Tourism's Role in Canada's Economy and Potential Impacts of the Crisis

Sustaining Canada’s tourism sector through COVID-19

Analysis and options

March 27, 2020

Draft discussion document 24th August 2018

Last Modified 2020-04-14 2:35 PM Eastern Standard Time Printed Last Modified 2020-04-14 2:35 PM Eastern Standard Time Printed to improve tourism improve to mind as a destination, and to and destination, a as mind - of - on travel (e.g., visa applications, applications, visa (e.g., travel on to improve availability and availability improve to to improve the knowledge and skills of employees in in employees ofskills and knowledge the improve to to keep Canada top Canada keepto to sustain employment in communities dependent on on dependent communities in employment sustain to mind as a place to visit while public health measures are are measures public health while visit to place a as mind - of - depends on duration of public health measures and desired desired and measures public health of duration on depends term investments that would not otherwise be possible be otherwise not would that investments term - – 2 Replenish gaps in supply that emerge as a result of insolvencies of result a as emerge that supply in gaps Replenish top Canada Keep returning demand of ahead marketing reintroduce and place, in promotions Marketing so do to safeis it once travel encourage taxes and fees in reductions Temporary fees) airport insurance health and travel Backstop accessibility upskillingand Training sector tourism the projects Community tourists of return the for them prepare and tourism, investments product tourism and Infrastructure resume does travel once experiences Stage 2: Prepare for recovery 2:PrepareStage for estimated Not impact ofscale in slowdown the using by growth future and rebound a for industry the Position long for activity 75K 75K - 700K depending on 700K - hit by the pandemic the by hit pandemic the by hit - - projected to run out of cash in in cash of out run to projected finance debt = 10% = debt finance - Cheque issued to business = 75% = business to issued Cheque 15% = credit New Re 25% - Grants to communities hard communities to Grants Total $ per business ranging from $50 from rangingbusiness per $ Total as: out split scenario the . . . from ranging businesses for revenue of share a as Loan 5 in workers to programs support ofavailability Expanded qualify otherwise not would who sector tourism the hard communities to Grants Direct cash transfer to businesses ranging from $5 from ranging businesses to transfer cash Direct pandemic the of duration the on depending business per 1 Indigenous communities Medium businesses Large businesses Employees Communities ~$15 billion to sustain ~60% of businesses businesses of ~60% sustain to billion ~$15 season summer no of event the eligibility, in gaps addresses that sector tourism the to support Provide to accessible are that measures announced already of duration and amount all businesses Small businesses Stage 1: Sustain the tourismthe 1: sectorSustainStage

Potential measures Description Estimated cost Estimated There are two phases for support that the tourism industry will will requirelikely industry tourism the that support for phases two are There Analysis and options presented here are current as of March 27, 2020 2020 27, March of as current are here presented options and Analysis Last Modified 2020-04-14 2:35 PM Eastern Standard Time Printed in in BC in AB in ON in QC in 90% 90% Alberta 20% 20% 20% 30% 20% than other major industries major other than Tourism Oil and gas extraction gas and Oil in in ~80% ~80% & Ontario Quebec ~60% ~60% & Ontario Quebec ntario ntario tourism urism activities urism ; O ; felt in more regions more in felt Finance and insurance and Finance trade Retail Provincial share of GDP by industry, 2017 industry, by GDP of share Provincial , accounting for ~2% of GDP, making it larger than than larger it making GDP, of ~2% for accounting, 7.1 6.3 5.6 2.6 2.0 1.8 1.7 1.5 1.5 1.0 , based on Q3 2015 annualized figures, 1 defence 2

Adjusted for Tourism GDP ratio, the share of GDP that is generated componentTotal major toGDP ratio, sectors; the share that ofgenerated is Adjusted GDP for for tourism'sTourism by tourism Excludes Excludes

2. Analytics Moody’s Account,Canada, calculationSatellite 2015” prices); using basic“Canadian Tourism Statistics(GDP SOURCE: 1. Share of Canadian GDP by industry, 2017 industry, by GDP Canadian of Share Percent Percent of GDP Tourism is a major Canadian industry Canadian a major is Tourism is impact GDP its mining; and telecommunications Auto industryAuto Food manufacturing Food Mining and quarrying and Mining Federal gov’t Federal Telecommunications Tourism Retail trade Retail construction Residential Oil and gas extraction gas Oil and Finance and insuranceand Finance Analysis and options presented here are current as of March 27, 2020 2020 27, March of as current are here presented options and Analysis Last Modified 2020-04-14 2:35 PM Eastern Standard Time Printed 22 Foreign demand Foreign spending by international visitors international by spending 78 spending by Canadians 40km outside 40km Canadians by spending Domestic demandDomestic Tourism is composed of two core core two of composed is Tourism international and domestic elements: Tourism includes only visitors who stay at least 24least at stay who visitors only includes Tourism (businesstravel business all involve: can and hours and friends visiting conferences),events, meetings, of education andtravel, / holiday vacation relatives, months3 thanless demand:domesticand international Tourism 2019%, Q3 Domestic: patternsdaily normal,their International: LS), and and American other LS), agencies to data North report industry ion Canada Canada ion (B 01; 01; Destinat - 0230 - 10 - of jobs in Food services and drinking places are places drinking and services Food in ofjobs to attributable directly are Hotelsin ofjobs directly are transportation Air in ofjobs reservation and arrangement Travel in ofjobs the uniqueness of the current economic current ofthe uniqueness the policy of thenature and situation/shutdown ofSME 100% help could (e.g. stimulus approaches just 20%)not establishments, service Food The share of output and jobs attributable attributable jobs and output of share The many industry: by varies tourism to while tourism without survive not would sales of part critical a as it require others to tourism’s applied oftenare figures These industry; ofthethesize reflectto sectors component component theentire considers modelour However, for to account services) ofFood (e.g. 100%sector 20% 20% spending tourism to attributable directly 62% spending tourism 73% spending tourismto attributable 85% spendingto tourism attributable directly are services 4 , but instead a , instead but 1 3 accommodations (NAICS 7211) is used elsewhere used and 7211) in in the model thisanalysis elsewhere (NAICS is accommodations impact 2 2

