Third quarter 2006
January 9, 2007 – Tourism spending advanced 1.0% in the third quarter of 2006, after growing 1.2% in the second. The strength came entirely from a 2.2% increase in tourism outlays of Canadians. Spending by non-residents visiting Canada in contrast fell 2.8%.
This was the 13th straight quarterly increase in tourism demand since the severe acute respiratory syndrome (SARS) outbreak during the second quarter of 2003. Tourism demand has advanced 18% since then.
Canadians’ tourism spending up
Domestic spending on tourism in Canada was up 2.2% in the third quarter, after growing 1.0% in the second. This marked the ninth straight quarterly increase, for a cumulative increase of 17%, since the second quarter of 2004.
Strong gains were recorded in domestic spending on accommodation (+3.7%) as well as items related to automobile travel, like vehicle rental (+5.9%) and vehicle fuel (+3.6%). Outlays on air and bus transportation in contrast were flat, while spending on water transport edged down 1.0%.
Canadians also spent more traveling abroad in the third quarter, boosting the country’s international travel deficit from $1.6 billion in the second quarter to a record $1.9 billion. A deficit indicates that Canadian travellers spend more abroad than international visitors spend in Canada. A decline in non-resident travel spending also contributed to the increase in the travel deficit.
International tourism spending down again
Spending by international visitors (tourism exports) slipped 2.8% in the third quarter, as the number of non-resident travellers to Canada fell 3.5%. The number of American visitors dropped 3.9%, while there were 1.0% fewer visitors from other countries. A sharper decline (-4.2%) was recorded for same-day travellers from the United States.
The third quarter marked a return to the downward slide of spending by non-residents (tourism exports) that began in the first quarter of 2005. Over the last seven quarters, tourism spending by international visitors has shrunk by 10%.
Declines in tourism exports were widespread in the quarter, ranging from a 0.5% drop in spending on transportation to a 3.7% drop in outlays for food and beverage services. Passenger air transportation and water transportation were the only notable exceptions to the pattern of lower spending.
Tourism employment continues to grow
Tourism employment was up 0.4% in the third quarter of 2006, due largely to job gains in the air transportation and accommodation industries. Job growth was negligible in the food and beverage industry, and was down 0.4% in recreation and entertainment.
Tourism outpaces overall economy
Tourism gross domestic product (GDP) expanded 0.8% in the third quarter of 2006, twice the 0.4% pace posted in economy-wide GDP. The strength in the third quarter came from the food and beverages and accommodation industries.
Early indicators for the fourth quarter of 2006 are mixed. The Canadian dollar lost ground against the US dollar and the euro in the fourth quarter, making it less expensive for Americans and Europeans to travel and shop in Canada.
The Business Conditions Survey for the Traveller Accommodation industry reported that 29% of hotel operators anticipated lower occupancy rates for the fourth quarter, while only 20% expected them to rise. On the other hand, almost twice as many hoteliers expected daily room rates to rise (40%) as those expecting them to fall (21%).
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