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I call the 47th meeting of the Standing Committee on Industry, Science and Technology to order.
Members, before we go to our witnesses, I have about five minutes of committee business. We had a subcommittee meeting last night, where we agreed to three items. So I will go through those three items.
As well, I do need someone to move the travel budget request for the committee to go to Waterloo, Toronto, Montreal, Sydney, and perhaps to Halifax, Boston, and Washington, with respect to our study on science and technology. You should all have a copy of the budget in front of you. The subcommittee did agree to it. So I do need someone here at the main committee to move it.
I'll just go through the three items that the subcommittee agreed to. It was agreed that the committee travel to Toronto, Waterloo, Montreal, Sydney, Boston, and Washington; and we will try to go Halifax, and to Sydney for sure. It's for the period, September 15 to 19, 2008, for the purposes of visiting sites and hearing testimony related to the study of science and technology in Canada.
As for the second item, it was agreed that the committee hold meetings for the purpose of receiving testimony relating to at meetings scheduled for October 7, 9, 21, and 23, 2008.
In the third and final item, it was agreed that the Subcommittee on Oil and Gas and Other Energy Pricing meet on Wednesday, August 27, for two separate two-hour panels, and that possible additional meetings be scheduled as required.
Is the subcommittee report agreed to?
(Motion agreed to [See Minutes of Proceedings])
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D'accord. Thank you, members.
We will now go to the orders of today, pursuant to Standing Order 108(2), a study of the current state of the Canadian tourism industry.
We have with us here today three organizations, two in person and one by video conference. First of all, from the Canadian Airports Council, we have the president and CEO, Mr. Jim Facette. We have also the director of communications, Mr. Daniel-Robert Gooch. Secondly, from the Canadian Tourism Commission, we have Michele McKenzie, the president and CEO; and we have Steve Allan, chairperson of the board of directors and the executive committee.
Are you in Vancouver?
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The third organization with us today is the Tourism Industry Association of Canada. We have Mr. Randy Williams, the president and CEO. Welcome, and thank you for coming back. And we also have Mr. Christopher Jones, vice-president of public affairs.
I do want to mention to all of you that I know we were supposed to have this meeting last week. There were some votes that unexpectedly happened, so I want to thank you for making yourselves available again today.
We do have a full two-hour session until 1 p.m., so we'll start with the Canadian Airports Council. Each organization has up to five minutes for an opening presentation, and then we'll go to questions from members.
Mr. Facette, do you want to begin?
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Thank you, Mr. Chairman, and good morning. Thank you for the opportunity to speak with you today as part of your study on the current state of the Canadian tourism industry. Mindful of time, I will be brief.
The Canadian Airports Council is the voice of Canada's airports. Our members handle 95% of the passenger traffic and 100% of the cargo traffic. You can see why the tourism business is important to Canada's airports. As gateways to the communities they serve, Canada's airports have an integral role in promoting tourism in this country. We are a key part of Canada's tourism value chain. Our airports are the front door to Canada and to the communities in which they serve. We are a significant part of the tourists' Canadian experience.
For Canada to be competitive in the tourism business, each link in the value chain must be competitive, efficiently operated, and customer focused. As an airport community, our competitiveness depends on three key areas: cost competitiveness, air access, and border facilitation. Canada's airports need a competitive business climate to compete.
This morning Air Canada announced a 7% reduction in its capacity for the coming winter months. Air Canada notes that in addition to record high fuel prices, Canadian carriers must contend with federal and provincial fuel excise taxes, security fees, and high airport charges, charges that are largely the result of an airport rent policy that has outlived its usefulness.
To operate in a cost-competitive business climate and provide a competitive product, we need the federal government to view aviation as an economic generator and not as an industry to be taxed at will. Canada's airports have invested more than $9.5 billion to upgrade airport infrastructure since the transfer of airports to local operating authorities. Our members pay nearly $300 million a year in rent. Since transfer rent payments to the federal government have totalled more than our airports' initial asset value, CAC members have paid in excess of $2.5 billion in rent. The revamped rent formula in 2005 did reduce the expected rent that was to be paid by nine airports in Canada; however, it did not go far enough. The new formula takes a percentage of gross revenue on a graduated scale, regardless of the size of the airport. To put this in context, the Greater Toronto Airport Authority will pay 12% rent on each dollar of revenue over $250 million. The GTAA is a $1.1 billion corporation. You do the math.
The elimination of airport rent would help everyone. Airports generate income for the federal treasury through job creation, both direct and indirect, and they attract tourists and investment. Airports in Canada are committed to passing along any savings from rent relief to their users, be it the airlines or the passengers.
Another important pillar of competitiveness is air access. Air access is a simple concept. If they can't get here from there, everyone suffers. For airports, it means that Canada needs better air service agreements. We define “better” as open skies agreements. Open skies means unfettered access of carriers between two states. The current EU talks are vital to growing our tourist base in Europe.
Few things will leave as bad an impression for tourists as long lineups at border facilitation halls. Border facilitation and the availability of customs officers is crucial. Currently we do not have enough border officers to meet the demand at Canada's airports. Whether for small airports or Toronto, Canada needs more officers at airports. We are using Nexus, and it has been a great boost, but tourists are not always members of trusted traveller programs. Making airports pay for services outside of core hours only adds costs to the business of any given airport.
Working with their local and provincial tourism sectors, Canada's airports today are actively promoting their communities in the United States and abroad. They attend air service trade shows, they are meeting with air carriers from around the world, and they are making the case for Canada as a tourist destination. We need federal policies that encourage more tourists, not ones that will result in a less competitive business.