Transit and ground and ground Transit passenger 485) in analysis used due modeltransportation to (NAICS data availability North American Industry Classification System (NAICS) is used by Statistics Canada, used is Canada, Statistics by Bureau the US Census, of (NAICS) StatisticsLabor System Industry AmericanClassification North Traveller in Not used to the modellack of detailed impact financial data and employees high operators without number of small

Classification System Classification sectors of collection Tourism is not it’s own industry as industry own it’s not is Tourism American North the by defined

Key sectors (in order of GDP contribution): (in of sectorsorder GDP Key 4. demand in Canada,” Account,Canada, Satellite2015”; table “Canadian TourismStatistics36 “Tourism SOURCE: 1. 2. 3. Scenic and sightseeing transportation sightseeing and Scenic transportationbus rural and Interurban Taxi and limousine service limousine and Taxi Motels Water transportation Water recreational andparks Vehicle) (Recreational RV camps Automotive equipment rental and leasing and rental equipment Automotive services reservation and arrangement Travel Hotels transportationAir Arts, entertainment and recreation and Arts, entertainment transportation Rail Food services and drinking places drinking andservices Food Tourism is an amalgamation of component sectors, all of which depend on it for survival and and survival for it on depend which of all sectors, component of amalgamation an is Tourism profitability Analysis and options presented here are current as of March 27, 2020 2020 27, March of as current are here presented options and Analysis Last Modified 2020-04-14 2:35 PM Eastern Standard Time Printed - nal 9.7 100 Natio 0 - 10.3 ories Territ 6 8.9 Prairies 6 9.0 Atlantic 2 13 9.4 Alberta 17 BC 13.2 and property of salesand taxes), and government property goods fromand services 21 9.2 es Quebec sm Satellite Account,Satellite sm2015” corporated corporated and contributions premiumsplans businessto(i.e., government insurance social business enterprises), 36 9.3 Ontario 01; 01; Canada, Statistics“Canadian Touri - … and a major source of employment for Canadians in every region of the country the of region every in Canadians for employment of source major a and … tourism 2015 %, Provincial/ territorial of share Canadian tourism employment 2015 %, Provincial employment from 0461 - 10 - 1.4 6.1 11.3 12.7 25.5 19.4 25.5 2016 5.6 1.4 11.1 24.7 12.3 24.7 19.1 2015 5.4 1.3 11.9 24.1 24.1 10.9 18.6 2014 1

Foreign tourists Domestic tourists

Federal Aboriginal Provincial Municipal/

Total of tourism's major component majorsectors Total of tourism's Government revenue on (i.e.,earnings, taxes on corporate profits,net employmentrevenue of Government from incomes unin receiptsincome covers for Canada/Quebec Pension taxes on compensation),Insurance Plan,production and and Employmentworkers as sal products (such

Tourism is an important contributor of of contributor important an is Tourism revenues… government Canadian

2. Canada, "Government Statistics revenue attributable table SOURCE: to tourism,"36 1. Tourism is also an important economic contributor, responsible for more than $25 billion in tax tax in billion $25 than more for responsible contributor, economic important an also is Tourism Canadians ~2M of a total employ sectors componentits and revenues, $ billions $ Tourism contribution to government government to contribution Tourism revenue Analysis and options presented here are current as of March 27, 2020 2020 27, March of as current are here presented options and Analysis Last Modified 2020-04-14 2:35 PM Eastern Standard Time Printed and recreational campgrounds and recreational transportation and sightseeing Scenic transportation passenger ground and Transit services reservation and arrangement Travel accommodation Traveller transportation Water Air transportation Air recreation and entertainment Arts, leasing and rental equipment Automotive places and drinking services Food transportation Rail parks (RV) VehicleRecreational 4 0.8 (1%) Large 20M), large companies (annual revenue greater 20M), large revenue companiesor (annual size than employee $20M+, - 3 3.0 (3%) Medium 3 all GDP and employment for tourism’s key contributing sectors, including: Air transportation sectors,transportation key contributing including: (481), AirArts; GDP and tourism’s all employment for accommodations (7211), and Water transportation (483) transportation and Water(7211), accommodations es companies (annual (annual revenue companies $5 61.1 21.0 transportation (482), RV (Recreational Vehicle) Parks and Recreational Camps (7212), and ScenicCamps(7212), and sightseeing Vehicle) ParksRecreational transportation RV (Recreational (482), 102.8 (96%) Small ail Traveller Number of businesses of Number 2018 total), of (% Thousands 01; 01; AnalyticsMoody’s Government Data”, of Performance Canada, “Financial - 75 275 100 146 765 Large (38%) 0222 - 1 10 - ” ” table 33 204 295 (15%) Medium 87 756 940 Small (47%) Total employment Total 2018 total), of (% thousands Jobs, 2 8.4 7.9 9.0 11.1 48.5 Large (47%) Canadian 2019, Canadian Business December Counts, with employees, 6.6 14.9 (14%) Medium

5.9 24.9 39.5 Figures from 2019 fromFigures entertainment and entertainment and Automotive recreation (71), and equipment and rental (722), R Food (5321), placesleasing drinking services (5615), services and reservation arrangement Travel and ground (485), passenger transportation Transit (487), transportation prices) using Canada data; (current estimatesStatistics AnalyticsCAD in Moody’s nominal Incorporated 2018 Data" "Financial businesses;Performance figures from Estimates due due of Estimates data to (annual lack segmentingrevenue mediumcompaniesby size <$5M), in Canada; industries company small 200, average assumingrevenue generated per of ratios employee 100K); but instead employment GDP or not does us apply tourism Small (38%)

4. Canada, “ Statistics SOURCE: 2. 3. 1. ~85% of the GDP and employment impact of tourism is from small or large companies; combined combined companies; large or small from is tourism of impact employment and GDP the of ~85% Canadians ~1.7M employ they

