The economic impact of Covid-19 on Canadian Travel Agencies

The Travel and Tourism Industry

The Travel and Tourism Industry consists of 5 main sectors –

• Transportation (including airlines)
• Accommodations (including hotels)
• Recreation (including attractions)
• Food & Beverage (including catering)
• Travel Services (including travel agencies, tour operators, consortiums)

Facts

• C$35.37 billion in contribution to Canada’s GPD in 2017
• 730,000 jobs across Canada
• C$16.23 billion in operating revenue for travel agencies/tour operators ($2.41 billion T.A. only)
• 5919 Canadian Travel Agencies
• 27,653 Travel Agents (17,653 employed, 10,000 self-employed)
• 90% Personnel are Women or LGTBQ
• Rate of retail travel agency closure estimated at 26% to date
• Travel Agencies earn an average of 10% commission of the sale of a trip
• Self-employed/Independent Contractors income is commission only (approx 70% of the 10%)
• Travel Agencies do not get paid until the clients travel
• During the pandemic, travel agents have not stopped working. They are busy repatriating Canadian travelers, processing cancellations/changes, rebooking, calming upset clients, processing credit card charge-backs, budgeting/policy updating
• Travel agencies can reduce expenses by 70% with existing CEWS and CERS support
• But with a revenue decline of 90% or more, a typical travel agency would still sustain about $136,000 in annual losses.
• Therefore they are forced to cut the highest expenses, employees and rent, making CERS and CEWS ineffective.
• US Travel agencies have received $60,000 fully forgivable loan in 2020, $60,000 additional loan in 2021, plus multiple provincial and municipal grants.
• RRRF loan has be denied to most travel agencies in Canada.
• OSBSG grant has been denied to travel agencies in Ontario “because they have been able to continue operating during the Province Wide Shutdown”
•  Ontario sector-specific relief of $4.4 million all went to the government regulatory body – TICO. They kept the majority for themselves to cover their own operating expenses while also waiving the small $300 – $700 annual fee per travel agency in Ontario. Essentially, the government paid the government the relief money and not to the travel agencies who need it the most.
• Canada is the only G7 country who has not yet provided sector-specific bailout to their airlines.
• Australia is currently providing a $128 million cash grant fund to specifically to the travel sector, which will be scaled from $1500 – $100,000 per travel agency.
• The travel sector in Canada supports government bailouts of Canadian airlines. We also support consumer refunds. However, once refunds are issued to the consumers, travel agencies will stand to be liable for $200 million in commission recalls by the airlines/tour operators. This is already starting to happen. Since this revenue has already been earned and spent, recalls would result in a catamorphic end to our sector with multiple bankruptcies.
• Travel agencies need to be recognized as the highest impacted sector and that, though our doors can be open, our industry is essentially shut down. This is due to:
  • 2020
    • Global Travel Advisories issued for all non-essential travel
    • Quarantine Act Implementations
    • Cancellation of Flights
    • Borders Closures
    • Period Lock-downs
  • 2021
    • Government plead to not travel and cancel all trips
    • Travel shaming and loss of jobs
    • Cruise bans
    • New testing requirements
    • Hotel quarantine stays at $2,000 cost
    • Suspension of flights to Caribbean and Mexico
• Though there isn’t a travel ban, all of the elements listed above make it impossible to sell travel at this time. Canadians have listened to the message loud and clear and are not booking and are not traveling.
• Travel agencies are not looking for a hand-out. We want to work. Most of us have degrees and certificates in Travel and Tourism and have spent our entire career in this industry.
• We contacted the Minister of Transportation Honorable Omar Alghabra and suggested to make the new Hotel Quarantine requirement for travelers to Canada mandated to be booked by a Canadian travel agency only, so that we could earn our 10% commission and help with revenue. Instead, The bid was given to a travel agency based out of New York, USA – American Express Travel.
• US Congress is considering providing a US$4000 stimulus check to all American citizens to book travel within the USA. Travel agencies in Canada would benefit from a similar program, but only if it is contingent on booking through a Canadian travel agency.
• Canadian travel agencies face a very slow and long recovery.
  • 2021: With limited vaccinations, there will be no travel and thus no revenue.  Business owners will have the added expenses of 4% interest on the HASCAP loan.
  • 2022, An estimated 30% of the population will choose not to get vaccinated and thus not be able to travel. An estimated 16% of the Canadian population are children, who are not being vaccinated at this time. Therefore their parents, teachers nor anyone else close to children will travel. Therefore it is estimated that only up to 30% of the population may have the ability to travel in this year. The CEBA loan needs to be paid back also by the end of this year for 33% forgiveness.
  • 2023 might begin to see a slow return of travel bookings. However, travel agencies will still not see the revenue until the passenger travels. At this time, a travel agency might be in 3-years+ of loss revenue debt estimated at $150,000 – $300,000 per agency (if no government support).

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