Industry Committee on June 17th, 2008

[Randy Williams]

Do you want to handle that one, Michele? You're aware of a couple of research projects on that. Some of the numbers are pretty scary, so we don't want to be overly optimistic.

Please go ahead, Michele.

[The Chair, Conservative, James Rajotte]

Ms. McKenzie.

[Michele McKenzie]

Thank you.

We have been working hard to compete for the China market and we have been experiencing growth. Up until last year, growth was in the mid-teens to 20% per year. That growth slowed last year to less than 10%, and we expect that will be our situation in 2008.

There are a number of factors driving that, including the fact that the world is competing for outbound business in China. Because we do not have ADS, we do not have the ability to market in the free marketplace in China. We can do specific promotions, we can do promotions working through other partners, but as a country we do not have the unfettered ability to market in China. From the CTC's point of view, that's the main attraction of approved destination status--the ability to market freely in that marketplace.

[John McKay, Liberal, Scarborough—Guildwood, ON]

What difference in numbers does that make?

[Michele McKenzie]

Our target with ADS is a 25% to 30% growth rate per year, year over year.

[John McKay, Liberal, Scarborough—Guildwood, ON]

From what base does that start?

[Michele McKenzie]

Our base right now is about 180,000 visitors from China. As I said, our growth now has slowed to about 7% to 10% per year, but we think that with ADS we could increase it to around 25%.

[John McKay, Liberal, Scarborough—Guildwood, ON]

So you would be up to a million visitors a year?

[Michele McKenzie]

We'd like to be. Of course, what the overall capacity would be depends upon airlift. We often benchmark ourselves against Australia in terms of our competition in other markets. While the math could get us up to close to a million visitors, we think the potential for Canada in the foreseeable future is in the range of 400,000 to 500,000 outbound visitors to Canada.

[The Chair, Conservative, James Rajotte]

Thank you.

Thank you, Mr. McKay.

We'll go to Mr. Van Kesteren.

[Dave Van Kesteren, Conservative, Chatham-Kent—Essex, ON]

Thank you for visiting with us.

Very quickly, what are the total tourism dollars, Mr. Williams?

[Randy Williams]

They're $70 billion.

[Dave Van Kesteren, Conservative, Chatham-Kent—Essex, ON]

What is the deficit for our own travellers? What are Canadians spending abroad?

[Randy Williams]

We're at a $10 billion travel deficit. We are spending $10 billion more than visitors to our country spend.

[Dave Van Kesteren, Conservative, Chatham-Kent—Essex, ON]

There's all this talk about China, and I agree that we have to open that market up. But you made a point, sir, about Canadian travellers. You said this is not the Windsor auto industry, and something just struck me. I beg to differ. What you're telling me is exactly like the case with the Windsor auto industry. They are complaining to us that their numbers are going down, but Canadians are buying foreign cars.

Should you not be concentrating more on Canadians? We can do all these great things and get the Chinese in, but isn't the biggest key to keep the Canadian tourist back here in Canada?

[Randy Williams]

Most of the $70 billion Canadian market, 60-odd percent of it, is from Canadians travelling within Canada domestically. The ability to incrementally increase that percentage faces a question mark, and it is a lower-yield market. In other words, a Canadian traveling in Canada is a lower-yield traveller than one from further away. The Canadian Tourism Commission and others in Canada, such as Ontario Travel and so on, are promoting more to the mid- and long-haul U.S. markets, those that are less price sensitive, because the close-in border just isn't coming back.

[Dave Van Kesteren, Conservative, Chatham-Kent—Essex, ON]

Prior to when I was in private business, I had a boss who introduced me to the spreadsheet, and he always used to tell me, “It's in the numbers, it's in the numbers.” I wish I had more numbers, because I think it's in the numbers. I wonder whether you could get this committee that—all the numbers, as many numbers as you can find, concerning what the travel has been, where it's going, what type of travel it is.

I suspect there's another story here too, and I think you can probably substantiate this: that the taste for travel has changed. We've become more affluent. We're no longer camping, and Americans are no longer camping—all those things. I really think we need to have some numbers.

I want to ask another question too—maybe we should go to Mr. Facette—on airport rents. Years ago, didn't we need to make major improvements? Wasn't it deemed necessary by the industry that these improvements be made and agreed that they would be paid for by rents?

I guess my first question is, wasn't that an agreement? Aren't we going back on that agreement when we ask for rents to be...? The public has a right to....

[Jim Facette]

The agreement in 1992, when the operation of the airports was transferred to local airport authorities, was that the federal government didn't have the money to upgrade the value of the asset, so that you would take it, you would upgrade it, and for the privilege of operating it and paying for the upgrades. “Oh, by the way, you're paying us airport rent.” Over time, the airport authorities looked at it and said, we have a gun to our head here, which was: either take it the way it is and upgrade it, or else you ain't getting it and you won't be able to operate it on behalf of your community—and you have to pay us rent.

They took the rent deal early on, and the lease, the legal document that exists for the airport authority that operates the airport, is between the airport authority and Transport Canada. That legal document, that type of lease, has changed. The first four that went—Vancouver, Calgary, Edmonton, and Montreal—have what was called a local airport authority lease. They eventually became Canada airport authority leases, over time.

Right now we have a changing business environment. At the time of transfer, airports were being operated very differently from how they are today. Airport authorities operate a business. They market the community in the same way as a local tourist destination does, or anything else. We ourselves, even CAC, market Canada, believe it or not.

[Dave Van Kesteren, Conservative, Chatham-Kent—Essex, ON]

I hate to interrupt. I have one more question.

[The Chair, Conservative, James Rajotte]

I'm sorry, you're running right out of time. You have five seconds.

[Dave Van Kesteren, Conservative, Chatham-Kent—Essex, ON]

If you could provide this committee with a little bit more documentation on the original agreement and where it's gone, I think that would be helpful too.

[The Chair, Conservative, James Rajotte]

Thank you, Mr. Van Kesteren.

Mr. Facette, if there is any information you want to provide to the committee, we'll distribute that to all members.

Monsieur Vincent.

[Robert Vincent, Bloc, Shefford, QC]

Thank you. Hello, everyone.

I looked at your report on the tourism industry. I will continue on the topic of airports because it is interesting. It is one of the most blatant problems. As concerns figures, the report says: “On the specific index of Ticket Taxes and Airport Charges, Canada is ranked 122 out of 130 countries.” These figures show that we lag well behind.

I also see that you must pay $300 million annually in airport fees. How can we address these two elements, that is, airport fees and the fact that the tourism industry could encourage tourists to come to Canada, by no longer paying these $300 million? What is another way that we could do this? I know that a brief of the Standing Committee on Finance of the House of Commons makes two proposals in this regard: the elimination of airport rental costs, and the amendment of the Excise Act to authorize the purchase of duty-free products upon arrival.

Do you think that this proposal would help us stimulate tourism here?

[Jim Facette]

Simply, yes. As the CEO of Air Canada said today, if these kinds of fees can be reduced, then that paves the way to lower flight costs. It's as simple as that. Canadian airports have promised that if their rental costs are reduced, these savings will be passed on to airline companies. It's simple.

[Robert Vincent, Bloc, Shefford, QC]

Do you think that the recommendations made before the finance committee should be taken up here, at the committee on industry, science and technology, and implemented rather than be left to gather dust? What do you think?