Proceedings of the Standing Senate Committee on
Foreign Affairs and International Trade
Issue 17 - Evidence, March 3, 2011
OTTAWA, Thursday, March 3, 2011
The Standing Senate Committee on Foreign Affairs and International Trade met this day at 10:44 a.m. to study the political and economic developments in Brazil and the implications for Canadian policy and interests in the region, and other related matters.
Senator A. Raynell Andreychuk (Chair) in the chair.
[English]
The Chair: Honourable senators, we will start. There are some mechanical problems of a visual nature. We will make do as best we can. As long as we can hear our witness and the witness can hear us, we can proceed.
This is the Standing Senate Committee on Foreign Affairs and International Trade. The committee is continuing its special study on the political and economic developments in Brazil, the implications for Canadian policy and interests in the region, and other related matters. This is our eleventh meeting on this particular study.
We welcome our first witness this morning via video conference from Vancouver, British Columbia.
We had another panel of witnesses; however, due to some critical issues that department is facing, they have asked to be rescheduled. Under the circumstances, it was warranted that they handle other priorities. It is not that they did not wish to come; it was a question of emergencies. We will reschedule them for a later time.
From Vancouver, British Columbia, Ms. Michele McKenzie is President and CEO of the Canadian Tourism Commission. The Canadian Tourism Commission is a Crown corporation and is accountable to Parliament through the Minister of Industry. Its mandate is to sustain a vibrant and profitable Canadian tourism industry and to market Canada as a desirable tourism destination.
Prior to her appointment in 2004, Ms. McKenzie served as Deputy Minister of Tourism, Culture and Heritage for the province of Nova Scotia. She has held positions on numerous boards including the Art Gallery of Nova Scotia and the Nova Scotia Museum.
Michele McKenzie, President and CEO, Canadian Tourism Commission: Honourable senators, thank you for inviting the Canadian Tourism Commission to contribute to your special study on political and economic developments in Brazil as well as tourism development, which is related to our mandate.
My preference would always be to meet with you in person. As you mentioned, the CTC is Canada's national tourism marketing organization. The CTC has international marketing initiatives in 11 countries. We are a Crown corporation that operates within a highly competitive and commercial environment. We are results- driven.
Tourism marketing is our business line; increased wealth for the Canadian economy is our objective.
CTC has developed a strong international tourism brand, Canada Keep Exploring. It is through that brand that we market Canada to travellers.
Our international tourism brand is resonating with customers. It is recognized as a contributor to Canada's receipt of the number one country brand in 2010. We have private and public partners standing with us behind this brand to promote Canada internationally.
A strong tourism brand is a prerequisite to compete for travellers. The rapid growth of global travel marks tourism as an astonishing economic and social phenomenon of the past century. There were 25 million international arrivals in 1950 and 935 million in 2010. It is estimated that there will be 1.6 billion international arrivals by the year 2020.
It is no surprise that this has become a high stakes game in which countries are competing to win. Winning countries are those offering exotic experiences, a strong tourism brand, great infrastructure and effective collaboration between government and tourism partners. The reward is greater revenues for those destinations that have it all together.
About 80 per cent of Canada's tourism revenue is generated from the domestic market. This is important revenue for businesses across our country, but ultimately this market is limited and selling to ourselves does not generate new wealth for our economy.
The CTC's vision has to be far afield: To take Canada's tourism brand into global markets and export markets, where we can connect with high yield travellers who stay longer and spend more. We need to compete for more than our fair share of an ever-expanding pool of visitors.
Travellers spent over $1 trillion on tourism globally in 2009. That is $3 billion a day or $2 million a minute. CTC's leadership and partnership are very much sought after in international markets where Canada's tourism brand holds the greatest impact.
In 2011, we will be focusing our efforts and available investments in markets where Canada's tourism brand leads and yields the highest return on investment. This strategy includes the developing market of Brazil, which is seen as a priority international market by the Government of Canada and supported with special funding to the CTC under the economic action plan.
In 2011, we will be competing against all other destinations to increase demand for travel to Canada. Last fall, CTC led a market development mission to Brazil. We had our partner and industry representatives from Alberta, Ontario, Quebec, VIA Rail and tour operators who have been working in Brazil for several years. The program was very successful in confirming the potential of the market for our partners and showing Canada's commitment to developing our tourism relationship with Brazil. The mission also gave us an opportunity to listen first-hand to the travel trade's perspective, as they gave us on-the-ground feedback about some of the challenges they face in selling Canada.
Brazil does have enormous potential, perhaps on a par with China and India. The population is 200 million. We were told by Canadian embassy officials that there is a faster growing middle class than in India and China. Their economy is strong and their GDP is greater than ours. They are the world's eighth largest economy.
The point made to all of us on that mission was that this is not a developing economy; rather, it is developed and growing. A sizeable number of Brazilians are wealthy, already travel a lot and are good market potential for Canada. They make up about 20 per cent of the population, or 40 million people.
There is also an emerging middle class that is a staggering 100 million people. This group represents high potential for travel. They generally speak English, are young, want to be connected, and travel is beginning to be important to them. They are categorized for our marketing purposes as "free spirits," which makes them an ideal market for Canadian travel products.
