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Tourism gets shot in the arm from stay-in-Canada travel bug

Tourists take in the scenery at Crow Head near Twillingate, Nfld.

Kevin Van Paassen/The Globe and Mail

Canada's domestic economy may be surrounded by clouds, but one segment of it – tourism – is enjoying its day in the sun.

Data released Tuesday by Statistics Canada show that spending in the tourism sector (which represents, unfortunately, a slim 2 per cent of the country's gross domestic product) grew a healthy 0.8 per cent in real terms (that is, adjusted for inflation) in the fourth quarter of 2012. That's an annualized pace of 3.6 per cent – in an economy that, overall, expanded a mere 0.6 per cent annualized in the quarter.

Tourism spending, in real terms, has increased in 13 of the past 14 quarters going back to the middle of 2009 – even defying the seasonal patterns we would normally expect to see in travel in a four-season nation. From the fourth quarter of 2009 to the fourth quarter of 2012, real tourism spending rose a healthy 9.4 per cent.

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The bulk of that increase has come not from foreign visitors flocking to Canada, but from Canadians spending more at home. Real tourism spending among domestic travellers was up 10 per cent since the end of 2009; foreign tourism spending, while up 7 per cent since the end of 2009, has shown little growth since a brief spurt in the first half of 2010.

An obvious explanation for this difference would be the strength of the Canadian dollar relative to most currencies over that period. This would have made travel in Canada relatively expensive for foreign travellers. However, while one would have expected the currency to have encouraged Canadians to travel more overseas to take advantage of the loonie's buying power, they seem to have picked up a stay-in-Canada travel bug along the way. Perhaps the country's strong labour-market expansion in the post-recession recovery – nearly one million new jobs created since the middle of 2009 – provided the fuel for this domestic tourism resurgence.

The biggest winner in this post-recession travel renaissance? The airlines.

Since the middle of 2009, real spending on air transportation has soared 27 per cent – accounting for half the growth in tourism expenditures all by itself. Evidence suggests this reflects a combination of both increased travelling and higher airfares. Air Canada and WestJet both reported record passenger loads (the number of filled seats as a percentage of available seats) last year – and fuller planes allow the airlines to demand higher average prices. Statscan reported earlier this year that airfares to Canadian cities increased by 4.5 per cent in 2011, the most recent year for which data are available.

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About the Author
Economics Reporter

David Parkinson has been covering business and financial markets since 1990, and has been with The Globe and Mail since 2000. A Calgary native, he received a Southam Fellowship from the University of Toronto in 1999-2000, studying international political economics. More


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