Harnessing Domestic Tourism to Strengthen the Service Sector

Highlights

• Persistent economic uncertainty is a threat to the services sector, which has proven to be resilient thus far. Increased domestic tourism could act as a stabilizing force by offsetting weaker performance in industries that are more exposed to US trade.
• Canada has traditionally recorded a travel services trade deficit, but this trend recently reversed, due in large part to a sharp rise in international students. Given the current geopolitical climate and relatively weak loonie, Canada has the opportunity to further improve its travel trade balance in the coming quarters by encouraging domestic tourism and attracting more international visitors.
• Tourism contributes approximately $10B to Canada’s GDP. If half of the Quebec residents who plan on cancelling their trips to the United States were to redirect their spending domestically, the resulting boost—factoring in indirect economic effects—could add an estimated $900M to Canada’s GDP. And if this change in behaviour were to last, it could support about 11,000 jobs nation-wide.
• However, domestic tourism development could be held back by capacity limits in some areas. The main challenges include the uneven availability of labour from one region to the next, and the capacity limits of local infrastructure.