Canada has the world’s second-largest oil reserves and a wealth of lumber and minerals, but most of its economy is serviced-based. Two-thirds of output comes from retail, education and business and health services.
The country’s economy is expected to grow 1.4% to 1.9% in 2017, gaining momentum from a gradual rebound in energy sector output, stronger non-energy industries and government efforts to encourage expansion. But uncertainty surrounding U.S. policy leaves Canada vulnerable. About 20% of Canada’s gross domestic product is exported to the United States. If U.S. President Donald Trump acts on his protectionist rhetoric, Canada could suffer a trade-related slump.
Business investment declined in 2015 and 2016, as low oil prices discouraged capital spending. But prices now are on the rise, improving prospects for the oil and gas sector. There’s less cause to be optimistic about consumer spending; a slowdown in employment growth is suppressing wage increases. Canadian consumers also face higher mortgage payments because rising U.S interest rates are pushing up long-term rates in Canada.
Outbound travelers account for two-thirds of all international trips in the Canadian market, and outbound trips fell 3% in 2016. So, even though international arrivals increased by 11%, total international trips rose just 2% year over year. Industry analysts expect about the same growth in 2017: The number of departures should stabilize, but arrivals will drop.
The U.S. is Canada’s most important travel market, responsible for 70% of inbound trips and almost 60% of outbound journeys in 2016. But Canadians are increasingly traveling elsewhere—to countries like Mexico, the U.K. and India. Meanwhile, more Chinese travelers are going to Canada: Arrivals increased by more than 150% between 2010 and 2015. China is now Canada’s third-largest inbound travel market.
Domestic trips accounted for two-thirds of the US$35 billion that businesses spent on Canadian travel in 2016. After two years of feeble growth, business travel spending is forecast to increase by 4-5% annually through 2020.
Most of Canada’s 30-plus scheduled airlines are small regional operators. Air Canada and low-cost carrier WestJet are the country’s largest airlines. Both offer nationwide networks, and their rivalry helps keep fares in check. WestJet, traditionally strong in western Canada, is expanding east, increasing competition in markets where Air Canada often accounts for more than half the flights. Porter Airlines is a third option for some travelers; particularly those making short trips.
NewLeaf launched in 2016 as an ultra low-cost carrier, or ULCC. A second ULCC, Jetlines, is expected to begin operating this year. WestJet is responding with its own ULCC, setting the stage for a domestic fare war.
Following its merger with Starwood and acquisition of Delta Hotels, Marriott has joined Wyndham, Choice Hotels International, Best Western and IHG as one of the largest international chains operating in the Canadian market. At least 16 hotels are set open through 2018, which will further develop its position.
Wyndham focuses on economy hotels. Choice, Best Western and IHG offer national coverage of midscale properties. Marriott has a more varied proposition, offering hotels in the midscale, upscale and upper upscale tiers. Local chains like Sandman Hotel Group, Coast Hotels and Le Germain Hotels offer alternatives in some Canadian cities.
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