Industry Committee on Dec. 7th, 2009

[The Vice-Chair, Liberal, Anthony Rota]

Thank you very much.

Now we'll continue with Mr. Bouchard.

[Robert Bouchard, Bloc, Chicoutimi—Le Fjord, QC]

Thank you, Mr. Chairman.

I want to thank you as well for being here this afternoon.

I would like to go back to the question of the visas that are required of Czech and Mexican nationals. I heard that those figures were negative, that is to say that the results were negative.

I also have an example to give you, that 90,000 Mexican tourists visit Montreal every summer. So this has a major impact. There are no doubt other examples elsewhere in Canada. Have you prepared any arguments or examples that you've submitted to the Canadian government or that you are preparing to submit?

What are your intentions in that regard? Would they be to do nothing, write a brief, make demands? I would like to hear what you have to say on that question.

[Michele McKenzie]

I can answer that from the point of view of how we're responding to it from a marketing point of view. The CTC, as a crown corporation, is not a lobbying organization with respect to the policy decision. But from a marketing point of view, we are working very hard with our airline partners and with our industry partners to mitigate the response in the market.

You note the very strong visitation to Montreal from Mexico. It's been one of the great growth markets in Canada with year-over-year growth in 2008 over 2007 of almost 22% across the country. And that is concentrated in some key areas where there is direct air access. And one of those, of course, is Montreal.

So we'll continue to work with our partners, our airlines, and our tour operators to make sure their customers have good information on how to get those visas.

[Christopher Jones]

Perhaps I could answer. There are three things we would see as being important here.

The first would be to increase consular services in those markets for the time being. I know it's a medium-term objective of the government to lift the visa requirement on Mexico, or at least that was indicated by the Minister of International Trade at one point. But for the time being, in the absence of that, we need to increase the number of consular services, staff, and resources available to process the applications.

I had a meeting recently with CIC. We might want to consider translating these applications into the native languages of the countries from which people are applying.

Second, we are beginning to form an industry committee with the department to look at ways, where in other emerging markets there are likely to be visa issues that could replicate what we saw with Mexico, to start having a better understanding of the tourism impacts of that.

And finally, as I understand it, biometrics will be required in the next couple of years from some of these markets. So we need to think carefully about how we're going to use biometrics to expedite the visa process.

[Anthony Pollard]

Mr. Chairman, I'm not going to go over what my two colleagues just said about this, but in terms of being able to facilitate the process in our missions around the world, this also has an impact on, as I mentioned this earlier, the temporary foreign worker program wherein you have to process the individuals in these countries. Whether it's in Mexico, for a Mexican citizen wanting to come to Canada on a holiday who needs a visa or somebody in Mexico wanting to work in Canada somewhere in the travel or tourism industry, we need to ensure that we have the people around the world.

In Minister Flaherty's budget not too long ago, I believe there was an infusion of $40 million or $50 million, but the people at DFAIT have said very clearly it's a drop in the bucket. When you end up with x number of people all lined up, I don't care whether it's to get a visa or to get a job, we need to make sure we have the resources in our missions around the world to be able to handle this.

So it's twofold.

[Robert Bouchard, Bloc, Chicoutimi—Le Fjord, QC]

The Hotel Association of Canada said that, in 2009, there was a major decline, a drop in the tourism industry and a deficit in money spent in Canada by foreigners.

Can that be attributed to two or three factors? Is the currency an important factor? There's also the economic crisis. Should other factors be taken into account? In short, can this major decline in the tourism industry be attributed to two or three factors? Are there more?

[Anthony Pollard]

You have probably identified most of it. Travel and tourism is influenced by the economy. When the economy went into a tailspin, we went into a tailspin. Why? If you don't have a job, you don't take a holiday; and if you're a business, you ask whether you really need to take that trip. So that had an impact on us, more than anything.

By the way, this is having a bigger impact now than what we had with SARS or with 9/11, and so forth—just so we're all on record about that, and I think my colleagues would support it. But it's also reflective of the problem we have with a tightening border, with the passport requirement, and with the dollar. When the dollar was trading at 65¢, if you came to Canada for two days, the third day was free. That's what it was. When we have a dollar that's at around 95¢ or so—my friend Gord Brown operates hotels right on the border and he knows this better than anybody—the fact is that all of these combined just make a real mess for us.

So to identify it as one specific thing, no, but together, boy oh boy, as I said, we lost $625 million in a seven- or eight-month period.

[The Vice-Chair, Liberal, Anthony Rota]

Perfect, thank you very much.

Now we'll continue with Mr. Brown.

[Gord Brown, Conservative, Leeds—Grenville, ON]

Thank you very much, Mr. Chairman.

I'd like to thank our witnesses. I've had the pleasure of working with, I think, all of you in some capacity.

