Concerns for the US market

The rise of the Canadian dollar in relation to that of Uncle Sam has been truly spectacular over the past five years. In 2002, the exchange rate for US$1.00 was CN$1.57 (average annual rate). For many years, the exchange rate was one of the incentives used to attract our neighbours from the south with slogans like “Stretch your dollar!” Clearly, the dollar’s sudden parity is of great concern, given that stakeholders across the board are looking for ways to stimulate this declining market, so key to the health of our tourism industry.

Since 2002, a record year for the number of American tourists in Canada, the numbers have been falling steadily, apart from a brief respite in 2004. And yet, is the exchange rate truly the prime culprit? Have we overestimated its influence on the travel behaviour of Americans?

The situation elsewhere

To better understand and put into perspective how the exchange rate truly affects the travel decisions of Americans, we have compared changes in the value of the loonie with those of other currencies (see Figure 1). We have examined fluctuations in the US dollar since 1995 in relation to the Canadian dollar, the euro, the Mexican peso and the Japanese yen. At the same time, we have charted the annual number of US citizen international departures to Canada, Mexico and overseas. To make the data comparable, we have established 1995 as the reference year, with an index of 100. The lines in the graph below illustrate the increases and decreases noted in relation to the reference year.

This graph shows the decline of the US dollar in relation to the Canadian dollar (red line) is much more dramatic than the drop in the number of American tourists to Canada (broken red line). The departures in question refer to stays of one night or more, as day trips have, in fact. recently dropped more precipitously.

Venturing further afield

It is a mistake to believe Americans no longer travel due to a combination of factors like a weak currency, security concerns, a turning inward, etc. The line tracking the number of Americans travelling overseas (broken blue line) eloquently shows that Americans are more interested than ever in discovering new destinations. For example, according to a survey of AAA travel agencies, reservations for US travellers to Eastern Europe jumped 55% in the summer of 2007.

Though there was certainly a temporary drop in the period immediately following 9/11, interest in far-flung destinations rebounded as of 2003. In fact, the euro is the most relevant currency in the analysis of how exchange rates influence US travel abroad (though we have included the yen for information purposes). Like that of the Canadian dollar, the euro’s value has appreciated significantly (dark blue line) vis-à-vis the US dollar since 2001. And yet, during the same period, the number of international departures from the US increased dramatically.

The example of Mexico

Mexico is a very interesting case because its geographic proximity to the US is similar to that of Canada. Unlike the Canadian dollar, the Mexican peso has been falling steadily in value against the US dollar since 1995 (green line). However, this growing purchasing power has not affected the decision to travel to Mexico, with the number of US tourists to the country remaining relatively flat (broken green line).

A closer look at two other indicators

A basic notion in economics is the idea of “All other things being equal.” This is often used as a premise when analyzing economic phenomena. However, in real life, all other things are never equal, a caveat that must be kept in mind when referring to the analytical model presented in Figure 1.

The travel intentions of citizens are often tied to their country’s economic performance. For this reason, we felt it was interesting to compare the change in the number of American tourists travelling to Canada and overseas with two other economic vectors: the level of personal consumer spending (purple line) and the price of gas (yellow line).

Without doubt, skyrocketing gas prices do nothing to encourage proximity tourism among Americans who usually travel to Canada by car. Over the past few years, the drop in the number of these travellers has been much more pronounced than the decrease in air travellers.

The change in US personal consumer spending is another interesting indicator of Americans’ ability and desire to spend. In fact, the graph shows that the significant increase in international departures is more or less in step with the spending indicator. Though our analysis may not be truly scientific, it does illustrate that Americans’ travel interests are evolving to the detriment of Canada.

Better understand the impact

Surveys show that the exchange rate can influence travel intentions, particularly among certain customer segments. When it comes to international travel, Americans demonstrate a lower sensitivity to currency fluctuations than Canadians.

Certain outside factors can enhance the potential impact of currency fluctuations. One such factor in particular is the media coverage lavished on the phenomenon; it would seem the Canadian media is more interested than the American media in the rise of our dollar.

It is also true that although Americans may not be very aware or influenced by the loss of their purchasing power, they definitely feel it once they reach their destination. The firm Moneris Solutions has studied US credit and bank card transactions at Canadian merchants. Total transactions in US dollars dropped in July and August 2007 compared to the same period in 2006.

