:
Thanks, Mr. Chairman. Good afternoon, honourable members.
We're pleased to have the opportunity to meet with the industry committee in support of a study on the economic performance of the service sector in Canada, with a focus on tourism.
First let me say that the Canadian Tourism Commission acknowledges the importance for Canada and our tourism industry of Canada's agreement with China on approved destination status. Until this important development, CTC has not been able to market directly to consumers. We have been preparing for ADS by establishing an entry-level team in China, leveraging tourism opportunities for Canada, and creating key relationships on the ground that will be strategic going forward.
With this announcement, CTC will now propose and seek to implement a robust action plan to leverage the growing interest in travel to Canada in China.
Mr. Chair, a 2008 Conference Board of Canada study, commissioned by the CTC, examined the vibrancy and competitiveness of the Canadian tourism industry. It showed that tourism, as an industry, outperformed all other traditional industries and outperformed the economy at large.
Tourism represents approximately 2% of the Canadian gross domestic product. At a value of $30.3 billion in 2008, it was equal to the approximate economic value of the agriculture, fishing, forestry, and hunting sectors combined. In that year, this industry generated $21.9 billion in government revenues, including $9.85 billion for the federal government, and it employed 663,000 Canadians.
That said, 2009 has been a difficult year for tourism. The economic uncertainty that began in the summer of 2008 resulted in fewer people travelling in 2009. This continues to impact consumer confidence and the net worth of travellers, especially in the United States.
While the current volatility of the global markets has resulted in cutbacks in various organizations throughout Canada's tourism marketing industry, the importance of continuing to market Canada's tourism brand to protect market share cannot be overstated. Tourism is often affected in the short term by economic declines, but the long-term outlook for global tourism remains strong. Tourism is traditionally a resilient industry that recovers quickly from economic downturns.
The Canadian Tourism Commission is Canada's national marketing organization. We market Canada in 12 countries around the globe. The “Canada: Keep Exploring” brand has been gaining strength since we launched its new look and feel three years ago in collaboration with Canada's tourism sector.
We've successfully repositioned Canada as a destination that offers exciting and extraordinary experiences. FutureBrand, a highly respected brand evaluator, has ranked Canada second for two years in a row in the bid for best country brand. Since the launch of Canada's new tourism brand, Canada has jumped from twelfth to sixth to second place.
In addition, we've been able to demonstrate, through studies administered by third parties, that our 2008 campaigns were directly responsible for a return on investment ratio of 45:1, or $45 of direct tourism expenditure for every dollar spent by the CTC.
As this committee knows, the U.S. is Canada's largest tourism customer. In 2008, almost three out of every four international travellers who came to Canada were from the U.S. Canada's tourism industry, particularly in areas such as the Golden Horseshoe, the Rockies, the Eastern Townships, and Atlantic Canada, are largely dependent on American travellers.
However, the economic downturn, the thickening of the border, and the high value of the Canadian dollar have resulted in fewer Americans travelling, and those who do travel here are spending less. In 2008, total U.S. spending in Canada was $7.4 billion, 10.2% lower than in 2007. For the first time in history, U.S. spending was lower than other international spending.
The CTC's U.S. efforts are currently limited to areas where there is stiff competition from other countries, namely in the four core metropolitan areas: New York, Boston, San Francisco, and Los Angeles. There is also stimulus funding for activities in Chicago.
We recognize that there is significant untapped potential in other U.S. cities. The CTC does not currently have the resources to support a presence there. Our strategy, then, in the U.S., as in all markets, is to focus on converting long-haul, high-yield consumers, who tend to stay longer and spend more money in Canada. In the face of serious economic downturns or currency fluctuations, a diversified strategy for CTC is both prudent and opportune.
In terms of overnight arrivals, Canada's source markets exhibiting the greatest growth for 2008 over the previous year were the emerging markets of Brazil, India, China, and Mexico. Federal stimulus funding delivered to CTC in 2009 and 2010 has been invested in developing a competitive position and promoting Canada in these key emerging markets.
At the same time as we are attracting international visitors to Canada, we're also working to convince Canadians to travel within Canada instead of going to foreign destinations. Canadian outbound travel spending continued to rise, in light of a strong Canadian dollar, to reach a record level of $26.9 billion in 2008, an increase of 15.5% over 2007. As a result, Canada's international travel deficit, the difference between what Canadians spend abroad and what international travellers spend in Canada, rose to a record $12.6 billion.
