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Canada’s tourism operators struggling to stay afloat as debt mounts: poll

The head of the Tourism Industry Association of Canada says businesses are struggling to stay afloat under a pile of debt and a dearth of overseas visitors.

In a poll of tourism operators, some 45 per cent said they were likely or somewhat likely to shut down within three years unless the government steps in to adjust their loan conditions.

“Unless there’s some change to the payback system and the payback requirements, they’re in danger of closing in the next three years,” said Beth Potter, CEO of the trade organization.

“Everything from campgrounds to hotels to amusement parks to outdoor adventure,” Potter said.

“Festival events oftentimes are run by non-profit organizations, and they’re really challenged right now in paying back these loans,” she said.

“It’s dire.”

Many businesses surveyed said they will not be able to make debt payments that are slated to come due in the next two years. The loans include those taken out through federal pandemic relief programs such as the Canada Emergency Business Account (CEBA) as well as the Regional Relief and Recovery Fund and the Highly Affected Sectors Credit Availability Program.

The tourism association is calling on the federal government to extend the zero-interest repayment deadline for CEBA loans to Dec. 31, 2025, two years past the current deadline.

It is also asking Ottawa to boost the forgivable portion of fully repaid loans to 50 per cent, from up to 33 per cent, and to extend the qualifying deadline for that forgiveness to the end of 2024, rather than by the end of this year.

About 30 per cent of survey respondents, mainly small- and medium-sized operations, reported more than $250,000 in outstanding debt. One in five claimed debt between $100,000 and $250,000.

One reason for revenue struggles weighing on repayment efforts is a lack of tourists from abroad compared with 2019.

In March, the combined number of visitors to Canada and returning residents sat at 77 per cent of March 2019 levels, according to the most recent figures from Statistics Canada.

Potter said business travel in particular remains down relative to pre-pandemic totals. “Not only business events like conferences and trade shows and that kind of thing, but also transient business travel, with somebody flying into Toronto for a meeting and then flying back out again.”

Americans have “cocooned within their own country,” Potter said, adding that she remains hopeful they will return in force soon.

Even in the United States, whose travel industry rebounded more quickly than Canada’s, business and international travel remain below 2019 levels _ “and business travel appears to have stalled at current levels,” said TD Cowen analyst Helane Becker in a note to investors on May 30.

Labour shortages remain another problem, hobbling business owners’ capacity to fill skilled positions, market and promote, serve customers at scale and manage their teams.

“We were in a challenging position with labour before the pandemic hit, and the pandemic has just accentuated it,” Potter said.

The exit of many baby boomers from the workforce hasn’t helped, she added: “They’ve said, `Nope, we’re out, we’re retiring, we’re moving to the cottage.’ We have lost a huge amount of leadership within the industry.”

After several program extensions and top-ups, the government says on its CEBA website that all “repayment deadlines are now final and cannot be changed.”

The CEBA program funded more than 898,000 small businesses and not-for-profits with $49.2 billion in interest-free loans of up to $60,000 after the COVID-19 pandemic set in, according to the government.

Conducted by Nanos, the online survey polled 149 financial controllers and accountants of businesses in the tourism sector between April 28 and May 12.

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