Tourism’s Growth Will Suffer From a Shortage of Workers

Nova Scotia’s 2018 tourism numbers are good, and further growth is possible, but there are obstacles—partly created by government policies.

Visitor numbers of 1,951,000 are virtually identical to 2017, which had the added impetus of being Canada’s 150th birthday and consequently providing free admission to National Parks. This year’s numbers are still 9% above 2016.

The number that really matters is room nights, which can be counted more reliably than visitor numbers (most visitors coming off the plane don’t look different than Nova Scotians) and is a better indicator of spending trends.

The visitor room nights are up 1%, and room rates are up 6%.

Room nights are surprisingly concentrated. More than half occur in Halifax. Together with the Bay of Fundy, Annapolis Valley, and Cape Breton, they represent 83% of the province’s total.

There is a big change in how people arrive, with air visits up 8% while road visits are down 4%. This in part reflects the strong growth in overseas markets, while North American visitor numbers dipped slightly.

Visitors arriving on the Yarmouth Ferry increased to 20,000, about 0.8% of the province’s total for the year. The ferry is important to tourism operators in the Yarmouth area but immaterial to the rest of the province. The province spending on regular subsidy plus pre-season engine repair amounts to about $800 per visitor.

Cruise ship passengers this year were up 11% in Sydney to 131,000, and up 8% to 317,000 in Halifax. That is nice for a few tour operators and dockside merchants, but the cruise ships are skillful at keeping most of their passengers’ spending.

Tourism operators believe there is ample opportunity for further growth in numbers, particularly of foreign visitors, and length of season. Visitors like a low Canadian dollar, perception of Canada as a safe place to visit, and relative convenience to American markets. Nova Scotia offers distinctive geography and culture.

Overseas visitors represent a big opportunity for growth. Europe continues to grow as a source. Operators salivate at getting a share of the 700,000 yearly Chinese visitors to Canada, and the airport is working to attract a direct flight.

None of this will matter if the operators can’t deal with a fundamental problem—a shortage of workers. This is particularly acute in the peak season of September and October when students go back to university.

But there is a bigger structural problem. Some (but not all) operators report that they lose a lot of staff as soon as they are eligible for Employment Insurance (EI)—which can occur after as little as 420 hours of employment.

Payments begin one week after cessation of work. In theory, employees who leave voluntarily are not eligible, and they must be ready, willing and capable of working each day. In practice, these requirements are not effectively applied.

Payments can continue from 17 to 26 weeks, depending on the unemployment rate in the region. This creates a perverse feedback loop. If workers leave their job to collect EI, they increase the unemployment rate in their region, thereby increasing the number of weeks for which they and others can receive benefits and further reducing the incentive to return to work.

If they are asked to work part-time in shoulder season, the compensation they receive is largely offset by the loss of EI benefits.

Meanwhile, it is harder for employers to receive approval for importing temporary foreign workers in regions with high unemployment rates.

Some employers provide employees with a bonus if they stay till the end of the season. Others are trying to attract immigrants who will stay in their area—always a challenge in the more rural areas of the province. It’s an uphill battle.

The industry is pursuing the Ivany goal of doubling over a decade. The biggest obstacle to that goal is not lack of opportunity. Rather it is lack of people to fill the resulting jobs. It is bizarre that the operation of government programs in support of the unemployed are making that obstacle more daunting.

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