The soaring loonie is clipping Canada’s tourism industry.
With the dollar hitting parity Tuesday, experts fear there are now even fewer reasons for cost-conscious foreign travellers to vacation in Canada.
“That’s of obvious concern to our industry,” said David Goldstein, president and CEO of the Tourism Industry Association of Canada. “It’s a very difficult and competitive landscape out there.”
Visits by foreigners to Canada have been falling since the dollar began increasing in value in 2001. In the past year alone, the loonie has risen 24 per cent against the U.S. dollar.
The decline in travel is most acute among Americans, who make the majority of foreign trips to Canada. Visits by U.S. residents have fallen by 52.2 per cent – from 42.9 million trips in 2001 to 20.5 million trips in 2009, a low not seen since the 1970s, according to the Tourism Industry Association of Canada.
In addition, Sal Guatieri, a senior economist at BMO Capital Markets, noted that the Canadian dollar has also risen against other currencies, suggesting possible future declines by international visitors.
“Even though travellers from countries other than the United States continued to come to Canada in recent years in steady numbers, that trend may turn south fairly quickly,” he said.
The Canadian dollar is up 24 per cent against the euro. It has reached a 25-year high against the British pound this year and is up 20 per cent over the past year. For foreigners visiting Canada, “that’s a fairly significant increase in traveller costs,” Mr. Guatieri said.
The increasing value of the loonie also means Canadians can travel more inexpensively to other parts of the world, meaning many will choose international excursions rather than trips within Canada. Travel to the U.S., the euro zone, the U.K., Taiwan, Switzerland and Japan has all become cheaper over the past 12 months.
“More and more Canadians will be diverting their travel plans from Canada to outside the country,” Mr. Guatieri said. “So, not a great news story for Canada’s restaurants and hotels and travel businesses.”
Mr. Goldstein said his association is working with various levels of government to try to fix structural issues it believes are eroding Canada’s competitiveness as a destination, such as high airport fees and a lack of investment in high-speed rail.