It may be interesting for senators to note that Canada is the number one choice for students wishing to learn English and/or obtain an education outside of Brazil. During our visit, we were told that 17,000 student visas had been issued by Canada's embassy in Brazil as of November 2010.
There are over 7 million outbound travellers from Brazil each year. Over 1 million travelled to the U.S. in 2010 and our early results show that 70,000 travelled to Canada. We think the final result will be closer to 80,000.
Why is there a difference between the U.S. and Canada? While the market has enormous tourism potential for Canada, the travel trade and consumers tell us there are two challenges: Air access and visas.
Our role is to create demand for Canada as a tourism destination. Our intention today is to inform your committee with our market insights and not to discuss policy, as that is not our role. We can inform you, from the customer's perspective, what we hear in the market.
Of the 11 countries around the world in which CTC conducts marketing campaigns, Canada has Open Skies agreements with two — the U.S. and South Korea — and has liberalized air agreements with the United Kingdom, France, Germany and Japan. Canada has already negotiated air agreements with 50 countries and we are well aware of the potential benefits for tourism under such agreements.
Brazilians are a high spend consumer group eager to travel. They are most interested in Canada because they love the idea of connecting with local culture and communities, and we have lots of opportunity for that in Canada.
At the present time, there is only one non-stop daily route between Brazil and Canada and that is in Toronto and São Paulo. Seats command a premium price. With no non-stop flights to other parts of Canada, they often pick other destinations in the world over great Canadian destinations. The growing Brazilian ski market, for instance, has no access to many of our ski areas in Canada, so they will often pick U.S. ski resorts over Canadian resorts.
We are told that 4 million Brazilians hold U.S. visas. The tour operators and agents we are working with in Brazil have the ability to identify these travellers, presenting the opportunity for a targeted marketing campaign. We can entice them to Canada, as well.
More and more, countries are viewing their visa process through a competitive lens. Brazilians who want to visit the United States must make an appointment to visit the U.S. embassy. This means they may have to wait. However, they are not required to surrender their passport while they are waiting, and they can expect to receive a visa the day of their appointment. In addition, U.S. visas are often issued for a 10-year period and are transferable to a new passport. That is a great strategy.
In Brazil, there is a general expectation from consumers that Canada's visa process will be similar to that with the U.S. When travellers learn that Canada's process involves more uncertainty, they often choose the U.S. over Canada as a destination. For instance, from January to October 2010, close to 1 million Brazilians travelled to the U.S., while only 68,000 travelled to Canada. Therefore, while arrivals to Canada for that period were up almost 30 per cent, Brazil's enormous potential as a tourism source market for Canada could certainly grow.
The new U.S. Corporation for Travel Promotion — the new U.S. version of the CTC — views the broad visa issue as a priority, and we understand we will be working with their government to have introduced a visa waiver for Brazil.
Our travel trade also sees visas through a competitive lens. They are seen as an arduous process with long delays, which can sway a traveller to walk away from one destination and pick another.
As mentioned at the outset, CTC believes the Brazil market has outstanding potential for Canada, and there is no question that short-term stimulus has provided Canada with great potential for the long-term growth of Canada's tourism sector. There is considerable untapped opportunity, and CTC will continue to market Canada aggressively as a premier travel destination to Brazilians. We look forward to years of progressive growth and development in this market.
Honourable senators, in the interest of your time and the important work of your committee, I would be pleased to answer your questions.
[Translation]
Senator Fortin-Duplessis: Madam President and CEO, thank you for sending in your speaking notes before our meeting, so that they could be translated into French. I appreciate that very much.
I would also like to mention that I was really impressed with your global tourism brand. It was a great idea to use "Canada: Keep Exploring," which is an excellent brand, in my opinion.
I have two questions for you. One is regarding safety, and the other one is regarding visas.
I want to ask about the safety of Canadian travellers because I have some serious concerns about this. For Canadians who travel with their passport, bank card, various documents, cash, and so on, there are perhaps some difficulties involved. This question is important for travellers who often go to Brazil. What advice would you give Canadian travellers so that they can stay safe and things can go more smoothly during their travels? Thefts occur frequently in Brazil.
[English]
Ms. McKenzie: The Canadian Tourism Commission is focused on inbound travellers to Canada. We do not have a mandate for Canadian citizens travelling abroad.
With respect to security of travellers travelling in Brazil, I can speak to the marketing missions that we send to Brazil. For the tourism operators who are marketing in the Brazil market, we have great confidence that when we send people into Brazil, they can be safe and travel safely, and certainly, that has been my experience in travelling throughout Brazil.
As the Canadian Tourism Commission, we are completely focused on inbound travellers to Canada.
[Translation]
Senator Fortin-Duplessis: I now come to my second question. All Canadians must have a valid visa before arriving in Brazil, and they must use it within 90 days of it being issued, failing which they are denied entry into the country. The European Parliament recently green-lighted visa waiver agreements. Citizens of the European Union travelling to Brazil on vacation or on business will now be allowed to enter the country without a visa, for stays of up to three months, according to the new rules on visas that Parliament members approved at the beginning of February. Residents of Estonia, Latvia, Malta, Cyprus and other smaller countries who had to apply for a visa up until now will be exempted.