In closing, we urge this committee to recommend elimination of airport rent, more open sky air service agreements, and greater investment in border officers at airports.
Mr. Chairman, thank you very much.
:
Thank you. Good morning.
The Canadian Tourism Commission's role is to market and sell Canada as a tourism destination in nine countries around the world. By marketing Canada in a way that differentiates us from our competitors, the CTC works to support the competitiveness of Canada's tourism industry.
Our focus is on attracting international visitors, while our ultimate goal is to keep increasing the amount of foreign money flowing into the country. We work with provincial and territorial marketing organizations, and tourism industry and federal government partners--for example, Parks Canada and Foreign Affairs and International Trade--so that we can do this under a single banner known as Canada's tourism brand. This collective voice concentrates our efforts and makes sure tourists around the world get a consistent and convincing idea of what awaits them on a vacation in Canada.
Only by working together can we overcome the greatest obstacle facing Canada as a travel destination--international competition. Let me explain. Air travel, once the domain of the wealthy and privileged, is today a form of mass transport, with over four billion passengers annually. Air access has spread the tourism base around and encouraged more countries than ever to get involved in the destination marketing game. In 1950, the top 15 countries held 97% of the world's market share. Today the top 15 countries hold only 57% of the total market share, and that percentage continues to drop. Once second in the world for arrivals, Canada doesn't even figure in the top 10 anymore.
The forecast doesn't look much better for the world's traditional destinations, Canada being among them. By 2020, Europe and the Americas together are expected to barely crest a billion international arrivals. Asia, Africa, and the Middle East together will hit 1.6 billion. This fact doesn't daunt us; it's fuelling our ambition.
Canada competed very hard for its share of the $800 billion that global consumers spent on travel last year. This effort saw Canada's tourism industry generate $70.2 billion in revenues in 2007. Nearly a quarter of these revenues--about $16.6 billion--came from international tourists bringing new money into the economy. This puts Canada in 11th place globally for the amount of total international travel spending our country generates.
In the face of so many competitive pressures and market complexities, Canada is fortunate to have a Secretary of State for Small Business and Tourism and a national tourism marketing organization. The government's decision to identify a Secretary of State for Small Business and Tourism demonstrates the importance the tourism sector holds for Canada and its economic growth. We were pleased with this appointment and see it as a positive sign for the future of tourism in Canada.
We recently held a board retreat to review the CTC's marketing strategy. We examined the competitiveness challenges we are facing and discussed the declines we are seeing from some of our international markets. Similar to the findings of the TIAC report, the board identified global competition and air access as risks.
To continue to be competitive globally, we need to have a strong collective Canadian presence and we need to be nimble enough to react to a rapidly changing global environment. We believe that the Canadian Tourism Commission has the right strategy in place not only to ensure that Canada remains a global contender now and into the future, but also to make sure our share of this foreign exchange continues to grow. We're making sure that Canada is relevant to consumers and that it stands out as a unique and different place to visit.
We're focused on making sure we get the best possible return for every marketing dollar we invest. We're focusing on countries that have a larger base of those consumers who will stay longer and spend more money in Canada. Our strategy has strong partner support, and there are signs our collective approach is working. Spending from overseas target markets is up $200 million to $7.1 billion in 2007. Traveller spending rose to $122 per night last year, up from $113 in 2006. Last year the CTC won a coveted spot on the list of Canada's top 10 marketers.
In terms of partner support, our marketing programs were fully subscribed to last year. Total partnership contributions reached $89.6 million.
Finally, visitor arrivals are up in seven out of the nine international markets that we do business in. Unfortunately, the two markets doing poorly are two of our biggest, Japan and the United States. Japan's visitor volume fell 14.6% to 310,400 visitors last year, but it's still by far our highest-yield overseas market.
The CTC has taken important steps to retool our approach there and influence a recovery--a recovery, I should note, that so far has eluded our competitors as well. This is likely to remain a common challenge as long as the decline in Japanese purchasing power continues to drive the market toward closer destinations, much to the benefit of countries like Thailand that have seen Japanese arrivals surge by nearly 100%.
The U.S. story is more complicated since visitors can both fly and drive into the country. The latest statistics for this year show that the U.S. market is down 3.5%. Last year, the market overall for the year was down 3.7%. We recognize that it is a difficult time for those in our industry who rely heavily on U.S. visitors. Although we continue to perform very well in many other markets, the U.S. continues to be our most important international market. The U.S. accounts for about 54% of the revenue Canada gets from all international markets.
Since our partner provinces and territories already market heavily to U.S. states along the border, the CTC focuses on attracting more affluent Americans who tend to fly into Canada. From this vantage point, U.S. leisure spending in Canada has actually grown since 1996 from $3.9 billion to $5.5 billion last year. That number swells to $7.1 billion if you add in the performance of the meetings, conventions, and the incentive travel market to Canada from the United States.
The number of overnight air leisure travellers to Canada has increased by almost 788,000 since 1996, while overnight automobile travellers declined by 398,000 over the same period. Reasons for the decline in the drive market are varied. Chief among them would be the recent economic uncertainty that has driven consumer confidence to a 30-year low, and of course the weaker American dollar is having a strong impact on U.S. visitors who drive into Canada.
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I'll be about one more minute.
Other reasons for the decline include, obviously, the cost of fuel and lingering confusion about the official documents required for U.S. entry. Passports, economic uncertainty, high fuel prices and declining purchasing power all make for powerful reasons why Americans are staying home rather than flying to Canada.
