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Travel and Tourism in Canada
Euromonitor International, Dec 2007, Pages: 95
Our Travel and Tourism in Canada report offers a comprehensive guide to the size and shape of the market at a national level. It provides the latest market size data (2001-2006), allowing you to identify the sectors driving growth. It identifies the leading companies and offers strategic analysis of key factors influencing the market - be they new legislative, technology or pricing issues. Background information on disposable income, annual leave and holiday taking habits is also included. Forecasts to 2011 illustrate how the market is set to change.
Sector coverage: travel accommodation, transportation, car rental, retail travel and tourist attraction markets
Data coverage: market sizes (historic and forecasts), company shares and brand shares.
Why buy this report?
- Get a detailed picture of the travel and tourism industry;
- Pinpoint growth sectors and identify factors driving change;
- Understand the competitive environment, the market’s major players and leading brands;
- Use five-year forecasts to assess how the market is predicted to develop.
Executive summary
Strong dollar has negative effect on domestic tourism
Now that the exchange rate between the Canadian and the US dollar is more favourable to Canadians, there are fewer American tourists taking their vacation in hot spot Canadian tourism cities like Montreal, Quebec City, Toronto and Vancouver. Another effect is that the stronger dollar has resulted in more Canadians taking their vacation, along with their disposable income, across the border into the US.
The hotel industry has been one of the strongest hit with a 5% decrease in room occupancy this year compared to the year prior, according to the Montreal Gazette. As a result, hotels attempted to bring in financially weary tourists by lowering room rates per night or creating special travel packages such as spend two nights at the regular price and receive 50% off the third night’s stay. This type of strategy has been especially relevant for boutique hotels that have started popping up in and around Canadian cities. Big cities like Montreal are able to bear the brunt of the effects of a stronger dollar with world-renowned festivals each summer, such as the Grand Prix, jazz, comedy and film festivals.
Economic growth helps offset negatives
The strong performance of the Canadian domestic market, along with that of several regions such as Europe and Asia, has offset the decline in tourism from visitors coming from the US. The federal and provincial governments, along with regional travel agencies have taken advantage of these strong economic trends by increasing domestic marketing campaigns. There is more focus towards Canadians travelling within their own borders rather then making a trip south of the border, for example.
Travel is a discretionary expense usually based on annual leisure expenditure, so the more disposable income consumers have, the more likely they are to take more trips and travel further distances. The economic situation in Canada has been able to offset the negative impact of higher energy costs on consumer spending. More Canadians have also been travelling abroad with greater spending power as the continued growth of the Canadian dollar has allowed people to get more for their money.
The ongoing change in interest and exchange rates has an impact on demand for industry products, and as consumer spending power changes this in turn has significant financial consequences for the airline industry. This results in companies within the travel industry making appropriate changes to their pricing structures and promotional offers.
High petrol prices affect tourism
The price increases in barrels of oil and gasoline at the pump in 2006 left a very immediate and strong impact on the travel and tourism industry in Canada and abroad. Even with a decline in prices in the last quarter of 2006 there was still no sign that the prices would stabilise anytime soon. The high fuel prices affected the auto travel sector for both domestic and cross-border tourism from the US. The elevated costs kept cars off the road, but to a larger extent it meant that people took trips of less distance.
The number of American visitors into Canada has declined sharply and the summer months, which are usually the busiest for tourism, saw fewer American tourists in July than anytime in the past 4 years as fewer and fewer Americans made one-day trips by car across the border, according to Statistics Canada. On the other hand the Hotel Association of Canada estimates that only 4% of Canadians will curtail their travel arrangements because of high petrol prices.
The Travel Industry Association of Canada states that the number of one-day car trips into Canada between the months of January to June of this year has declined by five million over the last five years. There are several reasons for this decline, for instance the stronger Canadian dollar, confusion over what documentation to bring, perceptions that there are long waits at border crossings, Canadians’ position on the war in Iraq and even the issue of SARS lingers. Yet the cost of fuel has been one of the most important factors over the past year.
Some hotels and inns are attempting to combat the high fuel prices and the impact it has had by offering gift certificates for gasoline during a certain time frame when business is usually at a low level, for example the Finest Inns Association of Ontario in cooperation with Petro-Canada. Yet distance still plays an important factor even with such measures, since regional tourism in such a large country is also suffering. If people from Ontario are not travelling to Quebec or the Maritimes, for example, because of high petrol prices, then people from the latter regions are not travelling to Ontario for the same reasons.
Globalisation impacts travel
The rapid upswing in the way that people communicate and connect electronically across the globe through such means as the Internet, mobile telephone systems, satellite phones and radio has had a positive impact on the travel and tourism industries in Canada. Along with such important factors as the reduction in air fare prices and more convenient long distance flights this is increasing the frequency and ways in with which individuals, companies and governments interact with each other beyond international borders. As people begin to use these electronic means to meet, work and socialise tourism has also seen a positive outcome.
According to Statistics Canada the number of European and Asian tourists into Canada this past year has increased, an extremely positive trend, even though the number of Americans coming into Canada declined sharply and left a greater impact. In essence, only 8% of the world’s population took part in international travel this past year so this definitely allows more potential for the travel industry to keep growing in Canada. Canadian government and travel agencies, along with national airlines, have begun more aggressive marketing campaigns focused towards the international traveller and the benefits and features of making a trip to Canada.
There are still several issues and concerns that the impact of globalisation has on the Canadian tourism and travel industries, both positive and negative. On the positive side, there is an immense international market reachable through a number of various communication outlets and this opens up the Canadian tourism and travel to a much larger pool of potential consumers. On the negative side, globalisation develops a much fiercer competition between international airline companies, especially those that are national carriers of developing nations such as Mexico and India. For them there is an even a greater need to attract business and tourists to their countries since sources of foreign exchange is desperately needed to fuel their own internal growth.
Western Hemisphere Travel Initiative (WHTI)
The WHTI is becoming more of a concern and priority for the Canadian travel industry. Every year since its inception in 2004 Industry Canada has been compiling information and making reports to prepare for the new American policy’s impact on Canadians going to the US and Americans coming into Canada. This new US security initiative will require all travellers entering or re-entering the United States to carry with them passports or other secure travel documents.
There is a special card uniquely specified for American citizens, called the PASS (People Access Security Service) for people who regularly cross borders, mostly into Canada or Mexico. As for Canadians, the start of 2007 required all air travellers to carry a passport or proper travel documents and by June 2008 travellers by land and sea will be included into this requirement.
Industry Canada reports that over the next five years the decline in US citizens entering Canada will account for a drop of 14 million inbound trips and tourism receipts will slide to C$3.6 billion. The implementation of the PASS card option will alleviate some of this since it will facilitate border crossing.
As for Canadians crossing the border into the US, Industry Canada is expecting a sharp decline as well. Over the next five years there will be a drop of over seven million trips by Canadians into the US and of those, five million will be one-day trips. By the end of 2007 this will be a decline of 6% in the numbers of trips taken into the US.
At the same time this will have an opposite effect on domestic travel as these will increase by over two million trips over the same five year period. Even though there will be more travel by Canadians within their own borders the impact of the WHTI will be a negative one as the increase in national cross-province travel will fall short of making up for the decline in cross-border tourism and economic effects from lost US travel.
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