Summer 2018 is coming to an end, and it looks like the country's tourism activity is about to surpass that of 2017.
The Conference Board of Canada expects the sector to grow by 2.6 per cent. This growth is due, in part, to more families choosing to stay in the country for their holidays. International tourist visits are also expected to increase by 6.7 per cent, partly due to 2018 being designated the Canada-China Year of Tourism. In addition, overnight stays by travellers from the United States are expected to increase by 3.4 per cent this year.
A significant part of the Canadian economy
This is good news for the Canadian economy. Travel and tourism contributed $36.9 billion directly to GDP in 2016, which is equivalent to about 1.6% of Canada's GDP for the same year, according to the World Travel and Tourism Council.
Statistics Canada data also shows that tourism is a significant source of employment.
More than
700,000
Canadians are directly employed in the tourism sector.
Approximately
4.5%
of the Canadian workforce is part of the tourism sector.
These figures are comparable to those in the finance and insurance sectors, which directly employ 725,000 workers. In addition, many other jobs are indirectly linked to tourism through its supply chain.
Given the importance of the tourism sector to the Canadian economy, it is worth asking how business owners can go about improving their competitiveness.
Tourism business owners must invest to stay competitive
A number of factors are driving the growth of the tourism sector:
Cruise ship activity is expected to increase in many provinces this year.
Convention activity is expected to be strong in 2018.
Domestic air transport capacity continues to expand, and new ultra-low-cost carriers are emerging.
New direct flights from Europe, Asia-Pacific and South America provide Canada with access to new international markets.
However, rising gasoline prices reduce the disposable income of potential tourists and increase the cost of travel. In addition, high accommodation prices in some areas may deter potential visitors.
Business owners in the tourism sector should consider reinvesting some of their profits to improve their competitiveness and be able to weather a potential economic downturn. Recent BDC research shows that improving productivity through investment, increasing the use of digital technologies and hiring new immigrants to fill labour shortages are promising strategies for tourism businesses.
Canada-China Tourism Year
The Chinese and Canadian governments have designated 2018 as the Year of Canada-China Tourism to celebrate the ties between the two countries. Approximately 5% of the Canadian population has ancestry engineer database from China. In 2016, more than 610,000 tourists from China visited Canada. The Government of Canada has set a goal of doubling this number by 2021.
How do the most successful companies in the tourism sector stand out?
Our May 2018 study of Canada’s top performers shows that 4.2% of tourism companies are top performers. This is slightly higher than the average for all sectors, which is 4%. Top performers have higher revenue growth and profitability than their peers (as measured by the median for the sector).
We found that the best performing firms in the tourism sector are more productive and invest more in machinery and equipment, such as information and communications technology (ICT).
Comparison of the best performing companies* in the tourism sector with their peer companies
Top performing companies Others Difference
Productivity (sales/staff) $65,179 $46,853 40% higher
Profit margin (net income before taxes/sales) 17% 3% 5.7 times higher
Net assets in machinery and equipment per staff member $4,109 $3,467 19% higher
Net ICT assets per staff member $499 $235 2.1 times higher
Source: Statistics Canada, BDC calculations, 2013-2015 average.
Strategies for Tourism Business Owners Who Want to Achieve Excellent Performance
Small Businesses: Focus on Productivity to Ensure Your Growth
The most successful companies in the tourism sector are more productive, which allows them to expand and achieve economies of scale to increase their profits.
Medium-sized SMEs: Invest more
Medium-sized businesses in the tourism sector need to reinvest their profits to improve their competitiveness and be better able to seize new opportunities in an increasingly automated and digitalised economy.
Large SMEs: Diversify your markets
Large SMEs need to expand internationally. The best-performing companies in the tourism sector are particularly diversified compared to their peers. Indeed, 38% of them do business in several foreign markets, compared to only 5% of other companies.
Tourism companies must increase their use of digital technologies
We recently conducted a study to assess the digital maturity of small and medium-sized businesses in Canada.
We found that 23% of tourism businesses are digitally advanced, which is higher than the average for all Canadian businesses of 19%. These advanced businesses are effectively using digital technologies to conduct their business and have the right culture to drive change within their organizations.
On the other hand, 59% of companies in the tourism sector are conservative when it comes to digital. Given their large number, there is still room for action to raise the level of digital maturity in the sector.
Visit bdc.ca/spme to learn more about digitalization. Try our new Digital Maturity Assessment tool, available October 15, 2018, and get personalized advice on how to digitally transform your business.
Labour shortages are particularly affecting companies in the tourism sector
Another recent study assessed the extent of labour shortages in Canada and their impact on business owners.
In the tourism sector, 48% of business owners said they had difficulty hiring new staff. This percentage is much higher than the average for all sectors, which is 39%.
Our research shows that labor shortages are holding businesses back from growing. Specifically, businesses most affected by labor shortages are 65% more likely to experience low growth.
In particular, we found that tourism businesses are more likely to hire less experienced or younger staff due to a shortage of workers. The extra time and effort required to train less experienced staff prevents senior and executive managers from focusing on high-value tasks, such as strengthening customer relationships or launching new projects.
Strategies to Help You Hire the Workforce You Need
Our study also presents possible solutions.