Budget 2009 entrusted the CTC with funds for a national advertising campaign at home. We launched the LOCALSKNOW summer campaign in June and the winter campaign in November, inspiring Canadians to stay at home and discover the Canada they don't know. So far, the campaign results indicate that about 200,000 trips that would otherwise have been taken to foreign destinations have been diverted to Canada.
The economic conditions of the last year have unquestionably hurt our industry. However, we have an ace up our sleeve. The opportunity of the 2010 winter games for the Canadian tourism sector is immense. Three billion viewers will be watching the games and wanting to get to know us better.
In partnership with VANOC and with our tourism consortium partners, we have launched a media program that will maximize international coverage of Canada and spread the excitement around the world.
Close to 600 travel stories and ideas are available to international media.
We have also been having great success with our international torch bearers program, most recently with César Cielo, a gold medallist from Brazil who ran at Hopewell Rocks, New Brunswick. We have Ashok Kumar, a Bollywood star from India, running in Toronto. Yang Yang, a short-track speed skater from China, ran in Prince Edward Island. We have Anna Maria Kaufmann, a German Canadian opera singer from Germany, who will be running in Alberta. These are runners who have been able to bring the attention of Canada's excitement around the games back to their home countries and spread our story.
There are 3,200 still images available to further enhance Canada's tourism personality; and 25 broadcast-ready high-end features are in the works all across Canada, with seven of these features already being used by rights-holding broadcasters.
International media have never before had this volume and variety of high-quality product available to them and delivered to them so early by a host country.
Mr. Chairman, there is no status quo or business as usual for the tourism industry in Canada, but there is immense opportunity.
Thank you.
:
Thank you very much. We appreciate the opportunity to once again appear before this committee.
I usually like to start out by saying that we're the good news industry. We're in the hospitality business and we're pretty good at what we do. I very much appreciate the opportunity to be here with quite a few of my old friends.
To give you a little bit of a feeling for the size of the lodging industry in Canada, last year we did $18.8 billion worth of revenue. The value added by our industry is $17.8 billion. We employed--we're down this year, obviously--about 378,000 people from every riding right across the country. One of the reasons I say we're the good news industry is that we generated about $7.5 billion worth of revenue in taxes for the government last year, of which about $3.3 billion went to the federal government.
Much as my colleague from the Canadian Tourism Commission did, I want to commend the government for the agreement on ADS with China. We've been looking for this for a long time. In fact, about three or four years ago I wrote a booklet called “Canadian Hospitality for Chinese Guests” in anticipation of it.
I also want to recognize some of our friends around the table who I know have been really pushing this forward in a big way. I know my hotelier friend, member of Parliament Gord Brown, has been pushing that. Mike Lake was doing it. Navdeep, I know when you and I were together about a month ago, we were talking about the same thing. Brian, I know you've been pushing it as well. So it's good to finally make it happen.
It's been a tumultuous year for us. Our occupancies in Canada--how we measure hotels--were down from about 63% to about 58%. From February to September of this year, we lost $625 million right off the top. We're like the airline industry. We offer a perishable product; if we don't sell it tonight, it's gone forever. It's not like we're selling computers or something like that. Yes, we're down in a big way. At the same time, Michele referenced the travel deficit, which is now upwards of about $14 billion. As far as our visitation from the States goes, we're fundamentally at about half of where we've been since 2001.
Having said all of that, though, we are starting to see a little bit of light at the end of the tunnel. We do see some of the group bookings for next year with business people travelling. The third and fourth quarters of next year are starting to come back. I like to give credit where credit is due, and the economic stimulus package is working in many parts of the country, and it's good for the hotel people. We're grateful for that, and I want to be on record as saying that.
At the same time, in the budget last year, the feds put in $40 million for tourism promotion, $150 million for the parks, and $100 million for the marquee tourism events program. When the announcement, the RFP from Diane Ablonczy, came out last week saying that we should get the message out to hoteliers and that they had until January 10 to go out and promote their events around the country, I made sure that got into every hotelier's hands so we can take advantage of some of the bucks out there and really make things happen.
