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Draft discussion document
24th August 2018
Sustaining Canada’s tourism
sector through COVID-19Analysis and options
March 27, 2020
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There are two phases for support that the tourism industry will likely require
Potential
measures
1 2
Stage 2: Prepare for recovery
Marketing promotions to keep Canada top-of-mind as a destination, and to
encourage travel once it is safe to do so
Temporary reductions in fees and taxes on travel (e.g., visa applications,
airport fees)
Backstop travel and health insurance to improve availability and
accessibility
Training and upskilling to improve the knowledge and skills of employees in
the tourism sector
Community projects to sustain employment in communities dependent on
tourism, and prepare them for the return of tourists
Infrastructure and tourism product investments to improve tourism
experiences once travel does resume
Estimated cost Not estimated – depends on duration of public health measures and desired
scale of impact
~$15 billion to sustain ~60% of businesses projected to run out of cash in
the event of no summer season
Stage 1: Sustain the tourism sector
Description Position the industry for a rebound and future growth by using the slowdown in
activity for long-term investments that would not otherwise be possible
Replenish gaps in supply that emerge as a result of insolvencies
Keep Canada top-of-mind as a place to visit while public health measures are
in place, and reintroduce marketing ahead of demand returning
Provide support to the tourism sector that addresses gaps in eligibility,
amount and duration of already announced measures that are accessible to
all businesses
Small
businesses
Direct cash transfer to businesses ranging from $5-75K
per business depending on the duration of the pandemic
Medium
businesses
Total $ per business ranging from $50-700K depending on
the scenario split out as:
Cheque issued to business = 75%
New credit = 15%
Re-finance debt = 10%
Large
businesses
Loan as a share of revenue for businesses ranging from
5-25%
Employees Expanded availability of support programs to workers in
the tourism sector who would not otherwise qualify
Communities Grants to communities hard-hit by the pandemic
Indigenous
communities
Grants to communities hard-hit by the pandemic
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Tourism is a major Canadian industry, accounting for ~2% of GDP, making it larger than
telecommunications and mining; its GDP impact is felt in more regions than other major industries
~80% in
Ontario &
Quebec
~60% in
Ontario &
Quebec
90% in
Alberta
Provincial share of GDP by industry, 2017
Finance and insurance Oil and gas extraction
Retail trade Tourism
Share of Canadian GDP by industry, 2017
7.1
6.3
5.6
2.6
2.0
1.8
1.7
1.5
1.5
1.0
Mining and quarrying
Federal gov’t1
Telecommunications
Residential construction
Finance and insurance
Retail trade
Tourism2
Oil and gas extraction
Food manufacturing
Auto industry
1. Excludes defence, based on Q3 2015 figures, annualized
2. Adjusted for Tourism GDP ratio, the share of GDP that is generated by tourism for tourism's major component sectors; Total tourism activities
SOURCE: Statistics Canada, “Canadian Tourism Satellite Account, 2015” (GDP calculation using basic prices); Moody’s Analytics; Ontario tourism
20% in BC
20% in AB
30% in ON
20% in QC
Percent of GDP
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Tourism is an amalgamation of component sectors, all of which depend on it for survival and
profitability
1. North American Industry Classification System (NAICS) is used by Statistics Canada, the US Census, Bureau of Labor Statistics (BLS), and other North American agencies to report industry data
2. Traveller accommodations (NAICS 7211) is used elsewhere in this analysis and in the impact model
3. Not used in the impact model to lack of detailed financial data and high number of small operators without employees
4. Transit and ground passenger transportation (NAICS 485) used in model analysis due to data availability
78
22
Domestic demand Foreign demand
Tourism is not it’s own industry as
defined by the North American
Classification System1, but instead a
collection of sectors
Arts, entertainment and recreation
Food services and drinking places
Rail transportation
Air transportation
Hotels2
Travel arrangement and reservation services
Automotive equipment rental and leasing
RV (Recreational Vehicle) parks and recreational
camps
Water transportation
Motels2
Taxi and limousine service3
Interurban and rural bus transportation4
Scenic and sightseeing transportation
Key sectors (in order of GDP contribution):
The share of output and jobs attributable
to tourism varies by industry: many
would not survive without tourism while
others require it as a critical part of sales
20% of jobs in Food services and drinking places are
directly attributable to tourism spending
62% of jobs in Hotels are directly attributable to
tourism spending
73% of jobs in Air transportation are directly
attributable to tourism spending
85% of jobs in Travel arrangement and reservation
services are directly attributable to tourism spending
