Tourism Ups and Downs

Tourism is having a decent year in Nova Scotia, now recovering after a dreadful start due to the winter from hell. To the end of July, visitor numbers are up 3% outside of Halifax—but flat when Halifax is included.

American road visitors are up a bracing 14%, much more than the Yarmouth ferry increase of 6%. American visitors by air are unchanged from 2014—perhaps because the lack of competition keeps fares high on many routes, and the loss of direct flights to Chicago.

Westjet launched a new seasonal service to Glasgow, which has been doing well. Best of all, as much as half of the traffic is Scots coming to Nova Scotia. Visitors from the United Kingdom are up 25%, or 2,100 in total. Nova Scotia provided some promotional support in Scotland, but no subsidies.

Scots have good reason to come here—it is warmer and much less expensive than home. Beyond that, many traditional (and, admittedly, warmer than Nova Scotia) locations in the Middle East and Africa are no longer considered safe.

Can that success be duplicated elsewhere in Europe? It seems like a good opportunity, although a reduction from 2014 of 500 German visitors—who have a charter service out of Frankfurt—is a cautionary sign.

The increase in American passengers on the Yarmouth ferry has far more to do with the drop in the Canadian dollar than Nova Star’s promotional efforts. It has been more than offset by a reduction in Canadian passengers, for the same reason. That may be bad news for the ferry operator, but it likely means that more Nova Scotians are vacationing in the province, adding to the rebound for tourism operators.

It is even clearer now that Nova Star Cruises is the wrong operator. The company has struggled to meet the province’s reporting requirements. They will not come close to meeting the stated goal of 80,000 passengers per year. Most importantly, the company has no financial capacity to make credible commercial commitments. As a result, the province has had no choice but to keep bailing them out.

It is disappointing that the province does not treat this for what it is—an economic development investment. Sound investments create jobs that become self-sustaining. The ferry, like the film jobs, has an endless need for more taxpayer money. In both cases, the jobs they are creating disappear the moment the subsidies stop.

Nevertheless, the provincial government “is committed to no discontinuance of the ferry service” according to Transportation Department officials. There are three other operators vying for the business.

The first question for a prospective new operator will be how much subsidy would be expected. By itself, that tells us almost nothing if the operator does not have the financial and operational capacity to fulfill its commitment. Otherwise, the province ends up paying the tab for things—such as winter layover costs—that have nothing to do with bringing tourists to Nova Scotia.

A better question is whether this is the most effective way of spending money in support of tourism. It looks like about 25,000 Americans will arrive on the ferry in 2015. Some of them are just there for the ride and will go back the same day.

Suppose this year’s subsidy ends up being $12 million. Those who stay—many of whom would have come by another method in the absence of the ferry—will have cost about $500 each.

Could that money be better spent supporting different strategies, such as the establishment of new air connections from Europe or elsewhere? We should look for ideas for which the need for subsidies should diminish with time, and for which there would be cost certainty from the outset.

The mandate of the new Department of Business includes the commitment to “Develop goals, targets, success measures, and sunset clauses to ensure that programs/regulations only last as long as they are effective.” The Yarmouth ferry is a textbook example of where that commitment needs to be met.

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