CAD millions (% of total), 2018 total), of (% millions CAD Total GDP contribution GDP Total Canada’s tourism sector broken down by company size company by down broken sector tourism Canada’s Analysis and options presented here are current as of March 27, 2020 2020 27, March of as current are here presented options and Analysis Last Modified 2020-04-14 2:35 PM Eastern Standard Time Printed dependent dependent - accommodations (NAICS 7211) 7211) is (NAICS accommodations Hotels transportation Air and arrangement Travel services reservation recreational and parks RV campgrounds Motels sightseeing and Scenic transportation Food services andservices Food places drinking and Arts, entertainment recreation Hotels 6 sectors are dependent on dependent aresectors 6 their offor ~60%+ tourism employment: ...... 75% oftourism 75% 3 sectors: fromare jobs . . . Traveller - 215 85 80 55 35 9 7 4 3 3 1 1 0 Number of of tourismNumber dependent jobs Thousands 85 85 73 63 62 59 - ccount) to Accommodation (NAICS 721) due 721) figures; to (NAICS to Accommodationccount) data availability, 22 20 19 17 8 7 6 Tourism dependent jobs 2014 sector, % of 1,060 depend on tourism for more than ~60% of their jobs their of ~60% than more for tourism on depend – 388 144 76 49 42 40 21 15 15 12 3 3 Employment Jobs,thousands 32.7 16.6 11.2 10.4 1 9.0 4.3 3.0 2.2 2.1 1.1 0.9 0.2 0.1 GDP CAD billions, 2018 hotels and motels, travel and arrangement services, scenic and sightseeing transport, transport, sightseeing and scenic services, arrangement and travel motels, and hotels – 2 2

used elsewhere thisanalysis used and in in the modelimpactelsewhere Moody’s Analytics estimates using Statistics Canada prices) using Canada data; (current estimatesStatistics AnalyticsCAD in Moody’s nominal GDP data and Satelliteemploymentfor hotels and A share calculatedapplying motelsCanadian by relative (using Tourismtheir

transportation Scenic and sightseeing sightseeing and Scenic transportation bus rural and Interurban Motels RV (Recreational Vehicle) Vehicle) (Recreational RV camps recreational andparks service limousine and Taxi reservation services reservation transportation Water Automotive equipment rental equipment Automotive leasing and and arrangement Travel Hotels transportation Air Rail transportation Rail places and Arts, entertainment recreation Tourism sector Tourism drinking andservices Food

SOURCE: Statistics Canada, Account, Canada, Satellite2015”; Analytics “Canadian TourismStatisticsMoody’s SOURCE: 1. 2. Six sectors Six camps and parksRV and transport, air Analysis and options presented here are current as of March 27, 2020 2020 27, March of as current are here presented options and Analysis Last Modified 2020-04-14 2:35 PM Eastern Standard Time Printed , and demand bounces back to levelshistorical st August) August) for at least 36% of most volume, and of likely its - round are to likely losemoney - open by open by July 1 - 19 result the could closure in in of a scenario of ~61,000 60 days total tourism and ~1.7 millionbusinesseslayoffs -

Tax breaks are not helpfulfor companiesthat do not have any revenues Tax Only the largest tourism companiesare in a position to consider taking on loans;their in normal operations, most tourism do businessesnot generate enough cash flow to operate and repay the costs of for operating another season

388 municipalitieson tourism depend for more than 15% of theiremployment. These communitieslocal may additionalneed supports and servicesto see them through this recession existing support programs Employees Employees the in tourism sector are seasonal;31% are young, and 25% are They immigrants.to are unlikely be covered by – The type The type of support that tourism businessesmost need is cash to continueto operate – COVID with 100% revenue decline Driven mostly by lackof cash on hand, and the continuationof relatively fixed rent/mortgagesexpenses like and utilities, In an optimistic scenario where businessesare able to re 2 within months, even tourism businessesthat operate year The The tourism sector dependent on the issummer season (June profits for the year

▪ ▪

▪ ▪ ▪ ▪ Key findings in this section this in findings Key Analysis and options presented here are current as of March 27, 2020 2020 27, March of as current are here presented options and Analysis Last Modified 2020-04-14 2:35 PM Eastern Standard Time Printed , st 22% - 33% - 45% - 58% - 68% - 76% 82% - - 1 1 1 1 July 1 July 1 August September October November December June 19 crisis continues until crisis1 September19 - 19 - summer is lost season 2: Scenario prolonged COVID impact Scenario 1:Scenario … so if the COVID of annual 58% revenues willattourismlose businesses least on basedloss potential Cumulative revenue when demand resumes revenue annual in % loss 1 12.6% 12.4% 10.9% 9.8% 8.6% 8.2% % share of% share 7.0% 6.5% 6.5% 6.4% 5.9% 5.4% Industry Industry seasonality estimate, revenue annual 15.3% 15.0% 12.4% 9.9% 8.6% 7.4% 6.6% 6.1% 5.1% 4.9% 4.4% 4.4% International arrivals arrivals of% share 10.1% 9.7% 9.6% 9.4% 8.9% 8.6% 8.0% 7.9% 7.8% 7.4% 6.5% 6.4% Hotels occupancyof% share

This estimate is conservative because it is based solely on volume. Tourism companies likely charge charge in the moresummer likely because conservative companieson based isitTourism volume. is solely estimate This

December November September October July August June April May February March January

1. Industries and Sport, Culture ofCanada; Tourism Heritage, Ontario Source: StatisticsMinistry

Based on hotel occupancy and international arrivals levels, a conservative estimate on conservative a hotel Based andlevels, international occupancy arrivals August… June to from of revenue their ~36% earn businesses tourism suggests The tourism sector is dependent on the summer season; a closure of the sector until September 1 1 September until sector the of closurea season; summer the on dependent is sector tourism The revenue annual their of ~58% will lose businesses rebound,quick a with even that means Analysis and options presented here are current as of March 27, 2020 2020 27, March of as current are here presented options and Analysis Last Modified 2020-04-14 2:35 PM Eastern Standard Time Printed 150 100 50 0 200 Dec Nov Oct Average daily rate ($) rate daily Average Sep Aug 2019 - 19 Response Team. Response 19 - Jul Summerseason Jun average 2014 average September summer season summer September - May ” Imperial College COVID College Imperial ” Assumed duration of duration Assumed Apr public health measures health public Mar critical May critical the the busiest, highest income period of the year July 1, the tourism sector will lose half of its half lose will sector tourism the 1, July If public health measures remain in place until place in remain measures health public If — lture Industries lture Feb Cu Jan 0 80 60 40 20 19 mortality and healthcare and healthcare demand mortality 19 Occupancy rate (%) rate Occupancy 100 - … whichwill limit tourism in the first half of the summer Canadianhotel seasonality, Oct Sep Great Britain Great pharmaceutical interventions (NPI) to reduce to COVID reduce (NPI) interventions pharmaceutical - Aug Jul Impact of of non Impact June May Assumed duration of duration Assumed public health measures health public , meaning tourism businesses will lose at least half of their busy summer season summer busy their of half least at will lose businesses tourism meaning , st Apr Ferguson, N. et al (16 March 2020). “ 2020). et al (16 March N. Ferguson, measures in Great Britain suggests that these that suggests Britain Great in measures Modeling of the impact of various public health public various of impact the of Modeling Mar CBRE Hotels’ Trends in the and Trends Hotels’ CBRE National Hotel Sport,Industry of TourismMarket/Operations Ontario Heritage, Report; Ministry