These figures are often applied to tourism’s
component sectors to reflect the size of the industry;
However, our model considers the entire component
sector (e.g. 100% of Food services) to account for
the uniqueness of the current economic
situation/shutdown and the nature of policy
approaches (e.g. stimulus could help 100% of SME
Food service establishments, not just 20%)
Tourism is composed of two core
elements: domestic and international
Domestic: spending by Canadians 40km outside
their normal, daily patterns
International: spending by international visitors
Tourism includes only visitors who stay at least 24
hours and can involve: all business travel (business
meetings, events, conferences), visiting friends and
relatives, vacation / holiday travel, and education of
less than 3 months
Tourism demand: domestic and international
%, Q3 2019
SOURCE: Statistics Canada, “Canadian Tourism Satellite Account, 2015”; “Tourism demand in Canada,” table 36-10-0230-01; Destination Canada
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Tourism is also an important economic contributor, responsible for more than $25 billion in tax
revenues, and its component sectors employ a total of ~2M Canadians2
5.4 5.6 6.1
18.6 19.1 19.4
24.1 24.7 25.5
Domestic
tourists
Foreign
tourists
Tourism is an important contributor of
Canadian government revenues…
Tourism contribution to government
revenue1
$ billions
… and a major source of employment for Canadians in every region of the country
36
100
21
17
136
6 0
1. Government revenue covers receipts from taxes on incomes (i.e., on employment earnings, corporate profits, net income of unincorporated business and government business enterprises), contributions to social insurance plans (i.e., premiums
for Canada/Quebec Pension Plan, Employment Insurance and workers compensation), taxes on production and products (such as sales and property taxes), and from sales of government goods and services
2. Total of tourism's major component sectors
9.3 9.2
13.2
9.4 9.0 8.910.3 9.7
Provincial/
territorial
share of
Canadian
tourism
employment
%, 2015
Provincial
employment
from
tourism
%, 2015
Ontario Quebec BC Alberta Atlantic Prairies
Territ-
ories
Natio-
nal
10.9 11.1 11.3
11.9 12.3 12.7
1.3 1.41.4
25.524.1 24.7
Municipal/
Aboriginal
Provincial
Federal
2014 2015 2016
SOURCE: Statistics Canada, "Government revenue attributable to tourism," table 36-10-0461-01; Statistics Canada, “Canadian Tourism Satellite Account, 2015”
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~85% of the GDP and employment impact of tourism is from small or large companies; combined
they employ ~1.7M Canadians
Total GDP contribution
CAD millions (% of total), 20182
Canada’s tourism sector broken down by company size1
Food services and drinking places
Air transportation
Automotive equipment rental and leasing
Transit and ground passenger transportation
Arts, entertainment and recreation
Rail transportation
Recreational Vehicle (RV) parks
and recreational campgrounds
Scenic and sightseeing transportation
Travel arrangement and reservation services
Traveller accommodation
Water transportation
1. Estimates due to lack of data segmenting industries by company size in Canada; small companies (annual revenue <$5M), medium companies (annual revenue $5-20M), large companies (annual revenue $20M+, or employee size greater than
200, assuming average revenue generated per employee of 100K); does not apply tourism GDP or employment ratios but instead uses all GDP and employment for tourism’s key contributing sectors, including: Air transportation (481), Arts;
entertainment and recreation (71), Automotive equipment rental and leasing (5321), Food services and drinking places (722), Rail transportation (482), RV (Recreational Vehicle) Parks and Recreational Camps (7212), Scenic and sightseeing
transportation (487), Transit and ground passenger transportation (485), Travel arrangement and reservation services (5615), Traveller accommodations (7211), and Water transportation (483)
2. Moody’s Analytics estimates using Statistics Canada data; in nominal CAD (current prices)
3. Incorporated businesses; figures from 2018 "Financial Performance Data"
4. Figures from 2019
Total employment
Jobs, thousands (% of total), 2018
Number of businesses
Thousands (% of total), 2018
SOURCE: Statistics Canada, “Canadian Business Counts, with employees, December 2019,” table 33-10-0222-01; Government of Canada, “Financial Performance Data”, Moody’s Analytics
Small
5.9 9.0
7.9
6.6
Medium
11.1
8.4
48.5
(47%)
Large
39.5
(38%)
14.9
(14%)
756
146
87
Small Medium
204
275
100
75
Large
940
(47%)
295
(15%)
765
(38%)
Small3
102.8
(96%)
Medium3 Large4
3.0
(3%)0.8
(1%)
24.9
21.0
61.1
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Six sectors – hotels and motels, travel and arrangement services, scenic and sightseeing transport,
air transport, and RV parks and camps – depend on tourism for more than ~60% of their jobs
2.2
9.0
10.4
32.7
16.6
3.0
11.2
4.3
2.1
1.1
0.9
0.2
0.1
40
1,060
144
388
76
49
21
15
42
15
12
3
3
20
22
8
62
73
17
85
6
59
19
63
85
7
80
85
3
1
215
4
55
35
9
1
7
3
0
Arts, entertainment and
recreation
Food services and drinking
places
