Elasticity of Demand in the Tourism Industry

The tourism industry in Canada is on the rise, albeit a slow a steady rise. The Canada Business Journal shows that the amount Canadians are spending on tourism is up slightly - "the ninth consecutive quarterly increase" (2010). This increase is coming from more Canadians spending money to vacation at home. In my opinion, this makes sense. The economy has been improving since the recession a few  years ago, but many people may still be paying off debt that was incurred during that time, or simply spending more conservatively with the memory of tougher times still fresh in their minds. It makes sense that as Canadians begin to spend money on the luxury of vacations, they would choose the more economical option of staying close to home.

This has led to a boost in the tourism industry, but not in every sector. "These increases were offset by a 0.2 per cent decline in spending on food and beverage services and a 0.3 per cent decline in other tourism commodities, such as recreation and entertainment" (2010). Canadians spend less than international travellers in these areas. This year, there was a cut in government funding to the Canadian Tourism Commission, meaning that they had to decrease the amount of marketing in international areas. This comes at the same time as the United Staes has increased their own marketing campaign (2012). So we are seeing a slow and steady rise in the industry, but not as big a rise as we would see if more international travellers were visiting Canada.

I think that the tourism industry has a high degree of elasticity. As Canadians see a rise in income, they will spend more on luxuries, including travel. Tourism is an industry that is income elastic. The more people make, the more they will spend on travel.


Canadian Business Journal. (2010, January). Tourism spending on the rise. Retrieved on August 7, 2012 from:
http://www.cbj.ca/business_news/canadian_business_news/tourism_spending_on_the_rise.html

Yelaja, Prithi. (2012, July 26). New tourism ad makes U.S. look like Canada. Retrieved on August 7, 2012 from: http://www.cbc.ca/news/world/story/2012/07/25/us-tourism-ad.html