Having said that, though, I wanted to talk a little bit about promotion and what we need to do. Yes, we like the promotion moneys that were put out last year, but we need to have these on a consistent, regular basis, so my friends at the Canadian Tourism Commission, as well as hoteliers, are able to go out and say, “Okay, we know what we have in the budget” instead of just having it go up one year and down another. We need to have that sustainable funding on a regular basis.
I want to talk just a little tiny bit about the airline industry.
We very much support liberalized air agreements around the world. I've been in with my friends at TIAC, from whom you're going to be hearing shortly, and the reality is that the airport rent situation at Toronto Airport in particular just does not make sense at all. It doesn't matter who you are or what you're doing. We met with two or three weeks ago, and--how can we put it, Chris?--he sort of rolled his eyes a little bit and let it go at that.
However, we did raise with him the fact--and I think Monsieur Garneau would appreciate this in particular--that the City of Plattsburg, in their airport now, is promoting itself as Montreal Airport South. We now have two and a half million Canadians travelling to the United States, particularly Plattsburgh, Syracuse, Buffalo, Grand Forks, and Seattle, to get flights out. Why? It's because our airport system in Canada is just too expensive. Two and a half million people is a lot of people. When we raised that with Mr. Baird, he said, and I quote, “Yes, it is embarrassing.” He said that himself.
The air travellers security charge, we firmly believe, is a service that the federal government provides. It should not be something that has collected $2.3 billion from 2002 to 2008. It's ridiculous.
We would like to see the aviation fuel excise tax eliminated, as some of the provinces have done.
What I would like to do at the very end of this, Mr. Chairman and members of the committee, is state that even though our numbers are down in the hotel business, even though we are not experiencing the shortages of employment that we had a couple of years ago, you can rest assured that in two or three years, as the economy recovers, we will once again have shortages. I very much encourage the government and all members to support the temporary foreign workers program, because without it.... I was just talking to a hotelier today from Lake Louise. He said to me, “Tony, when you appear before the committee, will you please reinforce how that is critical?” Even though the numbers right now, yes, are down, it's going to come back and we aren't going to be able to have the service levels. I know that for my friend Joyce Reynolds at the CRFA, it's the same thing. So please, let's make sure we maintain that.
Chairman, I've probably gone on too long. I appreciate the opportunity. Thank you very much to all the members.
:
Thank you, Mr. Chair, members of the committee, I'm pleased to be here today.
[Translation]
Tourism is a sector that generates $74 billion and has the potential to develop more, particularly as a result of the stimulus from the agreement whereby China has granted Canada approved-destination status. The TIAC is delighted with the Canadian government's success in negotiating that agreement. I would like to congratulate the Prime Minister and the Minister of State for Tourism in particular.
However, the industry is still facing major barriers as a result of the recession, such as the cost restructuring in the aviation industry, the high Canadian dollar, problems related to the border and required travel documents, high fuel prices and the lack of resources to promote Canada in new markets.
[English]
Just to give you some recent trends in tourism--some of which have been gone over by my colleagues--tourism demand has averaged about 6.3% growth since 2004, but negative growth is expected for 2009.
Since 2000, inbound travel from the United States has fallen, we estimate, by about 48.6%. U.S. overnight travel declined 6.6% from 2007-08. In 2008 our travel deficit with the United States was $8.9 billion, and our international travel deficit continued to grow and currently stands at $12.6 billion.
Hotel occupancy rates are down 5.1% in Ontario and 6.1% in B.C., and average daily room rates have declined 5.8% in Ontario and 4.9% in B.C. this year over last year. Air traffic at major Canadian airports declined 14.4% over the last year.
Now, while the ADS issue has been resolved, another has emerged as significantly problematic for the industry in two of our largest provinces. HST is nominally a smart tax, but mitigation strategies are needed for the tourism sector because many of these businesses were previously exempt from PST/RST. Hence, end consumer costs will now go up. Most tourism-related products and services will be subject to tax increases of the order of 7% in B.C. and 8% in Ontario. Tourism businesses are labour intensive, so input tax credits will not be available to operators to offset the negative impacts of increased tax levels. In the questions, I can provide some examples and illustrations of some businesses that are going to be impacted by that.
The B.C. Council of Tourism Associations estimates revenue losses of between $360 million and $545 million, direct and indirect job losses of 7,000 to 10,000, and average tourism price increases of 4.66% in B.C. In Ontario, cost increases for average vacation scenarios range from 14.2% for a shopping weekend in Toronto to 43.6% for a weekend getaway.