What do you think stands in the way of similar agreements being concluded on visa waivers between Canada and Brazil?
[English]
Ms. McKenzie: I cannot speak to the specifics of visa waiver programs for other countries for travellers travelling into Brazil, but you raise a very good point. Travellers view visa processes through a competitive lens. As we look at the Brazilian traveller who may travel to Canada, he or she will look at our visa process to see how friendly and competitive it is in comparison to other destinations. We know that some other destinations are being innovative in how they process visas, how quickly they do it and how customer friendly their processes are. We also know that other countries are considering visa waiver for Brazilian travellers to travel to their country, and the United States is one. You raise a good point. From a traveller's point of view, the visa process is a competitive issue, and that is certainly our experience in Brazil as well.
Senator Finley: Thank you for your excellent presentation. You mentioned that you work in partnership, particularly targeting 11 countries that you mentioned by name — U.S., South Korea, U.K., France, Germany and Japan. That is seven. Could you name the other four?
Ms. McKenzie: We are marketing, as you say, in the United States, the United Kingdom, France, Germany, Mexico, Australia, China, Japan, South Korea, India and Brazil.
Senator Finley: They are all places one would love to visit, by the way.
You mentioned also that you had both private and public partners. I assume the public partners are provincial organizations, largely. What kind of private partners are you working with, and what sort of relationship do you have, or what is your structure with private partners?
Ms. McKenzie: Private partners are any Canadian businesses that are invested and marketing their products outside of Canada. They would be some very large companies, like Fairmont Hotels or any of the big hotel chains that are present in Canada, or companies like Rocky Mountaineer Rail Tours. They are inbound tour operators who are selling through a tour operator network. An example is Jonview Canada, owned by Transat, which sells packaged tour products to other tour operators throughout the world. It is very much working with the airlines that are based here in Canada, as well as airlines based outside of Canada that bring customers to Canada.
We are working with that network of private partners and with all of the destination marketers across Canada, including the provinces that are largely invested in marketing internationally as well, at different degrees, depending upon the province. The cities have become a larger force in marketing internationally, and they are done through the destination marketing organizations across the country, from the large ones, Tourism Vancouver, Tourism Toronto, Tourism Montreal, to all the medium-sized cities that have strong marketing capacity, cities like Halifax, Quebec City, Hamilton, Calgary — every city that is out there with an international investment.
We measure our partnership based on a ratio. In 2010, we had $1.30 of partnership support for every $1 invested in the CTC, so we call that a ratio of 1.3 to 1. That is an important measure that we report on every year.
I also referred to Canada's brand leadership. By that I mean that when we are in a market like Japan or Brazil, all of those partners are marketing their destinations and their products under the Canada umbrella. An important part of how we believe we can be successful is that we have a strong Canada brand and that everyone is marketing under that umbrella, and there is strong consensus among all of our partners that that is the best way to go.
Senator Finley: CTC is like an umbrella organization or a coordinating organization, with perhaps a principal responsibility to sell the brand as opposed to the details. You will not organize a two-week vacation for a Brazilian family in Canada, presumably. Someone else does that.
Ms. McKenzie: That is a very good way to describe how we market. Canada provides the overall brand umbrella. In a case like Brazil, we would lead the marketing in Brazil under the Canada brand. Our partners put their money on the table to buy into our campaigns.
For instance, we would be in Brazil with a strong travel trade initiative, educating all of the travel agents in Brazil and inviting them to become Canada's specialists. We provide the overall context and the overall support for that program, and the partners provide the very specific content of the types of products that they are selling.
That is just an example of what we are doing in Brazil. That is a new market where trade is an important channel. If we are in another market that is more developed, say a market like the United Kingdom or Japan, we run major brand campaigns to get people interested in Canada. Our partners provide all of the specific offers to come to their particular destination, or all of the price point types of offers as to what a tour in Canada will cost.
Senator Finley: I am particularly interested, if I may, Ms. McKenzie, in a few points that have been raised about Brazil in this committee.
First, we were advised that Brazilians take to new technology like fleas to a blanket. They just grab this stuff, and they are perhaps among the most advanced, on an individual basis, users of new technology, be it iPads, iPhones, whatever. Second, we have been told that while a large proportion of Brazilians may not quite be consumer crazy, they do have a reputation for doing a high amount of shopping. Third, strangely enough, they are very fond of sports. I learned this morning that we received the go-ahead to host the FIFA 2015 Women's World Cup. Congratulations, Canada.
Would your marketing efforts encompass or concentrate on things like population genetics like technology, sports and consumer spending? Would you put together a brand that fits that genetic, or would someone else do that?
Ms. McKenzie: Yes, developing a deep understanding of the market and ensuring the way we are positioned in Canada resonates strongly with that market, is exactly the role we play. That would vary from market to market in terms of what people are looking for in a travel destination. It is especially different for countries like Brazil where there is a new travelling population that has not necessarily had the opportunity to travel. Brazilians in that emerging bracket have high aspirations and they see Canada as an ideal destination, which drives them to want to come here.
