Since COVID-19 struck Canada’s tourism sector, tourist activity has plunged to unimagined levels. During the summer, the highest weekly average occupancy rate for hotels in Canada only reached 42.9%. Passengers on major Canadian airlines for the month of June reached 440,000, which was 6.7 million fewer passengers than the same month a year prior. And with the border closed, the number of tourists coming to Canada collapsed from millions of individuals per month in the summer of 2019, to 67,787 this July.
The outlook for tourism is dire. Economic projections by groups such as Destination Canada expect that if the borders stay closed until 2021, total tourism demand (which includes both international and domestic tourism) will decrease at least 43% and perhaps as much as 61%. The International Air Transport Association (IATA) now estimates that global passenger traffic will not return to pre-COVID levels until 2024.
Tourism HR Canada wanted to understand the impact this would have on employment, considering not only demand from tourists, but also the local spending component. To do this, we worked with the Conference Board of Canada to adapt its tourism labour supply and demand model to project tourism employment levels to 2025, with quarterly employment estimates for 2020 and 2021.
The projections used the latest Provincial-Territorial Human Resource Module data from Statistics Canada from 2018, supplemented with labour force survey data, to show that there were approximately 1.88 million full-year jobs in Canada’s tourism sector in 2019.
The employment outlook was driven by assumptions regarding general economic indicators and specific levels of demand for tourism products and services from domestic tourists, international tourists, and non-tourism demand (locals). Local demand is included because many tourism businesses (restaurants, golf courses, and other recreation activities) sell their goods and services to local residents who are not tourists. In addition, assumptions were made about the ratio between revenues and employment based on the trends seen to date. In the immediate term, we know that employment has not declined as far as revenues have. This is due to businesses cutting into profit margins, taking on debt, or utilizing government subsidies to maintain staff until the revenue outlook improves. Over time it is expected that revenues and employment will return to equilibrium as government subsidies are removed and tourism businesses adapt their workforce requirements to the post-COVID reality.
For 2020, it is estimated that non-tourism demand will decrease 29.2%, domestic tourism demand will decrease 49.0%, and international tourism demand will fall 76.0% (all compared to 2019). Spending within the tourism sector from all three sources will remain depressed in 2021 and 2022. Non-tourism demand and domestic tourism demand are expected to recover to 2019 levels in 2023, while it will take until 2025 for international tourism demand to fully recover to its pre-COVID level.
Table 1: Predicted Demand for Tourism Products and Services, Compared to 2019
Source: The Conference Board of Canada.
The impact on employment will be significant. The number of full-year tourism jobs is expected to be 27.3% lower in 2020 than it was in 2019. The most severely impacted industries are travel services (-33.3%), recreation and entertainment (-31.5%), and accommodation (-31.4%). Employment in Canada’s tourism sector will not return to 2019 levels until the year 2023. The accommodation industry will not return to 2019 employment levels until 2024.
Looking at the shorter term, tourism sector employment dropped in the first quarter of 2020 due to job losses in March and then dropped precipitously in the second quarter as the full force of shutdowns took effect. Employment recovered in the third quarter (July, August, September) due to the easing of shutdowns. However, employment is expected to decrease again in the fourth quarter as seasonal demand, which is highest in the summer, tapers off. It will rebound once again in the first quarter of 2021 on expectations of easing of restrictions on international travel and general economic recovery. Growth in employment will continue through to the third quarter of 2021, followed by another seasonal reduction in the fourth quarter.
Impact on Employment by Province/Territories
In 2020, the loss of full-year jobs relative to 2019 is expected to range from a loss of 32.7% in the territories to 26.5% in Manitoba. The employment recovery picture is similar across most provinces, equalling or slightly exceeding the number of 2019 full-year jobs by 2023, with the exception of New Brunswick, which is not expected to fully recover until 2024, and Newfoundland and Labrador, which will see employment levels below those of 2019 until 2025.
Impact on Revenue in Tourism Industries
The impact on revenues in tourism industries is also severe. Overall, revenue from all sources is expected to decline by 47.1% in 2020. The effect will be particularly felt in travel services, air transportation, and rail transportation, although all tourism industries will lose close to half of their revenue this year.
Table 2: Tourism and Associated Non-Tourism Demand in Canada ($2019 millions)
|Food and beverage services||80,742||43,958||68,813|
|Recreation and entertainment||23,371||12,948||19,781|
|Other (Non-tourism industries)||21,187||8,579||16,839|
Revenues will remain well below 2019 levels in 2021, down 13.9% overall, and are not expected to recover to 2019 levels until 2023. For those industries that are most reliant on international tourists, the wait is even longer.
Tourism revenues have plummeted, as has employment in tourism industries, but not in a one-to-one ratio. Employment has held up better than revenues would suggest. Partially, this is because many tourism businesses also sell their goods and services to local residents. Partially, it is because businesses are willing to dip into their profit margins and credit lines in order to remain active while operating at a loss, to keep staff out of loyalty and to avoid needing to rehire staff when conditions improve. And partially, it is because government subsidies like the Canadian Emergency Wage Subsidy (CEWS) make keeping staff under these conditions more tenable, even when the business is operating on thinner margins, or even at a loss. At any given business, a different combination of these factors is at play.
Despite this, the loss of employment was severe. When businesses were fully shut down in March and April, over 880,000 individuals employed in tourism lost their jobs, a loss of 43.3% from February. Since May, employment has climbed, but in July and August—the height of the summer season—the number of people employed in the tourism sector was 557,200 and 463,500 fewer than in July and August of 2019, respectively.
Pre-COVID employment levels will not return until 2023—and that assumes no further shutdowns on the level seen in March and April occur. It is also important to remember that the number of workers in tourism had been growing steadily and, prior to COVID, was expected to continue to do so. The last pre-COVID labour supply and demand outlook produced by the Conference Board of Canada had estimated that the supply of workers would be able to fill 1,934,521 full-year jobs in 2023, 44,600 more jobs than expected after the effect of COVID-19. Over the next few years, the labour force will continue to grow as young people—who make up 31% of the tourism workforce—enter the labour market. Under the current outlook, many of the first jobs that tourism provides will not be available.
 STR: Canada hotel results for week ending 22 August, https://str.com/press-release/str-canada-hotel-results-week-ending-22-august
 Destination Canada, Visitor Demand Forecast (July 2020 Update), https://www.destinationcanada.com/en/coronavirus-updates/covid-19-research
 For the purpose of this study, a job is defined as regular work for the period of one year. If the work only exists for a fraction of the year (e.g, 3 months or ¼ of a year), it only counts as the corresponding fraction of a job. This causes a difference between jobs number reported here and the labour force survey data which counts the number of individuals working in tourism at any given time. While there were 1.88 million full-year jobs in tourism in 2019, the labour force survey shows that prior to COVID-19 about 2.2 million Canadians were employed in the tourism sector.
 The Future of Canada’s Tourism Sector: Bottom Line, Growth Aspirations Face Labour Challenges