What impact does the economy have on travel and tourism? Is the weak loonie good or bad for travel? We thought we’d check with an expert. Royce Mendes is senior economist at CIBC, he’s also very familiar with the industry.

“Obviously Canada is going through a significant change with oil prices a lot lower than they were just a few years ago, so there is weakness in the overall economy.” Mendes said.
There is also a regional divergence between more-commodity centric provinces and the rest, he explained, with the weakness centered in Alberta and Saskatchewan, so there will likely be a slowdown in outbound tourism from those provinces. On the bright side, though, there is underlying strength in BC and Ontario.
The lower Canadian dollar has actually helped to support employment, especially in non-resource provinces. “It works like a sale in a store,” he says, “as the Canadian dollar drops your exports become more competitive on the global stage.
The process is taking longer than expected said Mendes, but employment is growing in provinces like BC and Ontario, so there is strength there.
Nevertheless, the number of overall Canadians travelling to the US is still down significantly and the number of Canadians making same day trips to the US is down from a high of almost 5 million in 2012, to less than 3.5 million in late 2015.
If you’re selling the US from Canada, obviously that’s not the greatest news.
However, says Mendes, “if you are selling to non-US countries you’re actually doing OK – numbers have flattened out a little bit - but not a lot.”
So, yes tourism is down to the US – but in aggregate to the other places it’s not down that much.
“The US is the only developed economy in the world that has been doing well,” says Mendes, “I call it the best house on a bad block. Its currency has appreciated versus everyone else making it more expensive to travel to the US. But, if we look at it versus the Mexican peso – and I know you don’t book travel in pesos, hotels are paid in US dollars - Canada hasn’t lost ground.
“We may have lost a little ground against the euro, but again it’s not that much more expensive to travel to Europe. Not like the US anyway.”
So, one of the reasons Canadians are choosing destinations other than the US is exchange rates -the euro is a better deal.
Travel within Canada
Of course, travel within Canada also becomes much more attractive when the currency falls, says Mendes.
“In a flexible currency regime, when you’re having a tough time and your economy is doing poorly, the currency depreciates and that makes your exports more attractive. It also makes your domestic consumers substitute imports for domestic consumption. So, instead of travelling abroad which would be importing travel from outside, people stay in Canada – it works with all products - including travel.”
This of course, helps inbound travel too. So visitation to Canada is up, both non-US International visitors and visitors from the US.
The number of non-US residents entering Canada are actually up quite strongly.
And, while an increased number of Canadians are travelling abroad, travellers from countries other than the US are also visiting Canada more.
The weaker currency could be the attraction, making Canada a nice substitute for those who want to visit North America, but are finding the US has become more expensive – because the US dollar has appreciated against most of the developed markets.
“This is what we want – we want the tourism to come back. It’s a non-energy export that is very important to the country.” Says Mendes.
One curious phenomenon Mendes mentioned is the fact that same day travel to Canada from the US has fallen from a high of 1.2 million people per year in 2006 to the current level of about 700,000.
That would indicate that despite the favourable exchange rate, Americans are not coming here to shop.
Provincial outlook
“If you’re looking for outbound travel out of Alberta I don’t know if it’s going to go back to a level it was before,” says Mendes, “but Ontario, BC and Quebec are places that are exporting non-energy exports and should see the greatest benefits from the weaker Canadian dollar.”
He cautions however, that the process doesn’t happen overnight. There will be a lag in that pickup.
“The process takes a long time, and it’s actually taking longer than most economists would have expected. The hope is that it is going to turn into better opportunities in the future and that the Canadian economy will be back on its feet soon.
Some of the Maritime provinces should be seeing an increase in tourism says Mendes, “because those are the places many people want to visit when they come to Canada.”
While people want to visit the large cities they also want to see smaller places and rural areas, and provincial governments have been suggesting in their budgets that they are hoping that the Canadian dollar will increase inbound tourism - within Canada and internationally – and they are putting more marketing resources into tourism.
Brexit
Overall Brexit didn’t turn out to be the catastrophic event that everyone though it might be, said Mendes.
“I think in the short term there will be an economic slowdown and uncertainty will decrease investment– but certainly I would think travel is going to pick up.
Over time the uncertainty should dissipate as the blocks start being put in place as to what all this is going to look like post-Brexit. But domestic and inbound travel should pickup with sterling materially weaker”.
“Theresa May said she is not going to invoke article 50 (Article 50 of the Lisbon treaty sets out how an EU country might voluntarily leave the union) for a while yet, which is smart – I think it could to be years before that happens – and actually business travel may pick up to the UK because, think about it, any global corporation that has offices in the UK will be sending staff there to figure out ‘what are we going to do’.
So generally, from the perspective of an economist, Mendes sees the outlook for Canadian travel both inbound and outbound as positive.
Canadians he says are always ready to travel, to take advantage of any opportunities, “Look, is there a better time to visit Britain? I’m thinking of taking advantage of the exchange right now to take a quick vacation to the UK myself.”
Sounds like a plan.