Fuel Factor offers a summary analysis of the impacts of higher fuel costs on the BC tourism industry.  This second installment in the BC Tourism Review series is sponsored by the British Columbia and Yukon Hotels’ Association.

Executive Summary
Crude oil prices are an important determinant of global economic performance. A surge in oil prices harms virtually every sector of the economy and is especially negative for large fuel users such as the transportation industry and those that depend on it greatly such as tourism. However, strong asset price performance, low interest rates, stable to positive economic performance and resilient consumer confidence have mitigated the negative impacts of higher fuel prices in BC's major international tourism markets, such as the Asia-Pacific and Europe. Declines in the US market meanwhile can not be attributed solely to the current high cost of fuel. False impressions held by American citizens regarding passport requirements as well as the diminished purchasing power of the US dollar have resulted in some US clients staying at home or travelling elsewhere.

While the immediate impacts on tourism markets may not be apparent, without doubt the current price of oil has resulted in significant price increases at the gas pump and, if sustained, may result in both tourists and tourism operators adjusting their behaviour to account for increasing fuel and business input costs. Vacationers availing themselves of circle tours for example, are today spending more than 50 per cent more on gasoline than they would have just four years ago. Tourism operators are facing fuel cost increases of more than 25 per cent, but for fear of becoming uncompetitive are unable to pass these increased on to their customers. Others like taxi operators are forced to absorb fuel cost increases as long as government regulation controls fare rates.

Tourism sectors themselves could very soon be feeling the pinch of soaring energy prices. The BC industry’s largest sectors, the restaurants and hotels, rely heavily on the transportation sector for a wide variety of supplies. A study conducted at Cornell's Hotel School at the Center for Hospitality Research has shown that a 1 per cent increase in gasoline prices results in a 1.74 per cent drop in hotel room demand. Meanwhile, suppliers are passing increases on to restaurant operators, a sector where profit margins as a rule are already slim.

Purchase this report to read more on the impact of fuel prices on the BC tourism industry (COTA members receive a 10% discount).

Become a part of the BC Tourism Review series. For information on sponsorship opportunities and benefits, contact Suzanne Lawrence at slawrence@cotabc.com or 604-685-5956.