Rail transportation
Air transportation
Hotels2
Travel arrangement and
reservation services
Automotive equipment rental
and leasing
RV (Recreational Vehicle)
parks and recreational camps
Water transportation
Motels2
Taxi and limousine service
Interurban and rural bus
transportation
Scenic and sightseeing
transportation
Tourism sector
GDP
CAD billions,
20181
Employment
Jobs, thousands
Tourism-
dependent jobs
% of sector, 2014
Number of tourism-
dependent jobs
Thousands
75% of tourism-dependent
jobs are from 3 sectors:
Food services and
drinking places
Arts, entertainment and
recreation
Hotels
6 sectors are dependent on
tourism for ~60%+ of their
employment:
Hotels
Air transportation
Travel arrangement and
reservation services
RV parks and recreational
campgrounds
Motels
Scenic and sightseeing
transportation
SOURCE: Statistics Canada, “Canadian Tourism Satellite Account, 2015”; Moody’s Analytics
1. Moody’s Analytics estimates using Statistics Canada data; in nominal CAD (current prices)
2. GDP and employment data for hotels and motels calculated by applying their relative share (using Canadian Tourism Satellite Account) to Accommodation (NAICS 721) figures; due to data availability, Traveller accommodations (NAICS 7211) is
used elsewhere in this analysis and in the impact model
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Key findings in this section
▪ The tourism sector is dependent on the summer season (June-August) for at least 36% of volume, and likely most of its
profits for the year
▪ In an optimistic scenario where businesses are able to re-open by July 1st, and demand bounces back to historical levels
within 2 months, even tourism businesses that operate year-round are likely to lose money
▪ Driven mostly by lack of cash on hand, and the continuation of relatively fixed expenses like rent/mortgages and utilities,
COVID-19 could result in the closure of ~61,000 tourism businesses and ~1.7 million total layoffs in a scenario of 60 days
with 100% revenue decline
▪ The type of support that tourism businesses most need is cash to continue to operate
– Tax breaks are not helpful for companies that do not have any revenues
– Only the largest tourism companies are in a position to consider taking on loans; in their normal operations, most tourism
businesses do not generate enough cash flow to operate and repay the costs of operating for another season
▪ Employees in the tourism sector are seasonal; 31% are young, and 25% are immigrants. They are unlikely to be covered by
existing support programs
▪ 388 municipalities depend on tourism for more than 15% of their local employment. These communities may need additional
supports and services to see them through this recession
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The tourism sector is dependent on the summer season; a closure of the sector until September 1
means that even with a quick rebound, businesses will lose ~58% of their annual revenue
Based on hotel occupancy and international arrivals levels, a conservative estimate1
suggests tourism businesses earn ~36% of their revenue from June to August…
September
January
March
April
July
February
June
August
May
October
November
December
6.5%
7.4%
7.8%
7.9%
9.4%
8.6%
9.6%
8.9%
10.1%
9.7%
8.0%
6.4%
8.6%
4.4%
6.6%
4.4%
5.1%
6.1%
12.4%
15.0%
15.3%
9.9%
7.4%
4.9%
6.4%
10.9%
6.5%
5.4%
8.6%
5.9%
7.0%
12.4%
12.6%
9.8%
8.2%
6.5%
Hotels
% share of occupancy
International arrivals
% share of arrivals
Industry seasonality
estimate, % share of
annual revenue
… so if the COVID-19 crisis continues until September 1st ,
tourism businesses will lose at least 58% of annual revenues
November 1
October 1
June 1
December
July 1
September 1
August 1
-76%
-22%
-33%
-45%
-58%
-68%
-82%
Scenario 1:
summer
season is lost
Scenario 2:
prolonged
COVID-19
impact
Cumulative potential revenue loss based on when demand
resumes
% loss in annual revenue
Source: Statistics Canada; Ontario Ministry of Heritage, Sport, Tourism and Culture Industries
1. This estimate is conservative because it is based solely on volume. Tourism companies likely charge more in the summer
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Projections of the required duration of public health measures suggest these will be in place until at
least July 1st, meaning tourism businesses will lose at least half of their busy summer season
Epidemiological projections suggest that public health
measures could be in place until the start of July…
… which will limit tourism in the first half of the
summer—the busiest, highest income period of the year
0
100
0
20
40
60
80
50
100
150
200
Jan JulFeb Mar SepApr NovMay Jun Aug Oct Dec
Average daily rate ($)Occupancy rate (%)
Canadian hotel seasonality, average 2014-2019
If public health measures remain in place until
July 1, the tourism sector will lose half of its
critical May-September summer season
Sources: CBRE Hotels’ Trends in the Hotel Industry National Market/Operations Report; Ontario Ministry of Heritage, Sport, Tourism and Culture Industries
Ferguson, N. et al (16 March 2020). “Impact of non-pharmaceutical interventions (NPI) to reduce COVID-19 mortality and healthcare demand” Imperial College COVID-19 Response Team.
