With discussions surrounding the impending
war in Iraq first stirring in Quarter 3 of 2002, the commencement
of the Iraq War on March 19, 2003, and the arrival of SARS
to Canada in mid March, the world again is on full alert.
Add to this the announcement that Air Canada has filed for
bankruptcy protection, which will result in a restructured
and sleeker airline and there is no question that impacts
of these events will be felt by Canada’s accommodation
industry. The real question is whether the impacts will be
short-term challenges or longer term in nature.
Pre-War Analysis - CTRI
In advance of the Iraq War, the Canadian
Tourism Research Institute undertook an analysis, entitled,
What If There Is a War in Iraq? The Potential Impact on Domestic
and Selected International Travel Markets to Canada. Because
of the difficulty in predicting how the war itself will unfold
and conclude, two Iraq scenarios were analyzed -- a contained
war and a disruptive war. The contained war scenario relates
to military efforts that the U.S. and allied forces would
view as successful and be achieved without significant complications.
The disruptive war scenario assumes a similar U.S. led military
victory, however it is achieved with a number of complications
that would ultimately prolong the level of uncertainty in
the region. As shown in the following table, under both scenarios
there will be some impact on the level of growth expected
in overnight travel to Canada.
Under the contained war scenario, growth
in overnight travel to Canada will increase by 1.9% and under
the disruptive war scenario by 0.5% in 2003 relative to a
2.9% increase if no war had occurred. Under the assumption
that the war will end in 2003, travel projections for 2004
under both the contained war (3.4%) and the disruptive war
(3.5%) are greater than the 2.9% projected if no war had
occurred. Greatest impacts will be realized in markets catering
to US and Overseas markets.
Impact
of War with Iraq – Overnight Travel to Canada
(All Sources) |
Level
of Conflict |
2003 |
2004 |
Combined Impact (03/04) |
Base (No Conflict) |
2.9% |
2.9% |
6.0% |
Contained War |
1.9% |
3.4% |
5.4% |
Disruptive War |
0.5% |
3.5% |
3.9% |
Source: Canadian Tourism Research Institute January 2003
Measuring the Impacts – PKF Analysis
Now that the Iraq War is a reality and SARS
has reached Canada, there are rumours that some markets are
witnessing cancellations and a slow down in their booking
pace. PKF Consulting has been retained by Ontario Tourism
and the Canadian Tourism Commission to analyze the short-term
impacts of these events on Canada’s accommodation industry. Similar
to the analysis that we undertook immediately following the
tragic events of 9/11, PKF will be contacting our “Trends” participants
to ask them about the impacts on their specific hotel operations,
as the events unfold over the next 6 months. In April,
we will be issuing a survey to hotel operators and would
very much appreciate your time and cooperation in completing
it. As we continue to monitor the impacts, a 2nd survey
will be issued to you in July. We will keep you informed
of the quarterly results.
In Summary
In summary, it is likely that 2003 will
not be as buoyant as we had all hoped. However, the
prospects for 2004 should still be strong.
Fran Hohol, Principal
PKF Consulting
