promote  their  individual organisations, products and services. It is also a central contact for journalists and anyone connected with the finance industry, both locally and internationally, as a source of comment, industry news and information. [20]
14. The Board of Jersey Finance consists of three representatives from the Finance Industry, two States' representatives, two independent representatives from the business community, the Chairman, Chief Executive and Technical Director. The current Board is:

Jonathan White, Chairman

Geoffrey Grime, Vice-Chairman

Geoff Cook, Chief Executive

Hans Baerlocher, Managing Director, UBS

Julie Coward, Managing Director, Basel Group

Martin De Forest-Brown, Director of International Finance, States of Jersey

Mike King, Chief Executive of Economic Development, States of Jersey

Clive Spears, Chairman of Nordic Capital Limited

Martin Spurling, CEO of HSBC Offshore Islands

15. The Chief Executive Officer, Economic Development, explained how key aspects of how the Department protects the Public interest over strategic and policy objectives in the way it engages structurally with Jersey Finance Ltd, would be adopted within the Tourism PPP. In turn, that structure helps to safeguard against vested interest and domination by a particular sector:

I think the important thing to recognise is that if you take the Jersey Finance model I think is a good one from my perspective. Jersey Finance gets it funding from E.D.D. and we agree a business plan and a marketing plan which is done in great detail and that is used to justify the level of grant. The strategy and policy still stays with government and the grant is issued on the basis that the business plan and the marketing plan are consistent with that strategy and policy. One of those things is to make sure that we do not allow certain market segments to be totally dominant because we have a very good quality, a very broad audit document here.'[21]

16. The Minister for Economic Development further explained:

Do not forget, if you look at Jersey Finance as an example, it quite simply would not have worked if that was the case and one of the sectors there had fallen out. The reason for that is that you have various checks and balances in place. You have an independent board; you have an independent chair which is appointed by the Minister for Economic Development in the instance of the PPP I think those checks and balances and the fact that there is a membership fee that is going to be charged, clearly that is going to be an important part of the overall funding to increase the budget for the entity itself. So if you have one sector becoming dominant you are going to get members falling out. It just will not work; it would not be sustainable long term.'[22]

17. The Panel wrote to the Minister asking for further information relating to the funding, role and structure of JFL. Those questions and the Minister's response are attached as Appendix 3.

2. Outside Jersey

1. It was explained to the Panel that it is very difficult to identify valid comparisons to Jersey Tourism, with other organisations being too big, too city orientated, or some without the national issues of Jersey. The Director, Jersey Tourism elaborated on the point:

There is one point that is worth making when comparing us with other places and that is in Jersey, because we are, in tourism terms, a national state, it is very difficult to compare us with any other jurisdiction in the U.K. You have VisitBritain, who is responsible for the whole of the British Isles at the top level; you have an England organisation; you have literally 4 different layers of organisations all promoting tourism to a given region. Here we have one organisation that has to deal with all of those different layers at the same time and that does tend to make life different.'[23]

2. The Locum Report illustrated some examples of Tourism PPP that might merit consideration in the development of such an organisation in Jersey, although it too noted that the circumstances in Jersey are unusual. It explained that there has been considerable change in the past 10 years in the way in which cities, sub- regions and regions in the UK and Europe organise the functions relating to their visitor economy, often with some all of those functions placed into a form of not for profit PPP organisation. New Forest Tourism is highlighted as a well regarded example of a PPP in which the local authority employed the staff and provides the office and administration infrastructure, but operates otherwise as a participatory partnership.
3. In cases, such as Experience Nottinghamshire, The Mersey Partnership and Marketing Manchester, a destination-marketing organisation originally set up within a city has taken over responsibility for tourism marketing and services for the rest of their sub-region. A main feature is that these new organisations are partnership organisations (to a greater or lesser extent), set up as non-profit making companies limited by guarantee. In most cases, staff are employed by the company, although some may be on secondment from the local authority.

4. CV-One in Coventry is an independent PPP that manages all aspects of the marketing and management of the city centre, including Council owned car parks, events, the tourist information centre and all marketing activity of the city to locals and  outsiders.  This  is  similar  to  LeicesterShire  Promotions,  an  independent company limited by guarantee.
5. Ultimately however, the Locum report recommended that:

There is no single best practice template that Jersey should simply emulate. It should instead work out what it wants to achieve and what form of structure is best likely to achieve that. There are, however, clear trends that seem to represent current best practice. They include bringing together destination brand management, tourism promotion, town/city centre management and marketing, and events management into an independent partnership organisation.[24]

8. STRUCTURE – HOW WILL IT LOOK?

1. What Tourism Does Now

1. Jersey Tourism currently forms part of the Economic Development Department. There  are  25.5  full  time  employees  consisting  of  permanent  civil  servants,  a contracted UK based employee and some seasonal posts within the visitor services centre.
2. The breakdown of the roles of Jersey Tourism in terms of business activity and staffing is as follows:

• Director, Jersey Tourism
• Marketing Manager and team x 9
• Public Relations Manager and team x 2
• Festival and Events Manager and team x 2
• Visitor Services Manager and team x 5 and also 5 summer seasonal staff members

3. In addition 2.5 staff are retained by the Jersey Conference Bureau, a PPP which receives a significant provision of its budget from Economic Development/Jersey Tourism.[25]
4. The managers of the sections identified above report to the Director of Jersey Tourism, who is responsible to the Chief Officer, Economic Development. The Chief Officer in turn reports to the Minister for Economic Development, currently Senator Alan Maclean.
5. In the 2010 Economic Development Business Plan, the activity of Jersey Tourism is set out, with an expenditure breakdown, through its 2010 objectives:

Develop Jersey's potential  

Increase in number and as a conference and

Meeting, conference and  value of meetings, incentive destination.  316,200  332,377

incentive business  conference and incentive Contractual commitment to

promotion.  business and revenue from fund the Jersey

membership scheme. Conference Bureau.