Modeled impact of various public health measures, Great Britain
Modeling of the impact of various public health
measures in Great Britain suggests that these
measures will need to be in place until the start of July;
Canada put such measures in place two weeks earlier
Cri
tic
al c
are
be
ds
oc
cu
pie
d
pe
r 1
00
,000
of
po
pu
lati
on
Mar Apr May June Jul Aug Sep Oct
Assumed duration of
public health measures
Assumed duration of
public health measures
50
100
150
200
250
300
Summer season
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Year-round tourism businesses like hotels are barely profitable without the revenues of the summer
season; even if there is a quick bounce-back from COVID-19, they are likely to lose money
Financial model of a typical 120-room hotel1
$ thousands
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
0
-400
-200
200
400
600
877
10 10 10 59 69 74 7112 10 8
Revenues Expenses Net profit
COVID-19 is affecting tourism
operators’ finances in 3 ways:
“Bookings are down from China by about
70 per cent between March and October,
so that’s obviously quite considerable”
– Destination BC
Losing some or all of the summer
season which is the greatest source
of revenue and profit
Having to pay back deposits
on travel that has been cancelled
No revenue to cover fixed costs
of properties, including skeleton
staff, utilities, and property taxes
while public health measures are in
force
Pre
COVID-
19
200
-200
-400
600
0
400
-149
8 10
-173-140 -152 -178
-4271
12 10 8
With
COVID-19Assumes
a rapid
bounce-
back after
the end
of public
health
measures
Annual net profit
$ thousands (%)
415
(10%)
-715
(-28%)
Summer season
“Businesses count on these early bookings
as cash float to get by before summer.
Returning many deposits is equivalent to a
run on the banks but for tourism”
– Tourism business owner
“If we have no revenue to cover our costs,
we may be forced to close down. Closing
down might mean we won’t be around until
summer 2021 – if at all”
– Tourism business owner
1. A 120-room hotel was suggested by hotel industry experts as a “typical” hotel. Similar economics can be expected for smaller hotels; larger hotels may have additional revenue
streams such as meetings and events that reduce the impact of seasonality. The model is based on CBRE average monthly hotel occupancy and average room rate for Canadian
hotels 2014-2019. Assumes 35% EBITDA margin in summer (May-September) and 25% EBITDA margin the rest of the year. The "With COVID-19" model assumes a 50% drop in
revenues in March, a 100% drop in April-June, a 75% drop in July and a 25% drop in August; expenses are modeled as 50% of normal in April-June and 75% of normal in July
Assumed duration of
public health measures
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COVID-19 could result in the closure of ~61,000 tourism businesses and ~1.7 million total layoffs in
a scenario of 60 days with 100% revenue decline
1. Accounts for initial layoffs due to shock of 100% decline in revenue (calculated at ~70% of jobs), followed by additional layoffs due to permanent business closures over time; Percentage based on aggregate of sectors (~2M jobs)
2. Estimates job losses in overall Canadian economy due to initial layoffs and permanent tourism business closures (using multipliers); Calculated weighted average multipliers based on relative number of jobs of key tourism sectors
3. Supply chain effects (e.g. restaurants purchase from regional food wholesaler)
4. Effects of worker wages (e.g. restaurant worker shops at local retailer)
Length of
shock to
tourism sector
Month (# days)
Tourism business
closures
Thousands (% of total)
Tourism employees
laid off1
Thousands (% of total)
Decline in
Canadian jobs2
Thousands
Key takeaways Experts anticipate substantial business closures and employee
terminations across the industry if businesses are not provided with
financial support to stay open and retain staff this summer and
beyond
Significant increase in permanent business closures from 30 to 60
days, as many SMEs run out of cash after 30 days of low sales
Smaller restaurant owners have limited cash flow and their
landlords won’t defer rents causing many to shutter
– Former Marketing Director, Canadian hotel chain
Hotels need to retain their staff to be successful, but doing so
is nearly impossible with limited revenue coming in
– Former Marketing Director, Canadian hotel chain
Some individual operators are deciding to close and then
maybe reopen, but no one has guidance on the long-term
yet
– Former Director, Industry Association
The most at risk are the family-owned businesses. They don’t
have a strong enough voice, preparation plan, and the
