Proceedings of the Standing Senate Committee on
Transport and Communications
Issue 6 - Evidence, November 24, 2010
OTTAWA, Wednesday, November 24, 2010
The Standing Committee on Transport and Communications is meeting today, at 6:49 p.m., as part of its study on emerging issues related to the Canadian airline industry.
Senator Dennis Dawson (Chair) in the chair.
[Translation]
The Chair: Honourable Senators, I call to order this meeting of the Standing Senate Committee on Transport and Communications. Thank you for being here. This evening, we will continue our study on emerging issues in the Canadian airline industry.
[English]
Appearing before us on behalf of the Tourism Industry Association of Canada are David Goldstein, President and CEO; Kevin Desjardins, Director, Communications; and Catherine Sadler, Manager, Research.
[Translation]
The Chair: Mr. Goldstein, you have the floor. After your presentation, we will go to question period.
David Goldstein, President and CEO, Tourism Industry Association of Canada: Mr. Chair and committee members, I want to thank you for the opportunity to appear before the committee. I would also like to thank you for embarking on this important study.
I am David Goldstein, President and CEO of the Tourism Industry Association of Canada.
[English]
I am joined today by Kevin Desjardins, Director, Communications, and Catherine Sadler, Manager, Research.
By way of introduction, TIAC, Tourism Industry Association of Canada, is the only national organization that represents the full cross-section of the tourism and travel industry in Canada. Our members include those who are directly involved in the aviation sector, such as the airlines and airports who have already presented as part of your study.
While we are co-contributors to the white paper on aviation that has been deposited with the committee, our perspective goes beyond the simple economics of aviation in Canada and drives to the importance of the ripple effect it plays on the broader Canadian economy. We represent over 8,000 direct and affiliate members from coast to coast to coast who, in turn, represent over 1.6 million Canadians whose jobs depend on the economic activity generated by the travel and tourism sectors.
I am certain that you understand the ever-increasing impact that the aviation sector has on the entire tourism industry, which is why we are here today. Let me underscore this point for you: In the modern context, Canada is no longer a "drive to" destination, but is a long-haul destination as most people who travel to our country will arrive by air. To punctuate this point, the most recent data from Statistics Canada tells us that, in the first nine months of this year, 6.5 million visitors arrived in Canada by air, while 5.6 million visitors of one or more nights arrived by car.
If we are going to see renewed growth in Canada's tourism sector, it will need to come from new and emerging markets. Ensuring a safe, efficient and cost-effective air transportation system to deliver travellers from across the globe to Canada is an absolute necessity if we are to compete.
Let me take a quick step back and provide you with the global context. Tourism is one of the fastest-growing economic sectors globally, outpacing the world economy and, as an export category, it ranks fourth after fuels, chemicals and automotive products. According to the UN World Tourism Organization, international arrivals are projected to grow by 3 per cent to 4 per cent in 2010, reaching more than 1.6 billion arrivals by 2020. In essence, the tourism pie is growing but Canada's slice is getting smaller.
In 2002, Canada ranked seventh in the world in international arrivals but, by last year, we had dropped to fifteenth, slipping behind countries such as Turkey, Malaysia and Ukraine. Our tourism trade deficit over that time has ballooned from $1.2 billion in 2002 to more than $12.2 billion last year. Why does this matter?
It matters to us because we are facing structural issues that are eroding our competitiveness and investor confidence and preventing us from fully participating in the huge growth that is taking place in this global export segment. It should concern you because erosion to the Crown in competitiveness has an impact on the federal treasury, as outlined in a recently published Statistics Canada study of government revenues attributable to tourism, which showed a decline of 3.7 per cent across all levels ofgovernment and 5 per cent at the federal level. This is the first time since 2003 that government revenues from tourism have declined, and the reason stated by StatsCan is the decline in international visitation.
As outlined in our study, Canada's drop from seventh position to fifteenth in international arrivals is not only a market share issue, but also the loss of almost 5 million international arrivals. If we had simply held that number today, it would mean the following: over $5 billion more in economic activity in the Canadian economy; almost 50,000 more jobs for Canadians; more than $466 million to the federal treasury; and more than $727 million across all levels of government.
While it is tempting to blame the rise of the Canadian dollar for these declines, the truth is that our low dollar in the past served only to mask some of the structural problems that our country has as a destination. Simply put, Canadians travelling within Canada continue to be important, but frankly, that is just moving money around within the Canadian economy. A meaningful attack on the travel deficit means growing the number of international arrivals. That will provide real additional stimulus that will drive investment, jobs and revenue to the Crown.
How do we do this and take advantage of this economic opportunity? First, we need to address our price problem. The World Economic Forum's Travel & Tourism Competitiveness Report ranked Canada 106th in the world in price competitiveness. The reason includes taxes, government-mandated fees and charges on airfares. First, we need a fair tax regime that does not hinder economic development of the industry. This includes a more equitable arrangement for airport rents. Second, we need to develop a level playing field with our largest tourism competitor, the United States. This means a more equitable formula for the air travellers security charge. Finally, we need to look at policies that enhance the global competitiveness of Canada's travel and tourism industry. This includes competitive and stable funding for the international marketing and promotion of Canada, largely through the Canadian Tourism Commission.