Events

Lively, animated and well Develop and implement an

attended events which act annual programme of  Customer satisfaction

as marketing events to encourage new  analysis. Visitor value

192,104  208,281  communication platforms, business to Jersey,  during periods of key

are on brand and which increase stay and on  events.

animate the holiday island spend.

experience. Develop a range of  Range of activities

Customer satisfaction

products and experiences  including guided walking

analysis. Visitor value

to encourage new  124,104  140,281  programme, night and

during periods of key

business to Jersey and  farmers' markets, street

activity, maintenance of

maintain visitor  theatre and monthly

walking statistics.

satisfaction.  activities.

Lively, animated and well

attended events which act Customer satisfaction

Grants and sponsorships -  as marketing

analysis. Visitor value

Battle, Jersey Seniors  353,136  361,872  communication platforms

during periods of key

Classic and Air Display.  are on brand and which

events.

animate the holiday experience.

Joint Marketing  

Support the promotion of  

Jersey through trade  

channels - working with  

Increase in sales via trade  

Tour operators, travel  Increase in trade sales by 683,103  710,600  channels, currently 53% of

agents & trade media.  2%.

all SLV business.

These channels delivered

approx 53% of visitor

volume and £71M in value.

Research and Statistics

Visitor Services

Operate information and  

sales outlets to ensure that  

potential and actual visitors  Increased revenue from  

Increase in visitor numbers are directed to relevant  317,326  461,300  retail items. Client

to the centre. segments of the Jersey  satisfaction.

offering and to maximise

revenue.

To maintain and grow

market share of CRS  -51,000  -51,000  Improved accessibility to  vInaclureeaosfebiononkuinmgbsemr aandde bookings into the local  Jerseylink system.

using CRS. industry.

26

2. The Economic Development Vision

1. The Economic Development proposals for the structure of the PPP are set out in the document Discussion paper on the development of a Tourism PPP – Version 7, Jan 2010:

1. Governance

The PPP would be constituted as a Purpose Trust. The organisation would have an independent Board, led by a chairman appointed by the Minister for Economic Development

2. Constitution of the Board

An  eight  member  Board  (appointed  using  the  Nolan  Principles  of  public appointment) with responsibility for approving plans for all aspects of policy,

financial planning and operations would meet on a monthly basis (for more on the

responsibilities of the Board and the Minister see paragraph 8.3.11). The Board would comprise:

• A Chairman to be appointed by the Minister for Economic Development, who would be independent from both Government and the Industry. This post would be suited to a candidate with a broad business experience at senior level who would be suitably remunerated.
• The Chief Executive of the PPP whose presence will provide the link between the Board and the organisation and will allow the Board to hold the Chief Executive to account for the performance of the PPP.
• Political representation – A States member to be appointed by the Minister for Economic Development who would have the prime responsibility for ensuring that policies were consistent with States' strategies.
• Economic Development Department's representation - The accounting officer for the department or his nominee with specific responsibility for ensuring that the board policies are consistent with those for Economic Development and to oversee the adherence to Financial Codes of Direction as applied to private organisations funded by the States.
• A board member from the industry in Jersey. It would be probable that this individual would represent a member company or a member of an industry representative body.
• A marketing professional to take specific responsibility for advising the board on marketing strategy.
• A Finance professional to take specific responsibility for advising the board on financial matters.
• A UK industry professional, who would not necessarily be involved with promoting Jersey but who would be in touch with trends and issues affecting the industry in our main source market.[26]

2. In order to attract and retain an appropriate quality representation, the Board members would be remunerated for the services they provide.
3. The Discussion paper on the development of a Tourism PPP – Version 7, Jan 2010 outlines that the Locum Report concluded that the functions currently performed by Jersey Tourism are appropriate and should be continued as they mirror good practice elsewhere. However, the competitive landscape is constantly changing and Jersey must also change to maintain and grow market share. The emergence of e-commerce and internet in the market place with the associated need to match consumer requirements dictates significant change in the marketing and promotion of the Island.
4. An independent PPP, established outside the EDD structure, will require functions which are currently provided centrally to EDD's Jersey Tourism team by the States of Jersey. These include financial management and processing, information technology provision/support and human resources. These are all necessary and will need to be provided either by direct employment or under a contract either with the States of Jersey or with a private sector supplier. Both options will have one-off and recurring cost implications for the PPP.
5. It will also be imperative to deliver, through an account management function, membership services which, from the experience of the Jersey Conference Bureau (JCB), are financial and resource intensive.
6. As the existing JCB employees are already working in the areas of accounting and membership services, we have assumed an amalgamation of this function within the PPP, creating greater utilisation of the key competences. However, it is proposed to retain the role of Conference Manager and the JCB membership scheme as separate entities as they have a track record of proven success. They could continue to flourish alongside the PPP membership scheme and deliver added value and increased productivity. To account for this added requirement an estimated cost for a further 3.5 posts has been included in the cost estimates (plus the 2.5 JCB posts).[27]

