Natural Resources Sector Drives Demand for Tourism Products

During November 2011, the Canadian Tourism Human Resource Council (CTHRC) conducted 12 focus groups with tourism sector stakeholders across Canada. It became clear that current growth in tourism demand is being driven by corporate activities associated with the natural resources sector, particularly oil and gas. This has split the Canadian tourism sector. Regions with a significant natural resource sector are experiencing pronounced growth in tourism demand. Those without large oil, gas or mining industries are experiencing flat or even negative growth. That said, most areas are seeing labour difficulties regardless of demand, and these labour supply issues are exacerbated in those regions with a significant natural resources sector.

In general, tourism businesses have seen flat growth or a reduction in the number of tourists travelling for pleasure. In Calgary, hotel rooms are empty on Friday and Saturday nights. In British Columbia, the reduction in demand has required businesses to reduce the number of hours that their employees are working. New Brunswick and rural Ontario, particularly the resort region north of Toronto, appear to be the hardest hit areas. Tourism businesses in those areas experienced a reduction in demand in 2010 and do not expect to see demand growth in the coming year. In fact, a further fall in demand is likely. In rural Ontario, significant consolidation is being seen as resorts close due to a lack of business. In the large urban centres of Quebec and Ontario, business demand has recovered since the recession but future growth is expected to be moderate.

In contrast, significant demand growth is occurring in regions with a large natural resources industry. While Calgary hotels may only be 25% full on Friday and Saturday nights, occupancy climbs to 90% during the rest of the week, indicating that it is business travel driving demand levels. Hoteliers indicate that overall demand is close to the levels seen in pre-recession 2007. Other regions of Alberta which lack a connection to the oil and gas industry, such as the mountain resorts, have not seen demand for tourism increase as dramatically. Saskatchewan, which saw a negligible impact from the 2008/09 recession has seen demand continually increase in both the major centres and rural areas of the province. Although the number of pleasure travellers did not drop, the growth that is now being seen is driven by the oil and gas sector. In rural regions, this growth in demand is extensive enough that the number of hotels and restaurants may not be able to absorb all the demand. This has created a knock on effect in the neighbouring province of Manitoba, particularly in the western section of the province, where demand is up but so are labour shortages as people move to Alberta and Saskatchewan for work. Other significant growth in tourism demand is being seen in specific regions in the western provinces, such as Thompson in Manitoba and Kamloops in British Columbia, both have a large mining industry. In those areas, hotels are full and demand in other tourism industries is also being driven by the commodities boom.  One business, with multiple locations in British Columbia, is expecting to see significant revenue growth at its Kamloops facility, while predicting much lower or even negative growth in other regions of the province.

Perhaps no region of the country has seen such significant change over the past few years as Newfoundland and Labrador. Traditionally, the province has been known for supplying labour for the oil and gas industry in other provinces but with three offshore oil fields, a fourth under development, and ongoing exploration, it has become a major part of Canada’s energy industry. This has impacted tourism, particularly the accommodations industry. The growing demand is particularly noticeable in regions directly connected to the natural resources sector, such as St. John’s, where there is talk of building at least 5 new hotels, and Clarenville, which has a population of fewer than 5,300 and is potentially building three hotels.

While the demand for tourism has split Canada into high growth and low or no growth areas, the labour picture is more uniform. All regions of the country experienced shortages of qualified labour for some positions. Housekeeping room attendants and cooks are often difficult to find. While it was easier to find employees for certain positions, such as food and beverage servers, persistent turnover is a complication that tourism employers must deal with.

These issues are more pronounced in the regions that are experiencing demand growth. In Alberta, Newfoundland and Saskatchewan, businesses are seeing a shift from a lack of qualified applicants to a deficiency in the number of people applying to begin with, resulting in positions remaining open for months. Not only is demand increasing faster than the potential labour supply, the industries driving that demand are drawing workers away from tourism. For example, St. John’s restaurants are competing with mining camps and oil rigs for a limited number of qualified cooks.

It seems likely that the natural resources sector will drive tourism demand growth in 2012 as well, since the number of tourists travelling to Canada from the United States and Europe will likely continue to decline. This suggests a difficult year for regions lacking a significant energy or mining industry. While the food and beverage industry can rely on demand from local residents to help maintain growth, other tourism industries are more vulnerable.

Overall growth in Canada’s tourism industry, driven by corporate business associated with oil, gas and some mining, is hiding vast disparities in growth between different regions. Yet even with low or negative growth Canada’s tourism sector, particularly in rural areas, remains vulnerable to labour shortages. As one business operator noted, given the option of labour shortages and no demand or greater shortages caused by heightened demand, the second option is the better problem to have. However, labour shortages are harmful for the tourism sector as a whole in the long run, and are already causing significant difficulties in certain regions. In the future, labour shortages and issues with attraction and retention of employees must be dealt with across the country in order to maintain a thriving and competitive tourism sector in Canada.