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Feature - Tourism industry facing challenges

Three years ago, before the dot-com boom went bust, when terrorism was something that only happened in far away places, and computer technicians were searching for new ways to spend some of the $750 billion US they "earned" preparing system

Three years ago, before the dot-com boom went bust, when terrorism was something that only happened in far away places, and computer technicians were searching for new ways to spend some of the $750 billion US they "earned" preparing systems for the Y2K problem, tourism looked like a pretty healthy industry.

It doesn’t look quite so promising at the moment.

From 9/11 to bankrupt airlines to the SARS outbreak, the tourism industry – like many others – has faced some substantial obstacles in recent months. Despite these global uncertainties, the provincial government has challenged the B.C. tourism industry to double in size by 2010. Tourism in British Columbia generated $9.3 billion in economic activity in 2002, making it B.C.’s third largest industry.

Whether the industry can be at $18 billion in seven years remains to be seen, but the province has announced several tourism initiatives recently to get the world thinking about vacations in B.C.

Last week Rick Thorpe, the Minister of Competition, Science and Enterprise, was in Toronto for a meeting of federal, provincial and territorial tourism ministers and the Canadian Tourism Commission. Next week the CTC will launch a $5.4 million marketing plan that will, in British Columbia’s case, add funding for marketing to Seattle and San Francisco.

The tourism ministers will meet again this weekend in Vancouver to discuss plans for boosting marketing to the Asia-Pacific region. New federal money may be available for the effort.

Earlier this year the province allocated $500,000 for regional tourism associations around the province and the Aboriginal Tourism Association of B.C. Last month Victoria provided another $750,000 to Tourism B.C., bringing the provincial government’s support to $1.25 million to help the industry respond to global challenges.

Those figures don’t sound like much for a $9.3 billion industry – and they aren’t. But Tourism B.C. is not a ministry, it’s a crown corporation, and has been since 1997. The corporation is funded through a percentage of the provincial hotel tax revenue, which means the more hotel rooms sold the more revenue the corporation has for marketing. Tourism B.C. spent $24.2 million on marketing activities last year.

But marketing dollars are only one aspect of boosting tourism. Thorpe and people in the airline and tourism industry are trying to convince the federal government to make travel less expensive, like doing away with the $14 airline security fee imposed after 9/11. The fee has been a bone of contention to the industry since it was introduced. With the U.S. government suspending its airline security fee in an effort to boost tourism over the summer, industry officials are hoping the Canadian government will do the same.

However, Vancouver International Airport Authority CEO Larry Berg told the Vancouver Sun last week that while suspending the fee is "a step in the right direction" it’s not enough to get people travelling again. Berg suggested Ottawa should stop collecting rent from airport authorities. Last year the Vancouver International Airport Authority paid $66 million in rents to Ottawa. Berg said if the rents were suspended, half the savings would go to the airlines operating out of YVR.

In addition to costing more, airline travel is also less appealing than it used to be. There are longer lineups to go through security checks and passengers are routinely asked to remove shoes and belts, in addition to a passing through the ubiquitous metal detectors.

The precarious financial situation of airlines around the world, including Air Canada, is by now well known. Canada’s national carrier – the 11 th largest passenger airline in the world – sought bankruptcy protection on April 2. The airline has cancelled flights and reduced capacity.

In the U.S., United Airlines (one of Air Canada’s partners through the Star Alliance), U.S. Airways and Hawaiian Airlines have entered bankruptcy protection.

Before the war in Iraq the U.S. Federal Aviation administration had revised its passenger traffic estimates downward. Last year it predicted passenger numbers would return to pre-9/11 levels by 2004. It is now estimating it will take until 2006.

Vancouver International Airport saw 14.9 million passengers in 2002, 1 million fewer than in 2000 but above the forecast 14.3 million for the year. The airport authority had anticipated 4 per cent growth this year but following the Iraq war and SARS it may not see any growth.

Still, YVR also added seven new carriers in 2002 and Delta Airlines is introducing direct flights between Vancouver and Atlanta for the summer, with the hope that it will lead to year-round service. American Airlines is adding non-stop flights from St. Louis and Chicago for the summer.

Berg said in a recent speech to the Vancouver Board of Trade that the airport is planning a number of improvements to maintain YVR as an international gateway to North America, such as runway extensions, terminal upgrades and increased baggage handling capability, including a new ski carousel at the international terminal.

Not everyone comes to B.C. on an airplane, of course. Many simply drive across the border – at least it used to be simple. Now days it can take hours to cross the Canada-U.S. border. That’s a problem for Tourism B.C., which says that the United States was B.C.’s number one source of international visitors in 2001, with more than five million overnight visitors generating $2.4 billion in revenue.

While security measures have slowed traffic at airports and border crossings, the troubled U.S. economy isn’t making it any easier for Americans to vacation. Jock Finlayson of the of the B.C. Business Council recently called the U.S. economy "probably the biggest single uncertainty in the world today."

And the lightning rise of the Canadian dollar against the U.S. greenback may give Americans another reason to re-consider a Canadian vacation. Since the start of the year the loonie has gained more than 15 per cent against the U.S. dollar. In January of 2002, when the Canadian dollar was at a record low, $1,000 worth of ski equipment or accommodation in Whistler would have cost an American visitor $617.50. Today that $1,000 will cost Americans more than $730.

But the rising loonie isn’t just making Canadian vacations more expensive for Americans, it’s also slowing the Canadian economy. Last week Merrill Lynch cut its Canadian growth forecast for 2004 to 2.9 per cent from 3.5 per cent, while BMO Nesbitt Burns suggested the dollar’s rise will cut gross domestic product growth by 1 per cent over the next seven quarters.

And even though the SARS outbreak in Toronto is now over, the impact on Southern Ontario can’t be underestimated. According to Statistics Canada, employment in Ontario dropped by 27,000 jobs last month, including 12,000 in Toronto’s hotel and restaurant industry.

Finance Minister John Manley bragged last weekend that Canada’s economic health is the envy of the other G8 countries, but he also acknowledged that Canada needs to see the global economy, in particular the United States, get back on track.

With the economies of several Western European countries and Japan also struggling the heady times of three years ago seem like ancient history to many in the tourism business.



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