As the world's tourist industry continues growing, Canada's is shrinking. (CBC)

The UN's World Tourist Organization called 2006 a record year for tourism. With 842 million arrivals and a growth rate of 4.5 per cent, the industry continues a four-year streak of sustained growth.

Africa's rate of growth was nearly twice the world rate, at 8.1 per cent. Asia and Europe also posted strong results. Despite a violent 2006, even the Middle East was on par with the world growth rate.

So, how did Canada fare?

Well … it's down 4.1 per cent.

Even more alarming is that, as the world's tourist industry continues growing, Canada's is shrinking. After attracting a record 49,055,000 travellers in 1999, the numbers have been steadily declining. Whether it's same-day trips from the U.S. or travellers from overseas, there's a problem in Canada's multi-billion dollar tourist industry.

Foreign visitors spend about $17 billion a year in Canada, most of that by Americans. Since 1999, the U.S. has typically made up about 90 per cent of all Canada's inbound travellers. While that percentage hasn't changed much, the number of overall visits remains down. Ontario saw the biggest declines, with 10 per cent fewer U.S. entries than in 2005, but Quebec and super-scenic British Columbia weren't far behind.

"I think that international travel habits are changing," says Melanie Scott, editor of WHERE magazine. "People are going further afield. People are traveling to more exotic locations but I think in terms of consistency, yes, we haven’t had the huge numbers we used to have before."

American visits to Canada continued declining in 2006. Same-day car trips saw the biggest drop, hitting their lowest level since 1972.

A study done for the Canadian Tourism Commission in early 2006 estimates that the drop in U.S. visitors has cost Canada $1.2 billion since 2002.

Conversely, more and more Canadians are travelling south of the border. The numbers are up only slightly, but it means a widening gap in tourism spending. Less American spending here versus more Canadian spending in the U.S. created a record $7.2 billion dollar travel deficit in 2006.

What's keeping them away?

So, what's going on? Statistics Canada has advanced several reasons to explain the growing absence of U.S. travellers. The main ones include:

• The high Canadian dollar: Canada just isn't the bargain it was when the loonie was worth only 62 cents US in early 2002. Then, a U.S. greenback was worth $1.61 Canadian. Almost five years later, that premium had shrunk to $1.12.
• High gasoline costs: Gas prices have soared in the past few years. In the spring of 1999, a U.S. motorist was paying about 90 cents for each U.S. gallon. By the spring of 2004, it was $2. By the summer of 2006, the gas bill had reached $3 per gallon.
• Increased border security: In the immediate aftermath of the Sept. 11 attacks, Americans stayed home. But Canada managed to pick up some market share, because a road trip to Canada after the attacks in 2001 was perceived to be a safer option than flying to Europe. That boom lasted only until 2002, however. After that, Americans became increasingly reluctant to head north. Tougher border security measures put in place in recent years have led to often long lines at border crossings. As well, the perception of big delays and hassles gets a lot of play in U.S. border states.

Scott says there's no question that security issues are a factor, especially in the case of same-day car travel across the border.

"Cross-border security is the biggest [issue] because people hear about cars waiting for hours at the border and it discourages them," she says. "Without a doubt, that would be a contributing factor."

Tougher border security measures put in place in recent years have led to often long lines at border crossings. (CBC)

New developments may only exacerbate the problem. As U.S. passport regulations tighten, parties on both sides of the border are growing concerned over the potential impact on cross-border tourism.

The Conference Board of Canada cautioned that the rule changes could cost Canada $3.6 billion in lost tourism revenue and 14 million U.S. visitors over the five-year period ending in 2010.

Not promoting Canada to foreign tourists?

Other reasons for the decline have been put forward. The 2003 SARS (severe acute respiratory syndrome) outbreak garnered widespread media coverage in the United States and led to many cancelled conventions in Canada. Visits to the hardest-hit city, Toronto, fell noticeably that year.

Some suggest that there's a lot of confusion in the American public over when new border documentation rules will kick in and how severe they will be (passports or new "smart cards"). Only 26 per cent of Americans have a passport; the Canadian figure is 40 per cent.

But others suggest that some of the blame lies closer to home.

The Tourism Industry Association of Canada says we aren't doing nearly enough to promote Canada as a tourist destination. And the budget of the Canadian Tourism Commission has been cut at a time when many other countries have been rapidly increasing their marketing efforts aimed at foreign tourists.

The commission estimates that each dollar spent on sales and marketing in North America produces $10 in tourism revenue.

Taxing government

Federal cost-cutting plans may have played a part in the problems facing the industry. In 2006, the government repealed the Visitor Rebate Program (VRP), a tax refund once available to tourists.

Then-treasury board president John Baird defended the move, saying only three per cent of eligible travelers actually applied for the rebate.

Responding to the government's decision to axe the VRP, the Tourism Industry Association of Canada issued a press release condemning the decision.

"This shortsighted fiscal policy will result in a net loss of $46 million in government tax revenue and the loss of over 5,700 jobs in the tourism sector," it read.

It further argued that, although cutting the program saved $79 million, its removal would create a $239 million loss in GDP.

Scott says Baird's argument for cutting the program is a valid one, but questions the logic of tourism budget cuts.

"To slash the tourism budget right now is not a good idea," she argues. "I wouldn't say we're in recovery, but we have the potential to have an uphill swing and we need to ride that very carefully."

Encouraging signs

But all is not lost for the Canadian tourist industry. One encouraging trend is that as some markets are declining, others are on the rise. Although fewer American tourists are coming to Canada, the industry is seeing signs of increased numbers from growing overseas markets. In fact, Scott predicts one particular country will become a major market for Canada's tourist industry.

"The next big wave for Canada is going to be the Chinese travel industry because the [Chinese] borders have opened up," she says. "My prediction is that we'll have a huge influx of Chinese tourists coming here. The numbers coming from Asia could well surpass any numbers we ever had coming from the U.S. by a long shot."

Scott also foresees long-term growth from new overseas markets.

"The tourism base is going to broaden in terms of where people are coming from and I think it's going to steadily increase," she says.

Despite the dropping numbers of foreign tourists, Canadians are doing their part to keep the domestic tourist industry in the black. According to Statistics Canada, domestic tourism was on the rise in 2006 and domestic tourist spending went up in the third quarter of 2006. Tourism also created 663,500 jobs in that same period.

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