SME Profile 2023: Tourism industries in Canada

Small Business, Tourism, and Marketplace Services Sector, Tourism Branch

Innovation, Science and Economic Development Canada

Industry Sector, Tourism Branch

Table of contents

• Acknowledgements
• Executive Summary

1. Introduction
2. Distribution by Industry
3. Distribution by Geography
4. Employment
5. Distribution by Employee Size
6. Business Characteristics
   • Age of Tourism Businesses
   • Method of Obtaining Possession of the Business
7. Characteristics of Primary Decision-Makers
8. Growth
9. Financing Activities
   • Credit Availability and Approval
   • Main Provider of Debt Financing
   • Amount of Financing, Terms and Conditions
   • Intended Use of Debt Financing
10. Innovation and Adoption of Advanced Technology
11. Financial Performance
12. Conclusions

• References
• Appendix – North American Industry Classification Codes for Tourism Industries

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Acknowledgements

Tourism Branch wishes to thank Ennio Palombizio as lead contributor, and Jenifer Pilon, Natalie Byers, Ramsha Jaweed, and Cara Dewes for their helpful contributions. Additionally, we wish to thank Patrice Rivard, Lyming Huang, Michel Dubreuil, Ryan Kelly and Vincent Dore for their insights.

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Executive summary

On February 20, 2025, Statistics Canada released the Survey on Financing and Growth of Small and Medium Enterprises (SFGSME) for the reference year of 2023. The survey is carried out every three years on behalf of Innovation, Science and Economic Development (ISED) and for this release, Statistics Canada surveyed Small and Medium Enterprises (SMEs) between April and August 2023. The survey includes a reference sample for Canada's tourism sector.

The report reveals:

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Introduction

Tourism plays a vital role in Canada's economy, accounting for almost $48.6 billion or 1.8% of Canada's gross domestic product (GDP) and representing 13.8% of Canada's total service exports. Tourism drives key service industries such as food and beverage services, transportation, accommodations, arts, entertainment and recreation, and travel services, as well as contributing to other industries. Small and medium-sized enterprises (SMEs) – constitute the backbone of tourism in Canada, accounting for 99.9% of businesses in tourism industries.

In 2023, the sector continued its strong recovery from the impacts of the pandemic which had changed the nature of how tourism operators did business. International tourism, while continuing on a strong positive trend, showed an uneven recovery across markets. For example, the US market was the main driver of international tourism into Canada, while markets like China, South Korea and Japan lagged behind due to delayed removal of pandemic-related measures and/or geopolitical concerns.

Significant government supports, such as the Canada Emergency Business Account (CEBA)^{Footnote 1} and the Canada Emergency Wage Subsidy (CEWS)^{Footnote 2}, were made available to businesses throughout the pandemic years (2020-2022). In 2023, these loans were still on the books of tourism SMEs and were reaching repayment deadlines.

During the pandemic, more than 75% of SMEs in Canada applied for at least one type of government financing, such as CEBA or CEWS. The same was true for more than 85% of tourism SMEs, suggesting tourism industries experienced a more critical need for support during the pandemic. Most tourism SMEs that applied for government financing during the period reported having applied for CEBA (91%) or CEWS (75%), and almost half (44%) said they applied for the Canada Emergency Commercial Rent Assistance (CECRA).

In many cases, SMEs experienced difficulty obtaining the financing they needed to acquire assets, cover day-to-day expenses or expand into new markets. Obtaining financing can be particularly difficult for SMEs in tourism industries because financial institutions may view them as relatively risky compared with the SMEs in other industries^{Footnote 3} . One of the additional obstacles to obtaining financing in 2023 was the value of the outstanding portion of loans obtained through government support programs. This increased the debt loads of many SMEs, especially tourism businesses, which hindered access to the capital required and led to more businesses, who were approved for financing, obtaining less than requested^{Footnote 4} .

Given the importance of financing to the success and growth of a business, this report investigates the financing activities of tourism SMEs and identifies the financing needs and obstacles they face. This report is an update of SME Profile: Tourism Industries in Canada, 2020 and provides an overview of business characteristics, ownership characteristics, and recent financing activities of Canadian tourism SMEs in comparison with all SMEs in Canada. It uses data from Statistics Canada's SFGSME from 2023 and 2020. The focus is on results from the 2023 survey and comparisons are made with the 2020 and earlier surveys where relevant and possible^{Footnote 5} .

