Americans will spend more money visiting Canada this season than any point in greater than a decade as a low loonie makes heading north more attractive.
Total visits in the U.S. to Canada were already up a lot more than 1.6 million within the first 11 months compared with the year before, said TD Economics inside a new report. The financial institution expects that trend to carry on this year, with tourists in the United States spending a whopping $9.6 billion in 2016.
While Americans spend more in Canada, however, the reverse is happening down south. The deteriorating exchange rates are likely to keep more Canadians both at home and choosing other holiday destinations, says TD.
“Canadian appointments with the U.S. are required to fall to the lowest levels because the Great Recession this year, with daily visits prone to see another sharp decline at roughly double the rate of overnight visits,” said Derek Burleton, deputy chief economist at TD Economics.
The trend can help narrow the gap between American and Canadian tourist spending. In 2002, Canadians spent the same amount, in aggregate, as Americans did north from the border, says TD. But by 2013, the final time the greenback and loonie were at parity, Canadians spent $17 billion more than Americans did.
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“Put another way, total American outlays in Canadian malls, hotels and restaurants amounted to only 30 cents of each dollar spent by Canadians in the United States,” said Burleton.
Now that Canadians need to spend a 35 to 40 per cent high price tag because of the loonie’s tumble, a multi-year reversal is gaining momentum.
Burleton expects the space will narrow to $11 billion this year, adding a cumulative direct economic boost to Canada to the tune of $4 to five billion over 2015-16.
There already are signs that Canadians have stopped flying out of U.S. airports, a common tactic travellers used to take advantage of what were once much cheaper flights. Anecdotal evidence suggests Americans are actually even opting to fly out of Canadian airports due to the low dollar.
Unfortunately, Burleton said that Canada won’t reap the entire benefits of fewer Canadians travelling south. He expects much from the money that would happen to be put in the U.S. won’t necessarily be spent on domestic travel, but will instead be saved or spent in other countries with a more favourable exchange rate.
“Looking past this, additional tourist dollars should still give a much-needed boost to growth, though residents of these regions are likely to save a larger share of the reduced U.S. travel spending rather than spend it locally,” he said.