50 Canada put such measures in place two weeks earlier weeks two place in measures such put Canada measures will need to be in place until the start of July; July; of start the until place in be to need will measures

200 150 100 250 300

per 100,000 of population of 100,000 per

Critical care beds occupied occupied beds care Critical Sources:

Modeled impact of various public of various impact measures, health Modeled Epidemiological Epidemiological projections suggest that public health measures could be in place until the start of July… Projections of the required duration of public health measures suggest these will be in place until at at until place in be will these suggest measures health public of duration required the of Projections 1 July least Analysis and options presented here are current as of March 27, 2020 2020 27, March of as current are here presented options and Analysis Last Modified 2020-04-14 2:35 PM Eastern Standard Time Printed Destination BC Destination – Tourism business owner Tourismbusiness owner Tourismbusiness – – if at all” all” if at – 19 is affecting tourism tourism affecting is 19 - so that’s obviously considerable” quite obviously that’s so “Bookings are down from China by by about fromdown China are “Bookings October, March and between cent per 70 “Businesses count on these early bookingsearly these on count “Businesses summer.before by get to float cash as a to equivalent is deposits many Returning fortourism” but banksthe on run “If we have no revenue to cover our costs,cover to revenue no have we “If Closing down. close to forcedbe may we until around won’t be we meanmightdown summer 2021 No revenue to cover fixed costs costs fixed cover to revenue No skeleton including properties, of taxes property and utilities, staff, in are measures health public while force deposits back pay to Having cancelled been has that travel on Losing some or all of the summer theof all or someLosing source greatestthe is season which revenue profitand of COVID ways: 3 in finances operators’ et profit 715 28%) 415 - - (10%) ( Annual Annual n (%) thousands$ 19" model assumes a 50% drop a assumes50% model19" drop in 8 8 June and and June 75% in of July normal - - Dec D 19, they are likely to lose money lose to likely are they 19, - Net profit Net in April 10 10 Nov hotels; larger hotels may have hotels have hotels;may larger additional revenue ct 12 12 O Expenses ep 71 71 S 42 77 - Aug on CBRE average average on occupancy hotel CBRE monthly and rate average for Canadian room Revenues back from COVID from back - ased 74 Jul 173 - 69 178 Jun - 1 Summer season Summer 59 152 September) and September) and the rest marginof COVI the 25% year. EBITDA"WithThe May - - 10 149 Apr Assumed duration of duration Assumed room hotel room - - public health measureshealth public ar 10 140 M - June, a 75% drop June, a 75% drop in July and a 25% drop August; in expenses are modeled as 50% of normal - 10 10 Feb 8 8 Jan 0 0 400 200 600 200 600 400 400 200 400 200 2019. 2019. (May summer in 35% EBITDAmarginAssumes - - - - - round tourism businesses like hotels are barely profitable without the revenues of the summer summer the of revenues the without profitable barely are hotels like businesses tourism round - 19 room hotel was suggested by hotel industry experts as a “typical” hotel. Similar economics can be expected can expected roomeconomicsbe was hotel suggested for smaller hotel. by a experts Similarindustry as hotel “typical” - - - -

revenues revenues a drop 100% in April March, in A 120 suchmeetings and as events streams that reduce the of b isseasonality. modelThe impact hotels 2014

1. $ thousands $ Financial model of a typical 120 typical a of model Financial Year bounce a quick is there if even season; of public of health measures bounce after back end the COVID Assumes rapid a With With 19 Pre COVID Analysis and options presented here are current as of March 27, 2020 2020 27, March of as current are here presented options and Analysis Last Modified 2020-04-14 2:35 PM Eastern Standard Time Printed 3 don’t don’t term term - 4 and their and their coming incoming Direct and indirect effects indirect andDirect effects Induced owned businesses. They owned businesses. - Former Director, Industry Association Industry Director, Former limited revenue limited – no one has guidance on the long the on guidance has one no Former Marketing Director, Canadian hotel chain hotel Canadian Director, Marketing Former chain hotel Canadian Director, Marketing Former chain hotel Canadian Director, Marketing Former – – – restaurant owners have limited cash flow flow cash limited have owners restaurant a strong enough voice, preparation plan, and the and the plan, preparation voice, enough strong a Smaller Smaller shutter to many causing rents defer won’t landlords family the are risk at most The have flexibility financial so doing but successful, be to staff their retain to need Hotels with impossible nearly is and then close to decidingare individualoperators Some but reopen, maybe yet 01; 01; AnalyticsMoody’s Data”; of Performance Canada, Government “Financial - Experts anticipate substantial business closures and employee employee and closures business substantial anticipateExperts with provided not are if businesses industry the across terminations andsummerthis staff retain and to open stay support financial beyond 60to30from closures business permanent in increase Significant salesoflow days 30 after ofcashout SMEs run many asdays, 0222 - 10 - Key Key takeaways . . Layoffs due to decline in revenue in decline to due Layoffs closure to business due layoffs Additional ” ” table 33 rs); Calculated weighted based weighted sectorsCalculated on number of jobs average multipliersrelative of tourismkey rs); lie 2,762 2,750 2,735 2,714 2,682 2,640 2 s due s due Percentage to permanent over time;closuresbased businessaggregate on jobs) of sectors(~2M 2,562 2,373 off 2,341 2,331 2,318 2,300 2,274 2,238 2,172 2,011 Decline in Decline jobs Canadian Thousands 89% 89% 77% 83% 86% 87% 88% 89% 369 362 352 338 318 290 240 117 1 Canadian 2019, Counts,Canadian Decemberwith employees, Business 1,420 1,420 1,420 1,420 1,420 1,420 1,420 1,420 Tourism employees employees Tourism laid off total)(% of Thousands 78% 80% 82% 84% 26% 57% 68% 74% Projections (basedon revenue decline) 100% 89 88 86 83 79 73 61 28 closures total)(% of Thousands Tourism business Tourism on 19 could result in the closure of ~61,000 tourism businesses and ~1.7 million total layoffs in in layoffs total million ~1.7 and businesses tourism ~61,000 of closure the in result could 19 - etails