The U.S. consumers whom the CTC targets pay less attention to these factors. One issue that is of concern to all markets, not only Japan or the U.S., is air service. For an overseas destination like Canada, the right flight at the right price is critical in order to compete. On this front, Canada has not been doing well. For example, direct flights between South Korea and Canada are at capacity in the peak season. In Australia, we need to keep up the seat capacity secured by our competitors. Out of Japan, Canada is seeing tighter direct seat availability in the busy spring and summer months. Again, this is a market where competition is aggressively growing its air capacity.
In conclusion, I would offer that the CTC has the right strategy and the right partners to ensure that our country is marketed and sold effectively in nine countries that span the globe. However, there are indeed competitiveness challenges and policy issues that make marketing Canada to the world an increasingly difficult challenge.
If some of these issues were addressed, it would increase our ability to compete globally. Collectively, we need to work to ensure that the CTC and Canada's tourism industry are equipped to compete in the competitive global environment that exists today.
Thank you.
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Thank you, Mr. Chair and honourable members of the committee.
With me today is our vice-president of public affairs, Christopher Jones.
First let me thank the committee for the opportunity to appear before you to share our views on the current state of Canada's tourism industry. As you may know, TIAC released a report on Canada's tourism competitiveness on June 2, and I believe you have been provided with a copy of this report. We state in that document that the issues facing the industry are urgent and profound, so we are deeply appreciative of the committee's willingness to convene this meeting and look into these issues without delay.
Globally, tourism is one of the most significant economic engines, with close to $800 billion being spent annually on worldwide personal travel. But while tourism receipts in the rest of the world are growing at roughly 4% to 6% annually, Canada's growth rate lags far behind, at about 2% to 3%. Moreover, Canada's travel deficit--the difference between the amount foreign visitors spend here versus what Canadians spend abroad--reached an historic high of more than negative $10 billion for 2007, with a further significant deterioration of that in the first quarter of 2008.
We're also seeing historic declines in inbound visitation from the United States. Traditionally, more than 80% of our visitors in a given year come from the United States, but last year the number of Americans visiting Canada reached its lowest point in the 35 years that these numbers have been kept. Other markets, such as Japan, are also stagnating, while growth elsewhere has been modest at best.
When external challenges such as 9/11 put a stranglehold on our border, when fear of a SARS pandemic disrupts global travel, when the strength of the Canadian dollar increases the price of our tourism products by 30% in two years, or when fuel prices rise to record highs, there is only so much government can do to mitigate these individual events.
Let me be clear about the issues we are facing. The low Canadian dollar and cheap fuel prices of the past hid many of the underlying structural challenges to our competitiveness as a world-class destination. A higher dollar, higher fuel prices, and a weakening U.S. economy expose the sector's weaknesses. It is my contention that the focus on and reaction to headline-grabbing but isolated events have diverted our attention from the fundamental issues we face as an industry.
Tourism is a $70 billion industry in Canada, and 1.6 million Canadians depend on tourism for their livelihood, but our industry has traditionally been neglected by governments. We have tended to regard tourism as a source of taxation dollars, burdening our businesses with structural costs and compliance measures that impede its price competitiveness. For example, the continuing insistence on charging airport rents, airport security fees, and excise tax on aviation fuel; and the abrupt cancellation of the visitor rebate program and its replacement by the onerous and burdensome foreign convention and tour incentive program are illustrative of the problem. In aviation alone, we estimate the federal government is imposing at least $800 million in punitive levies a year on that industry.
In our report we single out two fundamental areas of concern: accessing Canada, and product animation. Under the heading of access to Canada, we state that visitors need to be able to reach Canada with ease, cross our border efficiently, and then be able to travel within Canada as seamlessly as possible. They also need to be able to find options for travelling to and within Canada that are cost-effective and competitive with other destinations around the world. One example of competing on an uneven playing field is the lack of an agreement on approved destination status with China, the fastest-growing outbound travel market in the world.
In addition to improving access to Canada, we need to ensure that there are persuasive and compelling reasons to visit our country. A concerted effort on the part of both the private and public sectors is required to make sure that new products are introduced and the products we currently offer are world-class. Products must be enhanced continually to meet changing market trends and the standards of today's discerning travellers. We need to do more to animate federally owned assets, such as the national park system and museums, to make them engaging and worthy of repeat visits.
Other countries are recognizing the incredible potential for tourism to be an economic force in their country, and they are investing the time, energy, and funds into ensuring that they are attractive and inspiring destinations. We can no longer rest on the advantages of a lower dollar, low fuel prices, and a strong U.S. economy, concealing some of our deeper issues. Canada has a remarkable opportunity to capitalize on our positive image in the global marketplace by promoting itself as a clean and safe destination that is socially and geographically diverse. Unfortunately, we have thus far failed to recognize and seize the economic opportunities that are afforded to us by this essential sector, which is equivalent in size to fisheries, agriculture, and forestry combined.
I invite you to examine in more detail the seven policy areas we have identified in our report that merit urgent attention. The challenges the tourism sector in Canada faces are profound, but they are not insurmountable. However, if we are to ensure that we remain competitive as a destination, we need a concerted and united effort on the part of leaders in the public and private sectors to address these competitive challenges now, or it will be too late.
Thank you.
I'd like to thank the guests for coming here today. I'm sorry about last week.
I have two questions. The first is for the tourist association.
I've done some round tables across this country and have gotten very similar results to those in your report, especially dealing with the problem of air access, border restrictions, approved destination status, and also availability of foreign workers, and the marketing was a big issue. All those challenges are from different departments. There are probably four or five departments involved with the challenges you're facing. There is Transport, Immigration, Foreign Affairs, and Industry.