Leisure travel demand from approximate markets is highly price sensitive. There's no national value-added tax in the U.S., no GST levelled at the national level, and there has been significant massive discounting by U.S. destinations and properties. Given the price elasticity of tourism, many of our key customers in the nearer markets are choosing to stay in their own jurisdictions.
By way of recommendation, we think that greater thought and allowance should be made for the impacts on non-manufacturing sectors, such as tourism, which have heavy labour inputs. While the federal government has limited jurisdiction to specify which provincial sectors will be exempted from the HST, it can mitigate the impact of this measure through the approach it takes to rebating value-added taxes to foreign visitors.
Therefore, TIAC's submission today calls for three things: reaffirming the principle in the tax code that tourism, as an export industry, ought to be exempted from national value-added taxes such as the GST/HST; two, ensuring the full HST amount is eligible for rebate under the FCTIP that applies to tour operators and conventions and meetings; and finally--and this is perhaps most critical--reinstating individual rebates to foreign visitors on GST/HST for qualifying goods and services.
That's the end of my submission. Thanks.
:
Thank you, Mr. Chairman and members of the committee.
Good afternoon.
Canada's $60 billion food service industry accounts for 4% of the national economy and over one million jobs. Our members include chain and independent operators of quick- and full-service restaurants, bars and pubs, cafeterias and caterers, as well as a combination of entertainment and institutional providers.
While tourism is very important to our industry and accounts for approximately 18.7% of our revenue--4.2% of that being international, and the remaining domestic tourist spending--our scope is broader than tourism. Like many other industries, food service has been hard hit by the economic downturn. The average unit volume fell by 1.9% in the first nine months of 2009 compared to the same period in 2008. Adjusted for rising menu prices, the real average unit volume fell by 5.4% in the first nine months of 2009.
All segments of the industry are struggling, but high-end restaurants have been hit the hardest. Limited-service restaurants have outperformed full-service restaurants as consumers look for value and convenience.
Food service is a very competitive business that operates on razor-thin margins. According to the most recent data from Statistics Canada, the pre-tax profit margin of the average food service business was 4% in 2007. That was when times were good. By contrast, Canada as a whole enjoyed a pre-tax profit of 7.7%.
Past research by CRFA has found that food service sales tend to lag economic activity by two to three quarters, and this recession is no different. Following several quarters of growth, the average unit volume fell in the second and third quarters of 2009 even though the recession began in September 2008. While food service operators continued to hire employees in the first five months of 2009, worsening sales in the second half of the year have led to a drop in the number of employees. Compared to September 2008, net food service employment at restaurants, caterers, and drinking places fell by nearly 16,000 workers in September 2009.
You should know, however, that the food service industry is uniquely positioned to contribute to economic recovery and growth. Every $1 million in restaurant sales creates nearly 27 jobs, making our industry one of the top five job creators in Canada. Every dollar spent at a restaurant generates an additional $1.85 in spending in the rest of the economy, and that's well above the average for all industries in Canada. The diverse nature of our industry means the benefits are felt in every community and not just in major centres.
I was also asked to comment on how government can help. We're not looking to government for bailouts, subsidies, or handouts. We are looking to government for fairness in how taxes and policies are applied and how our operators' hard-earned tax contributions are spent.
As mentioned by my colleague, our members in British Columbia are extremely concerned about the new 7% sales tax on restaurant meals resulting from GST/PST harmonization. Based on our experience in 1991 when GST was imposed on restaurant meals, similar and identical meals in grocery stores remained tax-free. We know this will have a devastating impact on our businesses, our customers, and our employees. To avoid history repeating itself and crippling this key sector of the B.C. economy, it is critical that the federal government work with the provincial government on joint solutions.
Food service businesses' key inputs are food and labour, and the cost of both has been rising dramatically. Neither is subject to input tax credit. Harmonization through input tax credits provides tax relief to capital-intensive companies. We believe it's time to provide tax relief to labour-intensive businesses.
Specifically, food service is looking for payroll tax relief through a yearly basic exemption in the employment insurance program. I can discuss that more in Q and A. We're also very concerned about the prospect of dramatic increases in employment insurance premiums in 2011. Payroll taxes represent a large percentage of our tax load. They are job killing, they are regressive, and they're profit insensitive. Again, I can elaborate on this during questions.
