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Canadian border towns benefit from low loonie

The Ice Wine Festival went from 36 per cent capacity last year to 76 per cent capacity this year.

Niagara Grape and Wine Festival

Until about 18 months ago, Amanda Reid of Windsor, Ont., shopped in the United States at least once a month. With the Canadian dollar at its peak, the U.S. was a deals mecca for the 27-year-old life and style blogger.

"The prices and selection were great," says Ms. Reid. "You could get a retailer that was in both the U.S. and Canada and it was worth picking up the sweater in the U.S. because of the price difference as well as the sales they have."

For the most part, Ms. Reid shopped for clothing and accessories. But while in the U.S., she would also pick up groceries and fill up her tank. "Gas was an added bonus," she says.

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That has all changed since the loonie began its precipitous descent. Like many Canadian shoppers, Ms. Reid's trips south of the border have slowed. Now she visits the U.S. about once every couple of months.

"There are still retailers that I don't have access to in Canada, and living in a border town it's very simple to cross over and make a day of it," she says. "But I'm constantly trying to calculate how much I'm really paying after conversion." By the time she takes into account gas, the bridge toll and the exchange rate, it often isn't worth it.

She's not alone. But, although cross-border shoppers like Ms. Reid may bemoan the low loonie, for Canada's border towns it's likely to be a boon, according to a Feb. 8 report by TD Economics.

Titled Canada-U.S. Cross-Border Spending: a reversal of fortunes, the report projects the loonie will average roughly 71 cents U.S. this year and Canadian visits to the U.S. will fall to the lowest levels since the Great Recession, with daily visits likely to drop at roughly double the rate of overnight visits.

The good news: "Some of the inflows from American tourist spending in Canada will certainly flow through to border communities," says the report's co-author Derek Burleton, vice-president and deputy chief economist with TD Bank Group.

Carly Rupcic, tourism manager for the Outlet Collection at Niagara, near St. Catharines, Ont., says she is already seeing the effects. Although the newly opened mall doesn't yet have a year's worth of traffic data, visits are up about 10 per cent over last year in each of the months for which data is available.

"We've definitely noticed an uptick in business," says Ms. Rupcic. "I can tell you anecdotally that there are a lot more American plates in the parking lot and the number of Canadians staying on this side of the border is noticeable as well."

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Even Patrick Kaler, the American president and CEO of Visit Buffalo-Niagara has succumbed to the temptation to cross-border shop. "One of the closest IKEA stores is on the Canadian side of the border," he says. "I crossed over, bought a slipcover for a chair and some kitchen utensils and had some Swedish meatballs for lunch."

That said, points out Mr. Burleton, the reasons Americans give for traveling to Canada are very different than Canadians' motivations for traveling south. Canadians take longer visits (think snowbirds), make short-term shopping trips and tend to spend more. For Americans, shopping isn't at the top of the list. "Americans are more apt to come to visit relatives or for business," Mr. Burleton says.

He believes Canadian border communities that double as tourist destinations will be better poised to benefit from an influx of U.S. travelers. "You can't paint all border communities with the same brush," he says. "Niagara Falls and Niagara-on-the-Lake for example stand to benefit more from U.S. traffic because they have that lure as a tourist destination."

Kimberly Hundertmark, executive director Niagara Grape and Wine Festival says she began to see an upward trend in both Canadian and American visitor numbers at the Niagara region's fall festival.

"But going into the Ice Wine festival in early January it became very apparent," she says. "Visitorship for the third weekend of the Ice Wine Festival went from 36 per cent capacity last year to 76 per cent capacity this year."

Canada's border towns should also benefit from a redeployment of Canadian money that would once have been spent in the United States, says Mr. Burleton. Although some of that cash will almost certainly fuel trips to non-U.S. destinations with better exchange rates, a sizeable share will be either earmarked towards travelling within Canada or spent in local retail stores, he contends.

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The impact is already apparent. Over the first three quarters of 2015, tourism spending by Canadians at home grew at the fastest pace in two years (4 per cent year-over-year) despite growing economic uncertainty. And some of the retail sales categories typically most sensitive to cross-border shopping – such as clothing and accessories – saw a significant pickup in sales over the past year, Mr. Burleton says.

Meanwhile, our gain has resulted in some pain on the other side of the border. Cities like Buffalo and Niagara Falls, NY are seeing the number of cross-border visitors drop.

Buffalo's restaurants and attractions are fighting back – offering special deals to Canadians or opting to take the loonie at par. "Are Canadians going to come as often?" asks Mr. Kaler. "Maybe not. But, we're still a good value location, so we're hopeful they will still come."

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