financial flexibility
– Former Marketing Director, Canadian hotel chainAugust (150)
June (90)
88
28
61
April (30)
79
May (60)
July (120)
73
83
86September (180)
October (210)
89November (240)
Sc
en
ari
o
Projections (based on 100% revenue decline)
1,420
117
240
1,420
1,420
1,420
290
3181,420
3381,420
3521,420
3621,420
369
77%
83%
86%
87%
88%
89%
89%
89%
26%
57%
68%
74%
78%
80%
82%
84%
2,274
2,011
2,331
2,318
2,172
2,238
2,300
2,341
2,373
2,562
2,640
2,682
2,714
2,735
2,750
2,762
Direct and indirect effects3
Induced effects4
SOURCE: Statistics Canada, “Canadian Tourism Satellite Account, 2015,” “Canadian Business Counts, with employees, December 2019,” table 33-10-0222-01; Government of Canada, “Financial Performance Data”; Moody’s Analytics
Layoffs due to decline in revenue
Additional layoffs due to business closureSector details on
following page
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Modeling the scenario of a 100% decline in tourism revenue over 60 days, the businesses most at
risk of closure are food services & drinking places, arts & entertainment, and traveler accommodation
1. Accounts for initial layoffs due to shock of 100% decline in revenue (calculated at ~70% of jobs), followed by additional layoffs due to permanent business closures over time
2. Estimates job losses in overall Canadian economy due to initial layoffs and permanent tourism business closures (using sector multipliers)
3. Supply chain effects (e.g. restaurants purchase from regional food wholesaler)
4. Effects of worker wages (e.g. restaurant worker shops at local retailer)
Tourism sector
6
42Food services and drinking places
Arts, entertainment and recreation 12
2
Traveller accommodation
Recreational vehicle (RV) parks and recreational camps
0Air transportation
0Automotive equipment rental and leasing
0Rail transportation
0
0Scenic and sightseeing transportation
0Transit and ground passenger transportation
0Travel arrangement and reservation services
Water transportation
Sightseeing is limited as individuals prefer to avoid
large gatherings
Many restaurants are facing mandatory closures
Rationale
Train service has been reduced to help curb the
spread
Travel bans limit foreign travel volume and
movement
Travel bans limit foreign travel volume and
movement depressing occupancy rates
Canadian airlines have either reduced capacity or
paused operations
Ferry service has been reduced, cruise routes
suspended
A call for self-isolation has reduced traffic on roads,
commuting needs, and the volume of foreign visitors
Parks Canada is closing all visitor services
Social gatherings in public spaces (e.g., recreational
venues) are restricted
Few customers are booking new trips with a
precarious regulatory and public safety climate
Decline in
Canadian jobs2
Thousands
SOURCE: Statistics Canada, “Canadian Tourism Satellite Account, 2015”,” “Canadian Business Counts, with employees, December 2019,” table 33-10-0222-01; Government of Canada, “Financial Performance Data”; Moody’s Analytics
Projections based on scenario of 100% revenue decline over 60 days
66%
54%
79%
61%
0%
0%
0%
0%
0%
0%
0%
3
186
34
753
18276
116
2
11
54
15
35
120
30
10
89%
76%
92%
88%
71%
71%
71%
71%
71%
71%
71%
Layoffs due to decline in revenue
Additional layoffs due to business closure
Tourism business
closures
Thousands (% of total)
Tourism employees laid
off1
Thousands (% of total)
3
166
28
146
196
7
9
1,168
63360
38
3
40
64
1
17
27
24
33110
9 26
Direct and indirect effects3
Induced effects4
Sectors that
do not
permanently
close in 60
days tend to
have more
cash and
less
operational
expenses,
but are still
at risk
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Past virus outbreaks have resulted in less severe drops in travel, yet recovery still took ~6 months
SOURCE: The Economist, IATA, WHO Situation Reports, Johns Hopkins CSSE, Reuters, CNBC, New York Times, OAG.com, EgyptAir
Impact of historical events on air travel
▪ During the SARS and
MERS cases, air travel
started to recover
shortly after the peak
case count for each
virus
▪ Domestic air travel in
China may take ~4-6
months to return to
historical levels,
similar to SARS and
MERS
▪ While outbound and
inbound traffics may
take even longer (~6
to 12 months) as it
also depends on the
travel restrictions
around the world
Impact of virus outbreaks on aviation, revenue-passenger km1
Start of outbreak = 100
65
60
100
70
80
90
110
75
85
95
105
102
Months before and after outbreak
7-3 -2 -1 0 51 3 4 6 8 9 11 12
Airlines based in Asia-Pacific Avian flu,2013
Airlines based in Asia-pacific SARS, 2003
All flights to, from and within South-East Asia Avian flu, 2005