Would be it be advisable for this government or your group to sit down with the different departments in a room and have a multi-department approach to this, so that the left hand knows what the right is doing? Often we find these departments and ministers work in silos. Especially given the timing right now and how important this is to our GDP, as you mentioned, and the slippery slope we are on, does this intervention need to happen right now?
If you can, give me a couple of minutes, because I have another question.
My second question deals with the airport situation. I'm going to give you an example. When we were in Vancouver, the biggest complaint, or what they were seeing, was the comparison between Vancouver and Seattle. When you look at the situation, especially the numbers in the report...and there was an article in the The Economist about the emerging economy and how there is a growing industry in tourism coming out of Southeast Asia as their economies grow, especially China's.
It the future, when Asian travellers want to go to western North America and are looking at how to get there and where they are going, what we were shown in Vancouver is that, first of all, there are a lot more airlines allowed to go to Seattle. They seem to have an open door to flights coming in.
I have another report in front of me on the airport landing fees. In Vancouver, for a B747, they're $2,400; in Seattle they're $1,700. My question is, when you see those comparisons, if something doesn't change, what's going to happen with that potentially vibrant tourist industry that we could be taking advantage of, if we don't change our airport strategy?
It's not only there. You would probably see the same thing in Toronto airport, that people are landing in Buffalo. I think it is the same right across the country. How is that going to translate over the next few years, when we're not picking up U.S. tourists, but we see all these potential Asian tourists?
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That's an excellent question. Thank you very much for it.
If we don't change the way we do business as a government in terms of policy on airports, we're going to lose potential. The reason Seattle has more international flights to either Asia or elsewhere is that the United States has 91 open skies agreements. That includes the countries in the European Union. Canada has five agreements. If you're keeping score, it's 91 to five. I'm not sure if it's a basket ball game or something else, but it's a high score. That's number one.
Number two, on the landing fee issue, the business model for airports in Canada is very different from that in the United States, and it is unique around the world. We're not asking for government subsidies to build capacity in terms of building structures, runways, and buildings, but the airports in the United States are operated by levels of government, and they are highly subsidized.
Canadian airports have invested $9.5 billion of their own money in airports. It's a very, very different business model in the United States as compared with what we have in Canada. If we don't get more air service agreements and we don't deal with the cost structure of airports, we're going to lose a great amount of potential.
It's a short drive from Seattle to Vancouver; it's not that far. And it's not just Seattle. It's as far as Buffalo is from Toronto. And Montreal is competing with our friends in the United States as well.
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Good day, ladies and gentlemen. Thank you for being here.
My first question goes to Mr. Allan and Mr. Williams. I was reading in the documents that were submitted by your respective groups that Canada used to be second in the world as regards arrivals. However, now it is only somewhere in the top 10. Also, Canada ranks 11th concerning total spending by international travellers in our country. So we can see that there are problems. These are only two elements among many.
In addition, according to the Tourism Industry Association of Canada, the government states that it invests $400 million per year in tourism, but we can see that is done with no overall strategy or overarching action framework. You referred to this earlier with the previous member.
You stated that the federal government has only recently recognized the importance of tourism by promising to collaborate with other partners and to explore the numerous opportunities for public-private partnerships.
You said that the government states that it invests $400 million. But does it really do so? We see that there is a lack of strategy. Please explain to me what public-private partnerships would consist of. How can we solve these problems? It is clear that there has been a substantial decline in tourism. Please give us some suggestions because this appears urgent.
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Mr. Chair, as I understand it, the $400 million collective investment made by the federal government into various tourism-related things, including parks, I think goes to the previous question about there being a lot of government departments involved in and touching on tourism. The $400 million is taken across many departmental budgets, and again, that's one of the things that make tourism a complex issue in Canada.
It is our understanding that the secretary of state is intending to come forward with a national tourism growth strategy that would involve the multiple departments. As we understand it, that investment is currently being made, but we do have to harness it and bring all the departments together in order to develop an appropriate strategy.
I'm not quite sure what the private-public partnerships are. In the CTC we do work with all of the provincial marketing agencies. We work with tourism industry partners. And I did mention that last year we had $89.6 million in partnership, both dollars and in-kind support, for our marketing programs, so that's added to our current budget of $75 million.
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Obviously the report indicates a $400 million investment from the federal government in tourism-related activities, and we wouldn't argue that point. Obviously when you're investing money in our national parks and in various projects, including convention centres and infrastructure through the Building Canada fund and so on, those are certainly tourism related.
What we need to do is really get serious about strategic investments. Focusing on the level of money that's being invested is really diverting us from the real story here. As Jim said, we're not asking for handouts here. We're not asking for the government to give us money, such as you might get from other sectors. We're asking you to make investments that are strategic, whereas now you're making them in a more haphazard or à la carte fashion.
We'd like to see a strategy developed that's accepted by all departments of government, whereby funds are spent more strategically and there is a commitment to really understanding what a tourism investment is. Some of these expenditures, such as those supporting our parks, are obviously a benefit to tourism, but we're not preserving our parks exclusively for tourism. That's obviously something Canadians would expect for the public good, to conserve our natural heritage. It's obviously of benefit to local Canadians as well.
We have to be serious about looking at the amount of investment we're making in the strategic areas that tourism needs rather than throwing numbers out, which I think is the way you're going with this question. That's the more intelligent way of approaching this, rather than just saying, “We're already giving tourism $400 million, so go away.” That's not what we want to hear. We want to be a lot more strategic in our thinking.
Welcome to our witnesses.
First of all, I want to say it's great to be talking about an industry that's near and dear to my heart. Today I'm here as a parliamentarian, looking at the big picture here in terms of how government can consider some of the issues that you've brought before us today.