The future success of our tourism sector depends on our ability to attract more travellers from around the world, and those travellers are going to come to Canada by air. In most cases, the first decision point that travellers will hit in planning their trip will be booking their flights. These layers of levies and fees built into the cost of coming to Canada serve as a disincentive at the most sensitive point in the path to purchase.
The good news is that the Canada brand is strong internationally as it was recently recognized as number one in the world according to the respected FutureBrand survey. Our challenge is to convert that brand affinity into arrivals. If we do not address these structural issues with our aviation system, we will simply price ourselves out of the market and continue to see declines.
We are blessed with the basics in Canada to be a strong participant in this growing global sector. Our members have weathered the worst of the economic crisis and are ready to invest to compete, but we need to provide a public policy environment that will allow them to succeed.
I welcome your questions.
[Translation]
The Chair: Thank you, Mr. Goldstein. I would like to remind the committee members that this meeting is televised. That is why I would like those who wish to ask questions to provide me with their names as soon as possible.
[English]
Senators, give me your name as soon as possible so that it is easier to share the time available. I ask for your cooperation because I do listen to some of the criticism. I will try to share the time as equitably as possible, and I want to be sure that our guests have as many questions as possible.
Senator Fox: You should leave some time for the chair.
The Chair: The chair bows to the membership.
Senator Plett: As long as I get my supplementary question, I am fine.
The Chair: Supplementary questions will have to be shorter than they have been in the past.
Long story short, you have two questions each. If you want a third question, you will get a supplementary on a second round. I will go to Senator Housakos.
Senator Housakos: Could you provide the committee with an explanation of the relationship and the interaction between TIAC, the airport authorities and the Canadian airline industry? How engaged are they in helping to promote the work of TIAC in trying to communicate our message and enhance our tourist revenues?
We have heard the argument repeatedly that we are challenged from a competitive point of view due to fuel taxes, airport rents and security fees. I have posed this question to others: What percentage of all these fees makes up the cost of the average ticket price of travellers to Canada from outside Canada and travellers within Canada?
Mr. Goldstein: Thank you for your question, senator. Many of the airport authorities, WestJet and Air Canada are members of our association. Our association structure is such that they are not disproportionate members. Obviously, our largest member group is through the independent operators, such as hoteliers, tourist attractions and local marketing organizations — basically, the broad breadth of the private sector in tourism in Canada.
That said they also have their own organizations — the Hotel Association of Canada, the aviation council and the Canadian Airports Council — with whom we have been working to construct the white paper that I believe was put before you. We believe that sort of alignment and in a forum like this we are able to have that discussion both with Parliament, with the media and with other key stakeholders.
As for the percentage, we can get back to you with a figure. Obviously, it varies depending on the fare and the location, but we know that the UN tourism council, which ranked us at 106 in the world, states we are 20 per cent cost structure higher than airline fees anywhere else in the world. Effectively, that is a 20 per cent premium on the average flight domestically and internationally.
Senator Merchant: Thank you. You are not the Canadian Tourism Commission? That is a different group?
Mr. Goldstein: No, we are not.
Senator Merchant: I have an article that I read some time ago, and they had some points that were very similar to yours and gave the same statistics. Of two of the points that they brought out, one was that Canada has begun to require visas from certain countries. They mentioned Mexico, that our Mexican visitors are much fewer because of this requirement. Is that part of the problem? Do we have several countries now that require visas that were previously not in that lot?
Mr. Goldstein: That is an excellent question, senator. Effectively, one of the toughest concepts I have to relay to people is that tourism is an export industry, much like others. The main difference is the goods and services are consumed here in Canada, so it may not appear as an export. It is not like sending a skid of softwood lumber to another country.
You have to look at the visa process a bit like having export permits. What is interesting to us is we have one arm of the Canadian government, the Canadian Tourism Commission, CTC, that has rightfully identified some key markets that are the best prospects for our growth going forward, yet we do not have alignment with the immigration department to ensure we can facilitate either visa issuance issues or areas like Mexico where we did not have visa provisions previously, and it is now increasingly difficult to market into those communities.
Just finding some alignment between those two bodies would be incredibly helpful largely because, as most export sectors, we are trying to reduce our reliance on the U.S. market and are looking at the emerging markets around the world as the best source for new revenues. The beauty of these markets is, if you think of the BRIC, Brazil, Russia, India and China, nations and include Mexico in that, they are effectively parts of the world that either could not afford to travel or were not allowed to travel 15 or 20 years ago. They are at the cusp of this new world travel set which is burgeoning quickly, and we risk, both through the air cost and visa issuance issues, an access problem to Canada.
Senator Merchant: You mentioned that maybe we need to advertise and spend more money advertising Canada in other countries. I think we are falling behind in that respect too. Can you tell us some countries that are very aggressively courting visitors? Perhaps we could learn something from them.
