Canada is losing its competitive edge

By John D. Cunningham

According to Statistics Canada our international travel deficit reached an all-time high of $10.3 billion in 2007, representing a staggering $3.1 billion (43 per cent) increase over the previous record of $7.2 billion in 2006. In 2007, Canada’s travel deficit with the United States reached an all-time high of $7.1 billion breaking the previous record set in 1991 by more than $1.1 billion.

This means that Canadians spent significantly more money in other countries than Canada received from foreign visitors. Two of the main reasons for the increase in our travel deficit are: 1) the strong Canadian dollar which makes foreign destinations more attractive to Canadians yet less attractive to international tourists to visit Canada, and; 2) increasing numbers of retirees who have the greatest amount of time and money to travel.

Based on these and other factors I expect that the trend toward higher travel deficits will continue unless the federal, provincial and local governments, the business community and other stakeholders formulate an effective response strategy to stem the tide.

To put the problem into perspective, Canada’s market share in terms of international arrivals has eroded significantly since the 1950s when it was ranked 2nd, behind the United States. Since that time Canada’s rank declined to 7th in 1980 and to 12th in 2005. Most of Canada’s major competitors have remained in the top 5 since the 1950s. France moved from 4th to 1st, The United States dropped from 1st to 3rd and Italy’s market share declined from 3rd to 5th. Spain’s market share increased from 8th in 1950 to 2nd in 2005. Also, China has entered the top five having earned 4th position in 2005.

The World Economic Forum recently released its Travel and Tourism Competitiveness Index report (TTCI), which provides a comprehensive evaluation of many factors and policies that make it attractive to develop the travel and Canada is losing its competitive edge tourism sector in the 124 countries studied. This 500 -page-report was developed in partnership with the major global tourism organizations including the International Air Transport Association (IATA), the World Tourism Organization (UNWTO) and the World Travel and Tourism Council (WTTC). The study population consisted of “CEOs and the top business leaders in all economies covered in their research.”

The TTCI’s fundamental objective is to “explore the factors driving travel and tourism competitiveness worldwide.” The TTCI is designed as a benchmarking tool to enable countries to identify key obstacles to competitiveness and “to provide a platform for dialogue among government, business, and civil society.” The TTCI measures the competitiveness of tourism destinations under 13 “pillars”.

Canada’s overall competitiveness ranking was 7th internationally and its individual rankings varied widely by “pillar”. There were some surprises, however, regarding how poorly Canada is doing compared to other, lesser developed, countries. Some of the highlights of this report are listed below (For a comparison with developed and developing companies, e-mail the author.)

CANADA: COUNTRY RANK 7/124

Competitiveness pillar	Canada Rank	Rank of other select countries
1) Policy rules and regulations	16	Singapore (1), Jamaica (3), Chile (7), USA (13), Russian Federation (124)
2) Environmental regulation	19	Denmark (1), Germany (3), Switzerland (4), Luxembourg (11), USA (23), Albania (124)
3) Safety and security	21	Finland (1), Jordan (19), Kuwait (22), USA (45), Guyana (124)
4) Health and Hygiene	38	Hong Kong (1), Greece (3), USA (32), Mexico (49), Ethiopia (124)
5) Prioritization of travel and tourism	32	Tunisia (1), Singapore (2), USA (47), Burundi (124)
6) Air transport infrastructure	2	USA (1), UK (3), France (4), Chad (124)
7) Ground transportation infrastructure	13	Germany (1), Hong Kong (2), USA (11), Chad (124)
8) Tourism infrastructure	16	Austria (1), USA (3), Croatia (11), Malta (12), Tajikistan (124)
9) ICT infrastructure	4	Sweden (1), Iceland (2), S. Korea (3), USA (7), Chad (124)
10) Price competitiveness in the travel and tourism industry	110	Indonesia (1), USA (99), Denmark (124)
11) Human resources	12	Switzerland (1), USA (5), Mozambique (124)
12) National tourism perception	76	Mauritania (1), Barbados (2), USA (112), Venezuela (124)
13) Natural and cultural resources	11	Germany (1), Belgium (4), USA (3), Lesotho (124)

Source: The World Economic Forum (2007)

Other notable rankings for Canada identified in the report included: Rules governing foreign investment (50), visa requirements (43), efforts to reduce risks from pandemics (41), government prioritization of the T&T industry (61), ticket taxes and airport charges (117), purchasing power parity (100), ease of hiring foreign labour (98), and effectiveness of marketing and branding (46).

The TTCI identifies many different issues which, if addressed, can significantly improve the competitiveness of a destination based on their ranking system. One example is the recent initiative south of the border. In an apparent response to a negative image and perception (ranked 54th in effectiveness of marketing and branding) the USA has recently embarked upon a comprehensive nation-wide effort to coordinate the tourism industry’s approach to international marketing. This image renewal strategy involves input and support from all the top level tourism stakeholders and is titled Restoring America’s Travel Brand: National Strategy to Compete for International Visitors.

Canadians also have the opportunity to use this benchmark to improve our country’s competitiveness and address the many challenges facing our industry. Recently, Canada has focused on a renewed National Tourism Strategy and it is hoped that the deficiencies identified in the TTCI will become an important part of this nationwide dialogue to improve upon our position in the global tourism market.

To receive copies of these reports please visit www.docuticker.com/?p=7080 and www.weforum.org/tourism/rankings.

John D. Cunningham is a member of the Faculty, Hotel and Resort programs, Georgian College, Barrie, Ontario. E-mail: johncun@rogers.com.