The provincial government deserves kudos for its announcement late last week that it was putting $50 million of new money into a "sweeping new tourism strategy". Half of the money will go to Tourism B.C., allowing its annual marketing budget from to go from $25 million to $50 million, while the other $25 million is a one-time grant to the Union of B.C. Municipalities to create its own five-year marketing plan to enhance tourism in B.C. communities.
As has been outlined previously in this space, Premier Gordon Campbell and his government have great hopes for the tourism industry. Campbell has challenged the industry to double in size by 2015. A B.C. Resorts Task Force was struck last year to recommend ways the government could aid investment in and expansion of resorts, and a resort strategy is expected to be announced this fall that will make most of the task force’s recommendations a reality. New tourism training programs have been announced. As well, the 2010 Olympics will attract global attention to B.C. prior to and during the Games, so the only missing piece for the tourism industry was more money for marketing. And now the province has come through on that front.
Tourism organizations and people in the tourism industry were rightfully excited by last week’s announcement of the new funding. But it should be looked at in perspective.
In Alberta, where the tourism industry is roughly half the size of B.C.’s (generating about $5 billion annually, compared to $9.3 billion in B.C.), Premier Ralph Klein announced in July that his government was doing away with its 5 per cent hotel room tax and, starting next year, replacing it with a 4 per cent tourism levy. The new tourism levy is expected to generate more than $42 million in its first year, and all of that money will go to marketing and development of tourism in Alberta. In other words Alberta’s $5 billion tourism industry will have $42 million to spend on marketing, while B.C.’s $9.3 billion industry will have $50 million for marketing.
Exactly what products and services will have the 4 per cent tourism levy tacked on is unclear, but Alberta still is more tax-friendly to tourists than B.C., which has an 8 per cent hotel room tax (10 per cent in some areas) and 7.5 per cent provincial sales tax on everything else. Of course, there’s GST on everything in both provinces.
The other thing to remember about Victoria’s new financial commitment to tourism is that the province may be giving up some revenue to help tourism. Up until last week’s announcement, all of Tourism B.C.’s marketing budget, which was about $25 million annually, came from its portion of the hotel room tax. Currently the province collects the lion’s share of B.C.’s 8 per cent hotel room tax; only 1.65 per cent goes to Tourism B.C., the remaining 6.35 per cent goes to Victoria, which considers it provincial sales tax revenue. If hotel room revenue goes down, Tourism B.C.’s marketing budget goes down.
While details haven’t been provided, it now appears Victoria will take less of the room tax and give a greater portion of it to Tourism B.C.
Victoria’s commitment to tourism also should be looked at in the context of other investments. The province expects $1.2 billion in new private sector investment and expansion of existing resorts over the next five years, while it invests $250 million in Tourism B.C.’s marketing efforts over the same time period. That’s not an outrageous commitment by the province. As one comparison, last February’s provincial budget included an investment of $176 million over three years – $58.6 million a year – to expand and enhance the B.C. Timber Sales Program. The forest industry is almost four times larger than the tourism industry in B.C. – forestry contributes about $17 billion to the province’s gross domestic product annually, according to the Council of Forest Industries, while tourism contributed $5 billion in 2002; forestry generates about $4 billion in government revenues annually, while tourism contributed $990 million to the provincial treasury in 2002 – but the Timber Sales Program is not the province’s only financial commitment to forestry, in fact it’s just one part of the Forestry Revitalization Plan, which includes money to compensate companies for lost timber rights and funding to help the forest industry adjust to meet new markets and realities.
Of course, if Victoria followed Alberta’s lead and weaned itself completely from the hotel tax and turned that revenue over to Tourism B.C. the tourism industry would be in heaven. Of that $990 million in provincial revenue that came from tourism in 2002, 11 per cent, or $108.9 million, was from the room tax.