An update on tourism in B.C.
No British Columbia industry was hit harder by the COVID-19 pandemic than tourism. With borders closed for much of 2020-21 and international travel dramatically curtailed, the province saw the virtual disappearance of international visitors as well as a sharp decline in the number of Canadians from other provinces travelling to B.C. The unprecedented slump in tourism in 2020 – extending into 2021 – was the biggest source of weakness in the provincial economy over that two-year period.
In part, this speaks to tourism’s outsized economic role in British Columbia. Within Canada, only Prince Edward Island is more dependent on tourism to generate business revenues and provide jobs. Before the onset of COVID-19, tourism accounted for 3.5-4.0%[1]of British Columbia’s GDP and supported more than 130,000 jobs. Almost 20,000 B.C. businesses operated in the tourism sector as of 2019.[2] Because of the very large numbers of both international and out-of-province Canadian visitors who come to B.C. in a typical year, tourism also ranked in the top tier of British Columbia’s “export” industries before the COVID shock of 2020.[3] As business conditions return to pre-COVID patterns, tourism will again serve as a leading export sector for the province.
It should be noted that tourism is not a distinct industry in the economic tracking systems used by Statistics Canada and its provincial counterparts. Unlike construction, education and manufacturing, for example, tourism is not treated as a defined industry within the North American Industry Classification System (NAICS). Instead, the “tourism industry” is comprised of other industry sectors where tourism-related expenditures occur. The main tourism-related industry sectors are the following:
Accommodation and foodservices, capturing spending by visitors on hotels, motels, resorts, parks and camp sites and restaurants. In B.C., international tourists spend the most in restaurants, followed by accommodation services.
Transportation services (spending by visitors on air travel, rail travel, cruise ships and other marine travel, travel booking services, and buses and taxis) is the next largest source of tourism-driven revenues.
Retail services (shopping at B.C. stores and malls by visitors to the province) is also counted as part of the tourism sector.
Recreation services (spending by visitors on bars, entertainment, sporting events, golfing, skiing, etc.) is another important source of tourism revenues.
COVID Impact
As noted above, COVID-19 had devastating effects on all parts of the tourism business. According to DestinationBC, the provincial government’s tourism marketing agency, overall economic activity in the tourism sector (real GDP) plummeted 67.4% between 2019 and 2020, business revenues fell by 65%, and tourism employment plunged by 64.4%.[4] These are unprecedented declines in economic activity – not just from the perspective of tourism, but for any large industry in the province.
Table 1 below provides key tourism-related indicators for B.C. in 2020, 2019 and 2011 to show the scale of the COVID shock following a strong expansion in the years up to 2019.
Recent Developments
With COVID restrictions in most jurisdictions steadily easing over the course of 2021-22 and both business and leisure travel rebounding from historic lows, the B.C. tourism industry has made a substantial and much-anticipated recovery over the past year or so.
By October 2022, the hotel/motel room occupancy rate stood at 75%, up 15 percentage points from the same month in 2021 – but still down slightly compared to the occupancy rate in 2019.
The average daily “room rate” charged by B.C. hotels/motels is now 27% higher than in October 2021; the rate is also up compared to 2019, which partly reflects the impact of higher inflation and rising labour costs.
Total airline bookings for flights arriving in B.C. were one-third higher in October 2022 than in October 2021, but they were still down 12% compared to 2019.
B.C. tourism employment was 2% higher in August 2022 than in August 2019 – suggesting that employment in the sector has regained if not surpassed pre-COVID levels. However, the picture varies across the different segments of the large and notably heterogenous tourism sector. Moreover, many B.C. tourism operators are finding it very difficult to fill vacant positions and retain existing staff in an environment featuring both a very tight overall labour market (a situation common to many service industries in Canada and the United States) and an above-average amount of job churn.
Table 1
It is important to note that domestic travel(capturing British Columbians travelling within the province and other Canadians visiting B.C.) has revived more quickly and strongly than international travel, which remains somewhat depressed. While domestic travellers comprised more than 70% of all visitors to B.C. pre-COVID, the smaller numbers of international visitors packed a disproportionate economic punch, accounting for almost half of all tourism revenues.Visitor arrivals from Asian jurisdictions, the U.S. and European markets remain well below the levels seen in 2019.