This study did not take into account the number of visitors involved. Nonetheless, the numbers do indicate that spending budgets have dropped in a greater proportion than the number of American tourists. Other factors like falling room prices in 2007 also had an affect on the expenditure base. The study reveals the sectors most severely affected: specialized retailers (-35%), campgrounds and trailer parks (-22%), public golf courses (-14%), hotel reservations (-13%), bus travel (-13%) and restaurants (-8%)

A major challenge

Canada’s current difficulty recovering its share of the American market is deep-rooted and not due solely to economic factors. Other studies have reached the same conclusion: Americans no longer find Canada as attractive as they once did and would prefer to set their sights on new destinations. An unfavourable exchange rate and high gas prices are merely additions to the list of deterrents, particularly when it comes to proximity tourism. Now that our currency has reached parity, we must use innovation and an enriched tourism supply to change their minds!

Sources:
- Montet, Virginie. “Les touristes américains découvrent l’Europe de l’Est,” La Presse, September 26, 2007.
- Office of Travel & Tourism Industries.
- Turner, Riva. “US Spending in Canada Sees Significant Decline,” Moneris Solutions [www.moneris.com], September 24, 2007.
- US Census Bureau.

Canada may no longer be one of the WTO’s top ten international destinations, but… when it comes to the tourism statistics produced by the World Tourism Organization (WTO), the data collection methods differ from one country to the next.

When compiling tourism data, some countries only count tourists, others include both tourists and same-day visitors, while still others report one tourist more than once during a single visit, because the tourist is counted each time he or she stays in a different hotel (see the table below).

If all countries used the same data collection method, the WTO’s infamous international ranking would be much different and Canada’s position would rise. Currently ranked 11th, Canada compiles its statistics using the TF method (see table), in other words, by simply counting the number of international tourists who enter its borders. The United Kingdom and Hong Kong, ranked 6th and 7th respectively, include both tourists and same-day visitors in their numbers (VF method). If Canada used the same method (tourists and same-day visitors) as the United Kingdom (27.7 million) and Hong Kong (21.8 million), it could add the 17.8 million same-day visitors who entered by car in 2004 to its 19 million or so international arrivals and thereby surpass both in the ranking. Germany and Austria, which rank 9th and 10th, employ the TCE method to compile their data, which means that if a single tourist stays in four different hotels during his or her stay, he or she is counted four times.

Tourism receipts: local currencies vs. US dollars

The WTO reports international tourism receipts in US dollars and in local currencies at constant prices. When tourism receipts (in yen, pesos, Euros, etc.) are converted into US dollars, figures can be compared and analyzed and used to create an international ranking. However, expressing receipts in local currencies at constant prices neutralizes the effect of exchange rate changes and inflation. When the US dollar depreciates against a given currency, this situation can inflate tourism receipts converted into US dollars. For example, Spain’s tourism receipts climbed 14.1% from 2003 to 2004 when expressed in US dollars, while they rose only 3.8% when expressed in Euros (the local currency). The same thing was true for Australia. Its receipts jumped 25.5% in 2004 when they were converted into US dollars, but climbed only 10.7% when they were expressed in constant Australian dollars. In addition, international tourism receipts include revenues generated by both tourists and same-day visitors.

Tourist activities

Statistics Canada has developed a special tool for finding out how many people engage in a given activity when travelling, but the Canadian Travel Survey (CTS) and the International Travel Survey (ITS) have different ways of reporting the number of participants. For example, let’s say that three people took a trip together. During their stay, one of them went shopping while the other two played golf.

• ITS – Regardless of which person in the group answers the survey, Statistics Canada will count 3 people as shoppers and 3 people as golfers.
• CTS – If the person answering the survey is the one who went shopping, then Statistics Canada will count 3 people as shoppers and 0 as golfers.
• CTS – If the person answering the survey is one of those who played golf, then Statistics Canada will count 3 people as golfers and 0 as shoppers.

A solo traveller is, by definition, a person travelling alone…or is it?

Statistics Canada has a very different definition of solo traveller. According to the CTS, a person is considered to be travelling alone if they are not accompanied by someone from the same household. Therefore, a person is reported as a solo traveller even if:

• he or she is accompanied by a family member (mother, daughter, brother, etc.) who does not live under the same roof,
• he or she is travelling with friends, or
• he or she is on a group tour package.

For the ITS, the method is different. People are only considered to be travelling alone if they are unable to provide any information on the expenditures and activities of the people accompanying them or if they are part of a group. However, as of 2005, the CTS was replaced by the Travel Survey of Canadian Residents, which uses the ITS definition of a person travelling solo.

Statistics will never look quite the same

When the WTO publishes its Top Ten, the data is disseminated around the globe without a word about the differences in collection methods. Statisticians must obviously work with a number of limitations if they wish to make sense of the information they gather. However, a closer look at the methodology sheds new light on the mishmash of numbers known as statistics and the way in which they are interpreted!