Mr. Goldstein: I think Ms. Sadler will have some numbers for me shortly, but we are punching above our weight. I think the Canadian Tourism Commission, given the means they have, has done an exceptional job, especially through the Olympics, which is why we have sort of rested in the brand index. We were often in the top 10, but we have shot up to number 1, and I think that is part of the halo effect of the Olympics.
As you will see in the report, the City of Las Vegas spends more than Canada on foreign promotion. U.S., U.K., Spain, India, France, I know some of those are very big countries, but even in relation, Australia is spending about 35 per cent more than we are on promoting their national brand.
We would like to see the Canadian Tourism Commission more strongly resourced and on a more sustainable, long- term basis because, in marketing internationally, it is tough to do a campaign within a year or two and find some actual traction. Being able to do long-term media planning is very important.
Senator Fox: Maybe it is because in Las Vegas they have a lot of people in the Canadian creative community who go down there.
[Translation]
Mr. Goldstein, I want to thank you for being with us. I found your presentation extremely interesting and unsettling.
First, I would like to go over two of the statistics you mentioned. You say that we have dropped from seventh to 15th place in terms of the number of international passengers arriving in Canada, and that we now rank 106th in the world in price competitiveness.
Is there a direct link between slipping from seventh to 15th place and the price competitiveness issue? If so, are we talking about a strong trend? If measures are not taken, could this situation get worse, or is it fairly stable?
[English]
Mr. Goldstein: We are at the cusp. One of the reasons why this is one of the fastest-growing segments in the global economy is, just as I had mentioned earlier, there is a huge, burgeoning middle class in these emerging markets, and so the access issues are extremely important and, to your question, I believe are totally relational. Some of it is air access, some of it is the cost of air access, and I believe we can turn that trend around. Just as the white paper made it a primary focus, our organization as TIAC had set a goal that, by 2017, Canada's 150th birthday, we should be back in the top 10.
Senator Fox: How do we do that?
Mr. Goldstein: Action in the next 12 to 18 months is critical because we are watching world travel patterns change around us right now. As an example of that, Air France recently had to make a decision on their "around the globe" or their Far East flights on where they would land between Seattle and Vancouver and they chose Seattle because of the cost structure. That is just one example of travel patterns that we are seeing. If we do not fix that now and shortly, I think we will see longer-term ramifications.
Senator Fox: You are attributing the competitiveness of the Canadian travel market or the lack thereof essentially to the cost of air travel, and yet, one would think if you are looking at domestic air travel, that is very expensive. My impression is that I can walk up to the Pierre Elliott Trudeau airport tomorrow and get a ticket to Paris that will cost very little, less than to go to Toronto. Can you explain that to me when you say the international is high?
Mr. Goldstein: First, the in-bound is very high. Our concern is Canadians travelling within Canada, there are cost issues there, but we are fairly saturated in that market. About 80 per cent of our tourism dollars are Canadians travelling in Canada. Given our northern climate, that is a pretty good number because many people want to go south.
I do not mean to be overly simplistic because I think there are three baskets to look at that have be taken in conjunction with each other. One is "M" for marketing, one is "A" for access, and "P" is product, and product is equally important. I know this is a debate for another committee, but it looks at products like festivals' programming, sporting events. If you need an example of what drives the purchasing decision from "I would like to go to Canada to I will go to Canada," you have to see what happened in Montreal between the numbers when they had the F1, Formula 1, and they did not have the F1. It is a remarkable difference.
Senator Fox: Are you saying, for instance, that if we were able to solve the price competitiveness on airlines for the rest of Canada that we would go a long way toward solving the problem?
Mr. Goldstein: I believe, actually I do not believe, I know you will see more competition in the airspace. I have had several discussions with other airlines that do not have problems getting routes to Canada, but are not flying to Canada because of the cost issue.
Senator Martin: Thank you, Mr. Goldstein, and your colleagues, for being here. The good news is Canada's brand being very strong, especially after the Olympics. I am a Vancouver resident. I saw some of the marketing that was done internationally, and it was very impressive, and we have heard from the Canadian Tourism Commission.
My question regards our strong international brand and how we can really capitalize on it, like you said, in the next 18 months. How is your relationship with the commission, with the airline industries? In what ways are you working to perhaps pool or maximize the resources in that, ultimately, what benefits the tourism industry would benefit the airline industry and vice versa? In those common interest areas, how are you working together at this time?
Mr. Goldstein: We work very closely with the Canadian Tourism Commission in support of their efforts. Frankly, to be blunt, they are not an advocacy organization and in many ways we come to people like you to ensure they have the resources to do their job. We have long-standing partnerships with airlines and airport councils. There is a direct link. You cannot just isolate the airports as one part of the problem. I cannot cite the source but someone once said to me that, in the U.S., they treat their airports like spark plugs of the economy and in Canada we treat them like taxation centres.
That is something we have to reverse if we are going to change those patterns. The white paper that we did in conjunction — I believe this is the first time these national organizations have come together to do this type of economic white paper — is the type of cooperation we are working on.
Senator Martin: Other than the structural issues that you identified, which will take time to strengthen and improve, can you think of some short-term strategies for the committee to consider? A report will be published and stakeholders will look at it.
