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Dollar, gas prices worry tourism industry

Projections suggest number of American visitors will drop while more Canadians will travel to U.S.
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"One of the main things is to have enhanced marketing for that market to try and bring them back." Tourism agencies scramble as soaring gas prices deter visitors. Photo by Andrew Mitchell

The loonie has dipped slightly from a 28-year high on May 9 when compared to the American Greenback, and oil prices are slowly receding from record highs in Canada and the U.S., but the B.C. tourism industry remains concerned that both factors could be a one-two punch that drives visitors away this summer.

The third punch could come in 2007 and 2008 when a new passport requirement comes into effect for travelers visiting and returning to the U.S.

According to Mary Mahon Jones, the CEO of the Council of Tourism Associations of B.C., the exchange rate and gas prices are already having an effect.

"I would say (tourism associations) are very concerned about the U.S. market, and we’re definitely focusing our attention there right now, looking at the things we can actually change," she said. "Some things we have little control over, and others we can address. One of the main things is to have enhanced marketing for that market to try and bring them back… but we’re certainly up against some significant issues."

According to Mahon Jones, U.S. visits were down approximately two per cent from 2004 to 2005, and recent statistics show the decline continuing through the New Year into 2006.

"There are a number of different things going on, but gas prices are definitely part of it. Gas prices in B.C. are significantly higher than Alberta or Washington state, so when people do get up here they realize abruptly that there’s an added cost to travelling," she said.

Gas prices also have further reaching implications for the economy, adding to the price of food, transportation, hotel stays and other amenities. Not only is it more expensive to fly, all of your travel costs will also increase.

While fuel prices have always been higher in B.C., those prices have been offset in the past by the low dollar.

"Our exchange rate is not having the advantage it used to have. It’s not only a disincentive to come to Canada, but also an incentive for Canadians to go to the U.S. and other countries," said Mahon Jones.

While the passport requirement doesn’t kick in until New Year of 2007 for sea and air and 2008 for land crossings, Mahon Jones says that it’s already having an impact on travel. She blames that on the fact that there has not been enough communication in the U.S. to explain the new rules, which is why tourism organizations in the U.S. and Canada are lobbying for a delay in the implementation of the program.

Whistler’s own outlook remains positive despite the rising dollar and oil prices, according to Tourism Whistler director of communications Michelle Comeau. Based on the most recent hotel forecasts for the summer, occupancy is expected to be up between five and seven per cent compared to last year.

Summer visitor numbers have been increasing steadily in past years, and generally don’t fluctuate nearly as much as winter numbers, which are contingent on snow.

"All things considered it’s looking strong, and one of the reasons is because of a strong meetings business," said Comeau. "The meetings business is one of the things that can help to insulate Whistler from things like fluctuations in gas prices or in the dollar. In the long run those things can have a negative impact, but groups in many cases book years in advance… and they’re not going to change plans because of one small factor.

"We need to always ensure we’re offering good value, of course, but our research shows that people still very much want to come to Whistler."

Tourism Whistler did a study in 2004 when the first projections were made about Canada’s rising dollar and found that it was not a deal-breaker for tourists.

A five per cent increase in value for the Canadian dollar would cause Whistler’s room night forecast for the U.S. market to fall by 1.6 per cent. At the same time, a five per cent increase in the value of the loonie would also result in a 2.2 per cent decrease in Canadian visitors, as people take advantage of the exchange rate to travel to the U.S.

Canada-wide, a Canadian Tourism Commission study found that a five per cent increase in the Canadian dollar would result in a 0.7 per cent decrease in visitors from the U.S., with a five per cent increase in Canadian travel to the U.S.

But while the impact of the increases so far appears to be minor, the CTC study also found that people are aware of exchange rates and do figure them into their travel plans. For short haul markets, where there is more cross-border travel, 23 per cent of people surveyed identified the exchange rate as a factor in decisions. Only 17 per cent of mid-haul and 19 per cent of long-haul visitors found exchange rates to be a factor.

"One thing we have identified is that, all things considered, gas price or the Canadian dollar are not necessarily going to be deal breakers," said Comeau. "We had some amazing rates available this winter, where we also saw higher gas prices and a rising dollar… but it was still a great value.

"No doubt if trends continue over the long term, especially gas prices, that’s going to have an overall impact on the economy and income… and will impact on travel in general because people won’t have as much money to spend.

"We’re keeping a really close eye on the dollar, on gas prices, and anything that impacts our business, and coming up with ways like the Real Choices campaign to offer people rebates or added value."

The Real Choices campaign, which ran during the winter months, provides visitors with vouchers that could be used for a wide range of activities.

"It’s just a nice way to recognize there may be some challenges to travel, but the value is still here and people can use the vouchers on something to make their trip that much better."

Last winter was a positive one for Whistler. Room nights sold were up over three per cent between November and April compared to the previous winter, mostly because of the excellent conditions. January saw record snowfalls, and flurries took place regularly through the later winter and spring.

As a result, Whistler posted its best visitor tally yet from the B.C. market, as well as a strong winter for visitors from Washington state. The long-haul U.S. market was down considerably, but according to Tourism Whistler that is generally expected following a tough snow year – and 2004-05 was one of the worst years on record for the resort.

The loonie reached a 28-year high of 90.95 cents compared to the American dollar on May 9, and some economists are projecting the Canadian dollar to pull more or less even by early 2007. The increases are the result of the relative strength of the Canadian economy as well as a weakening of the U.S. dollar due to a growing trade deficit, rising debt, a strong Euro, and rising interest rates.

At the same time oil prices for June delivery were reported at a record $70.69 a barrel, with speculation that Iran will cut production as a result of its ongoing standoff with the U.S.