One of the first things--and I'll direct this to TIAC, if I can--is that when you look at the preponderance of statistics in our industry, in particular we're citing growth levels in tourism of around 4.3% in 2007, and the fourth quarter was up 1.4%. We're seeing other indications from the industry that in fact would suggest this culture or this climate of crisis that you describe in your report isn't necessarily substantiated by the numbers we're seeing. We're seeing an industry that in fact is growing. Yes, there have been some changes, but even spending by Canadians is up 6.5% in 2007. I just looked at a Pannell Kerr Forster report for the accommodation industry, and they're seeing continued growth in things like average daily room rates and occupancy levels, even right out to 2010.
So when you look at that situation and compare it with this state of crisis that we're in--and I appreciate where you're coming from and have been on that page before--what can we do to work to improve the industry's position and not be so taken astride by Canada's rankings? Isn't it more important to look at the performance of our industry in terms of growth in profits, growth in expenditures, and actual tourism GDP? Shouldn't that be our first and foremost consideration in these issues?
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Obviously when you're looking at statistics and numbers, there are always going to be some numbers that you can fall back on and say there are some positive reflections there. But for each one of those, we certainly have some numbers that reflect a different point of view, like our travel deficit, like our growth compared to our competitors around the world.
Our report really talks about the future of our industry. A lot of the numbers you reflect on there really are talking about historical.... We've had some growth, yes, of 2% or 3%, and I refer to that in our report. But when the world is growing at 4% to 6%, is 2% to 3% growth in Canada a level that we accept as a satisfactory result? I wouldn't think so. I think there's tonnes of potential, as Jim was saying. This industry has the potential to do more, and it has the potential to do more for every community in Canada. We're not talking about Windsor and the automobile industry or localized industry; we're talking about an industry that has benefit for all Canadians and all communities in Canada.
There are some dark clouds on the horizon. Our report doesn't speak to this summer, it doesn't speak to this summer and fall; it speaks to the next four to five years. And it had the hotels—
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I don't mean to interrupt, but I have a limited amount of time here.
Basically what you've cited in your report is that you're looking for relief in terms of the airport rent situation. You're looking for some work on ADS, and we're talking about better animation and marketing of certain tourism products. Doesn't it take in a much broader picture here in terms of how we move forward?
Even if, hypothetically, those few things were considered and there were changes made to those, is that in itself going to predict that the tourism industry would, in turn, grow? We have to look at how Canada performs on its own merits. And yes, I know the travel deficit is there, and the rankings, but at the end of the day what's most important is that we have a climate here where tourism, like other business sectors, can prosper.
In fact, what I'm seeing is that your report is an indictment on what government's role has been in the past, but in fact, what we have is a contrary image in terms of where the industry is now. It has responded quite well. In fact, the only thing we know for sure is that in the future other geopolitical, social shocks are going to come our way. Isn't that our best way to strengthen our economy and business climate here so that we can attract more tourism investment and opportunity?
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We have asked for seven strategic areas to be looked at and 53 different initiatives in our report. Some of them are government, some of them are private sector, and some will involve both public and private sector. It's an indictment not only on the way government has looked at tourism, but also on our own industry and the things that we have to do as a private sector.
But government is a stakeholder; it is a shareholder in tourism. You have an investment already. The park system, the museums, many of the historical sites, all of those are owned by Canadians. We're saying that in the future, in the next three to five years, if you don't invest in those properties, they will not be sustainable.
The tip of the iceberg is shown today with 2,000 people laid off at Air Canada, with Air Transat saying their profits are down--one of Canada's success stories--and with VIA Rail increasing their prices by 5%. We are already seeing the crisis point hitting. We're not talking about the past five years; we're talking about the go-forward, the next two to three years.
Certainly you are outlining some major challenges we're facing in the tourism sector.
Mr. Williams, I can't remember if it was you who said this when you were before our committee in the service sector study, but we had a witness who described the situation in tourism right now as the perfect storm, in which we're facing the high dollar, high oil costs, and the downturn in the U.S. economy. I appreciate the point you're making today that these, in the past perhaps, masked some of the structural challenges that we're facing.
I think I read recently that Paris is still the number one tourism destination in the world. While I happen to think my home town of Toronto is a great place, it's not Paris. But Canada has amazing attractions that no other country has, and not only our natural attractions. I do believe Toronto, as the most diverse city in the world, has its own attractions that perhaps we need to be marketing better.
My question to you is, what kinds of attraction investments does Canada need to make? You said we should be maintaining parks anyway. There has been investment in some of the cultural attractions, at least where I come from. But what kinds of investments rise above the price differentials to make a destination really stand out in the world? What advice do you have for this committee to recommend to the government in terms of making those investments that really will help Canada market itself to the world?
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That's a difficult question to answer specifically, but obviously investments like we're seeing in northern Quebec now with
Le Massif project are certainly helpful. Blue Mountain is a smaller scale of a Mont-Tremblant or a Whistler. Those kinds of investments certainly are helpful. There have been some investments in the arts and cultural community in the Toronto area that are helpful.
However, we need to really make an investment in our people and our infrastructure to make sure we are getting people into the country--our border infrastructure, our transportation infrastructure, and our people--and provide a climate where businesses can be profitable. Then they can invest in added value, so the experience visitors have when they come to this country is one that they talk about when they go home.
Right now we're servicing the customer. In most cases we're doing a pretty good job of that. But are we wowing them? Are we differentiating ourselves so that when they go back home they're talking about Canada as a must-see destination that is compelling enough to come here?
