With virtually no international travellers B.C.’s tourism industry faces an uncertain future

It is self-evident that the pandemic is wreaking havoc in B.C.’s tourism industry. As one of the province’s foundational export industries, tourism is bearing a disproportionate share of the pain from this global calamity.

Tourism is one of the province’s leading export sectors. Travel to British Columbia by non-residents is considered to be a service export because it results in money flowing into the province from other jurisdictions – other countries in the case of international visitors. This yields export “earnings” just as selling merchandise to other countries results in money flowing in from external sources.

Domestic tourism activity, of course, is also an important part of the industry – even more so when international travel is restricted. However, the domestic element is smaller. Sure, some British Columbia residents have re-aligned their travel budgets towards domestic tourism experiences. The same is true for travellers from other provinces. But this reorientation is also being dampened by mobility restrictions within and between provinces and the reality is that many people are reluctant to travel at all. Even if domestic tourism activity were not heavily curtailed and the shift towards domestic tourism was substantial, it would not come close to offsetting the economic loss associated with the complete collapse of international tourism.

We all know international travel has slowed to a trickle in the last year. Still, looking at the numbers is shocking. The first figure below shows the number of international travellers arriving in B.C. each month going back to 2012. It captures all travellers from all countries coming to the province by all modes of travel. Canadian residents returning to the country via British Columbia are not included. Tourism is highly seasonal. In the peak summer months well over one million visitors come to the province. Winter months typically see about half this number. Shoulder seasons are quite active in B.C. In the figure, September is highlighted to show the underlying growth trend over the years.

The impact of the 2020 travel restrictions is starkly evident. By March 2020, the inflow of non-resident travellers fell to one-third of that in the previous year. By April just 16,000 non-resident travellers came to B.C. – a massive decline from the previous April, when B.C. welcomed more than a half million international visitors.

Figure 1

The next figure sums the number of non-resident travellers between April and October each year (2014-2020). Over the seven-month period in 2019, more than 6.2 million non-resident travellers came to B.C. Over the comparable period in 2020 just 207,000 did, representing a truly stunning 97% decline.

Figure 2

When Statistics Canada publishes figures for the final two months of 2020, it is likely that over the 9-month period of COVID travel restrictions the number of international visitors will be down at least 7 million compared to the same nine months in 2019. Domestic tourism activity did not and cannot remotely fill this hole. There are only 4.2 million people over the age of 15 in B.C., and only some fraction of the provincial population travels each year. International travellers – both leisure and business – also spend considerably more than domestic tourists per day and tend to stay longer than domestic tourists travelling within the province. Even if significant numbers of British Columbians realign their travel budget towards B.C. experiences, it will only replace a fraction of the usual economic benefits generated by international travel.[1]

Industry indicators confirm this reality. In August (peak season) of 2020 the average hotel occupancy rate was 53%. In August of 2019 it stood at 86%. The data also show that some B.C. regions were even harder hit. Greater Vancouver experienced the largest decreases in tourists and hotels and motels in the lower mainland reported some of the lowest occupancy rates in the province. Downtown Vancouver stands out has having the lowest occupancy rate among the regions shown. In August 2020, downtown occupancy was fully 70 percentage points lower than in August of 2019, marking the largest annual decline among B.C. regions.

There is some evidence that domestic tourism activity helped lessen the impact of essentially non-existent international travel. Many of the province’s more well-known summer travel destinations recorded more modest occupancy rate declines. In Campbell River, for example, the occupancy rate held up relatively well with only a 13-percentage point drop in the summer of 2020 versus the previous year. Kelowna also registered a 13-percentage point decline (from 92% to 79%). Penticton stands out as the only community (among those shown) where August’s 2020 occupancy rate was actually higher than 2019’s.

Figure 3

Reduced demand for accommodation from visitors meant average room rates were also down 31% in August 2020. In Greater Vancouver rates were down nearly 50%. Penticton saw rates edge up 4.4%.

