Submitted by the Tourism Industry Association of Canada (edited for length)
This morning, Beth Potter, president and CEO of the Tourism Industry Association of Canada (TIAC), gave a state of the tourism industry report in the context of the pending federal election.
Potter outlined that the tourism industry was the first hit, hardest hit, and will be the last to recover from the pandemic crisis. The impact on the visitor economy has been greater than SARS, the 2008 economic crisis, and 9/11 combined.
In a report prepared by TIAC researchers, Potter made clear that, “Prior to COVID-19, tourism was Canada’s fifth largest sector sustaining more than 1.8 million jobs. But since the pandemic, the industry has lost two summer seasons, drained financial reserves, taken on massive debt and now has difficulty attracting enough employees as it strives to relaunch.”
Potter then added, “without the economic jargon, tourism is on the brink of disaster without continued federal support.”
An industry-wide survey of tourism businesses in every province and territory indicated:
- Almost 40 per cent of respondents say they would have to shut down their businesses today if they no longer received support from government programs.
- One-third of respondents expect more than a 50 per cent decline in revenue in 2021 compared to 2020.
- One-third of respondents lost between 75 per cent and 100 per cent of revenue compared to the same time in 2019.
- Sixty-four per cent of respondents indicated low cash flow as a challenge facing their business, with a majority citing financial shortfall and burden as the biggest risk currently impacting them.
- Almost half of respondents have taken on over $50,000 in debt to keep their business afloat.
- Majority of respondents predict it will take between one to three years for sufficient tourism demand to return to the pre-pandemic level of profitability.
- Sixty-five per cent of respondents accessed the Canada Emergency Wage Subsidy (CEWS), and 35 per cent accessed the Canada Emergency Rent Subsidy (CERS).
Potter highlighted the report’s conclusions that “even with extensive vaccinations and the gradual lifting of restrictions, a bleak fall and winter is certain. There will be no conventions, limited business and government travel, and the wind-down of support programs (CEWS and CERS) could not come at a worse time.”
On the eve of the federal leaders’ debate, Potter urged “all parties to support a qualified and limited financial.support program from September 2021 to May 2022 to the hardest-hit businesses.”
Specifically:
- Survival support for the hardest-hit tourism, hotel and event businesses of any size that have experienced a 40 per cent loss in revenue in any 12-month period after March 31, 2020.
- Government support would cover negative cash flow from normal financial operations (i.e., excluding capital expenditures and non-cash items such as depreciation or accruals). Support not to exceed 75 per cent of normal cash expenditures.
- Program to run from September 1, 2021 to May 31, 2022. Cash flow calculated on a cumulative basis inclusive of CEWS and CERS.
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I run a tourism business.
This last year or two has shown me the actual potential of “retirement” far better than any financial planner ever could.
If the government does want to help out they could forget grants and stuff like that and do two things.
1- Allow industries that they want to support to be credited with up to the total of HST that industry collected if the money is spent on “new capital items and improvements” and for an arms length operating company (not some corporate holding company). As long as the money is spent and receipts submitted within a year of the collection of the HST, the government need only simply return these expenses up to the maximum limit of the HST already collected.
This would be an easy to administer and audit system with most of the accounting already done. It would allow scaled capital improvements in facilities and equipment that would be most useful to the industry.
2- Allow major expenses and capital items to be written off in the year they were incurred.
3- Create an account, a bit like a TFSA but for businesses, where money can be deposited tax free and invested tax free as long as the final withdrawals are used for approved capital items and improvements.
If the money is used for “other” purposes, then by all means apply the corporate tax but by not taxing this money, small business could invest it on their best time frame to achieve modernization of their facilities and equipment. The improved capability to compete that would follow from this type of allowance would more than make up for the temporary tax free benefits.
All these kind of things are better than grants. Grants are fraught with fairness issues and never work well. Better to use the kind of financing noted here, that is on a scale commensurate with the size of each company and the way they work in the real world. These ideas are to “help” industry. If projects are too large for these type of ideas to completely finance them then traditional loans should be used of course and I suppose if government wanted to help “even more” they could subsidize such loans by paying a portion of the interest due each year that they wish to operate the program.
Just a thought to get you all thinking. Not necessarily a final plan by any means.
Also, some industries have done very well during this pandemic. Just try to find a contractor to build anything and this becomes pretty obvious.
This is probably heresy in Muskoka…..But it seems to me that these guys are just slick high profile corporate welfare bums. They already get 100’s of millions in grants for advertising and the like….all pre-covid. For what to create “1.8 million” jobs….And let’s be honest, according to their own breakdown, 500,000 of that 1.8 million are students. Only 700,000 of these jobs are full time full year (the rest are subsidized by EI). It just seems to me that if you want to throw money at the economy why not spend your money on infrastructure that Canadians need (like fast track Fairvern……create the hospital facilities that we need….universal broad band etc). In reality, when tourism returns (when it is safe to do so) do we care if it is Holiday Inn or Deerhurst (both foreign companies) that supply the need? I see no point in greatly increasing the deficit just to return to 2019…..We need a bigger vision of the future