Canada’s Tourism Businesses at Risk of Shutting Due to High Debt

Canada’s tourism sector could experience a wave of business shutdowns in the next few years. The main problem: Companies there took on piles of debt during the pandemic, and now they’re cash strapped because international travel has been sluggish and operational costs are rising.

The Tourism Industry Association of Canada surveyed 149 financial controllers and accountants of tourism businesses this spring and about 55 percent of businesses said they are “somewhat not confident” or “not confident” they would be able to make debt payments due in the next two years. 

Most were small- and medium-sized businesses, which included tour operators, hotels and guides.

“We talk to businesses every day and they are absolutely in fear of losing their business and having to close their doors because they just won’t be able to financially sustain themselves,” said Beth Potter, president and CEO of Tourism Industry Association of Canada.

In the survey, nearly a third report having more than $250,000 in outstanding debt and 22 percent reported having between $100,000 and $250,000.

A large portion of those debts are to the Canadian government. During the pandemic, Canadian businesses received loans from the government to stay afloat and maintain their payrolls. The U.S. and other countries took similar measures. 

Now, tourism businesses in Canada are asking for leniency. Around 45 percent of businesses reported they are “likely” or “somewhat likely” to shut within the next three years without government help.

About 58 percent cited lack of profitability as the main issue. The slow return of international inbound travel, a labor shortage, rising supply chain costs have been holding back profits, said Potter.

For months, Canadian tourism businesses have been in a cost crunch. “We are hearing from our hotel owners and tour operators across the country that they’re not making as much profit, even though the revenue is higher,” Destination Canada Chief Marketing Officer Gloria Loree told Skift in February. “Their profits are not as high because their labor costs are higher, their supply chain is broken, and food costs are higher.”

International travel into Canada isn’t expected to fully recover to its pre-pandemic level until the end of 2025, said Potter. The country lifted its travel restrictions in October. In contrast, the U.S. will be 99 percent back in 2024, according to the U.S. Travel Association.

Canada’s biggest tourist market, the U.S., is still far from its 2019 level. In March 2023, Americans took 1.1 million trips to Canada, which was 74 percent of its March 2019 level, according to Statistics Canada.

The tourism association is calling on the government for loan modifications, including moving payment deadlines and some loan forgiveness.  If the government doesn’t provide help, communities will lose jobs, income and businesses, and travelers will have less choice in their lodging, restaurants and experience, said Potter.