Effects of worker wages wages shops atretailer) (e.g. restaurant local worker Effectsof worker Supply Supply chain effectsfood regional purchase (e.g. restaurants fromwholesaler) Accounts for initial layoffs due layoffs due Accounts to for initial shockof 100% in by decline revenue (calculated at additional followed ~70% of lay jobs), job in Canadian overall (using economy lossesdue Estimatesbusinessmultipand to layoffs permanent closures initial tourism following page following

November (240) November September (180) September (210) October August (150)August July (120) July June (90) June May May (60) April (30) April shock to shockto tourism sector (# days) Month Length Length of Sector d Sector

4. Account,Canada, Satellite2015,” “Canadian TourismStatistics“ SOURCE: 1. 2. 3. COVID decline revenue 100% with days 60 of a scenario

Scenario Analysis and options presented here are current as of March 27, 2020 2020 27, March of as current are here presented options and Analysis Last Modified 2020-04-14 2:35 PM Eastern Standard Time Printed 3 4 Direct and indirect indirect effectsDirect and effects Induced isolation has reduced traffic on roads, on traffic reduced has isolation - Parks Canada is closing all all closing is visitor services Canada Parks or capacity reduced either airlines have Canadian operations paused call forself A visitors foreign volumethe of and needs, commuting curb the help to reduced been service Trainhas spread avoid is individuals preferto limitedas Sightseeing gatherings large limitvolumetravel and Travel bans foreign movement with trips a new are bookingcustomers Few climatesafety public and regulatory precarious cruise routes reduced, Ferry been service has suspended Rationale closures mandatory facing are restaurantsMany recreational (e.g., spaces in public gatherings Social restricted are venues) limitvolumetravel and Travel bans foreign rates occupancy depressing movement 2 166 27 33 63 1,168 24 9 7 38 146 1 110 64 40 28 26 3 3 360 Decline in Decline jobs Canadian Thousands 01; 01; AnalyticsMoody’s Government Data”; of Performance Canada, “Financial 196 - 9 17 0222 - 10 - Layoffs due to decline in in revenue decline to due Layoffs closure business to due layoffs Additional 88% 71% 71% 71% 71% 71% 71% 71% 89% 76% 92% ” ” table 33 ltipliers) 186 mu s due s due to permanent over timeclosures business off 18 753 34 120 54 1 35 30 15 3 276 10 2 116 Tourism employees laid employees Tourism off total) of(% Thousands 11 0% 0% 0% 66% 54% 79% 61% 0% 0% 0% 0% less at risk at do not 42 cash and and cash expenses, have morehave close in 60 60 close in but are still are still but operational operational Sectors that that Sectors days to tend days permanently permanently Canadian 2019, December Counts, with employees,Canadian Business 2 12 6 0 0 0 0 0 0 0 Tourism business business Tourism closures total) of(% Thousands

Effects of worker wages (e.g. restaurant worker shops atretailer) (e.g. restaurant local wages worker Effectsof worker Accounts for initial layoffs due layoffs due Accounts to for initial shockof 100% in by decline revenue (calculated at additional followed ~70% of lay jobs), job in Canadian overall (using economy lossesdue Estimatesbusinesssectorand to layoffs permanent closures initial tourism Supply chain effectsfood regional purchase (e.g. restaurants fromwholesaler)

4. Account,Canada, Satellite2015”,” “Canadian TourismStatistics“ SOURCE: 1. 2. 3. Modeling the scenario of a 100% decline in tourism revenue over 60 days, the businesses most at at most businesses the days, 60 over revenue tourism in decline a 100% of scenario the Modeling accommodation traveler and entertainment, & arts places, drinking& services food are closure of risk Travel arrangement and reservation reservation services and Travel arrangement Watertransportation Transit and ground passenger transportation passenger ground Transitand Rail Rail transportation transportation sightseeing and Scenic Automotive equipment rental and leasing and rental equipment Automotive Recreational vehicle (RV) parks and recreational campsrecreational (RV) vehicle and Recreational parks Air transportation Traveller Traveller accommodation Arts, entertainment and recreation and Arts, entertainment Food services and drinking places services and Food Tourism sector Tourism Projections based on scenario of 100% revenue decline over 60days declineover revenue of Projections on 100% based scenario Analysis and options presented here are current as of March 27, 2020 2020 27, March of as current are here presented options and Analysis Last Modified 2020-04-14 2:35 PM Eastern Standard Time Printed 6 - and and may ~4 take may Domestic air travel in travel air Domestic China months return to to historical levels, andto similarSARS MERS While outbound inbound may traffics longer even (~6 take months) it to as12 dependsalso on the restrictionstravel around worldthe During the SARS During SARS the travel air MERS cases, to recover started peakthe after shortly eachcount for case virus ▪ ▪ ▪ 12 11 Pacific Avian Pacific flu,2013 Avian pacific2003 SARS, - - 10 9 Airlines Asia in Airlines based Asia in Airlines based Months Months beforeoutbreak and after 8 7 6 East Asia Avian flu, 2005 2005 flu, Avian Asia East 5 - 1 4 3 passenger km passenger - 2 All flights to, from and within South within and fromto, All flights 2015 MERS, Korea South within and fromto, All flights 1 0 1 - Start of outbreak 2 - passenger passenger equates km to one flying paying passenger one kilometer - 3 -

One One revenue

65 60 75 70 85 80 95 90

110 105 100 Start of outbreak = 100= Startoutbreak of Impact of on of Impacthistoricaltravel events air on of Impactaviation, outbreaksrevenue virus

