Uncertain economic factors could continue to pressure Canadian domestic tourism spend 

Tourism spend in Canada continues to grow, but the latest data show Canadian spend in the domestic market is on the decline, and some economic indicators could prolong the contraction.


Summary:

  • Tourism spend in Canada continues to grow, but the latest data show Canadian spend in the domestic market is on the decline;
  • Data from Statistics Canada show tourism spending in Canada notched up +0.2% in 1Q2018, with a +1.5% increase by international visitors;
  • The international rise offset a -0.1% decline in Canadian spend on tourism within the country,  the first time in almost ten years that domestic tourism spending had declined in two consecutive quarters;
  • Economic uncertainty could continue to pressure domestic tourism spend by Canadians, and perhaps dent International demand to the country, warns the agency.

Data from Statistics Canada show tourism spending in Canada notched up +0.2% in 1Q2018, with a +1.5% increase by international visitors offsetting a -0.1% decline by Canadian spend on tourism within the country. The agency stated it was the first time since 1Q2009 that domestic tourism spending had declined in two consecutive quarters.

Spend on food and beverage (-1.4%), automobile fuel (-1.4%) and recreation and entertainment (-2.6%) were the largest contributors to the decrease, said Statistics Canada. Those declines were almost offset by a 1.3% increase in accommodation and a 1.1% rise in spending for air transport.

Economic uncertainty could continue to pressure domestic tourism spend by Canadians, and perhaps dent international demand to the country.

The Conference Board of Canada recently issued a forecast of +1.8% economic growth for the country in 2018 versus +3.0% growth in 2017. Growth in exports will reach just +1.4%, the board stated, “weighed down by recently enacted tariffs on softwood lumber, steel, and alluminum”.

The forecast shows consumer spending will ease in 2018 and 2019 as Canadian households reduce their pace of borrowing due to higher interest rates and slower job growth. Lower home prices in Canada will also affect spending, said the Conference Board of Canada, as households will have less equity built into their home with which to borrow against.

There are some positive notes in the forecast. Wage growth in Canada is increasing at a solid pace, and average weekly wages are expected to increase by +3.3% in 2018, which is double the pace for 2017.

But trade disputes and lingering uncertainty over the fate of the North American Free Trade Agreement (NAFTA) could result in Canadians re-thinking their travel spend for the near future in order to cut back on discretionary spending as interest rates rise and job growth slows.