2. Distribution by Industry ^{Footnote 6}

Tourism businesses are distributed across five main industry groups: food and beverage services, arts, entertainment and recreation, transportation, accommodations, and travel services. In 2023, 7.7% (or 103,204) of the estimated 1.35 million^{Footnote 7} SME employers in Canada operated in tourism industries.

According to Statistics Canada's Business Register, the majority of tourism SMEs operated in the food and beverage services industry (66.9%), followed by arts, entertainment and recreation (13.6%), accommodations (10.0%), transportation (6.5%), and travel services (3.0%), as shown in Figure 1.

3. Distribution by Geography^{Footnote 8}

Tourism SMEs operate in every province and territory in Canada and their geographical distribution is roughly proportional to the distribution of other SMEs. As seen in Figure 2, in 2023, tourism SMEs were predominantly concentrated in Ontario (36.2%) and Quebec (22.2%). In Atlantic Canada, Quebec, Saskatchewan, British Columbia and the Territories (an aggregate of Yukon, Northwest Territories and Nunavut), the concentration of SMEs in tourism industries surpassed the concentration of SMEs in all other industries.

As shown in Table 1, the food and beverage services industry had the highest representation of tourism SMEs in Canada (66.9%), ranging from 56.7% in Atlantic Canada to 72.0% in Ontario. The Territories were the only jurisdictions where food and beverage services was not the majority share of tourism SMEs at 28.8%, coming second to the accommodations industry (at 31.1%). Arts, entertainment and recreation had the second-highest representation of tourism SMEs at 13.6% nationally, ranging from 11.3% in the Alberta to 15.7% in Atlantic Canada. In general, the travel services industry had the lowest share of tourism SMEs in every province and territory.

Table 1: Geographic distribution of tourism SMEs by region and industry

	Transportation	Travel services	Recreation and entertainment	Accommodations	Food and beverage services
Canada	7.1%	3.6%	16.2%	9.4%	63.8%
Atlantic Canada	6.9%	2.9%	18.3%	16.5%	55.4%
Quebec	8.2%	3.0%	16.7%	8.9%	63.1%
Ontario	6.0%	3.9%	15.5%	6.5%	68.2%
Manitoba	13.1%	2.6%	17.1%	12.3%	55.0%
Saskatchewan	5.7%	2.4%	16.5%	16.4%	59.0%
Alberta	6.5%	2.9%	14.4%	9.8%	66.5%
British Columbia	7.1%	4.7%	17.6%	10.3%	60.3%
Territories	19.7%	5.6%	13.9%	30.8%	29.9%

4. Employment

The Tourism Human Resource Module (THRM)^{Footnote 9} provides timely and reliable statistics on the human resource dimension of the tourism sector. Estimates include data from 2009 to 2022 for Canada and the provinces and territories. The THRM is used to complement Statistics Canada's Surveys on Financing and Growth of Small and Medium Enterprises. It should be noted that data from that module includes all jobs in businesses of all sizes within tourism industries, not just those in SMEs that depend upon tourism activities. The most recent release of the THRM provides an overview on employment for the reference year of 2022 and Statistics Canada's Labour Force Survey is used for the reference year 2023.

Tourism industries employed just over 2.02 million Canadians in 2023^{Footnote 10} , 3.8% below 2019 levels. As seen in Table 3, overall employment growth in tourism industries over this period was well on track to recovering from the impacts of the pandemic. The share of tourism in total employment hovered around 10%.

Table 2. Jobs in Tourism Industries and the Total Economy (thousands)

	2019	2020	2021	2022	2023	2019-2023 (% change)
Total, tourism industries	2,103.0	1,627.6	1,675.0	1,877.3	2,022.2	-3.8%
Total, all other industries	17,018.1	16,416.1	17,267.3	17815.6	18,148.7	6.6%
Total, economy	19,121.0	18,044.0	18,942.0	19,693.0	20,171.0	5.5%
Share of Tourism in total	11.00%	9.02%	8.84%	9.53%	10.03%
Tourism Industries
Transportation	356.0	292.0	292.0	327.0	362.0	1.7%
Accommodations	186.9	130.4	127.8	142	156.2	-16.4%
Food and Beverage Services	981.0	770.0	801.0	859.0	913.0	-6.9%
Arts, Entertainment and Recreation	525.0	395.4	418.5	511.4	552.5	5.2%
Travel Services	55.0	40.1	35.9	38.0	39.5	-28.2%

Note 1: Figures may not add up due to rounding.
Note 2: The percentage change is based on non-rounded figures.