Finally, like my colleague Tony Pollard, I want to identify labour shortages as a continuing concern over the long term. While this economic downturn has eased the crisis in the short term, demographics tell us that we will again be experiencing shortages of skilled, semi-skilled, and unskilled workers in the years ahead.
Thank you. I look forward to your questions.
:
It's interesting. Under the temporary foreign worker program, you have to demonstrate to the bureaucrats that you've gone out and tried to hire a Canadian. You have to show an advertisement to prove that you've actually advertised in the media. The problem we have is that we do not have sufficient numbers of people, particularly in the resort areas.
We don't have a major problem here, for example, in Ottawa, or in Toronto or Vancouver. Yes, there is a little bit of a problem, but where is the biggest problem? You can go to Mont Tremblant, for example, or the Muskokas, or the Jasper/Lake Louise/Banff area, or Whistler. In those places you've got 4,000 or 5,000 hotel bedrooms, and how many people live in Saint Jovite? There aren't very many; it's maybe 3,000 or 4,000 people. The Fairmont hotel group literally buses people in every day from Montreal. They drive up the Laurentian Autoroute to bring housekeepers to make up rooms at the Fairmont Tremblant.
We would be delighted to be able to have Canadians doing these jobs, and it's not a matter of benefits or salaries or all of those things; there just aren't the numbers. We opened a JW Marriott resort in Muskoka last spring, but we had to keep two floors closed. Why? Because we didn't have people to make up the rooms. We don't have sufficient numbers of people in the right places at any given time, Monsieur Vincent. That's what it comes down to, and it's going to get worse again.
Is it Mexicans? I was talking to a chap today out at Lake Louise. When I mentioned to him that he seemed to have a lot of people from the Philippines there, he said that in fact they were doing very well right now with people from Brazil. So what part of the world it is doesn't really matter; we just need to be able to keep the service levels up.
Michele McKenzie is talking about the experience here in Canada. Well, if we don't have the people to be able to take care of the rooms, we have a big problem.
:
Thank you. I'll be sharing my time with Mr. Garneau.
I want to echo the comments made by Mr. Wallace, and again I want to congratulate the CTC for receiving the marketer of the year award. Actually, I forgot to mention that in my earlier remarks. I think it's quite an accomplishment and it's well received by everyone in the industry, so congratulations once again on that.
Earlier Mr. Lake mentioned very passionately a decision made in the immigration department and he explained the rationale for it, but I think his comments clearly highlighted and demonstrated the impact it has not only in immigration, for example, but across many departments. These decisions are very widespread, and departments don't necessarily work in silos.
To that effect, I think the government has acknowledged and recognized that there needs to be a clear tourism strategy at the federal level, and they've identified and are starting to work on this process. The minister briefly spoke about this as well.
I think it's appropriate again to ask this question, which I asked in the context of the visa issue but I think it's appropriate in this context as well: have you been consulted on that strategy? Has your input been sought?
One of the issues, for example--and Mr. Pollard, you mentioned this to me when we spoke--is air service agreements. These are not done with any strategy in mind, or with CTC in mind, or with other areas in mind where we can actually try to align our goals and objectives in a way to maximize the potential for the industry. The idea behind a strategy is to avoid mistakes like that or to be able to line up our ducks to get the best set of ideas and strategies in place.
Can you guys comment, first of all, on any involvement with regard to the federal tourism strategy and the kind of input you've given to that process and the consultation aspect of it?
:
Thank you, Mr. Chairman.
My question is for Ms. McKenzie.
You talked about airports. We know that, at the airports, foreign visitors have to go through customs. I visited two places this summer, including Cranbrook, British Columbia, a town that was given a customs post in 2008. I also went to Mont-Tremblant, in Quebec, another town that was granted a customs post in 2007, I believe. I saw the vitality that there was in those new destinations.
The government is very restrictive in adding customs posts to receive foreign visitors. They focus particularly on the airports in the major cities such as Vancouver, Toronto and Montreal. I'm sure there are some elsewhere, but they are mainly in the major centres.
In my riding, there are plans for a customs post to attract tourists because of the specific characteristics there. Do you think that plans for new tourist destinations aimed at new markets, foreign visitors, would help develop the tourism industry, or should this be focused instead in centres such as those we currently have?