A sharp decline in the number of foreign tourists visiting Scotland has been blamed on the strength of the pound.

The Scottish Tourist Board's annual report has revealed visitor numbers and spending have hit their lowest level for four years.

Figures in the report showed there has been a drop of 11% in visitor numbers.

Spending by people who do venture to Scotland was down by about 13% - equivalent to �123m.

It was feared that the absence of high-spending visitors from overseas could spell disaster for hundreds of guesthouses and bed and breakfasts across the country.

The continuing strength of the pound has been cited as a main reason for the downturn, although it has been offset slightly by a rise in the number of Scots staying at home for their holidays.

Edinburgh and Glasgow, with a host of attractions on offer, have continued to do well while rural areas and the Highlands have struggled.

Myra McPherson, of the Inverness Hoteliers Association, said: "This year it's been very poor. We had a good April and the first bank holiday in May, but since then we really have seen a decline in the number of visitors into the area and obviously staying in the accommodation.

Important trade

"I think the strong pound is a factor, but it's not the only factor. The fuel prices have to be taken into consideration, there isn't a direct route for people to get into the Highlands and I don't think we do enough to promote ourselves as a destination."

The importance of tourism extends beyond the millions of pounds spent by visitors - some 8% of the Scottish population works in the industry. In the Highlands that figure is much higher.

Scottish Tourist Board Chairman, Lord Gordon of Strathblane, said the problem facing the industry was not the strength of the pound but the weakness of the Euro.

"Everyone thinks the Euro is undervalued, but it's not going to make any difference until the world currency markets regard it as undervalued and start to push it up," said Lord Gordon.

"Undoubtedly, if the cost of coming to Scotland has gone up by 30% for Italians, Spaniards, French, and let's also recognise the Irish as well, then clearly it is that little bit more difficult to persuade them to take their holidays here this year."

He added: "They will postpone it and it's remarkable that the industry has done as well as it has."

Big marketing budget

John Lennon, a tourism expert at Glasgow Caledonian University, said: "No matter how much marketing expenditure you throw at tourism, if you have a currency which is fundamentally very strong and this creates a price perception of Scotland as a relatively expensive market, then you have a problem.

"Really, getting the lobby up to say that this Euro is having a very negative effect on our tourism is quite an important job."

In the last year the tourist board has spent some �7.5m, both at home and abroad, on marketing Scotland.

Enterprise Minister, Henry McLeish, conceded the report contained "mixed news" for the Scottish economy but said the Scottish Executive was committed to investing in the industry and seeking to raise standards.

He said: "Today's news from the Scottish Tourist Board, with a 20% increase in domestic trips and that business visitors are staying longer and spending more, is encouraging.

"The 12.7% fall in the overseas market is, however, disappointing."