All flights to, from and within South Korea MERS, 2015
Start of
outbreak
1. One revenue-passenger km equates to flying one paying passenger one kilometer
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In the 2008 recession, volumes recovered faster than revenues in airlines and had a shallower dip
than revenues in hotels
1 Average fare per passenger mile
-20
-15
15
0
-10
10
-5
5
SOURCE: PaxIS, OAG
Pre-crisis
yield and
passenger
volume
follow
similar
trends
However, divergence of
yield and passenger
volume continued for
another year
The financial crisis had a longer and stronger impact on hotel occupancy
and revenues, taking 4+ years to recover
YoY % change vs. 12 months pre-recession (July 2007-June 2008)
0 5 10 15 20 25 30
Passengers Yield
-4
-6
-20
-8
-18
-16
-14
-12
-10
-2
0
2
0 6 18 30 42 54
Occupancy RevPAR
During and post-2008 financial crisis, airlines globally lowered prices to
prop up demand and accelerate recovery
YoY % change vs. 12 months pre-recession (July 2007-June 2008)
Months
since
event
Months
since
event
12 24 36 48
Hotel revenues
and occupancy
bottomed out
after 18 months
Hotel
revenues
dropped 2x
as much as
occupancy,
and both took
4+ years to
recover
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Six categories of tourism businesses, individuals and communities are likely to be impacted in
different ways by COVID-19, requiring different types of support
1: Small
businesses
2: Medium
businesses
3: Large
businesses
4: Laid off
employees
5:
Communities
6:Indigenous
communities
Tourism
companies with
annual revenue
<$5M
Tourism
companies with
annual revenue
$5-20M
Tourism
companies with
annual revenue in
excess of $20M
Nearly 1M
employees in the
tourism sector are
at risk of
temporary or
permanent layoffs
300+
municipalities rely
on tourism for
over 15% of
employment
share and
economic benefit
Nearly 2000
entrepreneurs
and organizations
participate in
Canada’s
Indigenous
tourism sector
Impacted businesses Impacted Canadians
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Small businesses: Labour and taxes account for over half of small tourism companies’ annual
expenses, suggesting these are high-potential areas to target support
1. Incorporated businesses; figures from 2018 "Financial Performance Data"
2. Government of Canada announced 75% wage subsidy for qualifying SMEs (March 27)
Tourism sector,
selected industries
Traveller
accommodation
Air transportation
Food services and
drinking places
Scenic and
sightseeing
transportation
Arts, entertainment
and recreation
Travel arrangement
and reservation
services
Sector average
596
522
396
333
321
241
402
32%
19%
44%
33%
34%
48%
35%
22%
17%
15%
21%
25%
20%
20%
11%
22%
5%
9%
7%
3%
10%
4%
9%
17%
8%
12%
8%
9%
7%
14%
4%
8%
5%
1%
7%
9%
6%
5%
5%
4%
3%
5%
4%
6%
3%
4%
5%
7%
5%
3%
1%
4%
6%
4%
7%
4%
7%
4%
1%
2%
2%
1%
3%
2%
3%
1%
4%
2%
1%
2%
Average annual expenses for tourism companies with annual revenues <$5M
Percent of operating expenses, 20181
>20% 5-19% <5%
Share of operating and indirect expenses
Implications for government support
Government can potentially support
small tourism businesses with 4
categories of expenses covering
>60% of their needs:
Labour and commissions2
Taxes
Utilities and telecommunication
Interest and bank charges
Traveller accommodation companies
are currently facing an additional
expense, refunding deposits paid for
travel booked for summer 2020
1
SOURCE: Government of Canada, “Financial Performance Data”, 2018
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Medium businesses: Labour and taxes also account for nearly two-thirds of medium-sized
tourism companies’ annual expenses, suggesting these are high-potential areas to target support
1. Proposed addition to the 10% wage subsidy announced by the Government of Canada on March 18, 2020
Note: # of jobs per company are estimated based on total labour and commission expenditures for each business divided by the average annual wage of an FTE in that industry
5.8
5.4
4.7
4.6
4.1
2.0
4.4
37%
27%
25%
33%
42%
53%
36%
30%
28%
22%
27%
17%
23%
24%
5%
7%
14%
16%
5%
9%
10%
9%
10%
11%
7%
6%
3%
8%
4%
7%
11%
7%
4%
1%
6%
4%
3%
2%
5%
6%
9%
5%
3%
5%
6%
5%
4%
2%
4%
5%
5%
4%
7%
3%
3%
4%
2%
7%
3%
3%
1%
1%
3%
1%
1%
2%
2%
1%
1%
1%
Average annual expenses for tourism companies with annual revenues $5-20M>20% 5-19% <5%
Share of operating and indirect expenses
Tourism sector
Traveller
accommodation
Air transportation
Food services and
drinking places
Scenic and
sightseeing
transportation
Arts, entertainment
and recreation
Travel arrangement
and reservation
services
Sector average
Implications for government support
Government can potentially support