Sources: Statistics Canada Labour Force Survey and Tourism Human Resource Module, 2019-2023 (via Tourism HR Canada); and Innovation, Science and Economic Development Canada calculations.

5. Distribution by Employee Size^{Footnote 11}

Small and medium enterprises are defined by the Survey on Financing and Growth of Small and Medium Enterprises as those that employ between 1 and 499 employees. On average, tourism SMEs tended to be larger than SMEs in other industries: while 56.6% of non-tourism SMEs had between 1 and 4 employees, only 27.4% of tourism SMEs were this size. Nearly half (44.9%) of tourism SMEs had between 5 and 19 employees, and a further quarter (25.5%) had between 20 and 99 employees, as shown in Figure 3. In 2023, a higher proportion employed more than 4 employees compared to 2020. Amongst numerous factors, this slight shift could also possibly be indicative of tourism businesses maturing and growing beyond the pandemic period.

The majority of tourism SMEs were those with 5 to 99 employees. SMEs in the food and beverage services industry were similarly distributed: as shown in Table 2, 50.5% of these SMEs had between 5 and 19 employees and a further 28.5% had between 20 and 99 employees. This is due to the fact that the food and beverage services industry accounted for nearly two-thirds of all tourism SMEs. Across the five tourism industries, there was significant variation in business size by industry. For example, more than half (58.1%) of all travel services industries had between 1 and 4 employees but the same is true for only 19.6% of food and beverage services businesses. Businesses with more than 100 employees comprised the smallest share of all tourism industries, less than 5.0% of SMEs across all of the five tourism industries.

Table 3. Distribution of Businesses by Industry and Employee Size

	1 to 4 employees	5 to 19 employees	20 to 99 employees	100 to 499 employees
Transportation	44.0%	34.2%	17.0%	4.8%
Travel Services	58.1%	31.8%	9.0%	1.1%
Arts, Entertainment and Recreation	45.1%	31.9%	19.0%	4.0%
Accommodations	35.0%	36.5%	25.1%	3.5%
Food and Beverage Services	19.6%	50.5%	28.5%	1.5%

Source: Statistics Canada, Canadian Business Counts

6. Business Characteristics

Age of Tourism Businesses

Historically, tourism businesses tended to be younger, on average, than other businesses across the Canadian economy. However, in 2023, the average age of an SME in Canada and a tourism SME were both 17 years. The shift came, in part, from the closure of smaller tourism businesses during the pandemic, as well as, from the continued maturing of larger businesses. Despite the closing of the business age gap, tourism SMEs tended to be relatively younger SMEs, 35.5% of which were between 3 and 10 years old, compared to 31.9% for all SMEs (Table 4).

Table 4. Year the Business was Established

Year the Business was Established	Tourism	All Industries
2021 to 2023 (2 years or younger)	10.8%	9.4%
2012 to 2020 (3 to 10 years old)	35.5%	31.9%
2003 to 2012 (11 to 20 years old)	22.4%	26.7%
Prior to 2002 (More than 20 years old)	31.3%	32.1%
Average Business Age (in years)	17	17

Source: Statistics Canada, Survey on Financing and Growth of Small and Medium Enterprises

Method of Obtaining Possession of the Business

Only about half (48.6%) of tourism SMEs were founded by the current owner, compared to almost three-quarters (73.1%) of SMEs in all industries. Tourism SMEs were more than twice as likely to have been bought or acquired by the current owner (38.3% of tourism SMEs were bought or acquired compared to 16.5% of SMEs in all industries), yet the share of tourism SMEs that were acquired was even higher in 2020. Generally, inheritance of a business was the least common method of possession, accounting for only 8.4% of tourism SMEs and 7.0% of all SMEs (Figure 4). However, the share of all SMEs and tourism SMEs that were inherited more than doubled compared to 2020.

For owners that started their business from scratch, more than two-thirds used personal financing for start-up funds regardless of industry; however, owners in tourism industries were more likely than owners across all industries to have used credit from financial institutions, financing from friends or family, and government loans, grants, subsidies, or non-repayable contributions to finance start-up costs.

For owners that acquired their business, tourism SMEs were more likely to use personal financing, while owners across all industries were more likely to use credit from financial institutions. That being said, credit from financial institutions was still an important source of financing for tourism SMEs.

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7. Characteristics of Primary Decision-Makers

The age distribution of primary decision-makers in tourism SMEs was comparable to that of decision-makers across all industries. Although more than half of tourism respondents reported that the primary decision-maker of the business is over the age of 50, younger decision-makers were more common in SMEs within certain tourism industries, such as food and beverage services, and arts, entertainment and recreation, relative to SMEs in other industries (Figure 5).