Sources:
- World Tourism Organization. [http://www.world-tourism.org/facts/menu.html]
- Statistics Canada, Canadian Travel Survey
- Statistics Canada, International Travel Survey
- Statistics Canada, International Travel, Advance Information, December 2004, vol. 20, no. 12, released February 2005.

The convention and business meeting industry is cyclical, and mirrors fluctuations in the economy. After a marked slowdown during the post-September 11 years, the Travel Industry Association expects the growth noted over the past few decades to gradually resume, reaching approximately 3.6% in the United States in 2005.

Be that as it may, players in the convention sector need to be aware of the major trends that will exert a strong influence in the years to come. Two university researchers did a qualitative study to see if there was any consensus concerning important trends among a sample group of over 250 British and Australian experts from tourism associations, convention bureaus, specialized convention planning services, sectorial associations, universities and convention centres. Three categories emerged from the study results: the business environment, technology and the social and political context.

Competition: the No. 1 business issue

There is growing consensus concerning the significance of global competition. This factor can only intensify, given the rapid proliferation of new convention centres, the modernization of services, the competitive prices offered by emerging destinations and higher customer expectations. For instance, meeting and convention space in the United Kingdom is no longer centred solely in large cities. It is also being integrated into country hotels, educational institutions and other kinds of alternate accommodation, such as castles or even historic sites. Even cinema complexes are trying to attract corporate events with high-tech audiovisual facilities and turnkey service.

The panel also identified currency fluctuations as a major issue. In the context of global competition, this can have a significant impact on destinations with a strong currency. In that respect, the strong appreciation the Canadian dollar over the past few months could negatively affect Quebec’s desirability for international travellers.

In fact, convention organizations will have to adapt to the changing nature of the events themselves, which will be shorter, with fewer delegates. These kinds of changes will require marketing initiatives that focus on developing long-term relationships with clientele, to ensure a certain stability and encourage repeat business.

In 2003, Meeting Professionals International identified the major technological factors influencing convention planning. These are: shorter reservation times – primarily attributed to more effective communication – and online reservation services, which greatly assist more rapid event organization. These factors inevitably make the long-term scheduling of events more problematic.

Technological advances

Although equipping convention centres with the latest technology makes them more efficient, it can also create problems. Often, the centre lacks the necessary support; when technological difficulties arise during an event, its efficiency is compromised. This, and the fact that convention centre employees need to be trained to use of the new equipment, are some of the reasons for a certain resistance to implementing cutting edge technology.

On the other hand, many customers are demanding the latest technological innovations. Unfortunately, the costs associated with installation and frequent updates are often prohibitive for smaller convention centres. In terms of technology, this will give the larger centres an increasingly significant competitive advantage.

For the past few years, much has been said about the effect of videoconferencing on business travel. Some experts have hailed it as a substitute for the trips themselves, but it seems this view is not completely accurate. These days, the panel of experts by and large agrees that Web solutions will never completely replace the traditional face-to-face meetings. Despite the technological breakthrough, human contact remains essential for effective communication. This view restores business meetings and conventions to their rightful place as the ideal setting – far better than an online videoconference – in which to make business contacts.

Social and political context

The steady growth in international tourism will increase demand for convention tourism. This is due to the simple fact that the more people travel – whether for business or pleasure – the more acceptable the idea of attending a convention in another country becomes.

Work habits have changed over the past few years, with more and more people working from home. The sense of professional isolation this can engender leads to the growing necessity of bringing together geographically dispersed colleagues in the context of business meetings.

Sociodemographic changes could also create new business opportunities. As the working population ages, a large number of former employees remain active in their field by joining various retiree associations and by attending conventions and business meetings. Also, as work-life balance becomes a more pressing issue, an increasing number of delegates will choose to add a pleasure component to their business trip by bringing along the family. Destinations that are seen as “family-friendly” will benefit from this trend.

Finally, a destination’s political stability remains a guarantee of visitor safety, in addition to conferring a significant competitive advantage. In that respect, Quebec must continue to capitalize on its completely safe environment, even in the downtown core of major urban areas. As for the future outlook, it remains to be seen what other factors will influence convention planners – choice of destination.

Sources:
- Biarritz, Anne. «Organiser un événement corporatif dans une salle de cinéma», Le Planificateur, mai 2005.
- Meeting Professionals International. «Welcome to Futurewatch 2003», MPI [www.mpiweb.org], 2003.
- Travel Industry Association. «Travel Industry Optimistic For 2005», Hospitality Net [www.hospitalitynet.org], 2 novembre 2004.
- Weber, Karin et Adele Ladkin. «Trends Affecting the Convention Industry in the 21st Century», Journal of Convention & Event Tourism, Vol. 6, No 4, 2004.