medium-sized tourism businesses with
3 categories of expenses covering
>60% of their needs:
Labour and commissions
Taxes
Utilities and telecommunication
Traveller accommodation companies
are currently facing an additional
expense, refunding deposits paid for
travel booked for summer 2020
2
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Large companies: needs and impact assessment Non-exhaustive - Illustrative only
The 800 largest tourism companies (>$20M in revenue) employ ~742K individuals and account for ~$48.5 Bn in GDP
Total
impact
(USD, $M)3 Considerations
Healthy economic multipliers
▪ Multipliers for the tourism sector
generate economic activity twice
as high as revenue
▪ Food services have the highest
multiplier due to strong regional
supply chains
Foreign-based brands but
Canadian operators
▪ Many brands across these
industries (Marriott, IHG) are
foreign-domiciled but their
operators are mainly based in
Canada
Anchors
▪ Many of these players operate as
cluster-builders / are destinations
in and of themselves, creating a
ripple effect and thus sustaining
other businesses
Examples of players
2019 data unless specified
Revenue
(USD, $M)
# of
employeesHQ location
Traveller accommodations
Jobs
attributed
to tourism2
Four Seasons
Temple Hotels1
Coast Hotels
Air transportation
Air Canada
Air Inuit
Central Mountain Air
Food services and drinking places
Restaurant Brands International4
Recipe Unlimited4
Arts; entertainment and recreation
Vail Resorts
Casino Niagara
Stratford Shakespearean Festival
USA
Canada
Canada
Canada
Canada
Canada
Canada
Canada
USA
Canada
Canada
34,000
545
900
29,895
610
250
6,200
11,000
6,600
3,700
650
3,270
127
87
13,961
195
80
4,140
921
2,200
322
98
6,343
246
168
28,035
391
160
9,369
2,084
4,611
676
205
73%
62%
22%
20%
Total
multiplier3
2.0
1.9
2.1
2.3
1. Operators of Hilton, Radisson, Days and others hotels
2. Employment generated by tourism, from Statistics Canada, “Canadian Tourism Satellite Account, 2015”
3. Total economic impact includes direct, indirect, and induced effects from revenue
4. Restaurant Brands International: Owners of Burger King, Tim Hortons, and Popeyes; Recipe Unlimited: Owners of Harvey's, Swiss Chalet, Montana's, Kelsey's, and Milestones Grill & Bar
5. Data from CapIQ
Source: D&B Hoover’s; CapIQ; Statistics Canada, “Canadian Tourism Satellite Account, 2015”; Company financial statements
3
Big Rock Brewery Canada 120 42 94
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Large companies: needs and impact assessment (detailed example) Non-exhaustive - Illustrative only
1. All Canadian-based companies; Based on real data pulled from D&B Hoover’s; 2018 figures (for consistency across companies – not all 2019 annual data was available) and in USD million; less available data than SME industry averages
2. Data from 2019 (2018 data not available)
3. Airline amortization and depletion often listed under cost of sales rather than operating expenses
Source: D&B Hoover’s
3
Tourism firm
examples
Revenue >$20M1
Air Transportation
Arts, Entertainment
and Recreation
Food Services and
Drinking Places
Traveler
Accommodation
13,913.6 10,795.9 1,961.5 1,327.0 411.2 697.9 13,885.0 28.6 3.03
1,045.9 768.6 109.8 45.8 993.8 52.1 3.40
133.4 17.6 104.1 12.5 126.3 7.1 0.38
943.6 291.20 363 65 51.5758.3 185.3 1.35
37.7 21.6 15.4 0.4 0.3 37.4 0.3 0.16
38.5 27.5 7.7 0.6 0.4 36.5 2.0 0.31
11.3 5.0 4.8 0.4 0.7 10.5 0.8 8.87
13.2 1.0 13.2 1.5 4.8 24.3 (11.1) 3.492
A
B
A
B
A
B
A
B
Implications for government
support
Government stimulus supporting large
tourism businesses should consider:
Highly-leveraged sectors:
Air transportation companies and
traveler accommodation companies
feature high debt-to-equity ratios,
meaning a large degree of existing
debt and potentially higher risk
Low profitability:
Large players in food services and
traveler accommodation are (similar
to smaller firms) susceptible to
downturns in the economy due to
small profit margins
Traveller accommodation companies
are currently facing an additional
expense, refunding deposits paid for
travel booked for summer 2020
Selected balance sheet components for tourism companies with annual revenues >$20M
USD million, 2018
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Employees: A younger workforce, large share of newcomers, and high seasonality may render
many displaced tourism employees ineligible for government support announced to date
4
The needs of employees in Canada’s tourism sector…
1. Maximum education level of high school diploma or equivalent
Young labour force depends on tourism for summer jobs
▪ Youth (age 15-24) represent 31% of tourism employees vs.
