32 Percent of Canadian Tourism Small Businesses Planning to Quit: Federal Report

A storefront on Roncesvalles Avenue displays a "for lease" sign as part of a protest against the Ontario government's pandemic lockdown rules in Toronto on Nov. 24, 2020. Jody White/The Canadian Press

A third of Canadian tourism operators are planning to call it quits due to rising operational costs, unpredictable business demand, and government regulations they experienced during the COVID-19 pandemic, a report by a federal commerce regulator says.

Released on Aug. 15, the report by Innovation, Science and Economic Development Canada (ISED) noted that small and medium-sized enterprises (SMEs) in the tourism sector have expressed more interest in closing their businesses for good than from other sectors.

“A higher proportion of tourism SMEs have plans to sell, transfer, or close their business in the next five years, at 32.2 percent compared to 24.9 percent of businesses in all industries,” said the report, titled “SME Profile 2020: Tourism Industries in Canada.”

According to the report, SMEs constitute the backbone of tourism in Canada, accounting for 99.9 percent of businesses in tourism industries, first reported by Blacklock’s Reporter on Aug. 24.

Using the data collected by Statistics Canada from a survey of 9,957 business operators, the report found that 47 percent of the SMEs in the tourism sector cited “rising cost in inputs” as the major obstacle for them in 2020.

Fluctuations in consumer demand (31 percent) and government regulations (29 percent) were also seen to be major obstacles to growth, based on the findings from the survey, conducted between April 2021 to August 2021.

The recruitment and retention of employees (39 percent) and shortage of labour (38 percent) were among the top concerns, while the ability to secure financing (15.6 percent) has been considered a challenge too.

“More than half of tourism businesses (57.8 percent) reported that they had to close temporarily due to the pandemic, compared to only a third of businesses across all sectors (33.4 percent),” the ISED report said. “Tourism businesses reported having to close for an average of 14.0 weeks in 2020.”

On average, tourism-related profitable small businesses had a net profit of $82,210 in 2020 compared to $76,307 in 2017. But nonprofitable ones, which make up the larger share of the industry, according to the report, suffered a greater net loss of $122,683 in 2020 when compared to negative $81,133 in 2017.

‘Specter’

Testifying before the Senate National Finance Committee last April, Susie Grynol, CEO of the Hotel Association of Canada, said the pandemic restrictions imposed by governments had impacted their industry so much that “we won’t be allowed to recover for a long time.”

“Our recovery will take, at earliest, 2022, but many project that our real recovery will not be until 2024 or 2025,” Grynol said.

“There will be some carnage and there already has been.”

Destination Canada, a Crown corporation created to promote tourism, reported in 2021 that the country’s accommodation sector alone lost 61 percent of revenue, or $10.5 billion, in 2020.

“More than 1 million business event delegates and more than $1 billion in associated direct spending have been lost from Canada’s meetings and conventions industry,” said the corporation in its “2021–2025 Corporate Plan Summary.”

“The tourism sector overall has lost 440,000 jobs in 2020 and recovery is expected to take until 2025, at the earliest.”

“We are facing the specter of an industry in deep crisis, with many parts of it on the brink of collapse,” wrote CEO Marsha Walden in the corporate plan at the time.