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opinion

People climb up a rock face towards the first peak on the Stawamus Chief mountain above the waters of Howe Sound in Squamish, B.C.DARRYL DYCK/The Canadian Press

The one holdout in Canada’s economic recovery – the travel and tourism industry – is poised to shift from laggard to major growth engine in the second half of the year. And the fact that the sector will still face restrictions may actually provide a boost.

In a report published this week by Royal Bank of Canada, economists Nathan Janzen and Claire Fan noted that the continued limits on international travel will not only discourage most foreign visitors from coming to Canada this summer, but will also prompt most Canadians to vacation within our borders. Which, they argue, is actually a pretty good trade-off for the industry.

Canadians are big travellers, and deep-pocketed ones at that; the RBC report noted that in the five years prior to the pandemic, Canadians spent almost twice as much on trips abroad than foreign visitors spent in this country. Prior to the pandemic, there were roughly one million more Canadians travelling outside the country at any given time than there were foreigners vacationing in Canada.

That suggests that border restrictions, as long as they continue, will actually increase the size of the market for Canadian tourism businesses.

“Redirecting some of that spending to homegrown tourism activities will help support a recovery, despite a slower expected rebound in international demand,” the economists wrote.

There’s certainly an awful lot of room for the battered sector to recover. The lost spending in Canada’s tourism industry in the first year of the pandemic added up to more than $50-billion. According to data published by Statistics Canada last week, tourism-generated employment in the first quarter of 2021 was still down about 35 per cent from pre-COVID levels – representing about a quarter-million lost jobs.

While those numbers are bleak, they also speak to the tremendous potential for a surge in employment and economic activity as COVID-19 measures relax and allow tourists to be tourists again. And the longer-lasting international restrictions will keep more of that activity and employment in Canada.

There’s no question that Canadians, over all, have the money to spend; the pandemic created a massive national savings glut. Mr. Janzen and Ms. Fan noted that the amount of additional savings accumulated by Canadian households since the pandemic began is equivalent to more than two full years of national prepandemic tourism expenditures.

Unfortunately, owing to the nature of travel and tourism, there are limits to the pent-up demand caused by the pandemic, and to the lost spending that the industry can recoup. Most people have a finite amount of vacation time each year, and can’t easily make up for a missed summer holiday last year by taking two this year. They can’t fly home for Christmas twice. A substantial portion of that missed spending is permanently lost.

There are also questions about how much hesitancy there might still be around travel this summer, as the pandemic, while fading, is still far from over, and volatile variants remain a source of uncertainty.

There is evidence that Canadians may be more cautious travellers than most in the wake of the pandemic. Twenty-two per cent of Canadians said they plan to travel in the next three months – up from 17 per cent a month earlier, but nevertheless well below the average among the 12 countries surveyed, according to a survey last week from Finder.com, a consumer financial data website. By comparison, 30 per cent of Americans said they plan to travel within the next three months.

But early evidence from the United States – where pandemic restrictions have eased earlier than those in Canada (largely because of earlier progress on vaccinations) – may hint at how quickly both domestic and international tourism could snap back as the sector reopens.

The RBC report noted that U.S. food-services spending – which has a large tourism component – was 16 per cent below prepandemic levels in February; by May, it had surged to 2 per cent above the pre-COVID pace. Airport traffic by late June had exceeded 80 per cent of 2019 levels – after being under 40 per cent early this year – despite the continued lack of international travel.

That not only provides an indication of how quickly these businesses could come back to life in Canada, but it points to the strong potential that sits waiting with the eventual return of the international component of Canada’s tourism sector. U.S. travellers make up two-thirds of foreign tourists who come to Canada, and Americans are sitting on their own pile of pandemic savings. That strong appetite for travel among U.S. tourists could spill over the border once it reopens.

Still, Mr. Janzen and Ms. Fan caution, the sector can’t get entirely back on its feet until we have higher vaccination rates, lower unemployment and a reopening of borders. They don’t see a full recovery in tourism until 2022.

“In the meantime, there is hope that some amount of international tourism can be displaced by domestic and interprovincial activities, as virus concerns ease, domestic restrictions recede and travel sentiment improves,” they wrote.

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