American spending in Canada poised to rise to highest level in more than a decade: TD

Americans will expend more money visiting Canada this season than any reason for more than a decade as a low loonie makes heading north more appealing.

Total visits in the U.S. to Canada were already up more than 1.6 million in the first 11 months compared with the year before, said TD Economics inside a new report. The bank expects that trend to carry on this year, with tourists from the United States spending an astonishing $9.6 billion in 2016.

While Americans save money in Canada, however, the reverse is going on down south. The deteriorating exchange rates are likely to keep more Canadians both at home and choosing other holiday destinations, says TD.

“Canadian appointments with the U.S. are required to fall towards the lowest levels because the Great Recession this season, with daily visits prone to see another sharp decline at roughly double the amount rate of overnight visits,” said Derek Burleton, deputy chief economist at TD Economics.

The trend can help narrow the gap between American and Canadian tourist spending. In 2002, Canadians spent the same amount, in aggregate, as Americans did north of the border, says TD. But by 2013, the last time the greenback and loonie were at parity, Canadians spent $17 billion a lot more than Americans did.

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“Put another way, total American outlays in Canadian malls, hotels and restaurants amounted to only 30 cents of each dollar spent by Canadians in the United States,” said Burleton.

Now that Canadians need to spend a 35 to 40 per cent higher price tag due to the loonie’s tumble, a multi-year reversal is gaining momentum. 

Burleton expects the gap will narrow to $11 billion this season, adding a cumulative direct economic boost to Canada towards the tune of $4 to 5 billion over  2015-16.

There are already signs that Canadians have stopped flying from U.S. airports, a typical tactic travellers accustomed to make the most of what were once less expensive flights. Anecdotal evidence suggests Americans are now even opting to fly out of Canadian airports because of the low dollar.

Unfortunately, Burleton asserted Canada will not reap the entire advantages of fewer Canadians travelling south. He expects much of the money that would have been put in the U.S. will not necessarily be spent on domestic travel, and can instead be saved or put in other countries having a more favourable exchange rate.

“Looking past this, additional tourist dollars should still give a much-needed boost to growth, though residents of these regions are most likely to save a larger share of the reduced U.S. travel spending rather than spend it locally,” he said.