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New report indicates 61,000 tourism business closures

“Experts anticipate substantial business closures and employee terminations across the industry if businesses are not provided with financial support to stay open and retain staff this summer and beyond."
20200320 Banff COVID 19 0027
A couple walks down a nearly empty Banff Ave. as numerous businesses have close in Banff due to the novel coronavirus COVID-19⁠. EVAN BUHLER RMO PHOTO⁠

BANFF – A new report paints a catastrophic picture for the tourism industry without major government financial supports.

The confidential document prepared by McKinsey and Company for Destination Canada indicated COVID-19 could result in the closure of more than 61,000 tourism businesses, and 1.7 million in layoffs within 60 days.

Over the next year, the report estimates more than $15 billion could be required to sustain tourism, with more than 60 per cent of tourism-based businesses projected to run out of cash in the event of no summer season, a critical time of the year for businesses.

The analysis and options presented by McKinsey and Company in collaboration with Destination Canada were current as of March 27 – and more has changed in the weeks following during the pandemic. 

“Experts anticipate substantial business closures and employee terminations across the industry if businesses are not provided with financial support to stay open and retain staff this summer and beyond,” states the report obtained by the Outlook.

Mayor Karen Sorensen said Banff’s tourism economy has been “devastated.”

“First and foremost, we’re concerned about the health and safety of our residents, but it would be naive not to look ahead and not be very concerned about the prognosis for our economy,” she said.

“I don’t have a crystal ball, but I respect and appreciate, whether it’s an organization like Destination Canada or the provincial and federal governments, looking at best and worst case scenarios.”

McKinsey and Company suggest that extending the federal wage subsidy throughout the summer will be critical to ensuring workers can stay in the tourism sector and for employers to avoid high turnover costs.

Tourism workers are more transient than employees in other sectors, according to the report, and seasonal shifts create higher turnover rates, with the hospitality sector seeing 60 per cent annual turnover among line-level staff.

“Increase the wage subsidy available to tourism operators to support businesses’ ability to retain staff, including migrant workers, and young people who may not meet the $5,000 threshold for CERB (Canada Emergency Response Benefit),” states the study.

Destination Canada did not want to comment on the report.

Tess Messmer, a spokesperson for Destination Canada, said the study was prepared to better understand the impacts of the COVID-19 pandemic on Canada’s visitor economy, including implications for the government.  

“As such, this work has only been shared internally and with the federal government to date,” she said.

“We are in the midst of preparing relevant research and intelligence to share with the tourism sector.”

According to the Hotel Association of Canada, the industry continues to rapidly decline with more than 4,100 hotel closures and more than 250,000 job losses due to COVID-19 as of April 2. 

A survey by Restaurants Canada showed many jobs lost during the pandemic might not return.

As of April 2, Restaurants Canada estimates that 800,000 food service jobs have already been lost nationwide – about 95,000 in Alberta alone – and they might not return if current conditions continue.

Industry officials say Alberta’s $12 billion food service industry represents 3.4 per cent of the province’s GDP and is the province’s third-largest private sector employer. 

If conditions do not improve, they estimate Alberta’s food service sales for the second quarter of 2020 will be down nearly $2.5 billion.

“Not only was our industry among the first to feel the impacts of COVID-19, we’ve been one of the hardest hit so far, with nearly two-thirds of our workforce now lost,” said Shanna Munro, president and CEO of Restaurants Canada. 

”In our 75 years of existence as Canada’s national foodservice association, these are by far the worst numbers we have ever seen.”

Officials with Banff and Lake Louise Tourism and Banff and Lake Louise Hospitality Association said they had not seen the report so they could not comment.


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