7. In summary:

1. The PPP would be independent of Government and established as a purpose trust.
2. The PPP would be a stand-alone organisation that would not benefit from centralised EDD support such as HR, Finance or IT and as such would incur additional costs. This is examined later in the paper.
3. A governance model comprising a Board and an organisation headed by a Chief Executive Officer would be established. Comparable models in existence are Jersey Finance Limited and the Jersey Conference Bureau.
4. The PPP would deliver an annual business plan including a marketing and promotional programme.
5. The PPP would be charged with delivering a series of outputs, measured by key performance indicators that would be agreed with the Minister for Economic Development.
6. Whilst the PPP would receive funding from the Economic Development Department at a level equivalent to current budget expenditure, this funding would be dependent upon the PPP's ability to generate a significant level of private funding which in turn would secure the public financial support on an ongoing basis. A significant increase in industry funding will be required to offset some of the additional administration and service costs and present the potential to increase the effectiveness of Jersey's annual centralised, fully co-ordinated marketing campaign.[28]

3. The Jersey Hospitality Association/Industry Vision

1. It is clear to the Panel that the JHA, having consulted with it membership through development process, is unequivocal in its support for a PPP in Jersey, indeed it raised the first proposal for a PPP back in 2005 and has since been heavily involved in the development of plans with Economic Development and Locum Consulting to the point at which they stand today. In that respect the JHA and

majority of its membership has signed up' up to the vision and structure presented by the Department and outlined in the above Section, as emphasised by the Chief Officer, Economic Development who said:

.  you have to remember that the discussion paper that you are scrutinising is something that was not just drawn up by E.D.D. It was drawn up by E.D.D. and the Hospitality Association. Now, you know, you can ask people who currently sit outside the J.H.A., or in fact even some of the members, and there is probably a difference in view overall. But there has been pretty broad support for this from the industry.[29]

2. It was certainly the case in the evidence that we gathered that both the Department and JHA are agreed on the principles behind a PPP and what it could deliver, above all the better harnessing of industry expertise through improved collaboration

and the amalgamation of funding streams from the private and public sector to use in a co-ordinated, structured manner.

4. However, the Panel became concerned during the gathering of evidence from the JHA that there were some key details within the vision on which the JHA expectations appeared to diverge somewhat from those being presented by the Department. One issue of the key areas that appeared to demonstrate differing expectations was the precise role of the Chief Executive and his/her autonomy to choose the structure he/she wanted to see for the PPP, and where ultimate responsibility would lie.
5. The PPP Chief Executive
6. The impression that the Panel formed of the JHA view of the role that the new Chief Executive would undertake, was that of a dynamic, experienced marketeer who would take the leading role very early on, in conjunction with the Board Chairman, in developing the structure of the new organisation and the staff that would fill the posts created from that structure:

Managing Director, Cimandis:

(we would).have the board, the chairman and the chief executive who will decide exactly how they would subset it based on where J.T.D. is now. It

is a matter of detail that is irrelevant to try and get right at the early part of the concept.'[30]

7. The importance the JHA placed on the dynamism and marketing experience of the Chief Executive was shared by Condor Ferries who told the Panel that for a PPP to work effectively in stimulating the tourism economy in Jersey it is of the utmost importance that the Chief Executive is able to offer dynamic, commercial leadership, setting out a clear vision and developing effective strategic plans. They said that this individual must also be adept at balancing the need to develop and manage private sector funding streams whilst delivering not just the visitors needed today but also creating an appealing product which will compete effectively in an increasingly sophisticated tourism marketplace.
8. Condor also told the Panel that it is clearly very important to ensure that island businesses like accommodation providers and attractions are supported in the current season, but that it is equally if not more important that any PPP consider the longer term future and address the "big" strategic questions to create a sustainable tourism model which will increase resilience of the island economy.[31]
9. In addition, the JHA saw the Chief Executive and Board as having ultimate responsibility for tourism strategy and finances. In a letter to the JEP in response to a PPP related article by Peter Body, its Chairman Mr R Jones said:

For the record, the PPP would have an independent board of directors comprising eight members. They would have responsibility for approving plans for all aspects of policy, financial planning and operations, not the Economic Development Minister..'

10. Furthermore he commented:

The Economic Development Minister will not be in charge of the "purse strings" as stated in the article. It will be the PPP Board which is responsible for a three year rolling business plan .'[32]

11. In response to those claims, the Chief Officer of the Economic Development Department responded by email to the Chairman of the JHA, commenting:

I would not like to think there has been a misunderstanding so, for the avoidance of any doubt:

The relationship between EDD and the PPP will be governed by a Partnership Agreement that will define, purpose, respective roles, process and requirements to secure funding. This agreement must be compliant with Financial Direction 5.4

The Minister for Economic Development will retain responsibility for setting tourism policy and any associated legislation. To discharge this responsibility EDD will have a small (one person) policy team. This is exactly the structure we operate with financial services/JFL where the Department and JFL work closely to achieve the best outcomes.

