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Tourism Business Recovery Subdued

The closing of businesses has hit the tourism sector particularly hard, and the recovery has not been as strong as in other industries.

Statistics Canada tracks the number of businesses opening, closing, and remaining active.[1] Closing businesses are those that had at least one employee in the previous month, but no employees in the current month. This can be caused by a firm going out of business or closing temporarily or permanently, or a seasonal firm ceasing business activity for the year. Active businesses are those businesses that reported having one or more employees in a given month.

Tourism has a large number of small businesses. In 2019, 72.1% of businesses had fewer than 20 employees. Small businesses tend to turn over rapidly. In 2019, there were roughly 2,500 businesses opening and closing each month in the accommodation and food services industry, out of roughly 60,000 active businesses.

A high turnover rate certainly, but the general trend saw slightly more openings than closings each month. Despite business turnover, the industry grew.

While smaller, the story was similar in the arts, entertainment and recreation sector. Out of roughly 14,500 active businesses, 750-800 opened in a given month, while another 750-800 closed. Again, each month slightly more businesses opened than closed.

With restrictions in place to prevent the spread of COVID-19, the number of businesses closing in these two sectors jumped from 3,309 in February to 6,608 in March and then 11,178 in April, before slowly dropping in May and June and settling into a more standard pattern in July.

As the number of restrictions on businesses lifted, the number of businesses closing dropped, while the number of openings rose. Openings started to rise earlier in the accommodation and food services sector than in the arts, entertainment and recreation sector.

It is in the effect on active businesses that the real impact of these trends can be seen. Before the pandemic, there were 63,000 active accommodation and recreation businesses and 14,500 active arts, entertainment and recreation businesses. By July, that number had dropped to 51,200 and 11,622 active businesses, respectively. A total loss of 14,600 businesses.

Since the pandemic began, the number of active businesses has declined across most sectors. In April, the number of open retail businesses dropped to 85.5% its average level for the months from January 2019 to February 2020. Manufacturing had dropped to 90.1% its average level.

While the total number of active businesses has recovered, it has not reached the pre-pandemic level.

The recovery has been most subdued in the tourism-related sectors. As of July, the arts, entertainment and recreation sector was only back to 80.2% its average number of active businesses, while the accommodation and food services sector was only slightly ahead at 81.4%. In comparison, the retail and manufacturing sectors were back to about 90% their average number of active businesses.

[1] Statistics Canada. Table 33-10-0270-01 Experimental estimates for business openings and closures for Canada, provinces and territories, census metropolitan areas, seasonally adjusted

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