Thursday, August 28, 2014

The Relative Performance of the Tourism Sector in Canada

The tourism sector in Canada is performing relatively well. The value added by this sector keeps increasing but its share in the gross domestic product (GDP) is declining. This comes from the fact that tourism GDP is growing slower than the economy as a whole. Economic factors likely to influence the performance of the tourism sector are the high oil price and a stronger Canadian dollar that make traveling to Canada expensive. 

Tourism GDP and its Share in the Entire Economy's GDP, Canada, 1986:Q1-2014:Q1, Source: Statistics Canada
Figure 1: Tourism GDP and its Share in the Entire Economy's GDP, Canada, 1986:Q1-2014:Q1, Source: Statistics Canada

Given the economic situation, some households are no longer traveling or are changing destinations and others are doing tourism differently like renting an apartment or a chalet instead of staying in a hotel. As a consequence, traditional tourism industries such as transportation, accommodation, and food and beverage have lost some market shares whereas the shares of other industries providing travel related services are increasing. 

Share of Various Industries in Tourism GDP, Canada, 1986:Q1-2014:Q1, Source: Statistics Canada
Figure 2: Share of Various Industries in Tourism GDP, Canada, 1986:Q1-2014:Q1, Source: Statistics Canada
Following their loss of market shares, the shares of employment generated by the traditional tourism industries except the food and beverage industry have also fallen. 

Figure 3: Share of Employment Generated by Various Industries in the Tourism Sector, Canada, 1986:Q1-2014:Q1, Source: Statistics Canada
Figure 3: Share of Employment Generated by Various Industries in the Tourism Sector, Canada, 1986:Q1-2014:Q1, Source: Statistics Canada

The third panel of the above figure shows that the share of employment generated by the food and beverage industry has been going up since the late 1990s. This upward trend is explained by the fact this industry does not exclusively depend on tourism as it also serves the local population. 

The big challenge of the tourism sector is now to reverse the declining trend in the number visitors to Canada made up essentially of US citizens.  

Total Number of Non-Resident Travelers and US Travelers, Canada, 1986:Q1-2014:Q2, Source: Statistics Canada
Figure 4: Total Number of Non-Resident Travelers and US Travelers, Canada, 1986:Q1-2014:Q2, Source: Statistics Canada