Canada's tourism slowing down again since pandemic lockdowns lifted, new report finds

People are shown at Pearson International Airport in Toronto on Friday, March 10, 2023. (Nathan Denette/THE CANADIAN PRESS)

Canada’s tourism sector seems to be slowing down again, following a brisk recovery when COVID-19 lockdowns lifted, a new report found.

Over the past three years, the tourism industry had been clawing its way back to pre-pandemic numbers, however, a new report by TD bank found the pace of recovery started to slow this year.

The report, titled ‘A Slow Road to Recovery for Canadian Tourism Spending,’ says the decline is due to financial challenges in Canada such as higher interest rates, a slowing job market and broader tourism slowdowns seen both domestically and internationally.

This slowdown means a full recovery will take time, as tourism activity and travellers’ spending are not expected to reach former levels until 2025, stated the report published on Thursday by TD’s economists Marc Ercolao and Rishi Sondhi.

INTERNATIONAL TOURISM ACTIVITY

While the number of domestic travellers was not available at the time the report was published, economists say the data available shows domestic tourism activity had a milder decline during the beginning of the pandemic, and has since recovered faster than international tourism.

From the beginning of this year until May, international travellers to Canada increased from 2.11 million to 2.25 million. This is similar to the 2011-15 average; however, this number is still 20 per cent lower than the pre-pandemic peak, read the report.

While domestic tourism has seen a faster recovery post-pandemic, the lag of international tourism presents a key weakness in the path to recovery.

According to the report, in the first five months of 2023, the number of Chinese visitors to Canada was 80 per cent below the level over the same period in 2019. This notable difference reflects, in part, the tensions between the two countries, as well as travel restrictions imposed on group tours.

However, there is a positive momentum with visitors from India, which have doubled in number compared to pre-pandemic travel.

REGIONAL DISPARITIES

The report also highlights different tourism recovery patterns across provinces, with the Atlantic region slightly outperforming the rest of the nation.

Hundreds of people walk near the lighthouse in Peggy's Cove, N.S., Tuesday, July 4, 2023. (Darren Calabrese/THE CANADIAN PRESS)Nova Scotia leads the charts as the only province surpassing pre-pandemic international tourism numbers, seeing a 15 per cent increase. Quebec comes as a close second as its tourism recovery is “moving at a faster pace than the rest of Canada,” states the report.

Tourism in Western Canada is ahead of other parts of the country as well, according to the report, with Alberta and British Columbia reaching 11 per cent and 13 per cent below pre-pandemic levels respectively. The challenges for both provinces include labour shortages, which could impede the ability to meet the demands of peak tourism season, states the report.

Saskatchewan, on the other hand, has lagged when it comes to international travel. Visits to the Prairie province are 40 per cent below the 2019 average. The report says this decline might be in part due to same-day tourists, whose numbers have fallen at less than 50 per cent pre-pandemic levels.

“Saskatchewan has also seen some domestic and international flight routes halted by major airlines,” reads the report.

Another province that’s lagging in international tourism is Ontario, which is down 24 per cent from pre-pandemic levels. According to the report, Ontario’s challenges are structural, including "staffing issues."

TOURISM SPENDING

The report states inflation-adjusted spending has stayed relatively steady for tourists, a positive for those in the industry.

In the first quarter of 2023, domestic tourism spending reached approximately 90 per cent of its pre-pandemic levels, compared to 80 per cent for international visitors.

In the second quarter, expenditures were similar; however, this means the numbers were 13 per cent below where they were in the same period before the pandemic hit.

The report predicts spending will not reach pre-pandemic levels until 2025, due to several economical challenges.

For Canadians, the job market is unstable, and it’s expected to “lose a considerable amount of steam” by the second half of this year, TD's economists forecast.

At the same time, higher interest rates announced by the Bank of Canada could mean Canadians are focusing more on meeting debt payments than spending it on domestic tourism.

Finally, the economic trends in the U.S. could also affect Canada’s tourism market.

“On the plus side, the Canadian dollar should remain relatively low through next year, providing a small offset to these other headwinds,” read the report.

Also on the plus side, those behind the report say they believe Canada's tourism recovery is "likely to continue to make some gradual headway" thanks to what they call "ongoing pent-up demand."

And, they wrote, the slower demand growth may allow the industry the time it needs to fill its staffing gaps.