Mr. Goldstein: It is not all doom and gloom. The numbers have gotten better near the end of this year. We attribute that to a cyclical return. We did sign the approved destination status, ADS, agreement with China this year, and we have already seen an impact from that. We have seen China leisure tours coming to Canada so that has been helpful.
There are some good short-term issues coming out. As you probably well know, the Prime Minister announced the federal tourism strategy framework, I believe, in June of 2009. We are expecting an update in the New Year from Minister Moore.
The real crux of our issue and why it is difficult to deal with just in a venue like this — and I believe your colleague raised this — is that, unfortunately, there are so many different federal government departments that impact the public policy-making in this sector that there is not a coordinated approach.
By imposing a visa on Mexico, for example, for dealing with a legitimate issue, you have turned away tens of millions of dollars' worth of business to the Canadian tourism economy. There are several of those issues down the pipes.
Frankly, if the government were to do one thing to capitalize on the Prime Minister's framework, it is really to find a coordinating body or a forum at the centre that can start to play — pardon the pun — air traffic control on some of these issues.
Senator Plett: Let me start by apologizing for being late. Senator Mercer and I were welcoming some wonderful farmers from Nova Scotia and Manitoba to Ottawa, so we were waylaid a little bit as a result of that.
Thank you for being here. I just have two questions. I thought Senator Fox would have raised the first question that I will now raise.
First impressions are tremendous in anything we do, whether it is in the tourist industry or whether it is inviting someone into your office or your home, or whatever the case may be.
When I come into Canada from wherever I am travelling from, tired from the long, uncomfortable flight and trying to beat the line to the customs people, and see under the wonderful "Welcome to Canada" sign this sour-looking individual who makes me feel anything but welcome back into my own country, I wonder how many of our wonderful tourists who come into our country wish they could turn around, get back on an airplane and fly back to where they came from, where people treat them a little nicer than we do when they first come into Canada.
What impact do you think that has on our tourism? Maybe it has none; maybe other countries are just as bad. I am not sure. Most of the countries I go to do not seem to be as bad. What is the impact of our customs and their welcoming way on our tourism industry?
Mr. Goldstein: That is a good question, senator. In fact, leading up to the Vancouver Olympics, the customs and excise people were put through a special training program to be more friendly greeters. I think it worked on an isolated basis leading up to the Olympics.
To your point, we all know that the first line, whether it is the receptionist or the kiosk person, is your first impression with the public.
To go back to the earlier point, it is a division of labour. The customs officials see themselves as a police force. They see themselves as protecting Canadian borders, and that is their role and responsibility. However, I think that with some training and some help, we could be far better greeters than we are today.
Senator Plett: My father passed away three-and-a-half weeks ago. He would be 86 the day after tomorrow. I remember just a few years ago, when my parents were not young people, and they came back from a long trip. Again, they were coming home, so it is not the same, but I am sure they would treat tourists exactly the same way. We had a blinding snowstorm in the City of Winnipeg, as we do so often. It was about minus 40 degrees. I was waiting for my parents to come off the airplane and I wanted to get home. We had an hour-long drive ahead of us. This large airplane unloaded, whether it was a 767 or whatever it was. My parents were the last two people who came out the door, because customs had gone through every bit of luggage that they had.
At that time, my parents were 80 and 82 years of age and using canes and so on and so forth. I guess there are those who smuggle things in at that age. However, is there not some discretion that one can use? Customs searched every piece of luggage that my parents had with them. When they were finished searching, they said, "There you go. Put it all back." I was outside waiting, and these poor people were devastated. How many visitors do our customs officials treat the way they treated my parents?
Mr. Goldstein: First of all, my condolences on the loss of your father.
Senator Plett: I appreciate that. That is not why I mentioned it.
Mr. Goldstein: I think there is probably a way to triage those coming into the country in a better way, and I think customs officials try to do that to a certain degree.
Senator Plett: Do you have interaction with them? This affects you and it affects tourism.
Mr. Goldstein: We are trying to make those representations to the appropriate officials but, unfortunately, they see their role as protecting Canada's borders and they see it as a policing function. We need a cultural shift there. Yes, it is their duty to police our borders but, at the same time, to welcome Canadians coming home and to welcome guests coming here.
I will give you a specific example. You talk about the logjam. We just signed, as I mentioned, the ADS agreement with China. The first groups of Chinese tourists arrived and, of course, there is not a line at Canada customs to deal specifically with tours. Therefore, you have a bunch of these people strewn throughout the line, and none of them speak English. The interpreter has to jump from customs station to customs station to help them get through the process. That jams up the whole line and it makes it inconvenient for both Canadians in line and visitors coming to Canada. Simply putting a tour line through the process would have expedited a great deal of that traffic.
I think there is a lot to be done, and we are trying to have those discussions with those officials.
Senator Plett: Would Public Safety Canada be responsible for that?
Mr. Goldstein: Yes.
Senator Plett: Thank you for telling me that. I might mention that to my friend in a day or two.
That was my first question. I think I was allowed two questions.