DestinationBC expects that the final tally for international visitors to B.C. in 2022 will be roughly 50% lower than in 2019. In contrast “domestic” visitor numbers in 2022 should come very close to regaining the pre-COVID benchmark.
In 2022 DestinationBC also projects that bookings for international air travel to B.C. will be down around 40% compared to 2019.
Table 2 provides the agency’s preliminary visitation forecast for 2022, along with data for the most recent pre-COVID year – 2019.
Table 2
Challenges and Opportunities
Recent discussions with B.C. tourism leaders and a review of reports on the sector published in the last several months point to several ongoing challenges for the industry.
Worker shortages: Most tourism-related businesses in the province – including hotels/motels, restaurants, resorts, and aviation and tour businesses – are struggling to attract and keep staff. During the worst of the COVID shock, huge numbers of employees in the industry lost or voluntarily left their jobs. Many of these former tourism employees have shifted to other lines of work, and thus are no longer part of the tourism workforce. Resort communities and tourism-related businesses outside of urban areas are particularly affected by labour shortages. The problem has been aggravated by a generally tight job market in B.C. and Western Canada as a whole. To help address worker shortages, industry groups representing the B.C. and the Canadian tourism sector are pressing governments to admit more “temporary foreign workers” under Canada’s immigration programs and to provide subsidies to support training of Indigenous people who may be interested in working in the industry.
Cost pressures: Almost all tourism-related businesses across B.C. are experiencing significant increases in operating costs due to higher inflation, upward pressure on wages/salaries, escalating energy costs, and – in the case of restaurants and bars – steeply rising food costs. These problems are not unique to tourism, but they are significantly impacting the sector and have caused some financially fragile tourism businesses to scale back operations or shut down altogether.Climate change: Natural disasters linked to climate change – notably floods and forest fires – are becoming more common and costly for certain industries, including parts of the B.C. tourism sector. This underscores the need for businesses vulnerable to extreme weather events to improve resilience and ensure they have cash resources available to deal with temporary business disruptions.
Maintaining community support for tourism: Like other land-based industries such as forestry, some parts of the B.C. tourism sector face challenges in sustaining local community support for their activities. This is a relevant consideration for ski resort operators, heli-skiing businesses, eco-tourism firms, hunting and fishing lodges, and major attractions. Businesses in these tourism-related sub-sectors increasingly require a “social license to operate” in a province where environmental values are important priorities for policymakers and the public alike.Even amid these challenges – and with international visitor numbers still lagging well behind 2019 levels – there is considerable optimism in the B.C. tourism industry about the sector’s prospects in the coming years. The Canadian government has lifted almost all the border and travel restrictions and vaccination requirements first implemented in 2020. Coupled with fewer severe COVID cases in the major foreign markets of interest to the Canadian tourism industry, this should pave the way for further increases in international visitor arrivals – a trend already evident in the last 8-9 months. The relatively low value of the Canadian dollar vis-à-vis the American currency will also provide an economic boost to tourism in B.C. in 2023 and beyond.
Assuming international travel numbers “normalize” in the next two years, the B.C. tourism industry can expect to post solid growth in visitor numbers and visitor spending in the near-term. Looking further ahead, B.C. has attractive growth opportunities in areas such as sport and Indigenous tourism; the cruise ship business; ski resorts and heli-skiing; nature and eco-tourism; and agriculture/wine-related tourism in the Okanagan.As for the business travel, meetings and conventions segment of the industry, 2022 has seen a notable recovery following the COVID-driven slump in 2020-21. However, the post-COVID world is likely to see less business travel than the pre-COVID world, as many organizations have been able to realize sizable cost savings by scaling back business travel and in-person meetings. In addition, Metro Vancouver faces a significant shortage of hotel room capacity, while existing convention facilities in some other B.C. communities (e.g., Kelowna) are inadequate to accommodate large groups. These constraints mean there may be limited scope to expand the conventions component of the tourism sector over the next few years.
[1]The specific share of GDP accounted for by tourism varies from year to year, mainly due to developments affecting other sectors of the B.C. economy (e.g., commodity price trends, residential investment and real estate activity, and the pace of population growth).
[2]Destination BC, “2020 Value of Tourism: A Snapshot of Tourism in BC.”
[3]In 2019, tourism generated more than $7 billion in “export” revenue for B.C. This figure represents all spending by non-B.C. residents on goods and services purchased while visiting the province. It does not capture spending by British Columbians travelling within the province.
[4]Ibid.