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Canada's Travel Surge Shows Signs of Lasting Beyond the World Cup Effect, Scotiabank Says

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Canada's travel boom appears to be continuing well beyond the FIFA World Cup, casting doubt on the view that recent travel-related inflation is merely a temporary phenomenon, according to Scotiabank Economics in a note Tuesday.

Air passenger traffic through Canadian airports has remained very strong into August, with volumes well above levels seen during comparable periods in previous years, said the bank. Restaurant activity has also remained robust, indicating that the surge in travel demand is extending well beyond the soccer tournament.

A weaker Canadian dollar is making Canada a more affordable destination for international visitors while increasing the cost of travel abroad for Canadians. This currency effect may also be encouraging more Canadians to choose domestic vacations.

"Canada is a cheap destination" thanks to the weaker loonie, wrote Scotiabank's Head of Capital Markets Economics Derek Holt in the note.

The travel surge could be further supported by Canadians opting for domestic destinations over the US, while pent-up demand and improving economic conditions continue to drive spending, added the bank. Recent economic growth and a stronger labor market are providing additional momentum to the trend.

Canada's reinstatement on China's approved list of group travel destinations could provide an additional boost to international tourism as diplomatic and economic ties between the two countries improve.

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