When brought into being, the PPP will be an EDD grant-funded body that will be the largest single recipient of a grant by a factor of at least two and will have to comply with States Financial Directions. This means that, whilst the PPP organisation formulates and the PPP board approves the annual business and marketing plans as part of an annual grant approval process, in all cases the Minister must approve the plans to enable grant funding to be awarded. Again, this is the same structure as JFL.[33]

12. PPP Staffing
13. Linked to the apparent misunderstanding over how the structure will be created and who would have responsibility for creating it and subsequent strategy, there was also some difference in the vision for the existing staff moving over to the new PPP (staff matters are considered in greater detail in Section 10). Again the JHA appeared to understand that it would be the role of the Chairman and Chief Executive to choose the structure and therefore the staff they wanted for the PPP.

Managing Director, Cimandis:

circa 25 people in the Jersey Tourism Department. Some of those people are doing fantastic jobs and out-delivering against their role. There are others that perhaps have not had the experience and the training. the whole secret is to make sure you have got somebody leading an organisation that knows exactly what they are doing and has that experience and then has the ability to develop the people that he has in the team. All the way through this process the arrangement is that the PPP, once formed - chairman, board, C.E.O. - from that point they work out what structure they need to make the PPP work. We have made some assumptions in this to give a shape, as E.D.D. have, but it is only them and then of course those people that are in J.T.D. (Jersey Tourism) at the moment with that relevant experience that naturally can move over, assuming that they choose to. It may be that some other people are needed that have skills that do not exist already. I think it is a combination of getting the right structure to begin with, taking the people that have got knowledge and have been working there and then obviously you have got to then train them and make sure they have the skills to discharge against the new direction that the PPP will take, critical.

Deputy M.R. Higgins:

I think what you just said there also applies that you ... I think you will not have rooms for all 25, not necessarily all of them will meet up to the criteria that you feel is needed for this new hobby.

Managing Director, Cimandis:

The PPP is very clear on this. It talks about those people that both wish to and are invited to move across to the PPP will do. Those that are not will be offered relocation elsewhere in the public sector.

Deputy M.R. Higgins:

Have you had discussions with E.D.D., at this stage, about who will be invited to move across?

Managing Director, Cimandis:

Absolutely not. It would be inappropriate and it would be insensitive because the only way that that sort of decision or shape could take place is once the chairman, the board and the chief executive is in there because the leader is

going to have to lead this and he needs to understand who he has got in the team and what he needs in the team.[34]

14. The Minister for Economic Development however made it clear that he did not envisage staff changes, unless existing staff chose not to move, and highlighted the  Department's  position,  contrary  to  the  JHA  vision,  around  where  ultimate responsibility would lie for strategic decisions. He also said:

I think what we have to focus on here is that, first of all, there is an extremely good and talented group of individuals filling the services within Tourism at the  moment  and  there  is  no  desire  to  change  that  at  all  as  far  as  the individuals are concerned. It is important to get certainty put in place and, as Mike rightly points out, ultimately the decisions come down to a proposal and an effective agreement being put in place. If that is not forthcoming then it would not happen, quite simply.'[35]

15. Responding to the JHA vision on this matter, the Director, Jersey Tourism made it clear  that  he  did  not  accept  its  vision  and  highlighted  that  the  position  was misinformed, telling the Panel:

I think some of the misinformation has not been helpful. The kind of comments it would appear that were made to your panel last week, from people like the Hospitality Association and so on, have not been very helpful. We get a lot of feedback that things are going to be different and so on. But that is misinformation .'[36]

4. The JHA commitment to PPP

1. As has been established and acknowledged, the initial impetus for the development of proposals for PPP can be traced to the JHA. Since the idea was taken up by the

Department, the JHA has continued to be heavily involved in developing the shape of the proposals. It is clearly committed to the concept of the PPP, however, it was of note to the Panel that the JHA has confirmed that it will not join the PPP from the start, but will instead, In order to maintain its independence, in parallel with the proposed new organisation for a period of three years until 2013 when it will review its position and decide whether to merge with the PPP.

2. This had led to some questioning of the motivation behind this stance, as it might be expected that if Jersey Tourism is to be fully incorporated into the PPP, the JHA should follow suit. The Director of Jersey Tourism outlined his reservations on the matter to the Panel:

The other thing that I think probably is worth just touching on now is the Hospitality Association and their desire to remain outside of this thing until, I think they state, 2012. That, I have to say, from our perspective does not fill us with confidence because if you really believe that this is the right thing to do, why would you not subscribe to it? So, it is asking the States to put all of its assets into something and people who are really pushing for it are not prepared to put their assets into it. I have a feeling that that is not a recipe for a good, ongoing relationship.'[37]

3. The JHA explained to the Panel its reasoning behind the decision to essentially wait and see what happened with the PPP. The Chief Executive of the Jersey Hospitality Association said that as a membership organisation it was dependent its members agreeing to a change in its constitution and, if that was a subsuming of its entire entity into a PPP, that would have to be done in a properly-constructed formal way. He continued:

It is not something that our members have told us: "No, we want you to just run in parallel with this entity" be the good neighbour, as such, do everything we can and, believe me, we have worked very hard to get to this point over the last 4 years. Do everything we can to run in parallel and make it a success, government and the private sector working together in harmony.