As seen in Table 5, tourism SMEs were more likely to have a primary decision-maker that is an immigrant to Canada. Across the economy, 68.8% of primary decision-makers reported their place of birth as Canada, compared to only 58.1% of tourism decision-makers. For those tourism decision-makers who were not born in Canada, the average period of time they have resided in Canada is 24 years. About 3.4% of tourism decision-makers who were not born in Canada had resided in Canada for less than 5 years, compared to 2.9% of decision-makers in all industries who were not born in Canada. About 28.8% of tourism decision-makers had a mother tongue other than English or French, compared to only 19.0% in all industries.

Table 5. Characteristics of Primary Decision-Makers, 2023

	Tourism SMEs	All SMEs
Place of Birth
Canada	58.1%	68.8%
Outside of Canada	41.9%	31.2%
Resided in Canada less than 5 years (if not born in Canada)	3.4%	2.9%
Resided in Canada more than 5 years (if not born in Canada)	96.6%	93.1%
Number of Years Resided in Canada (if not born in Canada)	24 years	27 years
Mother Tongue
English	55.1%	61.9%
French	16.1%	19.1%
Other	28.8%	19.0%
Education and Managerial Experience
Post-Secondary	69.5%	74.4%
College, CEGEP, or trade school diploma	29.7%	29.9%
Bachelor's degree	28.3%	24.7%
Master's degree or above	11.5%	19.8%
More than 10 years of Managerial Experience	69.8%	74.6%

Source: Statistics Canada, Survey on Financing and Growth of Small and Medium Enterprises

Table 5 also shows that more than two-thirds (69.5%) of tourism decision-makers reported having attained some level of post-secondary education, compared to 74.4% of decision-makers across the economy. In particular, tourism decision-makers were slightly less likely to report their highest level of education was a Bachelor's degree or a Master's degree or above, at 39.8%, compared to decision-makers in all industries, at 44.5%.

Tourism SMEs were more likely to be at least 50% female-owned than SMEs across all industries (Table 6). In 2023, the share of women holding a minimum 51% ownership stake in tourism SMEs (17.9%) was similar compared to that of SMEs across all industries (17.8%). Equal ownership stakes were held by women in 21.2% of tourism SMEs, compared to only 17.2% of SMEs across all industries. Tourism SMEs were also more likely to be majority-owned by visible minorities, at 11.4% compared to only 9.5% of SMEs across all industries, and by people of the 2SLGBTQ+ community, at 2.2% compared to 1.5% in all industries. While overall tourism sector revenues have recovered to pre-pandemic levels in 2023 (in both nominal and real terms), Indigenous tourism revenues have yet to do so in either nominal or real terms, which underscores the ongoing challenges for Indigenous tourism businesses in achieving a full recovery^Footnote12 .

Table 6. Majority Ownership, 2023

Majority Ownership, 2023	Tourism	All industries
Women, 50% ownership share	21.2%	17.2%
Women, 51-99% ownership share	3.8%	2.8%
Women, 100% ownership share	14.1%	15.0%
Indigenous	1.1%	1.5%
Visible Minority	11.4%	9.5%
Persons with a Disability	1.0%	1.2%
2SLGBTQ+	2.2%	1.5%

Source: Statistics Canada, Survey on Financing and Growth of Small and Medium Enterprise

8. Growth

When asked in 2020 about anticipated average sales growth for their business over the coming three years (2021-2023), tourism SMEs were generally optimistic, with 58.5% of those sampled for the survey in that year^{Footnote 13} anticipating annual revenue growth of between 1% and 10%. Despite this, there were still 22% of SMEs expecting no growth or negative growth. In 2023, when asked about their actual average revenue growth between 2021 and 2023, about 51.7% of the tourism SMEs sampled reported growth between 1% and 10% and almost 29% reported no growth or negative growth (Figure 6). Over this period of time, tourism SMEs were more likely to have specifically reported between 1% and 5% growth than SMEs across the economy, at 36.1% compared to 31.9%, respectively.

As shown in Figure 7, SMEs regardless of industry were optimistic about the next three years, with more than half of SMEs anticipating sales growth of between 1% and 10% from 2024 to 2026. However, tourism SMEs appeared to be especially optimistic as they were less likely to anticipate negative or no growth in the next three years (2024 to 2026) than SMEs across all industries, at 18.9% compared to 27.4%, respectively, and two-thirds of tourism SMEs expect growth between 1% and 10%, compared to 58.9% of SMEs across all industries.

