Industry Committee on Aug. 10th, 2020

[Martin Roy]

They're important. As I said, we are facing a lot of expenses right now. Artists are one of them, but we have a lot of expenses with just keeping our teams together. This is a huge challenge. I see a lot of festivals and events going virtual, and I salute that, but there's nothing like an in-person festival.

[The Chair, Liberal, Sherry Romanado]

Thank you very much.

We will now go to MP Dreeshen.

You have the floor for five minutes.

[Earl Dreeshen, Conservative, Red Deer—Mountain View, AB]

Thank you very much, Madam Chair.

To each of the witnesses.... Like every other community across Canada, the tourism sector here in Alberta has been financially decimated by this pandemic due to the cancellation of rodeos, conventions, sporting events, iconic exhibitions and other tourist attractions. Our local community volunteer base is very frustrated, as is the local hotel industry.

As the Tourism Industry Association of Canada pointed out from its recent survey, without immediate financial assistance many hotels and other tourism businesses will likely have to close their doors permanently. One of the things I have heard in my discussions with local hotel business people is “What can we do so that we're ready if this happens again?” Because shutting it down.... I know we had opportunities at the very beginning. We talked about using hotels to help with pandemic planning. I know it was mentioned earlier that that was something that had been done, but they want to make sure they're ready for it.

For the Hotel Association, with regard to the activities that took place, how do we see expanding those so that our hoteliers are going to have a bit of an idea of how they might fit in if we have to go through this again?

[Susie Grynol]

There are two answers to that question. One is that I think the government had to proceed with broad-based programming support, and we now find ourselves in this moment in time when tourism and the hotel sector look very different from every other sector. Every other sector is allowed to recover, and we're not.

One of the learnings here is.... If we get a liquidity structure in place that allows us to cover our fixed costs, that would be a good learning, and that's something we could easily resurrect the next time around, with the understanding that any support from government, like the wage subsidy, would need to have different parameters in a sector like this.

I think we will learn some of those elements as part of this. As for other ways for us to survive, we will be ready to support the needs of public health and provide shelter, etc., as we did in the last iteration.

[Earl Dreeshen, Conservative, Red Deer—Mountain View, AB]

Thank you very much. I think that's really the point, but we'll be better prepared for it this time.

[Susie Grynol]

Absolutely.

[Earl Dreeshen, Conservative, Red Deer—Mountain View, AB]

I think that's the critical part.

Speaking now to CAFE, as I mentioned earlier, the Alberta Association of Agricultural Societies is one of your members. Community volunteers are keeping our cultural heritage alive, and there is some serious frustration. Some of these events that have been going on for more than 100 years are in big trouble. I'm just wondering if you could speak to some of the discussions you've had with your members, so that we can look at how we can remain viable now and in the future, again, if something like this happens.

[Christina Franc]

Yes, this has really been a bit of a game-changer for us.

Our industry is based on mass gatherings—that's what we know and what we can do. So, yes, there have been situations before where mass gatherings have been restricted, but not in the past several years. Looking at it now, our business, our industry, is looking to diversify within our domestic tourism envelope, I would say, so we're looking to do other activities. We're looking at a smaller scale, at drive-ins and drive-through activities, but also focusing a bit more on agri-tourism and how we can continually support our local communities.

From a federal level, I would say, it's support to help us diversify our business model, as well as to help us get our buildings up to par. We have a lot of beautiful buildings, some of them heritage buildings, and to get them up to par so they could be used for multi-purpose functions would definitely help us in the future.

[Earl Dreeshen, Conservative, Red Deer—Mountain View, AB]

Thank you very much.

For my third and final question, perhaps, Mr. Grue, you could go through this.

We know that a huge part of our nation's cultural landscape is the Canadian Football League. The CFL has been a big part of our national identity for over 100 years. With all the assistance that is going to other cultural icons, we just can't throw up our hands and abandon the organization that brings in hundreds of millions of dollars to communities every year.

Does your organization see a role for the federal government to help support this iconic part of not only our tourism industry, but also our cultural heritage?

[Clark Grue]

Business events around the Grey Cup are usually where we would focus our efforts, and then, of course, the festival side would have the Grey Cup side. Personally, being a huge fan of the CFL and its cultural connection to Canada, I think it's extremely important that we support it and see it happen this year.

[Earl Dreeshen, Conservative, Red Deer—Mountain View, AB]

Thank you.

[The Chair, Liberal, Sherry Romanado]

Thanks you so much. I just have to throw in “Go, Als, go”.

On that note, we'll now move to Mr. Longfield. You have the floor for five minutes.

[Lloyd Longfield, Liberal, Guelph, ON]

Go, Bombers, go.

I want to send my questions over to Ms. Grynol. Thank you for spending time from your holidays in this committee meeting and also supporting the hotel sector while you're doing that.

This is the industry committee and not the finance committee. I know that the finance committee is looking at financial models. When we talk about liquidity, I've been working with a local major chain in Guelph, as well as bed and breakfasts in Guelph and a conference centre in Guelph, which are very different business models, and they all rely on visitors, of course. In terms of the hotel and the conference centre, the rental of the space and the food and service that go along with it quite often provide the profit for the organization more than room rentals. Also, there are deposits that have been paid by not-for-profits or by weddings that are not going to happen, and in the next fiscal year, those deposits are still sitting on the books and will affect cash flow.