The Chair: I was asked by some of your colleagues to try to discipline you, so do not take it personally. I will put you down for a second round.
Senator Mercer: This was not supposed to be my question but Senator Plett started this. I will try to frame it so I get a few of my questions in one.
Senator Plett raised an interesting issue because it is particularly a problem that has become a public issue at the Halifax Stanfield International Airport. We have had public complaints about the reception people have had from the Canadian Border Services Agency people.
I have another life, my volunteer life, where I do a lot of work for not-for-profits and charities. The Canada Revenue Agency is doing a remarkable job of consulting with people in the not-for-profit and charitable sector in finding out what works best and what will make life easier for the donor, the charity and the government as they administer all of this.
Is this something we should be encouraging the Canada Border Services Agency to do as well? They seem to be going off like rogue cowboys. You get the public issue in Halifax. There is also what I would call the abuse of Senator Plett's parents as they are coming into Winnipeg.
Is there a need for us to establish a rapport between the industry and the government agencies administering the Canada Border Services Agency so that they understand we want them to be good and tough, but that we want them to be nice as well? Canadians are nice, but we can be tough and nice at the same time.
Mr. Goldstein: Yes, there should be consultation, senator. However, what needs to be recognized is that there is a culture of participation amongst all different sectors of the federal government that are involved in either marketing or selling to people, or getting people through the lines here in Canada. There is that alignment issue amongst federal government departments, where people both in the visa process, the marketing process and in the arrivals process need to feel they are a part of this extremely important piece of this economic pie. That is the missing link.
Consultation is important, but consultation amongst federal government departments is even more important.
Senator Mercer: I am not used to being limited to two questions, so I will try to frame this next question so I can sneak in my third. I am being open and honest about it.
There are so many people promoting tourism in Canada. The Province of Nova Scotia, where I am from, is very aggressive in promoting tourism. Our neighbours in New Brunswick are aggressive, as are our friends in Quebec. It is the same across the country. The Government of Canada does some advertising as well.
Is there any coordination of this advertising? We are spending an awful lot of money in an expensive business so we can attract tourists to all parts of Canada. There is absolutely no place in this country that is not worth visiting and not worth attracting tourists to. At the same time, to get my third question in with my second, how has the move of the Canadian Tourism Commission from Ottawa to Vancouver affected this process? Has it been positive or negative?
Mr. Goldstein: On the first question, there is increased coordination happening right now. Again, in some places, the Canada brand leads and in some places closer to where we are, the individual brand, whether a provincial or a city brand, will have greater importance. If you are marketing to New York State, for example, they largely know the Canada brand. It is more important that Nova Scotia, Ontario, Toronto, Halifax or Quebec City is front and centre.
In their recent strategic review, the Canadian Tourism Commission said that they will take on the key markets further afield where the Canada brand should lead, and will let the provinces and cities do the heavy lifting in nearer markets. We agree with that. We are finding a better alignment of roles and responsibilities there.
As far as the movement of the Canadian Tourism Commission goes, it is probably good idea to get Crown corporations' headquarters out of Ottawa in certain circumstances. In that instance, it has probably given them a better focus on some of the Asia-Pacific markets. However, they are effective across the country. Like me, they end up being represented at meetings and forums across the country.
From the perspective of getting Crown corporations out of the centre, that might have been a good idea. I do not know if it has enhanced or diminished their effectiveness as a marketing organization.
Senator MacDonald: You mentioned a couple of things in your presentation: The travel deficit in Canada and the impact of airport fees. Therefore, I would like to ask you two questions in regard to both of those areas.
I think we have all seen, heard or read ads on television, radio and in news print, lovely ads, about Canada. I have seen lots of nice ads about Canada, most of them in Canada. If you had a fixed budget to spend on promotion of Canada internationally, how would you spend it and where?
Mr. Goldstein: Again, we are not the marketing organization. However, I think most of the Canada ads you saw in Canada were the "Locals Know" campaign which the CTC commissioned. That was a piece of the stimulus package which was directed at shoring up Canadians traveling within Canada. It was effectively to get the stay vacation, to put the cork in the travel deficit.
Again, there are two ways to impact the travel deficit, negatively or positively: Canadians staying in Canada, or foreign arrivals coming. As the foreign arrivals market fell off in the recession, that was a good strategy. That is just the tip of the iceberg. I believe that was a $10-million investment of the $70 million that the CTC was spending.
Senator MacDonald: Not a lot.
Mr. Goldstein: Not a lot but, frankly, it was a well-run, -executed and useful campaign for the resources they had.
The foreign-spend part is on top of that. We do not get to see most of the spending. I use the Olympics as an example: We saw a lot of ads for Ontario and British Columbia. However, those of us watching in Canada were not seeing the bulk of the advertising taking place in the rest of the world.
Am I happy with the percentage breakdown? Yes. In fact, we would love to see more emphasis on some of those long-haul markets where the Canada brand needs to have greater penetration. Are the resources enough? No, we do not think they are.
What was your second question?