When asked about the challenges SMEs perceived to be the major obstacles to growth of their business, SMEs across the economy and in tourism indicated similar obstacles: the rising cost of inputs^{Footnote 14} , the challenge of recruiting and retaining skilled employees, corporate taxes, and a shortage of labour. However, tourism SMEs reported these concerns as major obstacles to growth at much higher rates compared to SMEs across all sectors. Rising cost of inputs was cited significantly more as a major obstacle to growth for tourism SMEs at 63% compared to only 40% for SMEs across all industries.

Maintaining cash flows and/or managing debt and fluctuations in consumer demand were also seen to be major obstacles to growth. The ability of a business to obtain financing has been considered by some as a challenge for small businesses, especially in the tourism sector. Although it does not rank in the top five perceived major obstacles, almost 20% of tourism SMEs believed the ability to obtain financing was a major obstacle to their business, compared to only 11% of SMEs in all industries. This may be linked to concerns over cash flows and debt loads which is more of an obstacle to tourism SMEs (Table 7).

Table 7. Perceived Major Obstacles, (Top 6)

	2023		2020
	Tourism	All Industries	Tourism	All Industries
Rising Cost of Inputs	63%	40%	47%	31%
Recruiting and Retaining Skilled Employees	34%	25%	39%	28%
Corporate Tax Rate	30%	23%	24%	18%
Maintaining Cash Flows/Managing Debt Load	29%	20%	25%	18%
Shortage of Labour	28%	21%	38%	25%
Fluctuations in Consumer Demand	28%	25%	31%	23%

Source: Statistics Canada, Survey on Financing and Growth of Small and Medium Enterprises, 2023

A higher proportion of tourism SMEs have plans to sell, transfer or close their business in the next five years, at 24.7% compared to 17.4% of SMEs in all industries. This is particularly true for SMEs in food & beverage services (29.2%) and transportation (23.7%) industries. For those tourism SMEs that plan to sell, transfer or close their business, most (55.7%) intend to sell to external parties.

9. Financing Activities

Credit Availability and Approval

In 2017, 47.1% of SMEs requested external financing^{Footnote 15} , with goods-producing sectors like manufacturing and resource extraction relying on this financing more frequently than service-producing sectors, such as tourism. More than 61% of manufacturing firms and 56% of resource extraction firms (agriculture, forestry, fishing, hunting, mining, oil and gas extraction) reported a need for external financing in 2017, while for Canada's tourism sector (a more labour intensive sector), only 45.9% reported the same need.

In 2020, given the challenging operating conditions of the COVID-19 pandemic, the percentage of firms having requested external financing was significantly higher across the whole of the economy (it is also worth noting that support programs, in particular CEBA, also made financing much more accessible). In fact, 82.4% of all SMEs requested some degree of external financing in 2020, compared to an average of 88.9% for tourism SMEs (Table 8). SMEs in accommodations and, food and beverage services industries reported the highest need, at 90.4%.

In 2023, SMEs requesting external financing returned to near 2017 levels at 49.3% of all SMEs and 51.6% for tourism SMEs. Tourism SMEs in the arts, entertainment and recreation industry (66.9%) were more likely to require external financing in 2023.

External financing is defined as financing from third-parties. This may include debt financing, leases, trade credit, equity financing and government financing (for example, grants, subsidies or loans). SMEs may have requested more than one type of external financing.

Table 8. Percentage of SMEs Applying for External Financing, 2017, 2020 and 2023

	Tourism SMEs	All SMEs
Applied for external financing in 2017	45.9%	47.1%
Applied for external financing in 2020	88.9%	82.4%
Applied for external financing in 2023	51.6%	49.3%

Of those firms that reported that they did not request external financing in 2023, the most common reason was that external financing was not required (66.9% for tourism SMEs and 81.4% for SMEs across all industries). In addition, 13.2% of non-applicants in the tourism sector thought the cost of financing was too high, double that of all SMEs and highlighting the increase in interest rates throughout the year, as well as the fact that higher numbers of tourism SMEs were already holding higher debt loads acquired over the pandemic years.

Since 2020, the amount of financing authorized has changed substantially. In 2020, government financing (in the form of loans, grants, and subsidies) was the most important source of financing given the supports provided during the pandemic. This was particularly the case for tourism SMEs given they were amongst the most impacted SMEs in the economy. Almost 10% of the government financing provided went to tourism SMEs (and this figure was higher in 2021 as the pandemic went on).

