Hard-hit tourism industry showing signs of life
It may still be difficult for foreign tourists to visit, but Canada’s hard-hit tourism industry is showing signs of “green shoots” as the economy begins to reopen and more Canadians plan domestic vacations.
As of late June, travel spending — on car rentals, airlines, travel agencies and other related expenses — is down 43.5 per cent from 2019 pre-shock levels, according to a recent note from Royal Bank of Canada economists Nathan Janzen and Claire Fan. That sounds rough, but it’s a significant improvement from early January, when that spending was down 87.5 per cent.
“Early data is already pointing to green shoots emerging with spending on hotels, restaurants, and even travel moving up as vaccinations accelerate, case counts plummet and restrictions continue to ease country-wide,” they wrote.
That tracks with the recent findings of the Finder’s travel index, which reported just over 22 per cent of Canadians, or roughly 6.8 million people, plan to travel in the next three months, up from 17 per cent a month ago and just 12.5 per cent in February.
Finder reported Canadians’ interest in domestic travel was on the rise, with 15.4 per cent planning to take a vacation within the country, in comparison to just 8.74 per cent of Canadians who plan to travel abroad.
In normal years, Janzen and Fan said in their note, domestic demand makes up 80 per cent of tourism spending. So even though international travel is largely discouraged and borders are still tightly controlled, save for exceptions for fully vaccinated Canadians, virus containment measures are a “far larger drag” on the tourism sector, and those restrictions are easing.
Canada’s tourism industry may also be able to count on a larger pool of domestic travellers this year, the RBC economists said, as almost one million Canadians who would normally have travelled abroad stick closer to home.
“Re-directing some of that spending to home-grown tourism activities will help support a recovery, despite a slower expected rebound in international demand,” they wrote.
The tourism sector faces a “long runway to recovery” given more than half of its employment is in accommodation and food services — which accounts for nearly two-thirds of the jobs lost in the pandemic — and the number of active businesses remains well below the average across industries.
The recovery also won’t be even across provinces, with some more reliant on international travel than others. According to Statistics Canada, 50 per cent of pre-pandemic tourism spending in Yukon was from international tourists, and for both British Columbia and Prince Edward Island that number was 40 per cent. Saskatchewan, Quebec, Manitoba and Ontario, meanwhile, receive much more domestic and inter-provincial tourists than international.
But, the economists noted, there are reasons for optimism. One of them is the sheer amount of wealth Canadians have accumulated in the pandemic. In the first quarter of this year alone, households banked more than $200 billion in savings, or more than two years’ worth of tourism spending in Canada.
In the United States, which had early success with its vaccine rollout, tourism has rebounded “almost in lock-step with the loosening of containment measures,” the economists noted. Food service spending in the U.S. rose two per cent above pre-pandemic levels in May, and airport traffic reached over 80 per cent of pre-pandemic levels in late June.
And businesses themselves are more upbeat: half of Canadian travel businesses said they’re somewhat optimistic about the next 12 months, and 15.4 per cent were very optimistic, according to Statistics Canada’s secondquarter survey of business conditions.