Senator MacDonald: My second question was about airport fees. Since the mid-1990s, we have been privatizing a lot of the airports in this country. I think it is fair to say we have seen a substantial change in the quality of a lot of the bigger airports in this country in the past decade. A lot of them are quite beautiful now compared to what they were 15 years ago.
How do you think the privatization of the airports in the country has impacted the industry? Is it positive, negative or neutral?
Mr. Goldstein: I think it is net positive. The problem is that the cost structure that went along with that has not caught up with the current financial reality. To oversimplify an issue, the ceding of control to private local authorities should have come with a corollary reduction in rents over a period of time. Once the investment was put in, it is almost like a rent-to-own scheme, if you will.
Unfortunately, the rent levels have stayed up. They have continued to go in and make huge capital upgrades, especially in the larger centres.
Even medium-market airports like Winnipeg and others have made a substantial investment, but unlike airports that we compete with in the U.S., they cannot raise municipal bonds. They do not have the ability to reach out for capital like their competitors do which is probably why, on average, two million Canadians are cross-border shopping their airports. They are driving across the border to find flights. That is the competitiveness key that is missing.
Senator MacDonald: It still comes back to the fees?
Mr. Goldstein: In historical fairness, this is a piece of transportation policy that was put in place in a different time. It was pre-9/11 when we had a 60-cent dollar.
Not to bore you with economics, but the price elasticity for flights was different back then because we had a built-in discount. We do not have that built-in discount anymore, and that is the competitive imbalance.
Senator Frum: Are you able to comment on pre- and post-2006, before and after the blue sky policy, and what impact that has on tourism? You did just answer this with Senator MacDonald, but where would you like to see the growth come from specifically in the future?
Mr. Goldstein: There is an interesting debate going on in Blue Skies, Open Skies. I think they are bad bumper stickers for a bad campaign. As an organization, we are striving for increased rational competition. I know there are a bunch of airlines that have the ability to fly to Canada that are not doing so now, and not being a part of that competitive landscape because of the cost imbalance. I will use Virgin America as an example. They opened up their flights from Los Angeles to Toronto, and the immediate reaction is Air Canada increased capacity to California and dropped rates. Competition works, but I would consider them to be a rational competitor. When we sat down with them and asked if they could fly more to Canada, because we are broadly interested in that, their main response is it is a cost-structure issue.
We are missing out on competition right now because of the irrational structure that exists, what I call the club sandwich of fees, to land a plane in this country makes it prohibitive.
The Chair: I have more of a comment. Senator Fox talked about the Cirque du Soleil. People are spending money to go to Las Vegas, to see permanent shows of the Cirque du Soleil, which started close to Quebec City, grew up in Montreal, but it is basically a Quebec- and Canadian-based product that people are paying a lot of money, from Toronto, Vancouver, Halifax, from everywhere in Canada, to go see them in Las Vegas; and Montreal refused to have a permanent base for the Cirque du Soleil. A lot of what is being locally that we sometimes resist and has a cost.
Some subjects are a little more delicate and we try to be as non-partisan as we can in the committee, but a decision like Expo 2017, the fact that we are not hosting events in Canada that would have an international appeal, has a cost for tourism. Expo '67 or the Olympics in Vancouver were big items promoting Canada.
I know you are not an advocacy group that will want to get into a fight with the government and its decision, but is that not logical? It applies as well to local politics in Montreal not wanting to have the Cirque du Soleil and for the government thinking there is a cost to hosting it, but what is the downfall or the fallout negatively for tourism?
Mr. Goldstein: For the record, we were a supporter of the Expo 2017 bid, but fully recognized that the federal government has a fiscal issue right now that may not have made it compatible with their current priorities.
Our organization is more concerned about, broadly based, what 2017 looks like for Canada as a destination, not just in Edmonton but several places across the country. What does Canada look like? We just had our strategic retreat. Our board of directors came to the conclusion that it is not necessarily an event here or there, but what are the key structural problems we are facing so that we are open and available for the world to be here by 2017, irrespective of those types of events. It should not just be one event in one part of the country. We will have to be innovative and creative on how we welcome the world, like Quebec City did for their recent anniversary.
The Chair: I join on the fact that when you come to Canada you have the impression that you are going into a warehouse when you arrive at the border services. You do not have decorations; you have a big wide space that does not seem to be as welcoming as compared to other countries. I guess it is a question of wanting to take care of security and not promotion.
Mr. Goldstein: I think it is an alignment strategy where we have to look seriously at this as an important economic driver of the Canadian economy. It is the one sector that can both diversify and stimulate the Canadian economy in probably 308 ridings across the country. It is not regionally bound. It is small and large market, and federal government agencies and departments need to align their policies and regulations to reflect that.
Senator Housakos: One of my questions, I guess, is a comment and a follow-up on what the chairman was talking about earlier. Indeed, there are many entertainment centres around the world that have become hubs for tourism and entertainment shows, and the Cirque du Soleil is a perfect example of a Canadian idea, a Quebec idea that is being capitalized on by people in Las Vegas, as with Céline Dion who performed there for the longest time.
In the Canadian private sector, above and beyond the airline industries and airports, are the hotel industries, the Whistlers and Mont Tremblants of the world. Is the private sector doing enough to promote their products, or are they expecting the burden to be carried completely on the back of taxpayers and the government?