My riding of Leeds—Grenville, which is along the border, as Mr. Pollard said, is heavily dependent upon tourism. In fact, just last Friday we held a tourism summit at which we had about 80 tourism operators. It was the day after the ADS announcement, and I can tell you there was significant excitement about that.

Also, back in September, Minister Prentice was down in the riding to take part in a ceremony where we had a friendship agreement with the Thousand Islands Lake in China. That was an exciting development for our region.

With regard to last Thursday's announcement of ADS—and I know it was a long time coming, but we're glad that it has now been accomplished—maybe Ms. McKenzie, Mr. Pollard, and Mr. Jones could tell us a little more about how tourism operators could actually prepare for this. There's a lot of excitement. The numbers at this point are fairly small, but how could they could get ready to take advantage of this great opportunity?

[Anthony Pollard]

It's funny, Michele and I were communicating via e-mail last week after the announcement came out and I said, “This is great. Now we have it, what do we do with it?”, which I believe, Mr. Brown, is your question.

The fact is that we now need to work very closely with the inbound operators to be able to say, okay, who has their feet on the ground over in China? Who is over there in Shanghai, Xi'an, Beijing, and so forth that can facilitate this?

I had a very large operator, who does 75 to 80 properties, contact me last week asking for names of people they can be in contact with, which is what you and I were talking about after this came out, Michele. That's what we need to put the focus on right now. Canada is a really big country, but we're just a little tiny thing out there. We need to get in there and work very closely with them.

Michele, I know that in your capacity right now and then prior to that, you've done a lot of work with those receptive operators and so forth. I'll defer to you.

[Michele McKenzie]

We will be working with all of those receptive operators here in Canada and also the tour operators that have the ability to market. This is still a controlled environment.

What is interesting for us, and maybe the one benefit of having waited so long for this, is that we've seen where the ADS agreements have not gone so well for some of our competitors. I think about countries like Australia and maybe even New Zealand, for instance, that have had to go back and rethink how some of those agreements were structured and how some of the operators were functioning. We have the benefit of that learning.

The focus that we'll be placing right now is on communicating with the industry at large as to how to take advantage of this opportunity, what we're doing on the ground, and how they can get a share of that business.

[Gord Brown, Conservative, Leeds—Grenville, ON]

One of my roles around Parliament is to co-chair the Canada-U.S. Interparliamentary Group. Mr. Masse is one of the vice-chairs on that as well. We all know the issues that are involved with the thickening of the border and the issues involved with that, with getting people moving back and forth across the border.

Ms. McKenzie, you said one thing that is very important, that three out of four international travellers who come to Canada are from the United States. We're very excited about the opportunity in China, but what can we do and what can the Canadian Tourism Commission do in the short term to try to get those numbers back to where they used to be? It is having a pretty dramatic impact across the country, especially in border communities.

[Michele McKenzie]

Three out of four of our travellers are coming from the U.S., and almost half of our international revenue is coming from the U.S. It is our most important international market by far. It has been in decline, but that's not to diminish the importance of this market going forward.

With our core budget we are invested in those four city markets that I spoke to you of. With the stimulus in 2009 we were able to extend that marketing into Chicago with some great results. We were working with United Airlines, and they had a tremendous result with a two-for-one fly-into-Canada package. They were able to sell packages all across Canada from coast to coast to coast. We were very pleased with that.

That would be our approach going forward: take the resources we have and dedicate them to certain city markets where we know there's good airline access, and also, in some of those cases, attract from the direct market as well.

[Gord Brown, Conservative, Leeds—Grenville, ON]

Thank you.

My next question will be more directed at Mr. Pollard or Mr. Jones.

Mr. Jones mentioned the foreign convention tour incentive program, affectionately known as FCTIP. A few years ago the government phased out the former GST visitor rebate program. Maybe we could hear a little about the new program. I've been hearing from some that it's not as easy to use for some of the tour operators. How may that be improved so that it can be better used?

Also, on the HST, I believe in the Atlantic provinces the entire HST is rebatable to foreign tour operators, while right now in Ontario and B.C., it's not; just the PST portion is not. Maybe we could hear a little bit more about the HST/GST program.

[Christopher Jones]

You're correct about the HST, and I think it's assumed by the industry that the full HST amount will be rebatable for tours, meetings, and conventions. We would at least hope so. That's the fervent desire of the industry.

I was talking to some tour operators today, though, and what I think is important to recognize is that the global travel market is morphing a little bit. For instance, even in China, we see that there's a category or a market segment of people who may prefer fully independent tours, who may want to travel independently, particularly the younger folks between 30 and 40. Perhaps what we have to look at is finding a way to reaffirm the principle that tourism is an export industry and to reinstate an individual visitor rebate program, because if we can't necessarily offset the business costs, at least we can help the customer, the traveller, or the visitor get some of that money back, and that helps everybody in this sector.