There are those minor annoyances, such as that it's hard to get around, it's expensive when you get here, it's too much for liquor, it's too much to travel by air, and you take away my visitor rebate program. And it does matter. If the visitor rebate program didn't matter, then all those retailers out there who are saying you're getting GST-free sale on.... Tell those people they're wasting their money advertising a sale on which there's no GST. It does matter.
I want to give you one--
I want to say that I do appreciate the kind of tourism promotion for Canadians within Canada. I saw the VIA ads about VIA Rail being a more human way to travel. I think they're doing a good job in terms of promoting travel across Canada. But certainly air travel is a huge part of the tourism industry.
I appreciate the point you're making, Mr. Facette, about the airport fees. It does seem as though Canadian airports really get hit disproportionately with these fees. Again, coming from Toronto, I think we have a beautiful new airport there. It's a welcoming sight when you arrive at that airport. But I do appreciate the burden that places on companies.
I did want to raise the point about transportation infrastructure. Getting out of that airport is almost impossible. Do you have any recommendations on that?
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There's an expression in the aviation industry that if you've been to one airport, you've been to one airport. Each airport is different and unique.
A lot of the transportation links to the airport, be they public or private, are usually a function of the work that goes on between the airport and the municipality. Some talk about more public access through transit of some sort, be it light rail or what not.
We're going to see a unique situation coming up in Vancouver next year when they open the Canada Line. But the Vancouver airport is paying for the Canada Line on its property. It's paying $400 million for that. There is no other place that money is coming from--not from the municipality, not from anywhere else.
I think in general there's a cooperation that needs to happen between different levels of government to allow an airport to improve the transportation between the facility itself and other destinations. I would simply argue that getting out of Pearson Airport today, in 2008, is much quicker than it was 10 years ago.
:
I think I'm on Ms. Nash's side on this one.
I want to direct this question to Mr. Williams or Mr. Allan--probably both of you, for that matter. I was having a breakfast last week with representatives of the Taiwanese economic and cultural office, and if my memory serves me correctly, they are anticipating welcoming 3,000 Chinese visitors a week into Taiwan. I could stand to be corrected on that number. These were countries that were at war not too long ago and still have missiles pointed at each other, yet there does seem to be a significant thaw in the relationship.
The American tourist is not coming back any time soon. The structural difficulties in the U.S. economy are going to preclude Americans from travelling for the foreseeable future, which means essentially that if Canadian tourism is to pick up it's going to have to be Asian tourism, and we are not in the game as far as the Chinese are concerned. When Mr. Emerson was a Liberal, he pretty well had this a done deal. It seems to be stalled now, and stalled in a major way.
I would be interested in your view as to what is going to move the approved destination agreement off the stall point that it currently is on and move it forward so that your industry can get the proper fruits of its labours.
We have been working hard to compete for the China market and we have been experiencing growth. Up until last year, growth was in the mid-teens to 20% per year. That growth slowed last year to less than 10%, and we expect that will be our situation in 2008.
There are a number of factors driving that, including the fact that the world is competing for outbound business in China. Because we do not have ADS, we do not have the ability to market in the free marketplace in China. We can do specific promotions, we can do promotions working through other partners, but as a country we do not have the unfettered ability to market in China. From the CTC's point of view, that's the main attraction of approved destination status--the ability to market freely in that marketplace.
:
Prior to when I was in private business, I had a boss who introduced me to the spreadsheet, and he always used to tell me, “It's in the numbers, it's in the numbers.” I wish I had more numbers, because I think it's in the numbers. I wonder whether you could get this committee that—all the numbers, as many numbers as you can find, concerning what the travel has been, where it's going, what type of travel it is.
I suspect there's another story here too, and I think you can probably substantiate this: that the taste for travel has changed. We've become more affluent. We're no longer camping, and Americans are no longer camping—all those things. I really think we need to have some numbers.
I want to ask another question too—maybe we should go to Mr. Facette—on airport rents. Years ago, didn't we need to make major improvements? Wasn't it deemed necessary by the industry that these improvements be made and agreed that they would be paid for by rents?
I guess my first question is, wasn't that an agreement? Aren't we going back on that agreement when we ask for rents to be...? The public has a right to....
:
The agreement in 1992, when the operation of the airports was transferred to local airport authorities, was that the federal government didn't have the money to upgrade the value of the asset, so that you would take it, you would upgrade it, and for the privilege of operating it and paying for the upgrades. “Oh, by the way, you're paying us airport rent.” Over time, the airport authorities looked at it and said, we have a gun to our head here, which was: either take it the way it is and upgrade it, or else you ain't getting it and you won't be able to operate it on behalf of your community—and you have to pay us rent.
They took the rent deal early on, and the lease, the legal document that exists for the airport authority that operates the airport, is between the airport authority and Transport Canada. That legal document, that type of lease, has changed. The first four that went—Vancouver, Calgary, Edmonton, and Montreal—have what was called a local airport authority lease. They eventually became Canada airport authority leases, over time.
Right now we have a changing business environment. At the time of transfer, airports were being operated very differently from how they are today. Airport authorities operate a business. They market the community in the same way as a local tourist destination does, or anything else. We ourselves, even CAC, market Canada, believe it or not.
:
Thank you. Hello, everyone.
I looked at your report on the tourism industry. I will continue on the topic of airports because it is interesting. It is one of the most blatant problems. As concerns figures, the report says: “On the specific index of Ticket Taxes and Airport Charges, Canada is ranked 122 out of 130 countries.” These figures show that we lag well behind.
I also see that you must pay $300 million annually in airport fees. How can we address these two elements, that is, airport fees and the fact that the tourism industry could encourage tourists to come to Canada, by no longer paying these $300 million? What is another way that we could do this? I know that a brief of the Standing Committee on Finance of the House of Commons makes two proposals in this regard: the elimination of airport rental costs, and the amendment of the Excise Act to authorize the purchase of duty-free products upon arrival.