The Deputy of St. Mary :

Running in parallel and contributing £110,000 and then £150,000

Chief Executive, Jersey Hospitality Association

I did not say that. I said that what we said was the target is £110,000 from the private sector. As I say, we want to make that a success and, should our membership decide that some of that contribution would come from the association that is always a scenario that we could look at.'[38]

4. The British Institute of Inn keeping, Jersey Branch, supported the JHA on its continued role outside the PPP, recommending that it should continue with its current role of acting as a representative body for the industry and shouldn't be merged with the Tourism Department. The JHA could then keep its Training, Recruitment and Quality Assurance activities without there being problems incorporating them into the PPP. It could continue to receive grant aid to run their training programme as an independent industry service provider.[39]
5. There was some concern expressed to the Panel over the JHA as a truly representative group of the industry. For example, the Marketing Manager at Jersey Tourism told us:

I think it is interesting when we talk about the Hospitality Association my personal view is that they are not truly representative of the industry. If we deal with the industry, we deal with people we work with. Personally I do not think I have ever gone through the Hospitality Association for anything.'[40]

6. In addition, the British Institute of Inn keeping, Jersey Branch, also commented on its concerns over the representation of the JHA, saying that Jersey Hospitality is not necessarily wholly representative of the industry and service providers, commenting that there was an apparent assumption that the JHA is an efficient and independent representative body for the Tourism industry.[41]
7. The Panel would concur that there are some industry stakeholders that the JHA don't represent, but for its part the JHA has not claimed to speak for each and every stakeholder. Furthermore, it is undoubtedly the main representative body of the industry, representing a broad range of the industry including accommodation providers, tour operators, attractions, restaurants, and carriers.

8.4.9  Also of concern to the Panel was to hear of some disharmony that exists between the JHA and some of the current senior members of the Jersey Tourism staff, which does not bode well for a future PPP that is designed to foster a close partnership between the two sides. The Director of Jersey Tourism told us about his unhappiness at some of the misinformation' that he felt the JHA has provided to the Panel and in press articles regarding the plans for the PPP. We also heard the  following  exchange  involving  the  management  team  at  Jersey  Tourism, beginning with the Marketing Manager:

Well, the Hospitality Association actively exclude us. We are not permitted to attend any members' meetings.

Development Manager:

We do not get their newsletters.

Marketing Manager:

We do not receive any communications from them despite requests.

Deputy M.R. Higgins:

That is interesting because obviously see PPP as a very co-operative body and it looks like there is no real co-operation at all.'[42]

5. Events – concern about Industry' commitment

1. Throughout  the  evidence  received  from  the  JHA  and  from  some  other  industry stakeholders, demonstrated above in outlining the rationale and, for example, regarding the skills the Chief Executive of the PPP is envisaged to possess, there is significant emphasis placed on the advertising aspect of the tourism marketing mix.
2. There was some concern expressed to the Panel that there was a danger that the PPP, with  this  apparent  emphasis  on  advertising  as  opposed  to  a  demonstrably  holistic approach to marketing from key industry stakeholders, posed a threat to certain aspects of the current event offering, that currently forms a significant part of the tourist attraction' and marketing mix.

3. The Product Development Manager at Jersey Tourism, whose responsibilities include creating reasons for people to visit, including festivals and events, walking products and cycling explained that what her team does is considered to be part of current marketing activity. However, with regard to the PPP and key industry stakeholders,she explained:

I do not know how keen they would be to put funding into Battle of Flowers, Air Display, Fête dé Noué, Liberation Day. A lot of those events are not perceived as being that cool. You know, whenever I read about events in the paper it is always about Jersey Live and Grass Roots and Branchage which are fantastic events, but there is a whole gamut of events and activities that take place during the year, probably about 50 odd events and all of that is part of the promotional activity. They are the reasons to visit, they form part of the campaigns that our P.R. (Public Relations) team work on and, of course, the marketing.'[43]

4. The Chief Executive Officer of the Battle of Flowers wrote to the Panel to outline that her organisation was concerned that the creation of the PPP could lead to funding issues for Battle. She explained:

...in the letter published in the Jersey Evening Postthe President of the Jersey Hospitality Association states that the Economic Development Minister will not be in charge of the purse strings' and that this responsibility would be discharged by an independent board of directors who would have responsibility for all aspect of policy, financial planning and operations. We cannot take any comfort from this as it clearly leaves the future funding for Battle in the hands of the new board who may not be mandated or minded to continue with any level of financial support.[44]

8.5.6  The Director of Jersey Tourism told the Panel that whilst there may be some concerns about how some of the industry stakeholders view some events, there were measures that could be put in place to address them:

I think what would have to happen though is that there would probably need to be a service level agreement between the States and the new organisation to make sure that those things were funded on an ongoing basis because if you left it to a private organisation, they may not want to fund The Battle is often criticised by the industry as being too expensive. Jersey wants to see the Battle of the Flowers continue so I think that would have to be covered by some sort of agreement at a particular level to ensure that it did so.'[45]