You make the point about technology, and this is a very important point regarding how we get our message out. We are highly invested in social media channels, especially in markets that embrace technology as a way to receive information. Brazil would be one of those. In fact, we are finding that emerging markets are embracing technology at a faster rate than traditional markets. We find, for instance, the role of travel agents is still important in Brazil, but it is even more important in our traditional markets. Our direct-to-consumer campaigns in markets like Brazil are very much leveraging the customer's interest in using their new technology.
Shopping and sports are the types of experiences that we like to promote for Canada. Brazil feels a very strong affinity to Canada right now. They are very proud to be hosting the 2016 Olympic Games. They are also very proud to be hosting the 2014 FIFA World Cup. They are very focused on those particular events.
We have a unique opportunity in that the lead person on their Olympics committee who is organizing those games was recruited from the Brazilian CTC equivalent. She has a very strong understanding of Canada and how we approached our Olympic Games. We have a strong connection with her in terms of how they will leverage their Olympic Games for tourism purposes.
We see the value in sporting events to be able to draw customers to Canada. As we saw with our Olympic Games, it gives us an opportunity to tell the story about Canada as a destination much broader than just for sporting events. When the world's media focused on Canada, we got the chance to tell them everything about us as a travel destination. That worked well through our Olympic Games.
Senator Finley: I have no doubt my colleagues will explore the subject of visas more thoroughly. This is probably a question that you do not have an answer to but I will ask it anyway.
Of the approximate 68,000 or so Brazilians who visit Canada per year, how many of them abscond? In other words, how many of them stay in Canada when they should not?
Ms. McKenzie: I do not have that answer.
Senator Finley: I did not think you would. It is something we would perhaps ask to have researched. Thank you very much.
The Chair: We can ask Citizenship and Immigration Canada to provide us with that information.
[Translation]
Senator Nolin: Thank you for accepting our invitation. Like my colleague Senator Fortin-Duplessis, I would like to thank you for providing us with a French version of your speaking notes.
My first question is about the air link between Brazil and Canada. Since there is only one Canadian destination, does that mean that all Brazilian travellers are entering the country via Toronto at this time?
[English]
Ms. McKenzie: Presently, there is one regular flight between Brazil and Canada. It is a direct non-stop Air Canada flight between São Paulo and Toronto. That is direct access. We are hopeful that we will have more direct non-stop access to Brazil.
We have an important role to play in setting the stage for that. These things are always about supply and demand. Our job is to create demand. We are hopeful there will be additional air supply.
There are many opportunities for people from Brazil to come to Canada through other routes other than a direct non-stop flight to Canada. There are six daily non-stop flights to U.S. destinations and from those destinations, there is quite good access to Canada.
The challenge we have is that there is no transit without visa in the United States. In other words, for someone even transiting through U.S. to come to Canada on a U.S. carrier, they would need to acquire a U.S. visa and a Canadian visa. Usually when faced with that option, they will just stop in the U.S. They do not usually go the extra mile of getting both visas to take that trip.
Therefore, our focus in Brazil is to try to build demand to generate more direct non-stop access into Canadian airports, including but not limited to Toronto.
[Translation]
Senator Nolin: You anticipate that just over 80,000 travellers from Brazil will have arrived in Canada in 2010. You are familiar with airlines' needs. What critical mass needs to be reached for an airline to decide to add a new route, for instance, to Vancouver?
[English]
Ms. McKenzie: We know that the number of Brazilians to Canada in 2010 will come out; we are getting preliminary numbers now from Statistics Canada. We think it will land at about 80,000. We also know there is already great interest among airlines like Air Canada to provide more service between Brazil and Canada. That would require talks at a policy level in order to provide that opportunity. However, we know that Air Canada considers the demand already there.
[Translation]
Senator Nolin: So, I am to understand that 80,000 travellers are sufficient not only to service Toronto, but other Canadian destinations as well. You have already provided more than enough information in response to this question. I understand that you have developed initiatives intended to raise Canadian airlines' awareness and to encourage them to develop routes outside of Toronto.
[English]
Ms. McKenzie: That is correct. It is our job to try to create that demand. Such air discussions take place in a complex environment. One of the very fundamental needs of those discussions is to understand what kind of demand exists. Therefore, we do our job of trying to create that demand and communicate where we believe it exists and where we believe we have future potential. Then it is up to the experts in that area at Transport Canada to look at the overall situation and determine where they see opportunities for air negotiations.
[Translation]
Senator Nolin: I have a question about GST rebates for travellers. As you know, the 2007 federal budget eliminated or modified the rebate the Canadian government provides for foreign travellers to Canada. Do you know what the impact of this budget policy has been on foreign travellers and especially on Brazilians?
[English]
Ms. McKenzie: The main impact is that there is no longer an individual GST rebate for individual travellers to Canada; however, there is the new Foreign Convention and Tour Incentive Program through which our tour operators can apply for a rebate for their customers.
We hear that while that program is appreciated, initiatives could take place to make the process smoother for application and processing. We have communicated those ideas to the Department of Finance. The Tourism Industry Association of Canada is working with the Government of Canada on that program to make it a smoother and more competitive program.