Could you maybe speak to the liquidity piece? I know we've had loans through BDC and EDC, usually with a credit union. As you pointed out, banks are not usually financing hotels. Could you maybe expand on the liquidity a little bit for us, please, just so we can understand how that industry works?

[Susie Grynol]

Yes, with pleasure.

The hotel industry is asset-based, so when you go to the bank and you apply for a loan, it's not like you rent the facilities and they only look at cash flow; they look at the actual value of the property. As I indicated earlier, the biggest challenge is that they just can't seem to put their finger on what a hotel is worth today, and that is the deepest, fatal flaw in the BCAP that we have been able to pinpoint throughout this process.

To answer your question about cash flow, based on our analysis of a 100-room hotel, over a 12-month horizon, they would need $600,000 in cash. That already builds in the assumption that the CEWS program will be in effect until December, at the reduced rate that is already scheduled, and there are no other programs that are really relevant in terms of relief.

[Lloyd Longfield, Liberal, Guelph, ON]

I'm thinking of Farm Credit Canada, as an example from outside of this conversation. They provide cash flow financing for farmers who are capital-intensive and have cash flow issues. They can go for special types of financing just to deal with cash flow issues.

Is there some similar program within the hotel industry, or is that something that we need to be recommending as part of our report?

[Susie Grynol]

Oh, I think it needs to be recommended. I think it needs to go through the financial institutions. We have studied this at length over the course of the last three or four months. We have been working very closely with Minister Ng's office and Minister Joly's office, bringing in financial experts to really break down what the challenge is here and what is happening.

Our key recommendation is that it needs to go through the financial institutions, but it needs to be 100% backed by the government. Otherwise, the government would have to build a separate system, like the one you're referencing. It doesn't exist today, and time is critically of the essence here.

[Lloyd Longfield, Liberal, Guelph, ON]

Thank you.

I'll go now to a smaller market size, the bed and breakfasts. We have a bed and breakfast in Guelph that had two visitors booked for the entire season. They were going to be coming up from the United States. That's not going to happen now, and for very good reason. We want to keep our communities safe. We have to watch whom we allow into the country and how we allow them in. However, it has a major impact on the smaller businesses. In this case, they'll be using their personal bank account as a way to finance their business, and because they're using a personal bank account, they don't get access to other services.

Do you have a short comment on that?

[Susie Grynol]

I would say that you are absolutely right, but that's not true just of the bed and breakfasts. In fact, most of Canada's hotel industry is owned by a comparably small business in a community. I think probably all the MPs on this call would know a local hotel owner who has invested all their livelihood.

What is happening right now with BCAP is that they are being asked for personal guarantees against the additional 20% risk that is currently on the bank's shoulders under BCAP. In the hotel sector, I would say that 70% are owned by small businesses. It is a critical challenge.

[Lloyd Longfield, Liberal, Guelph, ON]

Thank you very much.

[The Chair, Liberal, Sherry Romanado]

Thank you very much.

Mr. Blanchette-Joncas, you have the floor for five minutes.

[Maxime Blanchette-Joncas, Bloc, Rimouski-Neigette—Témiscouata—Les Basques, QC]

Thank you, Madam Chair.

First, I want to thank our guests for joining us today.

I want to emphasize the importance of the tourism industry in Quebec. This industry employs over 400,000 workers and generates close to 9% of jobs in the Quebec economy. We're talking about over 30,000 businesses. It should be noted that two-thirds of these 30,000 businesses are located outside the major centres, meaning outside the Quebec City and Montreal areas. Most of these businesses are small. Over 80% of these businesses have fewer than 20 employees.

Mr. Hamel, you spoke earlier about the importance of cash flow and possible moratoriums to help these businesses. We fully understand that small businesses have a more difficult time obtaining a large amount of cash flow. We completely agree with you regarding financial support for these businesses. You spoke of the changes to the regional relief and recovery fund, or the RRRF. Recently, changes were made to another program, the Canada emergency wage subsidy. As we know, this program has been very structuring for the tourism industry since the start of the pandemic. However, the new criteria for this program have put many tourism businesses in Quebec out of commission. The new criteria aren't necessarily adapted to tourism businesses.

Mr. Hamel, can you describe the negative impact of the new program criteria?

[Yan Hamel]

Thank you for your question.

There's a major impact on the tourism industry in terms of subsidies. The tourism industry, which was the most affected, received payroll support of about 75%. Starting in September, this percentage will drop to 65%, then to 45%, and to almost 0% by the end of November.

In terms of impact, festival businesses won't have made enough money to get through the winter. Across Canada, seasonal businesses such as ski resorts won't have clients from outside Quebec, or even Canada, as they had in the past. Without these clients, sales will be very limited. Businesses won't be able to support their payroll, and therefore their employees, who are truly essential in the tourism industry.

We're really asking the Government of Canada to review the conditions of this program. Thank you.

[Maxime Blanchette-Joncas, Bloc, Rimouski-Neigette—Témiscouata—Les Basques, QC]

Thank you, Mr. Hamel—

[The Chair, Liberal, Sherry Romanado]

Thank you.

Sorry, Mr. Blanchette-Joncas. I said five minutes, but I meant two and a half minutes.

We will now go to MP Masse.

You have the floor for two and a half minutes.

Are you there, Mr. Masse?

[Sébastien Lemire, Bloc, Abitibi—Témiscamingue, QC]

I'm prepared to take his place, if you want me to, Madam Chair.