9. ALTERNATIVES AND MODELS

1. In response to the JHA's calls in 2005 for action to address such issues as those outlined above through the introduction of a PPP structure, the Economic Development Department commissioned Locum Consulting to undertake an examination of a range of alternative models for a PPP, based upon best practice elsewhere. From an initial discussion paper which was considered by both the JHA and the Economic Development Department, a final report was presented in 2007 which contained agreed principles between the parties on a PPP.
2. There was early agreement by the public and private sectors on the likely merits of pursuing a PPP, and it therefore appears from the evidence heard by the Panel that consideration of alternatives' has focused more on different types of PPP than actual alternative ideas. The approach was outlined in the Panel's Public Hearing held with the Minister and Officers from Economic Development, when the Director of Jersey Tourism told the Panel:

There are 3 ways of doing this: option 1 is not doing it at all, option 2 is the halfway house, I think we might term it, and option 3 is the full situation. In terms of looking at other alternatives obviously the Locum Report, which I think you have had a copy of, produced a series of options which were there and predominantly the support from the industry was for the full option 3 situation. I do not think there was much appetite for the middle route, as it were.

The Deputy of St. Mary :

The Tourism Board route? So you are saying that not much work was done to look at that because it seems to be fairly near to where you are evolving towards in the natural course of events.

Director, Jersey Tourism:

Other than the Locum Report and the work that you see in the paper, that was the work that was done, I think, essentially.

Chief Executive Officer, Economic Development:

Locum did the Destination Audit. They then did a specific piece of work on the organisational implications of this - the PPP - and within that they both evaluated and cited a number of examples of different types of PPP, structure some of which are restricted to tourism marketing.' [46]

5. The Panel explored further why this full approach had been chosen ahead of perhaps  settling  with  the  half  way  option  that  had  been  established  with  the Tourism Marketing Panel. The Minister for Economic Development explained how there has been a period of evolution, culminating at this stage in the recently established Tourism Marketing Panel. It was hoped that this was a stage in the evolution towards a full public private partnership. The Minister explained further:

So it is just one step putting in place this particular marketing group which is private sector, private sector expertise, and not expertise, I might add, from just within the Island. There are marketing experts from the U.K. (United Kingdom) who have experience of Jersey who are part of that group which we believe will add significant value.'[47]

6. The Tourism Marketing Panel has been formed to advise on future marketing planning and activity. The membership of the new Panel, below, was decided after a broad list of applications, with selection taken under the guidelines of Jersey Appointments Commission:

• Alicia Andrews , Head of Sales, Marketing and Retail, Condor Ferries
• Patrick Burke, Managing Director, Atlantic Hotel
• Anna Marie Dowling, Managing Director, Grand Hotel
• Robert Mackenzie, Managing Director, C.I.Travel Group
• John Markham, Commercial Director, Preston Travel Group
• Robert Parker, Chairman, Hotel de France
• Andrew Shrimpton, Director, Dolan Hotels
• Ian Taylor , General Manager, Market Development, Flybe
• Steve Cartwright, Chairman of the Jersey branch of the Chartered Institute of Marketing has been invited to act as an independent member.

7. The Panel Chairman is Mike King, Chief Officer of Economic Development, who on behalf of the Department is accompanied by the Strategy Development Manager, and, by invitation as required, the Director of Tourism, David de Carteret and Marketing Manager, Simon Le Huray.[48]
8. It appeared to the Panel that the Director, Jersey Tourism, himself had some sympathy to the idea that it may be better at this time to take small steps, perhaps even stopping short ultimately of a full PPP with the Tourism Marketing Panel. He told the Panel:

Personally I think that we are probably trying to take too big a leap in one go. I suspect that it would be more sensible to sort of try and take some bite size moves towards this, but certainly the concept of a board coming in but with the organisation staying roughly the same could work quite well.'[49]

9. The Minister was asked about the merits of not just stopping with the private sector expertise that could be harnessed with the introduction of the Tourism Marketing Board, potentially avoiding the upheaval and inherent expense of creating the full PPP – what was the extra incentive offered by a full PPP? He responded:

Well, I suppose to crystallise it quite simply, it is getting greater involvement. If you look at the industry themselves within this particular area, you can look at the success of an organisation which is a good example, which is Jersey Finance which, again, has been very successful in promoting the finance

industry externally. It is a very similar model to the one proposed here. There are  other  models  that  exist  elsewhere  in  the  world.   We  believe  that  a partnership arrangement where the private sector is involved and accountable and can put and bring their expertise is going to add significant value. We believe also in the longer term you will be able to draw in additional funding from  the  private  sector  that  can  be  more  effectively  targeted  for  better results.'[50]

