Sticker shock, border delays sour hopes for Canadian travel boom

·3-min read

By Julie Gordon

OTTAWA (Reuters) - Rising prices, border restrictions and airport chaos are threatening hopes for a post-pandemic summer travel boom in Canada, stalling a tourism recovery and taking the sheen off the country as a destination, analysts and industry executives say.

Tourism spending in Canada remains 34% below 2019 levels despite strong gains over the last year, official data shows. With most COVID-19 restrictions lifted, the Canadian travel industry had hoped 2022 would be the year when domestic tourism at least returned to normal volumes.

But gas prices have soared, souring the outlook for road trips. Flying faces its own challenges: Canada's airports are dealing with stranded tourists, cancelled flights and lost baggage. Others are stuck at home due to long passport processing times.

That has the travel industry bracing for a smaller-than-expected summer boom, which will delay the industry's domestic recovery by about an year, said Beth Potter, chief executive of the Tourism Industry Association of Canada.

"At this point it looks like we could get there by the end of 2023, but we just don't know," said Potter.

She added that "there's incredible pent-up demand" for travel, but that has been tempered by high inflation and other challenges.

Before the coronavirus pandemic hit travel, tourism brought in more than C$100 billion ($76.7 billion) in revenues a year and accounted for over 2% of Canada's gross domestic product. Revenues are forecast to be around two-thirds of that level this year.

The largest shortfall is in international visitors.

Foreign air arrivals were down 50% in April 2022 compared to April 2019 and same-day visits from the United States, key to many border town economies, are lagging. About 10 million people made same-day cross-border trips to Canada in 2019, and Potter estimates current numbers are at just half that level.

"At the big border crossings in southern Ontario, they'd normally see 50 motor coaches a weekend and now they're averaging about two," said Potter, adding a full recovery of foreign visitors is not expected before 2025.

'SYSTEM IS BROKEN'

While Canada has eased its pandemic restrictions, it still requires foreign visitors be fully vaccinated and all travellers entering the country must use a public health app to upload vaccination documents and personal data.

By comparison, most European countries have dropped all coronavirus-related entry requirements, as have popular North American tourist destinations in the Caribbean and Mexico.

Canada needs to do more to smooth out issues at the border dogging travellers, said Perrin Beatty, chief executive of the Conference Board of Canada, a business lobby group.

"If what people are hearing from Canada is that the system is broken, they'll simply go somewhere else where things are functioning better," said Beatty.

The federal government last week reiterated it is working to improve airport efficiency. It has hired 1,200 border agents since April, is adding new customs kiosks and has paused random COVID testing in airports to alleviate the strain.

On the domestic front, a surge in travel spending after most COVID-19 restrictions were lifted earlier this year is plateauing, according to the RBC Consumer Spending Tracker.

"It hasn't shown signs of deteriorating yet, near term," said Nathan Janzen, a senior economist at RBC. "But it's stopped growing at a fast pace."

Inflation is cutting into consumer purchasing power, with travel one of the first discretionary items to go, said Janzen. Interest rate hikes meant to curb inflation are adding to the pinch.

Saskatchewan resident Craig Bott, who recently visited Ottawa with his family, said the long-planned trip became far more expensive than expected and flight delays were frustrating, making them reconsider plans for more travel this year.

"We had talked, possibly, about doing something else in the summer, but I don't think we will," said Bott. "Maybe we'll just go to a lake near home, do some fishing."

($1 = 1.3033 Canadian dollars)

(Editing by Deepa Babington)

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