TIABC Voice of Tourism Newsletter – March 10th, 2023

CEO MESSAGE

In the late eighties, I sold my prized new Honda Prelude to a friend and used the cash for a down payment on our first home in Steveston. While the house itself was relatively inexpensive at the time, interest rates were nearly triple what they are today. As young newlyweds and high-risk borrowers, we were saddled with first and second mortgages of 15% and 18% respectively. Combined with annual property taxes, insurance, utilities, and maintenance costs, as well as basic living expenses such as food, gas, clothing, diapers, and other incidentals, we were spending more than our one-income household generated each month.

Although we refinanced our mortgage after a year, we still couldn’t afford to keep our old, small, poorly built house and ultimately sold it for a modest profit. After renting for a few months, we subsequently moved even further away from my downtown Vancouver office to purchase a slightly larger, more affordable home to raise our growing family. Then each time we added another member to our brood, we moved again…all the while increasing the size of our house and mortgage. Thankfully my regular paycheques were also growing exponentially so we could afford to pay our bills.

As tough as it was for us back then, it’s far more difficult today for anyone (especially young people and immigrants) to take out a loan of any size to purchase a home or finance a business. Exorbitant real estate prices, high taxes, rising costs for food, gas, and other necessities (i.e. record inflation), as well as the highest interest rates in over two decades have caused serious challenges for those trying to get into the market, or for homeowners renewing their mortgages. Monthly payments have become too much for the average household, particularly in larger centres around the province.

In a business context, tourism operators are also facing a similar dilemma vis-a-vis meeting their loan obligations since both fixed and variable cost expenses are far outpacing revenues. Many have few options other than borrowing from Peter to pay Paul or closing shop permanently. In fact, owners are pleading for a break on paying back loans due by year’s end for several federal government assistance programs offered during the pandemic.

Countless businesses in BC and across Canada are not yet in a stable enough financial position to retire these government-backed loans even though deadlines have been pushed back by a year.

For example…both the Canada Emergency Business Account (CEBA) and the Regional Relief and Recovery Program (RRRF) offered borrowers up to $60,000 with as much as one-third forgivable if the loans are paid off by December 31st of this year. Despite an extended deadline, operators are worried they won’t be able to comply.

Our national partners at TIAC, with support from TIABC and our provincial and territorial (PTTIA) counterparts are set to launch a two-part survey later this month targeted to tourism business owners across Canada to ascertain the magnitude of the debt-servicing issue, with a goal to lobby for revised repayment terms that allow businesses a fighting chance to remain open and thrive again.

If this issue affects your business, we’re counting on your survey participation and prompt response since government is unlikely to act without sufficient data to support the need for another extension to loan repayment deadlines. Stay tuned for more information in the coming weeks.

I am mindful of how fortunate I am not to be faced with a significant financial burden at this stage of my life, but I empathize with those who do, especially after experiencing a similar situation many years ago that forced me to sell my home and leave a community that I loved. With a solid strategy and active lobbying, we aim to help tourism operators avoid a similar fate for their business.

As for my beloved old Honda Prelude…I tried to buy the car back from my buddy for more than 20 years but finally gave up after the odometer turned over at 400,000 kilometres and the rusty front quarter panel fell off.  Looking back, seems to me he got the better deal.

Walt Judas,
CEO, TIABC