10. STAFF MATTERS

1. As previously illustrated (see 8.1) there are 25.5 full time staff within Jersey Tourism, consisting of permanent civil servants, a contracted UK based employee and some seasonal posts within the visitor services centre. Gross costs for this team were £1,200,000 in 2008 excluding JCB staff that cost an additional £95,000. The cost of conference bureau staffing is met from the grant from Economic Development to the JCB which is combined with the membership income to form the annual budget for bureau activity.
2. In the document Discussion paper on the development of a Tourism PPP – Version 7, Jan 2010,  it is estimated that the separation of the organisation from the Economic Development Department would increase the staff requirement by an additional 5 posts, to provide support services to the Board and management team of the PPP, membership services and to ensure that a number of other key services such as finance, human resources and administration are provided for.
3. 2.5 of those posts would be compensated by the amalgamation of the Jersey Conference Bureau and the transfer of the JCB Manager. The Jersey Conference Bureau (JCB) has a total staff of 2.5 (1 based in London and 1.5 based in the Jersey Tourism building in Jersey. The gross cost of this team is £95,000.[51]
4. Clearly, the proposals to move Jersey Tourism from within a States Department to being a PPP organisation have led to disruption and concern amongst existing staff wondering what the future entails for them. The Panel is aware of the pressures that this proposed change has placed on the staff, and indeed this was one of the main factors that shaped the Review, and acknowledges the professionalism of the staff in the way it has dealt with the ongoing process.
5. From the beginning of its Review, the Panel was committed to examining how the change could impact on the existing staff, and in evidence gathering has covered areas including the sensitive but fundamental questions including; whether jobs will be offered to all existing staff, if so what terms they would be employed on (e.g. would existing terms be honoured?), and if not what alternatives would be offered to them.

2. Jobs for all existing staff?

1. Discussion paper on the development of a Tourism PPP – Version 7, Jan 2010, explains that it is anticipated that the majority of the current employees of the Jersey Tourism team will continue within the new PPP. An employee who is unwilling to accept such a transfer should be allowed to make that decision. However, where this occurs, such an employee should be considered to have voluntarily terminated his contract rather than transferring it and he would not, therefore, have title to any redundancy terms provided by the States of Jersey.
2. It also outlines that where there are no equivalent roles for a Jersey Tourism employee in the new PPP or where there are significant differences between the role that an employee currently undertakes and other roles that remain vacant within the newly created PPP, it would be inappropriate for the States of Jersey to require that person to transfer. In these circumstances, the States should offer alternative suitable employment for those employees within the public sector or agree mutually acceptable redundancy terms.[52]
3. When the Panel heard from the JHA, it suggested that the Chief Executive, Chairman and new board of the PPP, when it is created, would decide the new structure and what the different roles would be, and who would fill them. They indicated that some of skills required would be found within the existing staff, but ultimately that some would not.[53]
4. The Minister told the Panel that there is an extremely good and talented group of individuals filling the services within Tourism at the moment, and there is no desire to change that at all as far as the individuals are concerned.
5. This point was emphasised by the Chief Executive Officer, Economic Development, who told the Panel that he did not envisage any of the functions that are undertaken by Jersey Tourism not being undertaken by the PPP, nor any of the people who work for Jersey Tourism not having a place in that structure. He continued:

  making it absolutely clear, any activity of the PPP and the public sector funding related to it is governed by a business plan and a marketing plan that has to be approved by the Minister. So, both in terms of the secondment and the subsequent process, we have built into that protection for the existing staff.

Deputy S. Pitman:

So you do not envisage any redundancies?

Chief Executive Officer, Economic Development:

I would hope not. I think that we will be working very closely with the chairman of the board of the new organisation to make sure that it delivers all of the functions that that are delivered by Jersey Tourism. I would very much hope that that is delivered by the same people because I think we have got a very good team.'[54]

3. Transferred or Seconded?

1. There has also been some concern for the staff regarding the terms on which those who moved to the PPP would do so. Original proposals appeared to be lead to a transferral of staff, but this could impact on existing terms of employment. The terms could of course have an impact on a range of issues including such things as salaries and pensions.
2. On the pensions matter, Discussion paper on the development of a Tourism PPP – Version 7, Jan 2010, highlighted that a feature of earlier transfers of public sector employees has been the continuation of membership of the Pensions and Public Employees  Contributory  Retirement  Scheme  PECRS.  The  newly  created organisations to which the employees have been transferred have been accepted as "admitted bodies" for the purposes of PECRS and employees have retained

their membership of the pension scheme. It is felt that a similar approach should be adopted in the case of the creation of the Tourism PPP.

3. The preferred option indicated by the Treasurer of the States is for existing members of staff to be seconded to the new organisation whilst continuing to be States employees within the PECRS scheme. Separate pension arrangements would have to be made for new employees by the PPP [55]
4. It was clear to the Panel at its final hearing with the Minister that a final decision had yet to made, although there has been a resolve to find a method that would protect existing terms, which was leading towards a preferred use of secondment. When asked whether the PPP employees moving from Jersey Tourism would cease being public servants and move on to totally new conditions of service the Chief Executive Officer, Economic Development said:

 I think the one thing we have to complete resolving is the time limit, if there is one, of the secondment. The reason for seconding people is specifically because we can absolutely ensure that they retain the same terms and conditions of employment as they enjoy as Jersey Tourism employees. I think that is right, I think it is fair and I think it is just.'[56]

5. The Director, Jersey Tourism elaborated:

"Seconded" means that those people would continue to be employed by the States of Jersey and would be placed in the PPP but still continue to enjoy the benefits. I think the term is no less favourable than those which are currently enjoyed by other members that are working for the States of Jersey.

