A plummeting Canadian dollar means that Canada is on sale – a fact not lost on tourists heading north across the border and transiting our cruise and airport terminals. With the dollar plummeting to a 10-year low against its U.S. counterpart this past week, the underlying positive trend in tourism will only strengthen.
International tourist visits to B.C. climbed again in May, marking a fifth gain in six months. Total visits reached a seasonally adjusted 407,750 persons, up 1.7% from April and 7.2% above same-month 2014. Notwithstanding the 2010 Winter Olympics period, this was the highest level observed since 2007.
A favourable exchange rate has given U.S. travellers and the mighty greenback 20% more buying power north of the border in the past year. This, along with strengthening economic growth and labour markets, is driving powerful momentum in travel to B.C. Visits from the U.S. were up 8% year-over-year in May and 9% through the first five months.
Meanwhile, overseas visits to the U.S. remain near historical highs and are up 5% year-to-date, led by travellers from Asia and Europe, but the trend has flattened since late 2014. Growth trends are being dampened by persistently weak economic growth in Europe as well as a slowdown in China. Additionally, Canada’s dollar has held up better against the currencies of major trading partners outside the U.S., driving less exchange-rate-led tourism growth. Measured against a trade-weighted basket of global currencies (the Canadian-dollar effective exchange rate index) that excludes the U.S., the loonie is down only a couple of per cent from where it was a year ago compared to its swoon against the U.S. dollar. However, currencies pegged to the U.S. like that of Hong Kong have also appreciated in value relative to the loonie.
With the Canadian dollar expected to average $0.78 this year and even lower in 2016, along with the lift from the 2015 FIFA Women’s World Cup that culminated in Vancouver, there is little doubt that tourism will be a strong source of growth for B.C.’s economy this year and next. •
Bryan Yu is senior economist at Central 1 Credit Union.