1. EgyptAir OAG.com,Times,York New CSSE,CNBC, Reuters, Situation Johns Reports, Hopkins IATA, Economist,The WHO SOURCE: Past virus outbreaks have resulted in less severe drops in travel, yet recovery still took ~6 months ~6 tookstill recovery yet in travel, drops severe lessin resulted have outbreaks virus Past Analysis and options presented here are current as of March 27, 2020 2020 27, March of as current are here presented options and Analysis Last Modified 2020-04-14 2:35 PM Eastern Standard Time Printed Months Months since event 54 RevPAR 48 Hotel revenues 2x dropped as muchas occupancy, tookboth and to years 4+ recover June 2008) June - 42 36 Occupancy 30 recession (July 2007(July recession - 24 18 after 18 months18after Hotel revenues Hotel occupancy and out bottomed 12 6 0 2 4 6 8 2 0 - - - - 18 20 10 12 14 16 ------The had afinancial longer andcrisis on stronger impact hotel occupancy to recover taking 4+ years and revenues, pre monthsvs. 12 change % YoY Months Months since event 30 Yield 25 June 2008) June - Passengers 20 15 recession (July 2007(July recession - However, divergence of divergence However, passenger and yield for continued volume year another 10 2008 financial crisis, airlines globally globally financialairlinescrisis,2008 to lowered prices - 5 , OAG crisis crisis - PaxIS passenger volume follow similar trends Pre and yield

Average fare Average passenger per mile 5 0 5

During During and post recovery prop up demand and accelerate pre monthsvs. 12 change % YoY In the 2008 recession, volumes recovered faster than revenues in airlines and had a shallower dip dip shallower a had and airlines in revenues than faster recovered volumes recession, 2008 the In hotels in revenues than SOURCE: SOURCE: 20 15 10 10 15

- - Analysis and options presented here are current as of March 27, 2020 2020 27, March of as current are here presented options and Analysis Last Modified 2020-04-14 2:35 PM Eastern Standard Time Printed 6:Indigenous 6:Indigenous communities 2000 Nearly entrepreneurs organizations and in participate Canada’s Indigenous sector tourism 5: 5: Communities 300+ rely municipalities for tourism on of 15% over employment and share benefit economic Impacted Canadians Impacted temporary or temporary layoffs permanent 4: Laid off Laid 4: employees 1M Nearly the in employees are sector tourism of risk at 3: Large businesses Tourism with companies in revenue annual $20M of excess 19, requiring different types of support of types different requiring 19, - 20M 20M - Tourism Tourism with companies revenue annual $5 2: Medium 2: businesses Impacted businesses Impacted

annual revenue revenue annual <$5M Tourism Tourism with companies businesses 1: Small1:

Six categories of tourism businesses, individuals and communities are likely to be impacted in in impacted be to likely are communities and individuals businesses, tourism of categories Six COVID by ways different Analysis and options presented here are current as of March 27, 2020 2020 27, March of as current are here presented options and Analysis Last Modified 2020-04-14 2:35 PM Eastern Standard Time Printed 2 Labour and commissions and Labour Taxes telecommunication and Utilities charges bankand Interest >60% of their needs:oftheir >60% . . . . companies accommodation Traveller additional an facing currently are forpaid deposits refunding expense, 2020for summer bookedtravel Implications for government support government for Implications support potentially can Government 4 with tourismbusinesses small covering ofexpenses categories <5% 3% 1% 4% 2% 1% 2% 2% 19% - 5 4% 1% 2% 2% 1% 3% 7% >20% 1% 4% 6% 4% 7% 4% 3% Share of operating and indirect expenses and indirect operating Share of 7% 5% 4% 6% 3% 4% 5% 3% 5% 9% 6% 5% 5% 4% 1% 7% 7% 4% 8% 5% 14% potential areas to target support target to areas potential - 8% 9% 4% 9% 8% 17% 12% 3% 5% 9% 7% 10% 11% 22% 21% 25% 20% 20% 22% 17% 15% Labour and taxes account for over half of small tourism companies’ annual annual companies’ tourism small of half over for account taxes and Labour

1 33% 34% 48% 35% 32% 19% 44%

333 321 241 402 596 522 396 Small businesses: businesses: Small high are these suggesting expenses, Government of Canada of Canada Government announced 27) 75% (March wage subsidy for qualifying SMEs Incorporated Incorporated 2018 Data" "Financial businesses;Performance figures from 1

Sector average average Sector services and recreationand Travel arrangement reservation and transportation Arts, entertainment Scenic and Scenic sightseeing Food services andservices Food drinkingplaces Air transportationAir Traveller accommodation Tourismsector, industriesselected

Percent of operating expenses, 2018 expenses, operatingof Percent Average for withtourism companies<$5M annualannual expenses revenues Average 2. of 2018 Canada, Government Data”, Performance “Financial SOURCE: 1. Analysis and options presented here are current as of March 27, 2020 2020 27, March of as current are here presented options and Analysis Last Modified 2020-04-14 2:35 PM Eastern Standard Time Printed sized sized - sized tourism businesses with with businesses tourism sized - Labour and commissions and Labour Taxes telecommunication and Utilities >60% of their needs:oftheir >60% . . . companies accommodation Traveller additional an facing currently are forpaid deposits refunding expense, 2020 forsummer bookedtravel Implications for government support government for Implications support potentially can Government medium covering expensesof categories 3 thirds of medium of thirds 1% 2% 2% 1% 1% 1% 1% - potential areas to target support target to areas potential <5% - 7% 3% 3% 1% 1% 3% 2% 19% - 5 5% 4% 7% 3% 3% 4% 5% >20% nnual nnual wage of thatan in FTE industry e e a Share of operating and indirect expenses and indirect operating Share of 2% 4% 3% 5% 6% 5% 4% 20M - 9% 5% 4% 3% 2% 5% 6% 1% 6% 4% 7% 7% 4% 11% 3% 8% 9% 7% 6% 10% 11% 9% 5% 7% 5% 10% 14% 16% Labour and taxes also account for nearly two nearly for account also taxes and Labour 27% 17% 23% 24% 30% 28% 22%

33% 42% 53% 36% 37% 27% 25%

4.6 4.1 2.0 4.4 5.8 5.4 4.7 Medium businesses: businesses: Medium high are these suggesting expenses,annual companies’ tourism # of jobs per company are estimated based on total labour and commission expenditures # of jobs are per based estimatedcompany on expenditures totalfor each labour and divided by business commissionthe averag Proposed Proposed addition to the 10% wage subsidy announced by the Government of Canada 18, 2020 on March 2

Sector average Sector services and recreationand Travel arrangement reservation and transportation Arts, entertainment Scenic and Scenic sightseeing Food services andservices Food drinkingplaces Air transportationAir Traveller accommodation Tourismsector