Do you think that this proposal would help us stimulate tourism here?
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We're focused on a number of markets in Asia-Pacific, specifically China, Japan, South Korea, and Australia. We've been doing ongoing research to determine how best to attract visitors from those markets, and we've been doing very well out of the markets of South Korea and Australia in particular. We've been experiencing growth there of over 10% last year. We talked a little about China already in terms of what's happening to our growth rate there, and we're struggling, as I said, in Japan.
One of our biggest challenges out of the Asia-Pacific market is air access. It's one thing for a marketing organization to create demand, but we have to have the supply to fill that demand if someone has the idea that they do indeed want to come to Canada. We have seen some air capacity increases out of China, but our capacity is more strained in markets like Japan and South Korea. We've had a little increase out of Australia.
So to the extent that we've been able to have increased air capacity, we've been able to succeed in attracting more visitors.
The other market that is a very strong growth market for Canada in terms of tourism is Mexico. It's leading the pack, with growth rates close to 20% year over year.
My question is about the layoffs that were announced today at Air Canada. Normally at this time of year we're heading into peak season in the airlines. Normally April, May, and June are a hiring period, and the summer months are the busiest months of the year, when airlines, certainly, and other related industries make their money.
How significant is the announcement today of a layoff of 2,000 Air Canada workers, and is that creating shock waves in the tourism industry in Canada?
It must be a period of a lot of uncertainty for the companies involved, but also for the people who work in these industries. Of course, a year ago no one was predicting the extent of the spike in oil and gas prices. It's something our committee is going to be studying over the summer period.
But if we are in a scenario where oil prices remain, maybe not permanently high, but high for the foreseeable future, are there structural changes that you believe are necessary to avoid this kind of crisis that appears to be looming? You have made specific tax recommendations and trade recommendations, but this is a very important sector of our economy. Is it one that perhaps Canada has taken for granted because we have so many natural attractions, and maybe we haven't really seen it for the important economic engine it ought to be?
Michele, you alluded to some of the strategic markets you're looking at. The industry is growing, and there's no disputing the product we have here in Canada from coast to coast to coast. But then you start finding out the numbers. I think I heard correctly that Las Vegas spends just as much on promoting as Canada does; and Australia, with just over two-thirds of the GDP of Canada, is spending way more than we are in promotion and marketing.
So I guess my question is twofold. Is there new clientele out there? Should we be changing our marketing? Do we need more money for marketing, not just from government but from the stakeholders out there--whether it's the bed and breakfasts seeing the relevance of putting a few more dollars into the pot, etc.?
It seems that the provinces all have their own different strategies, and a lot of them are chasing the same dollar. So on the marketing side, if there were more money available from all the stakeholders, would we be able to do better marketing? Should we be looking at marketing Canada differently in this century--maybe from the green side? The whole thing is a different product than we've been marketing before.
:
Let me take a stab at that.
I was appointed chairman of the CTC just over three months ago and was unfamiliar at that time with their marketing approach and the effectiveness of the organization. Certainly these past three months have proven to me that what we have in Canada is a very effective and state-of-the-art marketing arm for tourism in Canada, and really, too, into our international markets.
Our budget in 2002 was $100 million, and that has been gradually reduced to the point now where it's $75 million. I personally believe that if there was an addition to the budget, it would be spent effectively. We have very sophisticated mechanisms for focusing on certain markets and how much can be invested in a specific market, and then an assessment as to how effective a particular program has been.
So I do believe that if there is an increase in the budget, it can be spent effectively.
The other thing I have noted since my appointment is how effective the CTC is in working in partnership with the provincial marketing agencies. There is consensus--and I think the TIAC report mentioned this--that it is important for everybody to be working under one Canada banner, particularly in our international markets. I think we do that fairly effectively. It could be more effective, but that's something we can't force. We do the best we can to convince our partners that we are effective when we go into international markets.
In terms of product, the TIAC report addresses that, I think, under the banner of animation. It's certainly something that I think we need to address as well. I personally believe that if we create the right climate in Canada for tourism, and if we address issues such as air access and the kinds of things that the other fellows are addressing today, that will create a climate for further investment in Canada from industry as well.
:
Our report alludes to the fact that we need more money in emerging markets. The CTC addresses nine countries, as Michelle and Steve talked about earlier. That's great, and they're doing a good job in those nine markets. Seven of them are growing. Japan and the United States are problems. But there are markets with a growing middle class that is starting to go outbound that we're not even into yet. We have to create awareness of Canada in those markets or we'll never be visited. There are other countries, as Christopher was saying earlier, that are eating our lunch in those markets.
We have no money. We just have enough to barely service the nine markets we're in. We have no money, and neither do the provinces, to go into these other markets, such as Brazil, India, China, and so on. If China ever opened up, where would we take the dollars from the market there, let alone the airlift?
So that's a big challenge for us. I would say directly that I know the industry wants the CTC to be in those emerging markets, but I understand they don't have the dollars right now. If we had the dollars, we'd love to be in them.
:
Thank you, Mr. Chairman.
Good afternoon, Ms. McKenzie.
Last weekend in Quebec City, over 200,000 people took part in one of the most spectacular air shows in North America. For the first time in aviation history, teams comprising over three countries simultaneously performed in aerobatics shows. The extraordinary success of the event was made possible by the cooperation of a number of partners, particularly Aéroport de Québec.
What effort did the Canadian Tourism Commission make to promote the event in the New England market, which is such a good one, to publicize the event? New England is less than a five-hour drive away from Quebec City.