Senator D. Smith: A very long time ago, 1983-84, I was the Minister of State for Small Businesses and Tourism.
With regard to the question of people coming here, Senator Finley used the word "abscond." Filing for refugee status sometimes triggers the visa requirement. For example, an immigration consultant had several hundred people in from Jamaica who immediately filed for refugee status. The basis of their claim was that they were supporters of Michael Manley, who was prime minister. However, he lost the last election. If they went back, their lives would be threatened and they would not get jobs, et cetera. Through a bunch of legal devices, these hearings were delayed. Before the hearings took place, there was another election and Mr. Manley got back in. Every one of the claimants had to come up with new reasons to stay.
I am proud that Canada is very generous on this issue. However, there are loopholes and some effort should be made to address them. I will not get into that debate. Jamaica and Brazil seem like democratic countries. However, that has not prohibited people from taking that route. Is that a factor in the thinking of the bureaucracy that this visa requirement be maintained? What are your thoughts on that?
Ms. McKenzie: I do not know the rationale for Canada's visa requirement from Brazil. However, we are aware of the concerns around the new refugee legislation and the efforts being made in that regard. We are most aware of that in a country like Mexico where, of course, we have visa requirements to deal with those types of concerns. We see that on the customer side. In terms of tourism performance from a market like Mexico, we would have expected to receive about 270,000 Mexicans to Canada in 2011. Right now, our predictions are more like 106,000. The opportunity cost of that gap is about $270 million into Canada's economy. There are many considerations when these decisions are made; however, there is great opportunity cost, from the tourism revenue point of view, as well.
In a market like Brazil, we look at the realistic situation where the U.S. may lift the visa requirement. We know what happens when the U.S. lifts a visa from other countries. We have seen that happen in South Korea in 2009-10. The U.S. had a visa requirement from South Korea; they no longer do. We had a great performance from South Korea in 2010; it was up by about 20 per cent. However, the U.S. performance from South Korea was up by 55 per cent. Therefore, we know that, when a visa is lifted, there is latent demand that can be easily fulfilled. We feel that would be the situation out of Brazil, if the U.S. lifted that visa.
While there are legitimate and important considerations on that process in Canada from a refugee point of view, there are also important economic considerations in terms of the economic benefits that increased international travel brings to Canada. Our collaboration on looking at these challenges across the broad spectrum will serve us most competitively as an economic force in the world.
Senator D. Smith: Rather than pursue this, perhaps we can ask Ms. McKenzie to provide answers on statistics from Brazil as to whether there have been refugee claims and the basis of those claims. You have addressed my question satisfactorily, thank you.
The Chair: There is the issue of how Brazil handles entrance in and if it would be a transit site. That is the information that we need. We will follow up to get the answers or call the witnesses.
Senator Downe: I thank the witness. With the time difference, it was an early start to your day and we appreciate it.
I am surprised that 80 per cent of the Canadian tourism revenue is generated from the domestic market. Has that figure been consistent over the years?
Ms. McKenzie: It has not been consistent. In fact, in the last 10 years, that number has grown considerably. In the year 2000, for instance, about two thirds of our revenues came from the domestic market. In 10 years, that number has grown to 80 per cent. That shows that we have a very strong domestic travel market in Canada. However, in order to bring new wealth into the Canadian economy, we have to be more competitive with respect to attracting international travellers. We need both of those revenue streams to be strong. In the last 10 years, the domestic stream has been much stronger than the international stream.
Senator Downe: Tell me about the other 20 per cent. Are the majority of the travellers from the United States?
Ms. McKenzie: Yes, they are and that is the reason why there has been such a shift in that percentage. We have lost travellers from the U.S. in some significant numbers over the last 10 years. There are many reasons for that loss. We have lost a substantial portion of the drive travel from the United States into Canada. We are maintaining good performance with air travel from the U.S. into Canada, and we have been growing in other international travel. We saw the tipping point in 2008, which was the first year ever that other international revenue surpassed U.S. revenue to Canada for travellers, and we do not think that will ever go back. We think that it will forever be the case that other international revenue will be higher than U.S. revenue to Canada. The U.S. is still an important market for Canada, but, increasingly, the importance of the U. S. market is with the air traveller, not the automobile traveller.
Senator Downe: Tell me about China. I know we are talking about Brazil, and I will get to that in a moment. We finally have this agreement on travel with China after many years of setbacks. Having been signed, are the Chinese, in your opinion, enthusiastically promoting it? Have we had a rapid rise in the number of Chinese visitors to Canada? As we know, the Chinese are travelling the world. Are they coming to Canada?
Ms. McKenzie: We were delighted in 2010 to have Canada finally approved for destination status out of China. We know that there is a great interest among the Chinese traveller to come to Canada, and we know that the Chinese are a rapidly growing outbound travel market. They are predicting that they will have 100 million international travellers by the year 2015. We want to be there competing for those travellers, and we finally have the opportunity to do that.
