Canada is losing international tourism market share—Why?
By Dinah White, Senior Manager, Chemistry Consulting Group
Across Canada, tourism marketing organizations are facing budget cuts. From the Canadian Tourism Commission (CTC) to community-based destination marketing organizations (DMOs), the county’s tourism marketers are trying to figure out how to make the most effective use of tight or declining budgets.
In response to the recent announcement that the CTC’s marketing budget will drop from about $72 million currently to about $58 million next year (2013/14), tourism marketers have raised a red flag regarding the cumulative impact of reducing investment in national tourism marketing when Canada is already losing market share to other destinations.
In order to get a better picture of what’s been happening to Canada’s international tourism market share over the last few years, Chemistry Consulting Group compiled statistics from the World Tourism Organization’s (WTO) annual Tourism Highlights publication related to international arrivals (the number of people who arrive in a country other than their own each year).
Worldwide tourism is growing. On the one hand, the WTO numbers show that tourism activity worldwide is growing significantly. Between 2002 and 2010, the number of international tourist arrivals rose 34 per cent. This represents an average of 4.25 per cent per year.
Tourist arrivals to Canada are declining. On the other hand, the share of international tourist arrivals coming to Canada during this same period has steadily declined.
When global and Canadian international tourist arrivals numbers are graphed, the contrast is striking. Canada hosted 2.9 per cent of the world’s international tourist arrivals in 2002. By 2010, this figure had dropped to 1.7 per cent. Likewise, when we only look at the top 15 countries (based on 2010 international tourist arrivals), we see that in 2002, 4.9 per cent of international tourism arrivals to these 15 markets came to Canada. By 2010, this figure had dropped to 3.1 per cent. Given these trends, it is not surprising that Canada’s ranking in terms of international arrivals dropped from 7th in the world in 2002 to 15th in the world in 2010.
Marketing spending in Canada went up but visitation went down. It is interesting to note that while this decline in Canada’s international tourism market share and global arrivals ranking has been occurring, the tourism marketing budget of the CTC has been increasing. Between 2004 and 2010, the CTC’s marketing budget increased by 43 per cent rising from $73.5 million to $105.5 million. By comparison, between 2004 and 2010, the number of international visitors to Canada dropped by 16 per cent (falling from 19.2 million to 16.1 million). If we just look at U.S. visitors, the decline over this period is even greater at 42 per cent.
What factors are contributing to the decline in Canada’s tourism market share? Some significant factors are:
o There has been a gradual shift in the percentage of international tourists originating from advanced versus emerging economies. The primary destinations of travellers from emerging countries tend to be nearby countries (e.g., people from Brazil traveling to Argentina). As such, travel by residents of emerging markets is contributing to an overall shift in global travel patterns. This shift is exacerbated by the growing trend for travellers from advanced economies to seek out new and more exotic destinations.
o We’re still dealing with the financial fall-out of 2008. In addition to shifting travel patterns, Canada’s travel industry was affected by the shift in people’s bank accounts which occurred after the financial meltdown in 2008.
o Our competitors are increasing their investment in tourism marketing. For example, Australia’s 2010 tourism marketing budget was about twice that of Canada’s. (See table, p. 12.) In 2012, the United States, which has not previously conducted marketing activity aimed at attracting international visitors, launched the high-quality “Discover America” campaign in Canada, the U.K. and Japan (later the campaign will expand to Brazil and South Korea). This campaign, which has a budget of $12.3 million for the first three months, will create additional competitive challenges for Canada in these markets.
o A strong Canadian dollar is good for importers but not so good for exporters – and tourism is an “export”. This currency challenge is not helped by the fact that Canada is the only G8 country that does not have a value-added-tax refund program for international visitors.
Moving Forward. In moving forward, both the need for government fiscal responsibility and the realities of limited resources have to be recognized.
However, Canada stands to lose even more international market share if national tourism marketing initiatives are reduced. Remember the truism “out of sight out of mind”. There is an imperative to consider new, alternative, creative ways to find resources to support international tourism marketing. Industry leadership has never been so important.