Trips between Canada and the United States are going down. This shift could help trigger a wave of new consumer spending, benefitting Canada’s independent local businesses. Those weren’t just travel plans, as the CFIB’s Dan Kelly (above) realized when he booked his summer travel. Rather than going overseas, he has decided to make a domestic trip from Toronto to Kelowna. This shift is emblematic of a national, broader trend. In 2024, almost 40,000 vehicles passed in non-commercial and NEXUS lanes. However, they just crossed over 23,000 this year.
Kelly, for her part, refers to the development as a “mixed blessing.” She hopes that some of the trade tension between Canada and the U.S. will encourage local businesses to flourish. He notes that Canadians may not be going south. At the same time, Americans are pouring in, providing an essential lifeline that Canadian businesses have come to rely on.
Impact of Travel Trends
Largely, the effect of this decline in cross-border travel is set to change where consumers choose to shop. Kelly adds that with Canadians deciding to travel more domestically, that can result in an uptick in consumer spending going in one direction. He says he’s hopeful that the summer will see a continuation of this encouraging trend. Thousands of Canadians are getting ready to take their vacation dollars closer to home this year.
“If they’re staying closer to home, that can increase consumer spending, and we’re hoping to see some of that this coming summer. Remember, the travel and tourism industry has been hit pretty hard,” – Dan Kelly
While this could easily lead to an upsurge in consumer spending, Kelly cautions that countless Canadian SMBs are still facing a cash-crunching squeeze. The typical small business today is still dealing with an additional $100,000 of debt from pre-pandemic levels. This additional hurdle makes their recovery even more difficult.
“The average small business, even now, is still $100,000 in debt more than they were at the start of the [COVID-19] pandemic. We’ve seen a record number of business bankruptcies coming out of the pandemic because a lot of businesses managed to keep the lights on during those tough COVID years, but afterwards, have not seen consumer spending bounce back to the levels needed for their business,” – Dan Kelly
Economic Outlook and Consumer Sentiment
More encouraging CFIB points to lack of many other factors this has been a very bad environment for Canadian entrepreneurs. There is cause for optimism, particularly in the face of new consumer trends. As revealed in a recent nonpoll, 89 per cent of Canadians realize how crucial it is to shop local at small businesses this summer. What’s more, 64% of them expect to travel within Canada.
Julia Kelly, vice president of small business banking at TD, notes a significant decline in international guests visiting Canada compared to previous years. Still, she is hopeful that domestic tourism can make up the difference and is looking forward to…
“It’s encouraging to hear that Canadians are planning to support local small businesses as part of their vacation plans this summer, as it helps both entrepreneurs and our local economies,” – Julia Kelly
Kelly further admits that increasing costs incurred during travel and lodging are likely to add barriers for some visitors. In fact, we have already heard stories of skyrocketing hotel prices in hot markets such as Kelowna.
“One of the challenges for a lot of small businesses is that there is a capacity limit and a practical limit in terms of your ability to serve Canadians. This is going to be a busy year, and we are already hearing about a tick up in hotel prices, travel prices as a result of that,” – Dan Kelly
The Future for Canadian Small Businesses
The growth in U.S. outbound travel potential would be a significant boost to Canadian businesses. It’s still too soon to make definitive conclusions about net job creation or the broader economic impact over this summer. Kelly adds that the burgeoning demand from domestic travelers would bring in enough revenue to counteract inflation-driven cost increases. So far, we have no clear idea of just how substantial these benefits will be.
“Will the fact that Canadians are staying closer to home help enormously? Absolutely. This is terrific news,” – Dan Kelly
As companies and consumers alike find their footing amidst ongoing uncertainties from the pandemic and other global economic headwinds, Kelly is guardedly optimistic. Even the trade war started by the U.S. has the potential to be a boon for Canadian retailers and service providers.
“U.S. retail goods are becoming more expensive for Canadians and Americans in their home market. So, as a result, those tariffs that the U.S. is imposing would have to be paid by Canadians if they are going to go and try to do some cross-border shopping,” – Dan Kelly