We just launched our first ever consumer campaign in China last month, and that was launched under the new Approved Destination Status regime. The ADS designation officially allows us to receive group travel out of China, and that is one piece of the business, but we are not targeting that piece of the business. We are targeting individual travellers out of China. They have a higher spend, and they are very interested in the types of product we have here in Canada. However, without ADS, we were unable to market to that individual traveller. With the new ADS designation, we are able to do marketing in the open marketplace, such as it is in China, and we are seeing great response from our Chinese partners. Tour operators in China were anxious to increase the amount of Canada travel product that they were offering. They are working closely with the Canada side in terms of tour operators. We are happy with the way it is going, and we expect 20 per cent year-over-year growth, certainly between now and 2015.
Senator Downe: You indicated in your presentation as well that the CTC led a market development team to Brazil, and you listed a number of the partners. Some of the provinces were there, but not all the provinces. For example, Atlantic Canada would not have the resources, with their small tourism promotion budget, to participate in all the activities. I notice British Columbia was not there as well in this case. How do you as the CTC ensure that they are exposed to the market as well, as part of your mandate?
Ms. McKenzie: We represent all of Canada. Wherever we go, into whatever market, we have a mandate, and we certainly aggressively present all of the opportunities that exist in Canada. We also recognize that parts of Canada have their own priorities as well. Brazil would be a good example. We think that Brazil has great downstream potential for Atlantic Canada, for instance, but right now it is not a priority within Atlantic Canada in terms of where they are putting their marketing investment. I am an Atlantic Canadian as well, and we represent the entire country.
What would trigger a part of the country to actively invest with us and market is often critical mass and also access. For instance, British Columbia was not with us in Brazil on our market development trip. They believe that they need to see air access into Western Canada before they want to make that investment. It is always a bit of a chicken and egg situation. We need to grow demand in order to get that new air supply, but the supply will not come on board unless we are there with that demand. It is a delicate balance in terms of how these things work, but I can assure you that wherever we are invested in the world, we are representing all of Canada.
Senator Downe: What is your budget? Has it stayed constant over the last four or five years?
Ms. McKenzie: Our budget has several different dynamics. Our core budget has been reducing. By 2012, we will be at about $17 million, we expect, and that is down from about $100 million when the CTC was created as a Crown corporation in 2001.
In 2010, our actual budget was about $105 million, and that is because we have been in receipt of substantial one- time funds to take advantage of specific opportunities. We have a base budget this year of about $74 million, and in 2010 we had $28 million additional under the economic action plan. We also had additional monies over a five-year period to leverage the opportunity around the Olympic Games. The combination of the one-time funds and the base budget puts us in relatively good shape. We do our future planning, however, based solely on our base, and that has been in decline.
Senator Downe: I assume the number of employees that you have based in Vancouver has been in decline as well. When you were relocated, you had roughly 100 employees.
Ms. McKenzie: Yes, when we relocated from Ottawa to Vancouver, we had about 165 global employees and 100 of those were at our headquarters. We have changed our business model since then. In 2010, we changed our business model substantially and became smaller and leaner. We have gone from 165 employees globally to 118. That was largely because we no longer have our own direct employees in many of our markets. We set up regional offices to service those markets. We have now hired representatives in market as opposed to having our employees there. Having a simplified model globally has also allowed us to reduce our headcount in our headquarter office.
Our motivation in doing that, of course, was to respond to our base budget going forward, but most important to ensure that, as much as possible, we are putting every single dollar that we can toward marketing programs and not into overhead lines. That has been a major driver for us, and 2010 was a big year of change to help us reinvent a model that would be most efficient and get us out there to put most of our money where it helps us compete.
[Translation]
Senator Robichaud: During your presentation, you said that, when Brazilians apply for a U.S. visa, the procedure is rather straightforward. They can apply for a visa in person and pick it up on the same day. However, when they apply for a Canadian visa, the process seems to be a little more complicated, and there seems to be a lot of uncertainty involved. Could you tell us a little bit about that uncertainty?
[English]
Ms. McKenzie: I was making the point that from a customer's point of view, they look at a visa process as a competitive factor when they are choosing a travel destination. The comparison I was making to the U.S., I believe, is an important one, because often our customers are considering Canada or the United States for a trip. They would also be looking at the visa process.
If they want to go to the U.S., they must make an appointment, and they have to perhaps wait months for that appointment. Certainly, from a competitive point of view, they are not as fast as the Canadian process.
However, many of our customers tell us that they prefer that process because there is more certainty to it. They know the date of their appointment, they have to show up in person, they meet with someone face to face and they walk in with their passport. It may take an entire day to go through the process, but if they get a visa, they will walk out that day with a visa on their passport. It is likely that visa will be a multiple entry visa, valid for 10 years and transferable to the next passport, should their passport expire.
If you compare that to the Canadian process in Brazil, we do not have a face-to-face process. You do not have to wait months for an appointment. However, you are expected to surrender your passport to the Canadian process while your visa is being considered. You are often required to submit substantial financial documentation, which can include copies of your tax returns perhaps, a regional deed to your house, regional documentation of that nature. You put that in an envelope and mail it or drop it off or send it by secured courier to the Canadian government. Your visa is processed, and eventually you will get your documents back, including your passport. That timing is quicker than the U.S. timing.
However, our customers are saying more and more that they find that uncertain. They do not like to sit around without a passport, and they do not like the fact that they cannot speak to someone, face to face, through the process to find out the status of their application.
