Tourism in crisis, business collapses for companies but the federal government doesn’t care
TORONTO – Tourism to Canada is in crisis: this was declared by the head of the Tourism Industry Association of Canada, according to which – as reported by Global News – companies in the sector are struggling to stay afloat and not drown in a sea of debt caused by the shortage of foreign visitors. A concern confirmed by a survey conducted between April and May by Nanos – online, on a sample of 149 accountants of tourism companies – according to which about 45% of operators could close within three years, unless the government intervenes to adjust the terms of the loans.
“Unless there are changes to the repayment system and the repayment requirements for loans received by companies, businesses such as campgrounds, hotels, amusement parks are at risk of closing in the next three years” confirmed Beth Potter, CEO of the tourist-commercial organization.
Many companies interviewed said they will not be able to make debt payments that are due in the next two years. Loans include those obtained through federal relief programs launched during the pandemic, such as the Canada Emergency Business Account (CEBA), as well as the Regional Relief and Recovery Fund and the Highly Affected Sectors Credit Availability Program.
The Tourism Industry Association of Canada is therefore requesting the federal government to extend the interest-free repayment term for CEBA loans to December 31, 2025, two years after the current deadline. It also asks Ottawa to increase the “forgivable” portion of fully repaid loans to 50%, from a maximum of 33%, and to extend the deadline for that forgiveness until the end of 2024, rather than later this year.
About 30% of respondents, mostly small to medium-sized businesses, reported outstanding debt of more than $250,000. One in five incurred between $100,000 and $250,000 in debt.
Against these financial commitments, there has been no economic payoff: in March, the combined number of visitors to Canada and returning residents stood at 77% of March 2019 levels, according to the most recent data from Statistics Canada . And Potter himself says business travel also remains down from pre-pandemic totals. “Not just corporate events like conferences and trade shows and stuff like that, but also transient business travel, with someone flying to Toronto for a meeting and then flying back”.
Even in the United States, whose travel sector has rebounded faster than Canada’s, business and international travel remain below 2019 levels, “and business travel appears to have stalled at current levels,” says the TD Cowen analyst Helane Becker in a note to investors. Labor shortages remain another problem, hampering entrepreneurs’ ability to fill skilled positions, market and promote, serve clients at scale, and manage their teams. “We were in a difficult position with the job before the pandemic hit and the pandemic has exacerbated it” Potter points out.
And the exit of many baby boomers from the workforce hasn’t helped. “They said, ‘No, we’re out, we’re retiring, we’re moving to the cottage.’ We’ve lost a huge amount of leadership within the industry”.
But the federal government does not seem to care about the operators’ alarm: after several extensions of the program, the same government states on its CEBA website that all “repayment deadlines are now final and cannot be changed”.
The CEBA program has funded more than 898,000 small businesses and nonprofits with $49.2 billion in interest-free loans up to $60,000 since the COVID-19 pandemic began, according to data of the government which now wants back that money and is not willing to wait any longer.