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Editor’s Note: Lyle Hall, managing director of HLT Advisory, Inc, a Toronto-based tourism and hospitality advisory firm, recently penned the following opinion piece about why Canada should focus on growing the amount of tourism spending rather than the total number of annual visitor arrivals.
This article was originally published by the Lyle Hall and it is published here with permission.
During a keynote speech at Rendez-vous Canada in Calgary this week, the federal Minister of Small Business and Tourism, the Honourable Bardish Chagger, released Canada’s Tourism Vision. The release and associated funding commitments clearly demonstrate this government’s commitment to tourism, but much follow through is required to achieve the targets set out in the plan.
Among other predictions, the Vision asserts that Canada (with 20 million international visitors in 2016, a record year) is going to be a top 10 destination by 2025. Russia is currently the 10th most visited country with 34.5 million international visitors in 2016. Assuming no growth in international visits to the top 10 until 2025, that means Canada has to move from 20 million visitors to at least 34.5 million by 2025 — an increase of 14.5 million visitors or 72.5 percent (about seven percent compounded annually).
It’s a commendable target. Destination Canada, you have your work cut out for you! But how realistic a target (here’s where the follow through comes in)?
Let’s assume that of these 14.5 million new international visitors to Canada:
Some 90 percent enter the country at either the Toronto, Vancouver or Montreal airports (which is about the current proportion of all international air visitors to Canada); stay at least two nights in the arrival city (a reasonable minimum expectation, day of arrival and departure, but actual stays are likely much longer); travel in a group of three people; and half of them stay in commercial lodging (hotels, B&Bs, etc.) That would generate demand for 4.35 million room nights (14.5 million X 90 percent X 2 nights ÷ 3 persons/travel party ÷ 50 percent staying in commercial lodging = 4.35 million).
Then, if we further assume 35,000 hotel rooms in Toronto, and 20,000 in each of Vancouver and Montreal, that’s 75,000 rooms. Over the course of a year, that’s 27.375 million room nights combined (75,000 rooms X 365 nights). CBRE’s most recent occupancy estimates for greater Toronto, Vancouver and Montreal are roughly 60% so that means we are left with 10.95 million available room nights (27.375 million room nights, less 60 percent occupied leaves 10.95 million unoccupied room nights).
No problem — we can easily accommodate the additional 4.35 million room nights required in the 10.95 million available rooms, right? Wrong!
The problem is two-fold:
No commercial lodging establishment can achieve 100 percent occupancy over an extended period of time. This starting point needs to be discounted to at least 90 percent, perhaps lower in calculating our available nights. Using a 90 percent threshold reduces the 10.4 million nights to 8.2 million nights.
The greater problem though is that the majority of these 8.2 million available room nights are in November, December, January and February. Peak season (May to September, inclusive) occupancies in these three major cities are greater than 80 percent.
Therefore, whether you believe Canada can attract an additional 14.5 million visitors by 2025 or not, without significant development of commercial accommodation, an explosion in Airbnb listings or some other creative way of adding room night capacity, the “Top 10” target is going to be very difficult to achieve. Of course, we could assume they are all visiting friends or relatives travelers, but that sort of negates the target in the first place.
Instead of focusing on volume, let’s focus on spending. Canada should be positioning itself to attract higher-value, higher-spending visitors. Achieving top 10 status in visitor spending would be a far more beneficial target (and maybe even more realistic) than being top 10 in sheer volume.