TORONTO—The Canadian economy still has a long road back to recovery and hoteliers should expect a bumpy ride, according to Avery Shenfeld, chief economist at CIBC World Markets.
Shenfeld delivered a state of the industry presentation during the Hotels Association of Canada’s 2010 Annual Conference at the Fairmont Royal York in Toronto.
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Avery Shenfeld
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“What is good is that 2009 is behind us, and we are on that first step back toward economic recovery,” he began. “… But this is going to be a bit of a longer road back than we would typically see … because this recession was linked to a global collapse.”
The global economy has seen slight improvement during recent months, to the tune of a 4-percent growth rate. That growth is unbalanced, however, with emerging markets shouldering much of the burden as their more mature counterparts, such as Europe and North America, lag behind at 2.5 percent.
Despite this lackluster recovery in North America, things have been looking better in Canada, but Shenfeld warned not to get overly optimistic. Much of the economic improvement in recent months has been a direct result of government intervention—something that won’t last forever. When government stimulus initiatives slow down in 2011, the private sector is going to need to step up, he added.
That’s also the case in America, where government stimuli and increased private sector inventories fueled solid gross-domestic-product growth during the fourth quarter of 2009. That growth likely will slow as the year progresses, Shenfeld said.
What does that mean for potential tourism opportunities into the True North? While corporate travel will show slight improvement from last year, the outlook for American leisure travelers crossing the Canadian border is cautiously optimistic at best, according to Shenfeld.
The exchange rate certainly doesn’t help in this regard.
“The Canadian dollar will remain pretty close to parity on the U.S. dollar over the next few years,” Shenfeld explained. “Don’t bank on the Canadian dollar weakening to help drive the attractiveness of Canada as a tourism destination. … That will remain a challenge to the Canadian tourism sector.”
To close, Shenfeld offered a number of key implications for the Canadian tourism industry and the economy in general:
• Expect weaker than normal recoveries during the next two years than one would normally see after a recession.
• Americans will be cautious about discretionary spending in 2010. There must first be a solid year of job growth before these consumers start loosening the purse strings.
• Business travel in Canada will pick up by 2011 on healthy earnings gains.
• The Canadian dollar will remain not far from parity against the American dollar.
• Ontario will experience above average economic growth in 2010, but Western Canada will take the growth lead again by 2011.