That is a comparison of the two processes. We do not think the U.S. process is the most competitive process out there either. It is just giving you an idea of how our customers might see that with a competitive destination.
We are seeing now that Australia has determined that their visa process will be an area where they want to be most competitive in their bid to attract travellers out of all markets, and of course they are a big competitor to Canada as well. They have invested in the online process which is attached to your passport number. It is very innovative in terms of how it works. As in the American example, the visa would transfer to a new passport. That is one of our challenges. If you have a multiple entry visa, coming out of any country, when your passport expires, your visa expires, and you have to go through the process again.
Senator Finley: Air Canada flies Toronto to São Paulo once every day, five days a week. I can guarantee you it is an expensive ticket. Does the Brazilian airline Varig fly into Canada?
Ms. McKenzie: Not presently.
Senator Finley: It is one-way air traffic?
Ms. McKenzie: No. There is two-way air traffic, but there is only one direct, non-stop carrier.
Senator Finley: Only one carrier?
Ms. McKenzie: Yes. There seems to be consensus that there is an opportunity to improve that situation, so we are hopeful that it will improve. We know the demand is there and we are aware that Air Canada is anxious to have more service on these routes, not just with São Paulo, but also with Rio de Janeiro.
Senator Finley: I did a quick calculation in my mind, as a person who used to be in the aviation business, that a break-even load factor of about 250 people per flight, five days a week, the critical mass would appear to be, for one airline, for one flight daily, $62,000. It is difficult to go by train, boat or car from Brazil to Canada. We acknowledge that.
I am a great believer that, if you build it, they will come. It strikes me that an expensive single carrier, flying to a single city destination is not the smartest way to go. If we created more capacity and more competition, cheaper seats, we might get a better flow of traffic.
Right now, if I were an airline executive —, which, thank the Lord, I am not — the $62,000 critical mass to $80,000 calculated number for 2010 leaves me only $18,000. It is not a very healthy margin.
You say the demand is there. Could you explain that dichotomy? My numbers are rough. It could be $50,000 or $55,000, but right now, I would say $62,000. We have a total market size of $80,000. What would encourage Air Canada, Varig or whomsoever to open up a new flight destination, based on numbers?
Ms. McKenzie: What we see in those numbers is one direct service between Canada and Brazil, servicing Toronto and São Paulo. What the airlines would look at is what other opportunities might exist from Brazil and also from Canada to visit other parts of both of our countries. Our research shows us that there is great potential in cities like Rio de Janeiro, and there is great potential to destinations beyond Toronto's Pearson. That is how we believe that this is an opportune time.
I know that Air Canada agrees and sees that there is potential. The numbers are showing what we are getting today with the current style of services, as limited as they are in terms of city pairing, but we know that Brazil is a very big country and there is great potential beyond São Paulo.
We also see how well the U.S. is performing. We believe that is a good indication of the type of demand that there is for international, long haul travel. As I said earlier, 4 million Brazilians hold a U.S. visa. Most of them are 10-year visas. They can all enter Canada through the United States on a U.S. carrier, or on a Brazilian carrier, transferring to another carrier. We have good opportunities there, but our best opportunity is for more direct non-stop service. We think there is great demand.
Senator Finley: Is there much air traffic via charter airlines or charter operators between Brazil and Canada, particularly Brazil coming to Canada?
Ms. McKenzie: No, we have not really seen that development. We have seen that in some of our markets, but not out of Brazil.
Senator Finley: That is usually a good indicator of some pent-up demand, because charter markets are price sensitive. Usually this airline, city to city, country to country, requires some form of reciprocity. Are there any indications that Brazil, or Varig in particular, are opposed to more Air Canada flights into Brazil?
Ms. McKenzie: I am not familiar with the details of the air discussions. I know there are a number of Brazilian carriers, including Tam Airlines as well, that are servicing the U.S. quite extensively. I do not know the details of the reciprocal discussions between Canada and Brazil.
Senator Finley: Madam Chair, perhaps it would be good to have witnesses here to discuss the reciprocity in the airline agreements.
The Chair: I know that Varig used to fly into Canada, but under a different structure of ownership. They have gone to more of a business model and the competition has changed. I do not know whether they still have those rights, but, if they do, they are not exercising them.
Senator Finley: I was sure that Varig had access at one point.
The Chair: Yes, I flew Varig coming into Toronto and other points, if I recall.
Ms. McKenzie, you pointed out that visas could be an inhibitor for increasing tourism coming into Canada. You have pointed out there is only one flight. One of the inhibitors I have heard of and experienced myself is navigating the São Paulo airport. If you want to go other parts of Brazil, you have to go to another airport. These are all problems of flight connections and navigating through the airports. At some point, you believe do not have to go through any other security, but then you find out that you do and you miss your connection.
Has that been the inhibitor as much as the flight? I do know other people go to Buenos Aires and Santiago, Chile, but it is always the inhibitors are always the stops.
Ms. McKenzie: My focus is not so much about Canadians travelling into Brazil, although two-way traffic is always good to secure air service. Rather, I am concerned with the inhibitors for Brazilians coming to Canada. The airport infrastructure in Brazil is certainly a part of that, as you note.