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The air service agreement Canada has with Japan is a traditional bilateral air service agreement. Traditional bilateral air service agreements dictate the number of seats and the destinations carriers can go between states. So the limitations put on any carrier, be it Air Canada or anybody else, are dictated by the air service agreement.
Canada just recently renegotiated its air service agreement with Japan. And I don't know that Japan is ready for an open skies agreement yet. I'm not sure. I believe that this government, given its new blue sky policy, probably proposed an open skies agreement with Japan. I don't know whether Japan is ready for it yet. But if there were an open skies agreement, all the capacity would be driven by the market. It would not be driven by an air service agreement. So any carrier from Japan could fly anywhere it wanted to in Canada.
The other thing we know, though, is that Air Canada recently suspended its flight between Vancouver and Osaka.
The cost of flying distances now, with the aircraft we have available, is increasing because of fuel costs. There's a point at which, on a flight, you actually have to fuel the airplane just to have fuel to get far enough. That is, you fuel to carry fuel. So the price of fuel is becoming a major issue on long hauls.
:
I've talked to quite a few international travellers over the last few years, and one of the things they say they notice, they appreciate, is getting the value-added tax back. You alluded to it already. Here it's called the GST, of course, and we don't give it back.
Many craft shops across the country--and we have substantial artwork in this country, and some of the pieces are worth $3,000 or $4,000 easily--are telling me that this GST rebate is really having an effect on them. A person would get $200 or $300 back on a substantial piece of artwork--it could be native artwork, it could be local artwork--and they're not buying it. So some of them are feeling that they almost have to go back to the people who are making the crafts and say, “We're going to have to give them the GST back, because they're not going to buy it knowing they don't have it.”
I had a couple of questions. Was there any consultation with your groups--consultation on the numbers, the impact it had--when the government decided to do this? How important is it that this rebate comes back?
:
Well, it's important that it comes back, firstly. There was no consultation. Initially it was a decision that was made that surprised us all. Obviously it is important. We're one of the only countries in the world with a value-added tax that doesn't give it back to their visitors.
Tourism is an export industry. All other exports have their foreign end user not pay GST. But in tourism you decided to penalize us at the worst possible time by having our foreign customer pay the GST.
It's just wrong. In principle, it's wrong. So it is important.
I talked to a Montreal storekeeper who sells Inuit carvings. His business is down dramatically, because foreign visitors don't come in and buy product anymore because they don't get the GST rebate back again.
The government did give us back the volume ones--the convention--which is working perfectly, and it's fine. We congratulate the government for at least hearing us and giving us the convention side back.
The tour operator or tour package side was given back to us, but the program to manage that is too difficult, too bureaucratic, too administrative, so that most tour operators are just charging the GST. So the FCTIP, the government program, is meant to be an incentive program, but it's a disincentive for foreign tour operators. That has to be fixed, and is aware of that, and she's committed to helping us fix that.
It's the individual program. We need that back again as well. We should look at broadening it. We should go beyond products and hotels. Let's do what other countries are doing and look at other ways to incent people to come to Canada.
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The government came out, when they made the decision, and said that only 3% of visitors were using it, which was wrong. They were counting babies and couples in that. Two-year-olds don't fill out rebate forms.
It was 13% when you do it properly, and that's 13% of a program that was really very, very hidden. It wasn't marketed. If you go into some countries, you can get it right at point of purchase. They advertise it.
In Canada we kept it a secret, and we don't do it conveniently at airports for other people, and we still had 13% of people claiming it. It took them two months to get the refund cheque, and we wouldn't give it in their own currency, we'd only do it in Canadian currency. All those kinds of things were done wrong, and we still had 13% of people wanting it back.
:
I acknowledge the challenge in having to be strategic in some of the recommendations, Mr. Chair, but I think when you add all the little pieces up together, it makes a big difference in the long term.
And on the jet fuel side, it's only this one particular industry that uses it, and it's not just the large carriers, be it Air Transat, WestJet, Air Canada, or anybody else, that are going to benefit from that. You're also talking about some of the smaller carriers, the regional carriers, even some private operators, who will also get the net benefit of that. So the benefit of it is that it goes beyond just one particular market.
It's fascinating to see the government being put on trial because it is asking for a bit more money for access to airports, among other things. On the other hand, we will also have to monitor your efficiency, your performance. If I understood your answer to my colleague's question on New England correctly, you do some advertising in Boston. With regard to the Quebec International Air Show, which is held at Jean Lesage Airport, it seems that New Brunswick and Ontario are not close enough to Quebec City.
Ms. McKenzie and Mr. Williams, Quebec City's 400th anniversary is coming up, and I would like to know what your overall strategy is for that event. I imagine that you have already made plans.
Merci, monsieur Vincent.
Ladies and gentlemen, I have to go and present on behalf of the committee at the Liaison Committee. The clerk and I have to leave. Madame Brunelle could volunteer to chair the committee for five minutes, but then we wouldn't have a clerk. There's obviously a lot of interest in this topic, and the committee may decide to do a second or third meeting on this.
We want to thank you all for being here before us today. Thank you for your presentations, and thank you for being in Toronto.
Mr. Facette, you were going to provide something further. If any of you have anything further, please provide it to the clerk. We will ensure that all members get it.
Steve, I didn't recognize you at first without your white cowboy hat, but welcome to you as well.
He was president of the Calgary Stampede, the second best rodeo in Canada next to the Canadian Finals Rodeo. I'm just kidding.
This will be our last meeting, so have a wonderful summer. We will see you back here in September. Thank you.
This meeting is adjourned.