Mr. Goldstein: No, senator. As a matter of fact, the Canadian Tourism Commission and most of the other promotional agencies rely on a leveraging model so that it is a private-public partnership in leveraging advertising dollars. Sometimes in the New York Times for example, you will see a Canadian Tourism Commission ad in conjunction with Fairmont Hotels and Air Canada, and so that leveraging model is important.
The second part is there is a bit of a vicious cycle in that we are having an access-to-capital issue, which I know necessarily is not the issue for this committee, but recognizing that many of our members are small- and medium-sized enterprises and have had difficulty both through the recession and coming out of the recession in getting access to capital. Whether it is levers like the Business Development Bank of Canada or Export Development Canada, which are supposedly there to get small businesses ready for the world stage, I think that requires a little more attention.
On the good news side, our sector — and I am sorry I do not have the numbers today — had relatively few bankruptcies going through this recession, which shows the resilience of the sector, I believe.
Senator Housakos: My next question is connected to the question Senator Frum pointed out on open skies. We have had a number of agreements with many places in the world, especially with the EU, European Union, and the United States. You have already commented on that. Are there areas in the world with a potential for tourist dollars right now that we have been negligent on in terms of not expanding open skies markets, be it Asian markets or other places in the world?
Mr. Goldstein: I believe they are in the works. Brazil, India, China, I believe there is already access capacity from China that is being unused, and the same for India. We would be happy to make a formal written answer to that question to the committee just for the sake of accuracy, but those are the key markets that are of interest to us, and as I said earlier, to any global exporter, those are key markets because those are the burgeoning economies.
The Chair: If you could send the answer to the clerk, all members would be happy to receive it.
Senator Fox: Senator Plett and Senator Dawson asked my second round question so I will ask my third round question right away.
First, you fingered the competitiveness and cost structure of Canadian airports as the main factors involved in bringing tourism down. Can you tell us where we stand in the world in terms of costs among airports?
Second, what would be a level playing field? Is it the comparison with the United States or another country and how do we get there?
Mr. Goldstein: I will respond to the second question first. The United States is our main litmus test and our closest competitor. They are marketing to the same long-haul passenger that we market. They have their challenges. I have this discussion with my counterparts in Washington on a regular basis.
If I understand your first question on the difference, we can give you a detailed chart, which we will file with the clerk of the committee. We are looking at a 20 per cent premium on the cost of a plane ticket to Canada, which is substantial. To the premise of your question, that has been much of the focus because we were trying to address the issue that the committee is looking at. There are other significant issues but the biggest barriers for us are the immigration issues and the cost-structure issues.
Senator Plett: You have touched on something numerous times but I never felt you entirely told us the reason. You talked about Air France flying to Seattle rather than to Vancouver because of cost. A number of times you said, "cost." Maybe it was in your presentation, and if so, I apologize. Why does it cost Air France more money to fly to Vancouver than to Seattle? Is it landing fees? Air France sets their price structure, do they not?
Mr. Goldstein: The short answer is landing fees. Page 18 of the report tabled with the committee by our predecessors will go through that. There are ground rents for a Canadian flight; there are no ground rents for the U.S. airport. Ground rent for an overseas flight is $25.74 and $17.06 for a transborder flight.
Senator Plett: Is that cost per passenger?
Mr. Goldstein: I believe it is per ticket. There is no cost for the American flight. The air travellers security charge is $33.59 for an overseas flight and $22.26 for a transborder flight. In the U.S., it is subsidized by the U.S. government and the fee is not passed on to the consumer. It is in detail in the report.
Senator Plett: I appreciate that. In your opinion, has increased screening at airports, not only Canadian airports but also American airports, discouraged people from flying?
Mr. Goldstein: No. People are making a choice to travel and to fly. If that were the biggest inhibitor, in a post-9/11 environment you would see the tourism numbers go down.
Senator Plett: Did it not drop post-9/11?
Mr. Goldstein: It went down briefly, senator. Since then, we have seen a massive growth internationally. I do not think that is the issue. I believe that there is a review of CATSA, Canadian Air Transport Security Authority, and our issue is how that aligns itself with the actual traffic of an airport. The interesting problem we face is that every part of the value chain, from the time you arrive at the airport until you board the plane, the airport has control, except for the time you are captured by the CATSA process. It is a case of having better alignments so that CATSA has a better understanding of the numbers. I believe the airports have tried to demonstrate to CATSA when their flight patterns are, the number of flights and the number of people to expect through the queue so that they have appropriate staffing. It would be extremely helpful.
As for the pat-down, people realize they need to be safe. For example, I do not worry about the security issues at Ben Gurion International Airport because I want it to be secure. I do not think that is a big inhibitor; it is part of the travelling reality.
However, in Europe and other places, it might be the reason that passenger rail is a better alternative.