We want to secure more direct non-stop access. We know there is a great market, for instance, in Rio de Janeiro; however, Brazilians are not as anxious to make the trip from Rio de Janeiro through São Paulo to get a flight to come to Canada.
We met with the airport authority in Brazil when we were there in November. They recognize the challenges they are having with respect to their airport infrastructure. They have ambitious plans to improve that infrastructure, certainly in advance of the World Cup as well as the Olympic Games. I think they realize they have a great deal on the line in terms of getting it right and they are investing heavily in airport infrastructure right now. The Brazilian traveller very much favours travelling non-stop, airport to airport, to get to any destination.
The Chair: Anecdotally I hear that Brazilians like non-stop flights. Often, commercially driven tourists take destinations to either Spain or Paris. Canada offers environmental drivers. We also have a whole host of sports, ecotourism, et cetera. What was the driving force for Brazilians to come to Canada?
Ms. McKenzie: There are so many travellers in this market. We do not believe that every one of those travellers will be a target for Canada. We are specific about the target we are going after in Brazil. We are seeing an increasingly sophisticated traveller. They like the idea of our city destinations. They want to know that they will be able to shop. However, they also want to know they will be able to get out and have those great, iconic experiences they can brag about. We have all kinds of those experiences in Canada. The travellers are young, adventuresome and they have their "bucket lists" already designed. Canada is on that list, and we offer those great exotic experiences.
We are not necessarily competing against the traveller going to Spain. We are certainly competing against some of the other destinations coming out of Brazil, and those would be destinations like South Africa, Australia or the United States. That is where we are focused, and we think we have a great opportunity.
[Translation]
Senator Robichaud: You say that Brazilian arrivals in Canada are up by 30 per cent. Are we talking about tourists or business travellers?
[English]
Ms. McKenzie: I believe your question is about the travel motivation or the split of the different types of travellers; is that right?
Senator Robichaud: Yes.
Ms. McKenzie: There are different types of travellers in all of our markets. There is the pure leisure traveller, who we can most often impact with our marketing. In many markets, we have a high percentage of travellers coming to visit friends and relatives. We can least impact those travellers with our marketing. We have a group of business travellers, some of whom we can influence with our marketing. We can especially influence those travellers coming for meetings and conventions.
We find that proportionately, compared to our other markets, Brazil has a high percentage of pure leisure travellers. That means we have a greater opportunity in Brazil to influence people with Canada's marketing. There are not as many travellers coming to Canada to visit friends and relatives are there are from India. We have a large Indian diaspora here in Canada. That market depends on the nature of the historical and immigration style relationship of the two countries over time.
Proportionally, Brazil offers us a great opportunity with a higher percentage of leisure travellers. I have already mentioned there is a very high percentage of students coming out of Brazil to study English, or coming to finish high school, in Canada. If they can finish high school in Canada, then they have eligibility to apply to the universities in the United States or Canada, and that is a strong aspiration as well for Brazilians. We see that as a growing market. That has great downstream benefits for tourism, as well.
The Chair: Ms. McKenzie, thank you for coming to us by video conference. We apologize for some of the technical difficulties. Your information has been extremely valuable, as you can tell from our questions. We are studying Brazil and determining economic opportunities, but also foreign policy perspectives. You have certainly given us a whole new area to pursue. I think we will need to follow up on many of the questions on visas.
Thank you for being with us and for providing us with this information.
Ms. McKenzie: It is my pleasure. I want to thank you again for allowing me to join you today by video conference. I am sorry I was not able to join you in person.
The Chair: I think we have what we need, and we appreciate the efforts you have made.
Senator Downe: My question does not pertain to the witness.
This is a comment and a suggestion for the researcher and the research team. We keep hearing about this visa problem. The assumption is that the Canadian government is not intentionally hindering tourism, trade or commerce. As Senator Smith and others indicated, they are doing it out of concern that some people may try to stay here illegally.
I think we need to compare and contrast. For example, if the Australians, as the witness indicated, are trying to speed up their visa process, the other end must be that they have a quicker way of removing people they do not want to stay in their country. I think we should look at the other side of the visa problem. We may want to consider studying that subject at some point.
The Chair: I have already had the discussion with the researcher that various numbers should be provided: How many have come here and overstayed their visa, et cetera. I think there have been many other questions asked about the process. It is interesting in light of our RIC study — as opposed to BRIC — we were looking at business visas and inhibitors for business. We did not hear anything about the other side of visas. I believe we should address this new realm.
Senator Downe: We hear this constantly: How can the Americans and Australians do this? At the other end, they must have a removal mechanism that we do not have; otherwise, they would be doing the same thing. We are not doing it to be difficult, but to protect Canada. We should have that comparison.
The Chair: We will look for someone who can analyze that information for us. We know the U.S. system on student visas was very different before 2001 than it became post-2001. It was centred on student visas as opposed to tourist visas. We should carry on the study. I think we will start with our own ministry, and then see if any other experts have been tracking the differences in both entrance and removal.
We are adjourned, but I will ask the steering committee to stay for one minute.
(The committee adjourned.)