Large and wide-spread economic impacts

Tourism contributed $8.3 billion to provincial GDP in 2018, according to Destination B.C.’s 2018 Snapshot of the tourism industry. According to the same source B.C. has an estimated 19,000+ tourism businesses and prior to the pandemic, the sector employed more than 160,000 people across the province.

These are big numbers. When the different elements of the tourism sector are added up, it turns out that tourism accounts for approximately 3% of all provincial economic activity (GDP).[2] This makes B.C. one of the most tourism-oriented provinces in the country. Only PEI’s tourism industry represents a similar proportion of GDP. In Ontario, the sector makes up just 1.8% of GDP, while in Alberta the proportion is 1.4%.[3] B.C.’s over-sized tourism industry is one of the features of our province’s relatively diverse and resilient export base.

B.C.’s tourism industry was strong in 2019. The number of non-resident travellers grew by 3.6% in that year. Real GDP in the accommodation industry (one of the biggest elements of tourism) rose by an impressive 6%. B.C.’s tourism GDP clearly expanded by more than 3.5%, lifting tourism GDP to more than $8.5 billion, in 2019.

Estimates of provincial tourism GDP for 2020 are not yet available (and won’t be for some time). We can, however, get some insight into the expected provincial impact from estimates of Canadian GDP that Statistics Canada produces. Over the first three quarters of 2020 Canadian tourism GDP contracted by about 45% compared to the same three quarters in 2019. The full year drop is likely somewhat greater given the dismal situation facing the entire Canadian tourism industry in the latter months of 2020. B.C.’s tourism industry has experienced a drop at least this large, which points to a $3.5 to $4.0 billion decline in tourism GDP in 2020. When the official data are compiled, this will be almost certainly be the largest contraction across all the province’s economic engines.[4]

Faced with a downturn of this magnitude and ongoing closures well into 2021, additional direct government support will be necessary – and some is likely to be forthcoming. A challenge for government, however, is the diversity and number of businesses in the sector. This makes it impossible to provide enough support to all businesses and employees throughout the duration of closures and the subsequent gradual recovery process.

Policy makers also need to focus more attention on the airline and larger air transportation sector. Air services across much of Canada and in B.C. could be greatly diminished in the aftermath of the pandemic. Traffic at YVR was down 85% in August from the previous year. Sweeping layoffs at major airlines have been reported in the media recently, but regional air carriers are also struggling with unprecedented drops in demand. It was just a couple of years ago that Greyhound stopped all bus service in B.C., Alberta, Saskatchewan, Manitoba. Diminished air service and any closure of regional airports would further reduce intercity mobility in the province.

In addition to well-targeted support, the industry and government should be looking to make substantial capital investments in tourism-related infrastructure and assets that can help to underpin the industry in key regions and communities. Such investments could be specific attractions, but the net should be cast widely. Projects that improve waterfronts, enhance downtown cores, or create new walkways, pathways and overpasses should all be considered. There must be a community in the province where a streetcar could be developed with tourists in mind that would also enhance public transportation. The sector could also work with the province’s vibrant film and television industry to create tourist film and digital experiences about local sights, history, wildlife and heritage.

B.C. has world class tourism offerings and the tourism business will gradually recover after taking an extraordinary hit in 2020-21. Rebuilding the industry will require near-term support measures but should also include smart capital investments and some forward-looking strategic planning.

[1] Tourists from Alberta and other provinces will also help offset the decline in international tourism. This source is also curtailed due to COVID complications. It is difficult to estimate number of domestic tourists, but industry indicators clearly show a sharp downturn in activity throughout the sector.

[2] Comparatively strong growth in tourism in recent years means tourism’s GDP share is even somewhat higher in B.C.

[3] Statistics Canada, Provincial and territorial gross domestic product (GDP) and employment generated by tourism and related measures, Table 24-10-0042-01.

[4] Tourism GDP is comprised of parts of many different industries, the most significant being transportation, accommodation services, food services and recreation and entertainment.