Average for withtourism companies$5annualannual expenses revenues Average Note: Note: 1. Analysis and options presented here are current as of March 27, 2020 2020 27, March of as current are here presented options and Analysis Last Modified 2020-04-14 2:35 PM Eastern Standard Time Printed Illustrative only Illustrative - exhaustive exhaustive - Non domiciled buttheir domiciled builders / are destinations/ are builders - - based but brands - multiplier due to strong regionalstrongtodue multiplier chainssupply acrosstheseMany brands (Marriott, IHG) industriesare foreign in based mainly are operators Canada asoperate Many oftheseplayers cluster athemselves,of andcreatingin sustainingthusand effect ripple businessesother Multipliers for the tourismforthesectorMultipliers activity twice economicgenerate revenueashighas highest the have services Food Foreign operatorsCanadian ▪ Anchors ▪ Considerations multipliers economicHealthy ▪ ▪ 3 28,035 391 160 9,369 2,084 94 4,611 676 205 6,343 246 168 Total Total impact $M) (USD, 3 2.1 2.3 2.0 1.9 Total Total multiplier 2 22% 20% 73% 62% Jobs attributed to tourism Owners of Harvey's, Swiss Chalet, Montana's, Kelsey's, and Milestones Grill & Bar Grill and Milestones Kelsey's, Chalet, Montana's, Swiss of Harvey's, Owners 2,200 322 98 13,961 195 80 4,140 921 42 Revenue Revenue $M) (USD, 3,270 127 87 ; Company statementsfinancial 5 6,600 3,700 650 29,895 610 250 6,200 11,000 120 # of of # employees 34,000 54 900 USA Canada Canada Canada Canada Canada Canada Canada Canada USA Canada Canada HQ location needs and impact assessment impact and needs

Statistics Canada, Satellite Account,Canada, 2015” “Canadian TourismStatistics 4 1 Large companies: companies: Large Casino Niagara Casino Festival Shakespearean Stratford Vail Resorts Vail Recipe Unlimited Recipe Brewery Rock Big Restaurant Brands International Brands Restaurant Air CanadaAir InuitAir Air Mountain Central Four SeasonsFour Hotels Temple HotelsCoast Data from CapIQ fromData Operators of Hilton, Radisson, Days and and Radisson, Operators Days hotels ofothers Hilton, Satellite Account,Canada, Statistics2015” “Canadian fromTourismgenerated Employmentby tourism, and indirect, direct, revenue includes impactinduced Total fromeconomiceffects Unlimited: and Popeyes; Recipe Hortons, King, Tim of Burger Owners International: Brands Restaurant Source: D&B Hoover’s; CapIQ; CapIQ; Hoover’s; Source: D&B 3

5. 1. 2. 3. 4. Arts; and recreationentertainment Arts; Food services and drinking Food placesservices Air Air transportation 2019 data unless specified unless data 2019 accommodations Traveller Examples of of players Examples The largest800 tourism companies(>$20M revenue) in employ ~742K individualsaccount for and ~$48.5 Bn in GDP Analysis and options presented here are current as of March 27, 2020 2020 27, March of as current are here presented options and Analysis Last Modified 2020-04-14 2:35 PM Eastern Standard Time Printed Illustrative only Illustrative equity ratios, equity - - to - exhaustive exhaustive - Non leveraged sectors: leveraged - Air transportation companies and and companies transportation Air companies accommodation traveler debt high feature existing ofdegree large a meaning risk higher potentially and debt and services foodin players Large (similar are accommodation traveler to susceptible firms) smaller to to due economy the in downturns margins profitsmall . profitability: Low . companies accommodation Traveller additional an facing currently are forpaid deposits refunding expense, 2020 summer forbooked travel Implications for government government for Implications support large supportingstimulus Government consider: should businesses tourism Highly 2 0.38 1.35 0.16 0.31 8.87 3.03 3.40 3.49 7.1 0.3 2.0 0.8 28.6 52.1 (11.1) 185.3 697.9 697.9 all 2019 annual data was available) and in USD million; less available all 2019 data available than less annual data averages and SME industry was available) in million;USD not not 0.7 4.8 0.3 0.4 – 45.8 51.5 411.2 411.2 65 0.4 1.5 0.4 0.6 12.5 12.5 1,327.0 4.8 7.7 13.2 363 15.4 109.8 109.8 104.1 1,961.5 5.0 1.0 17.6 17.6 21.6 27.5 768.6 768.6 291.20 291.20 10,795.9 10,795.9 37.4 36.5 10.5 24.3 993.8 993.8 126.3 758.3 13,885.0 13,885.0 needs and impact assessment (detailed example) (detailed assessment impact and needs 37.7 38.5 11.3 13.2 133.4 133.4 943.6 1,045.9 13,913.6 13,913.6

A B A B A B A B

1 based based companies;companies across 2018 Based on data Hoover’s; consistencyreal figures D&B(for pulled from - Large companies: companies: Large Airline amortization and and amortization depletion Airline often under oflisted rather sales than cost operating expenses All Canadian All 2019 fromData (2018 data not available) Source: D&B Hoover’s Source: D&B Traveler Traveler Accommodation Food Services and and Services Food Places Drinking Arts, Entertainment Arts, Recreation and Air Transportation Air Tourism firm Tourism examples >$20M Revenue 3

USD million, 2018 USD million, Selected balance sheet components for tourism companies with annual revenues >$20M with revenues annual companies tourism for components sheet balance Selected 3. 1. 2. Analysis and options presented here are current as of March 27, 2020 2020 27, March of as current are here presented options and Analysis Last Modified 2020-04-14 2:35 PM Eastern Standard Time Printed for for EI or or EI for income threshold threshold income could only support these support only could does not last long enough long last not does migrant workers migrant month Wage Subsidy Subsidy Wage month - sharing, and may not meet the meet not may and sharing, - To qualify, an affected worker will have to reside in reside to have will worker affected an qualify, To “ 12 previousthe in $5,000 earned have and Canada months” Seasonal tourism workers are not eligible eligible not are workers tourism Seasonal work Benefit Response Emergency Canada the – of Employers Wage extended an through summer this employees Subsidy The 3 The the in money their of most makes who someone support to students) (e.g., summer ▪ ▪ ▪ …are unlikely to be met if supports like the wagethe like supports ifmet be to …areunlikely seasonsummer the through extended arenot subsidy vs. vs. - to pay for school for pay to 31% of tourism employees employees tourism of 31% Temporary Foreign Temporary summer job job summer 24) represent represent 24) - A younger workforce, large share of newcomers, and high seasonality may render may seasonality high and newcomers, of share large workforce, younger A due to the sector’s labour shortage labour sector’sthe to due

