Quick take

Tourism spending bumps up in the second quarter

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  • Tourism expenditures in Canada rose by 4.2 per cent (q/q) in the second quarter. However, expenditures were 55.4 per cent lower than their level in the second quarter of 2019.
  • The slight increase in tourism expenditures was mostly driven by higher spending on transportation, which rose by 4.4 per cent. Pre-trip expenditures, such as luggage and camping equipment, grew by 2.8 per cent and have remained above their pre-pandemic trend since the third quarter of 2020.
  • In relative terms, passenger rail transport spending rose the most (+33.3 per cent). Yet, this spending only reached 15.8 per cent of its level in the second quarter of 2019.
  • Spending by domestic travellers in Canada rose by 5.4 per cent. Meanwhile, non-resident travellers’ expenditures fell by 22.6 per cent.
  • Tourism’s share of total GDP was bumped up to 0.84 per cent. Tourism output increased during the second quarter and total output remained flat, both of which slightly bumped up tourism’s share of economic activity. Tourism’s share of GDP hovered above 2.0 per cent before the pandemic.
  • Employment attributed to tourism increased by just 1.0 per cent (q/q). Most of this growth was concentrated in the recreation and entertainment sector.

Key insights:

  • Tourism spending is sensitive to lockdowns. Despite showing some growth, the pandemic’s third wave and stringent restrictions on nonessential domestic travel kept tourism expenditures low during the second quarter. With the border closed and bans on nonessential inbound travel, international visitor expenditures in Canada also remained subdued.
  • Most provinces reopened to Canadian visitors at the beginning of the summer, thus we will see a larger increase in domestic expenditures in third quarter data. International visitor spending will also lift. The Canada-U.S. border reopened for Americans visiting Canada in August and nonessential visits from international tourists resumed in September. Total non-resident tourists entering Canada increased by 78.6 per cent (seasonally adjusted) between June and July.”. While flying to the U.S. is possible, the land border remains closed to Canadians. Consequently, expenditures in the third quarter will reflect both higher U.S. traveller spending and sustained “captive” domestic spending.
  • It will be a bumpy road back to normal for the tourism sector, but expenditures will continue to recover in the fourth quarter of 2021. New COVID-19 cases are climbing amid the “fourth wave” but most provinces have vaccine passports or comparable arrangements in place. This will moderate the virus’s impact on tourism activity and reduce the likelihood of additional lockdowns. The Canadian household savings rate also increased during the second quarter. Over the next year, some of these savings will be spent on travel and recreation.

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Kiefer Van Mulligen

Kiefer Van Mulligen

Economist

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