Deputy S. Pitman:

Will they be in the same role within the PPP?

Director, Jersey Tourism: Not necessarily, no.

Deputy M.R. Higgins:

How long is the secondment for?

Director, Jersey Tourism:

That is a question that we have yet to answer. That is a question at the moment  that  we  are  trying  to  deal  with  at  the  States  Greffe  because secondment should have a fixed period and at the moment we have not defined a fixed period. So that is something that needs to be resolved.'[57]

11. FUNDING

1. It is clear that achieving a reliable funding structure is a fundamental requirement if the proposed PPP is to be implemented. The Panel heard that one key benefit of the creation of a full PPP was that it could lead, in the longer term, to additional funding from the private sector that, combined with the public sector funding, could be more effectively targeted to achieve better results marketing and resulting visitor numbers. But equally, without that additional funding being achieved, the merit of creating a PPP would need to be questioned. And in particular these current uncertain economic times, can the proposed, required public and private sector funding be guaranteed?
2. The proposed PPP budget

1. Public Sector
2. It is proposed that a public sector grant will be provided to the PPP by the Minister for Economic Development, subject to his agreement of the Board's Business Plan and an agreed Service Level Agreement. With regard to the Public sector grant to the PPP organisation, it is proposed that the PPP would be established with a grant equivalent to the programme and staff related costs of the Jersey Tourism team. Reflecting the independence of the PPP, no grant provision will be made to replace the value of central services provided by the States to Jersey Tourism. By way of indication the following figures are used to demonstrate the level of grant that can be anticipated [58]:

3. The public sector grant of the £4,450,000 for marketing and promotional activity with a further £1,200,000 of staff costs, would be supplemented by an industry contribution of £1,015,000. This is largely generated through industry contribution to joint marketing activities and through advertising revenues. If the PPP proposal is adopted it is anticipated that with an additional industry contribution of £110,000, in 2010 the process of increasing industry contribution would be commenced and expectations are that these could be increased by £150,000 in the following year and then further increases being added annually. It should be noted that this additional income does not compensate for the additional costs involved and that a much more ambitious target will be required if additional marketing activity is to be undertaken.

4. This leads to a proposed budget breakdown for the PPP as follows [59]:

5. Private Sector
6. The Private Sector Funding Structure should generate revenue from three sources: corporate contributions, direct income and joint marketing activities. At present Jersey Tourism raises revenue through a variety of means including advertising, direct income, on-line bookings, retail, etc. – the 2009 breakdown is as follows [60]:

7. In Discussion paper on the development of a Tourism PPP – Version 7, Jan 2010, it was made clear that:

 whilst income from StayJersey and Conference Bureau membership fees is assumed to be constant, income in the areas of Joint Marketing can and must increase. It is in the area of corporate contribution (the second P in PPP) that significant additional funds must be raised.[61]

8. As demonstrated below, the JHA has set out the additional revenue which might be expected with a breakdown of the individual component sums which would add a possible £312,000 to the marketing spend which could be available to the PPP.

Industry Funding Plan Proposal [62]

Current industry contribution to the M&P programme is circa £1,080k

Year 1 2009 £110k uplift, year 2 2010 £150k uplift, £260k in total with a further aspirational, not contingent, target of £150k in years 3 & 4, 2011 & 2012 respectively.

The PPP agreement considers three main sources of industry contribution – membership scheme, increased joint initiatives and corporate contributions.

JHA Strategic Planning Group has met several times since the PPP Draft 4 has been finalised to consider how the target of £260k industry contribution uplift could be best achieved, thus enabling any remaining obstacles to be removed from preventing speedy progress to the full implementation of the PPP structure during 2009.

It will be for the newly formed PPP team to actually decide on which initiatives to implement and when, however the JHA is happy to provide clear indications of intent and assist in delivering the required commitment from the hospitality and tourism sector.

Membership Scheme  Est £ value Open to any business who wishes to be involved in the marketing and promotion of Jersey as an island destination, outline details in the PPP document.

50k

Increased Joint Initiatives

Current activity of circa £740k per annum, plus the Guide at £250k per annum ,this trend has shown positive increases in recent years, anticipated further progress in this area of +5%, including a £50k uplift in the guide income to 2007 levels.

87k

Redirection of Existing M&P Investment from Direct into the PPP

Industry players invest and allocate M&P monies both jointly but more importantly individually on specific activity to stimulate interest, booking and new business. If only 5% of current spend could be directed through the PPP to leverage the cost benefit ratio by pooling funds then a cumulative target of £100k per annum is possible. If JTD or the PPP can provide innovative initiatives, then the industry will happily engage in partnership.

100k

Corporate Contributions

Target all island businesses who currently do not contribute to the M&P budget in any way even though their business benefits from the hospitality and tourism sector product i.e. retailers, service providers & commerce in general.

75k

312k

3. Funding Concerns

1. Whilst it is clear that all sides recognise that adequate funding is fundamental to the success of the PPP, the Panel has considerable concern over the ability of both sectors to guarantee the levels of funding required to justify the creation of a successful PPP.
2. States grant concerns