Many employers rely on rely employers Many Workers ~25% of tourism employees are immigrants or non or immigrants are employees tourism of ~25% residents permanent ~25% of sector employees work for part of the year year theof part for work employees sector of ~25% Labour Canadian of 18% vs. season) summer (e.g., work seasonal in participate who Force 13% of the overall labour force labour overall the of 13% many with tourism in is employment youth Canadian of 40% a leveraging students Youth (age 15 (age Youth ▪ Large source of employment for newcomers, and and newcomers, for employment of source Large workers migrant ▪ High fluctuation and seasonality swings seasonality and fluctuation High ▪ ▪ Young labour force depends on tourism for summer jobs summer for tourism on depends force labour Young ▪ Employees: Employees: date to announced support government ineligible for employees tourism displaced many Maximum education education of or high level diploma Maximum equivalent school 4

1. of Canada, AssociationCanada, Industry Government Tourism of Canada, HR Canada TourismSource: Statistics The needs of employees in Canada’s tourism sector…tourism Canada’s in employees of needs The Analysis and options presented here are current as of March 27, 2020 2020 27, March of as current are here presented options and Analysis Last Modified 2020-04-14 2:35 PM Eastern Standard Time Printed 2 3 in Appendix 19% 16% 15% 18% 22% 19% 20% 18% 17% 28% 19% 19% Detailed breakdowns Detailed breakdowns Share of Share tourism employment 420 114 32 17 72 1 61 2 44 Tourism share of employment 15%+ employment ofTourism share 10%+ population of share Aboriginal 36 2 388 34 97 1 3 21 71 59 13 4 10 42 1 35 1 31 6 6 3 17 9 12 Number of communities by of Number communitiesby of and tourism share aboriginal population X2016099 - 400 - Province Manitoba New Brunswick Labrador and Newfoundland Northwest Territories Nova Scotia Ontario Island Prince Edward Quebec Saskatchewan Yukon Alberta British Columbia Total of total (more granular data industry of not granular totallevel) (more at available CSD come Statistics,” table table 98 comeStatistics,” ensus Profile 1 >65 X2016321; X2016321; In “Household - 400 - 65 - 55 Aboriginal Aboriginal as detailed in C ancestries“ - 55 - 45 ≤45 Median householdMedian income $ thousands Brokenhead X2016042; X2016042; Status,” table of Work“Place 98 - 401 - Whitecap >21 388 municipalities depend on tourism for more than 15% of their local local their of 15% than more for tourism on depend municipalities 388 21 - Wabamun 18

18 Waiwakum -

16 risk municipalities declinefrom risk in revenue tourism - Communities: Communities: Indigenous 10% than more are 22 these, within support; additional need may and employment, Aboriginal definition used here: “Aboriginal ancestry (only)“ and and and Aboriginal definition used non "Aboriginal (only)“ ancestry here: “Aboriginal Used Census Subdivisions (CSDs); filtered out CSDs with tourism employment less than lessthan employment 15%;tourism employment with filtered out CSDs (CSDs); Subdivisions Census Used employment defined Entertainment,as and Arts, Tourismand and a AccommodationemploymentRecreation, as Services share Food ≤16 5

3. table Canada, Profile,” 98 “Census Source: Statistics 1. 2. Tourism employment share 2016 area, in employment total % of Top at Top income household median and(>15%) share tourismemployment by Municipalities in tourism industries over >15% and Indigenous population >90% population Indigenous and over tourism>15% industries in Communities called out on map are examples with with shareemployment are examples mapon Communities out called Analysis and options presented here are current as of March 27, 2020 2020 27, March of as current are here presented options and Analysis Last Modified 2020-04-14 2:35 PM Eastern Standard Time Printed for - 1 keepers, and keepers, - Providers of authentic cultural authenticof Providers nottypically are experiences Elders,by operatedprofits knowledge sourcea to provide communities development economic of 2 ▪ 4: Indigenous Indigenous 4:tourism driving the areforce businesses many localeconomiesfor - 19, Canada’s Indigenous tourism tourism Indigenous Canada’s 19, - 900M less in GDP in GDP less 900M - The success of the sector hasthesector ofsuccess The theestablishment on built been andframework institutionalanof to trust ofcommunities earned viable a tourismas recognize career the return couldcrisis The with levels to 2001 industry $800 forthis predicted contribution year 3: The crisis endangers long endangers crisisThe 3: viability trust in the term sector’s ▪ ▪ 900M in GDP contribution and at least 12,000 jobs in 2020 in jobs 12,000 least at and contribution GDP in 900M - Following the outbreak of COVID of outbreak the Following ~70% of till revenues come fromcome of revenuestill ~70% greatest with visitors foreign the during seen earnings seasonsummer be will operatorsThese near to the vulnerable especially a andtravel international ofhalt season summer shortened 2: The majority revenue of majority The 2: visitors from foreign comes ▪ ▪ 1 in interestedin Indigenous1 international (37%) are3 to visitors Canadatourism experiences

19 crisis endangers the stability of Indigenous tourism in Canada with four key riskskey four with Canadain tourism Indigenous of stability the endangers crisis19 - Indigenous communities: communities: Indigenous $800 lose to forecasted is sector Destination Canada Canada Destination 2018 Indigenous Tourism Association of Canada AssociationofIndigenous Canada March 12, statement2020 Tourism forecasted to go out ofbusiness outgo to forecasted weeks within Without an immediate liquidity liquidity immediate an Without of hundreds (e.g., grants) injection are operators tourism Indigenous potentially hindering thesector’s hindering potentially capitaltoaccess No business supports announced to announced supports businessNo distributed be through will date channels funding Indigenous 6

2. Association Source: ofIndigenous Canada, Board Conference Tourismof Canada, Canada Destination 1. ▪ ▪ historically been supported by beenhistorically supported by Indigenous funding channels 1: Indigenous Indigenous has1: tourism The COVID The Analysis and options presented here are current as of March 27, 2020 2020 27, March of as current are here presented options and Analysis