Tourism companies in ‘bad’ shape, with rising debts and meager demand: industry
The head of the Tourism Industry Association of Canada says businesses are struggling to stay afloat under a mountain of debt and a lack of foreign visitors.
In a poll of tour operators, some 45 percent said they were likely or somewhat likely to close within three years unless the government intervened to adjust their loan terms.
“Unless something changes about the repayment system and repayment requirements, they are in danger of closing for the next three years,” said Beth Potter, CEO of the trade organization.
“Everything from campgrounds to hotels to theme parks to outdoor adventure,” Potter said.
“Festival events are often run by non-profit organizations, and they are currently very challenged to pay back these loans,” she said.
“It’s bad.”
Many companies surveyed said they will not be able to pay debts that fall due in the next two years. The loans include loans taken out through federal pandemic relief programs such as the Canada Emergency Business Account (CEBA), the Regional Relief and Recovery Fund and the Highly Affected Sectors Credit Availability Program.
The tourism organization is calling on 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 percent, from a maximum of 33 percent, and to extend the qualifying deadline for that forgiveness to the end of 2024, rather than the end of this year.
About 30 percent of respondents, mostly small and medium-sized businesses, reported more than $250,000 in outstanding debt. One in five claimed debt between $100,000 and $250,000.
One reason for revenue problems weighing on reimbursement efforts is a lack of tourists from abroad compared to 2019.
In March, the combined number of visitors to Canada and returning residents was 77 percent of the March 2019 level, according to the most recent figures from Statistics Canada.
Potter said business travel in particular remains lower than before the pandemic. “Not just corporate events like conferences and trade shows and things like that, but also temporary business trips, where someone flies to Toronto for a meeting and then flies back.”
Americans have “cocooned into their own country,” Potter said, adding she remains hopeful they will return soon.
Even in the United States, whose travel industry has recovered faster than Canada’s, business travel and international travel remain below 2019 levels — “and business travel appears to be stalled at current levels,” TD Cowen analyst Helane Becker said in a note. to investors in May. 30.
Labor shortages remain another problem, hampering entrepreneurs’ ability to fill, market and promote skilled positions, serve clients at scale and manage their teams.
“We were in a difficult position with labor before the pandemic hit, and the pandemic has only accentuated it,” Potter said.
The departure of many baby boomers from the workforce hasn’t helped, she added: “They’ve said, ‘No, we’re gone, we’re retiring, we’re moving into the cottage.’ We have lost a lot of leadership within the industry.”
After several program extensions and upgrades, the government says on its CEBA website that all “reimbursement terms are now final and cannot be changed”.
The CEBA program funded more than 898,000 small businesses and nonprofits with $49.2 billion in interest-free loans up to $60,000 after the outbreak of the COVID-19 pandemic, according to the government.
The online survey, conducted by Nanos, surveyed 149 financial controllers and accountants from companies in the tourism industry between April 28 and May 12.
This report from The Canadian Press was first published on June 20, 2023.