What we are hearing from tour operators about the FCTIP is that it's a little burdensome and cumbersome to comply with. There's a lot of paperwork involved. Also, regrettably, some tour operators are choosing to price the GST right into their product offering as opposed to reclaiming it, so they just make the consumer pay.

We don't want to see that. We've had some good, encouraging discussions with Minister Ablonczy and the CRA about their willingness. I think this HST might be an occasion to revisit that.

[Gord Brown, Conservative, Leeds—Grenville, ON]

Mr. Pollard.

[Anthony Pollard]

Mr. Brown, the information I have from a director general over at CRA is that the full HST would be rebated. Do I have that in writing? No, but he told me that orally, and I've no reason to believe differently. I think that's very, very beneficial for our industry. It's a bonus and we look forward to seeing that happen.

[The Vice-Chair, Liberal, Anthony Rota]

Thank you very much, Mr. Brown.

Now we'll go on to Mr. Masse.

[Brian Masse, NDP, Windsor West, ON]

Thank you, Mr. Chair.

Thank you for being here today.

The passport implementation, the petrodollar policy we have of a high dollar value in Canada right into the United States market, and the GST rebate being eliminated are three significant steps against your industry that have really targeted three-quarters of our market. I don't know of another industry facing similar challenges to this extreme, aside from the auto industry and few others like this.

You need to understand that in the normal process for legislation like the HST, it would actually go to committee, there would be study and then debate in the House of Commons, and there would be votes on it. That would be the normal process to get your input. That's being taken away from this debate right now. Quite literally, you have some of the very limited testimony that's going to take place if we don't change paths right now.

Here's what I want to know. Is it important, in your opinion, for the HST to be studied in order to look at the consequences and at where some solutions could be found prior to its implementation?

[Joyce Reynolds]

Obviously this is a critical issue for our industry. When the GST was imposed back in 1991, our sales declined by 10.6%. It was a recessionary period at that time. In contrast, the GDP declined by 2%. We were identified in an Ernst & Young study as being in a unique position, because consumers had the option of purchasing the same or similar products tax-free from grocery stores. In our opinion, the GST is a flawed tax. By extending it to the province of B.C., where there's no tax on restaurant meals, history is going to repeat itself and we're going to suffer the same declines in customer sales and employment.

There's no policy decision that has had a more severe impact on our industry than the imposition of the GST, so we are extremely concerned about the impact this will have in British Columbia. We absolutely need to have more study and we need the federal and provincial governments to come together and work out solutions.

[Christopher Jones]

Thank you, Mr. Masse.

Clearly, there are components of our industry, like the bed-and-breakfast sector in British Columbia, that had hitherto been exempt from the PST but are now going to see a significant rise in their costs. I think, though, that perhaps we should preface this by saying that all service sectors should be assessed on the impact of an HST, not just tourism, particularly if you're a labour-intensive industry. The impacts that befall a sector like ours would be worthwhile examining.

One thing we could perhaps say is that given that this is falling in the midst of both an economic recession and a pretty steep decline in visitation, the timing of this isn't so good. Maybe in some ways--and this could be a matter for the provincial governments--we could look at some kind of holiday or phase-in that would allow some of the tourism businesses not to be whacked so hard and so suddenly with this steep increase in their prices. But in some ways, that's a provincial issue.

That would be my view.

[Brian Masse, NDP, Windsor West, ON]

There is no doubt that this is a federal issue. I mean, nothing happens without it starting here. It's born here. It has also been the history of this country, with regard to this tax policy, of making the other provinces come to the table too.

It's interesting; ironically, your members are going to pay for it both ways. Right now this government is going to have to borrow money and pay interest on that money to bring in a tax against their own members.

I just commissioned an economic paper that estimated that if we used the borrowing rate over 10 years to pay this off, it would actually cost the government $9.9 billion. That's on the average borrowing rate of the last 10 years that the government would actually have to pay on that.

Mr. Pollard, are you concerned about that for your members? If you look at some of the packages of the hotel industry--golfing, lift tickets, and a whole series of different services that attract people--they will now become more expensive. Bundling is one of the more attractive things in the hotel industry. That will automatically go up now.

[Anthony Pollard]

Mr. Masse, we have major concern anytime prices go up for whatever reason. I have to say, though, that in eastern Canada, when the HST was brought in, I saw a lot of the debate that is taking place today.

I also know that down east, notwithstanding some one-off items, the vast majority of hoteliers--who are in the real estate business, fundamentally, and you know that--will say that notwithstanding some items, they are supportive of an HST.

[Brian Masse, NDP, Windsor West, ON]

But have any approaches been made to your industry about studying this issue and looking at the amelioration? I have seen studies done from the private sector and lobby groups. Have any of you been approached by the government on this issue?

[Anthony Pollard]

No.