13% of the overall labour force
▪ 40% of Canadian youth employment is in tourism with many
students leveraging a summer job to pay for school
Large source of employment for newcomers, and
migrant workers
▪ ~25% of tourism employees are immigrants or non-
permanent residents
▪ Many employers rely on Temporary Foreign
Workers due to the sector’s labour shortage
▪ ~25% of sector employees work for part of the year
(e.g., summer season) vs. 18% of Canadian Labour
Force who participate in seasonal work
High fluctuation and seasonality swings
…are unlikely to be met if supports like the wage
subsidy are not extended through the summer season
▪ The 3-month Wage Subsidy does not last long enough
to support someone who makes most of their money in the
summer (e.g., students)
▪ Seasonal tourism workers are not eligible for EI or
work-sharing, and may not meet the income threshold for
the Canada Emergency Response Benefit
– “To qualify, an affected worker will have to reside in
Canada and have earned $5,000 in the previous 12
months”
▪ Employers of migrant workers could only support these
employees this summer through an extended Wage
Subsidy
Source: Statistics Canada, Tourism HR Canada, Tourism Industry Association of Canada, Government of Canada
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Communities: 388 municipalities depend on tourism for more than 15% of their local
employment, and may need additional support; within these, 22 are more than 10% Indigenous
1. Used Census Subdivisions (CSDs); filtered out CSDs with tourism employment less than 15%; employment
2. Tourism employment defined as Arts, Entertainment, and Recreation, and Accommodation and Food Services employment as a share of total (more granular industry data not available at CSD level)
3. Aboriginal definition used here: “Aboriginal ancestry (only)“ and "Aboriginal and non-Aboriginal ancestries“ as detailed in Census Profile
Source: Statistics Canada, “Census Profile,” table 98-401-X2016042; “Place of Work Status,” table 98-400-X2016321; “Household Income Statistics,” table 98-400-X2016099
Top at-risk municipalities from decline in tourism revenue
Municipalities by tourism employment share (>15%) and median household income1
Median household income
$ thousands
≤45 45-55 55-65 >65
Tourism employment share
% of total employment in area, 2016
≤16 16-18 18-21 >21 Province
28%
19%
19%
19%
16%
15%
18%
22%
19%
20%
18%
Number of communities by
share of tourism and
aboriginal population
17%
Share of
tourism
employment
Total
31
97
12
17
35
3
6
42
6
71
59
3
17
1
4
1
2
1
2
1
New Brunswick 21
72
Alberta
British Columbia
Manitoba
Newfoundland and Labrador
44
Northwest Territories
Nova Scotia
Ontario
Prince Edward Island
Quebec
36
Saskatchewan
Yukon 10
34
114
13
619
5
Tourism share of employment 15%+2
Aboriginal share of population 10%+3
Wabamun Whitecap
Waiwakum
Brokenhead
Communities called out on map are examples with employment share
in tourism industries over >15% and Indigenous population >90%388
32
420
Detailed breakdowns
in Appendix
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Indigenous communities: Following the outbreak of COVID-19, Canada’s Indigenous tourism
sector is forecasted to lose $800-900M in GDP contribution and at least 12,000 jobs in 20201
1 in 3 international visitors to Canada are interested in Indigenous tourism experiences (37%)2
1. Indigenous Tourism Association of Canada statement March 12, 2020
2. Destination Canada 2018
The COVID-19 crisis endangers the stability of Indigenous tourism in Canada with four key risks
Source: Indigenous Tourism Association of Canada, Conference Board of Canada, Destination Canada
6
4: Indigenous tourism
businesses are the driving force
for many local economies
3: The crisis endangers long-
term trust in the sector’s viability
▪ The success of the sector has
been built on the establishment
of an institutional framework and
earned trust of communities to
recognize tourism as a viable
career
▪ The crisis could return the
industry to 2001 levels with
$800-900M less in GDP
contribution predicted for this
year
2: The majority of revenue
comes from foreign visitors
▪ ~70% of till revenues come from
foreign visitors with greatest
earnings seen during the
summer season
▪ These operators will be
especially vulnerable to the near
halt of international travel and a
shortened summer season
1: Indigenous tourism has
historically been supported by
Indigenous funding channels
▪ No business supports announced to
date will be distributed through
Indigenous funding channels
potentially hindering the sector’s
access to capital
▪ Without an immediate liquidity
injection (e.g., grants) hundreds of
Indigenous tourism operators are
forecasted to go out of business
within weeks
▪ Providers of authentic cultural
experiences are typically not-for
profits operated by Elders,
knowledge-keepers, and
communities to provide a source
of economic development