Senator Merchant: I have found that travellers do not believe all of the security measures make them safer. I hear that all the time. They find it to be an inconvenience. I know you are not from CATSA. There is inconsistency from airport to airport. I went to Toronto last week where a gentleman in front of me had four big plastic bags full of little jars. He had about 10 little jars that could have made one big jar if he had wanted to be mischievous on the flight. I find this confusing. I do not mind being patted down, although I will not go through the screening device. I think it is inconsistent.
Mr. Goldstein: I am not a security expert but I have my personal views. I do not feel comfortable answering that.
Senator Merchant: People do not believe they necessarily find the real culprits.
Senator Mercer: I want to comment on something that the chair said about welcoming as we arrive in Canada. The real question is: Are we open for business or are we open for business? That is the question we have to ask ourselves. Pearson International Airport is probably one of the most efficient in the country. As you come into the international terminal, the sign does not work. It makes us look tacky as a first impression.
My question is somewhat related to that. Has the Tourism Industry Association of Canada developed some best practices or criteria to assess the best practices of Canadian airports across the country?
Mr. Goldstein: No. That would be up to the Airports Council of Canada. One of the by-products of the Olympics, for example, is the multilingual signage at the Vancouver airport. If we are to attract an increasing number of visitors from India or Spanish-speaking countries or China, having those multilingual signs would be a great improvement.
The best practices issue is best laid to the airports council.
Senator Mercer: We seem to forget at airports that we are a multicultural country — the most multicultural country in the world — and that we can speak more languages than any other country in the world. It sort of stops at the curb as we get out of the car to enter an airport, other than Vancouver.
Mr. Goldstein: If I might, that is one of our best calling cards. We have a great diversity in our cities. We have a reputation for cosmopolitan but safe cities. It is a great drawing card that was quite well highlighted by the Olympics. This makes us quite attractive to the burgeoning middle-class population from some countries who are travelling the world for the first time.
Senator Frum: Does your organization have any position on cabotage and how that might have a beneficial influence on tourism?
Mr. Goldstein: We were not in support of cabotage, but we are in support of increased competition within Canada between Canadian carriers and to Canada for carriers under the blue sky agreement.
Senator Martin: I cannot seem to take my eye off the chart on page 3 of your presentation.
Mr. Goldstein: Ms. Sadler has done a very good job with that chart.
Senator Martin: Yes, I will compliment you on that.
I know that Canada has dropped. Do you have any information as to how Malaysia jumped to where it was? Turkey came out of the blue and landed in the number seven spot. Do you have any other information as to how these countries have moved up and what some of the determining factors were?
Mr. Goldstein: Some of it is marketing. Some of it is open visa structures. There are proximity issues, whether they are in Europe or other parts of the world. Those are determining factors. The Canadian dollar is a factor, but it is not as big a factor as some people would want to dismiss it to be. If the Canadian dollar was the only factor in this chart, then the U.K. would have dropped as well because Canada's dollar has gained in value proportionally with many of those other currencies. U.S. tourists to the U.K. would have dropped in a proportional way, but it has not. I do not know if I have explained that clearly or not.
Senator Martin: Yes, that was fine.
Mr. Goldstein: There are a series of factors. Some of these areas have been extremely aggressive. Turkey is an example. They have been extremely aggressive in marketing, and to Senator Mercer's point, they will tell you they are open for business and they have aligned themselves with a tourism strategy to bring people there.
Senator Housakos: I have a supplementary to Senator Martin's question. Is it fair to say that our largest number of tourists come from the United States and is it not also fair to say that, over the last 10 years, if you do an analysis of the periods of time where we have more activity coming up from the U.S., it is when we have a lower dollar? When our dollar goes up in strength, there is a significant drop in American tourists who come to Canada. Turkey is a prime example of a tourist destination. Is it fair to say, again, that one of the significant reasons for its growth is that it is a very inexpensive place right now to go to and vacation?
Mr. Goldstein: As we said in our opening statement, senator, when we were 40 per cent discounted because of the dollar, it was an easier sell. That does not mean we cannot be competitive in a dollar parity world. That is the first part of the answer.
The second part is that we found that the price-sensitive, dollar-sensitive traffic is more of a Canadian phenomenon than a U.S. phenomenon. The impact it has on the trade deficit is that it inspires more Canadians to want to go to the United States. The Americans were less price sensitive to what was going on with the Canadian dollar. Border issues are, frankly, a bigger inhibitor, and the new passport issue is a bigger inhibitor to the American tourists coming here.
At the same time, it is the long-haul visitor that we are more interested in. That cross-border traffic, while important for several border communities, were not big spenders; they did not stay a long time; and they were not making a large contribution to the Canadian economy. It is not so much the Buffalo-New York example as the New York-New Orleans-San Francisco, just to use the American examples. It is those longer-haul tourists that are really the sweet spot.
As we said, we are less and less of a "drive to" country. That phenomenon has reduced itself, and that is why the structural issues are so important to us.
The Chair: Mr. Desjardins, Mr. Goldstein, Ms. Sadler, thank you for your presence.
[Translation]
Before we wrap up, I would like to remind the committee members that, next Tuesday, we are welcoming the Atlantic Canada Airports Association.
Thank you everyone.
(The committee is adjourned.)