In 2023, debt financing and trade credit were the most important sources of financing used by tourism SMEs (Figure 8). In 2023, only 7.7% of tourism SMEs requested government financing (Table 9). As such, only $118 million in government financing was provided to tourism SMEs accounting for just 3.6% of all government funding provided to SMEs economy-wide^{Footnote 16} .

Table 9. Request and Approval Rates, by Financing Instrument, 2023

	Type of Financing	Tourism SMEs	All SMEs
Request Rate	Debt	26.0%	25.7%
	Lease	7.3%	6.9%
	Trade Credit	25.7%	27.4%
	Equity	3.7%	1.4%
	Government	7.7%	6.9%
Approval Rate	Debt	87.0%	88.2%
	Lease	96.4%	96.4%
	Trade Credit	93.9%	96.7%
	Equity	N/A	N/A
	Government	63.6%	74.3%

Source: Statistics Canada, Survey on Financing and Growth of Small and Medium Enterprises

In 2023, of those tourism SMEs whose debt financing requests were turned down, the main reason was insufficient sales or cash flows (37.2%), consistent with past years, but only 12.4% of them indicated that the lender turned down the request because the project was considered too risky, significantly less than the 24.3% in 2020, and more tourism SMEs (26.0%) cited other reasons, which includes high debt load.

Interestingly, almost all accommodations industry (95.2%) SMEs turned down cited poor or lack of credit history, almost half of food and beverage services SMEs (42.2%) and over three-quarters of transportation SMEs cited insufficient sales or cash flows^{Footnote 17} . Federal, provincial and territorial governments implemented new eligibility rules for existing financing programs as well as created new temporary financing programs, which may explain the rise in government institutions as the providers of debt financing between 2017 and 2020. Most of these programs and supports are being wound down, further explaining the sharp decline in government as providers of debt.

Main Provider of Debt Financing

In 2023, the majority of debt financing regardless of sector was sought from domestic chartered banks or credit unions. Additionally, the increased share of debt financing obtained through government institutions seen in 2020, reverted back to pre-pandemic levels, which is indicative of the unique conditions of the pandemic years (Figure 9). Another trend which started to take hold in 2023 was the increased share of debt financing coming from alternative/online lenders^{Footnote 18} , which had reached 2.2% of SMEs in the overall economy and 4.7% for tourism SMEs, when these were below 1.0% in 2020, and virtually non-existent in prior years.

From 2014 to 2020, one of the most common reasons for lenders turning down the financing requests of tourism SMEs was that the project was too risky or the business operated in an unstable industry, and tourism SMEs reported these reasons at higher rates than SMEs across the economy. Given this perception of risk, tourism SMEs may have relied more on government institutions like the Business Development Bank of Canada (BDC) to obtain external financing or to programs such as the Canada Small Business Financing Program to access loan guarantees. Although this perception of risk declined into 2023, tourism SMEs still made up significant portions of the respective portfolios of these sources of government financing.

When a lender deems a project too risky or an industry unstable, it comes down to how each individual lender defines risk or instability. Each lender may have differing ways of modelling or calculating instability or risk, which impacts their willingness to lend. Responses are likely based on what the lender indicated^{Footnote 19}.

Possible reasons a lender could perceive tourism SMEs as risky include seasonality of business operations, size, profitability, debt load, etc^{Footnote 20}.

Amount of Financing, Terms and Conditions

On average, the ratio of authorized funding to requested funding was higher than 80% for tourism SMEs. Breaking this down by source, this means that a tourism business received 83.7% of the amount of debt financing they requested, and 95.4% of the amount of lease financing they requested. These rates are similar to those of SMEs across all industries (86.4% for debt financing and 95.2% for lease financing) except for government financing which had only a 63.6% approval rate for tourism SMEs compared to a 74.3% approval rate across all industries. (Table 10).

Table 10. Financing Statistics, 2023

	Financing Source	TourismFootnote 21	All Industries
Average Financing Approved per Application ($)	Debt	136,513	378,307
	Lease	62,778	113,280
	Trade Credit	106,747	169,519
	Equity	280,562	1,101,581
	Government	30,917	74,248
Total Financing Approved ($)	Debt	2,656,765,2647	81,176,120,998
	Lease	347,482,078	6,649,401,082
	Trade Credit	2,003,333,848	38,839,109,121
	Equity	802,565,292	13,168,685,906
	Government	118,279,729	3,269,994,339
	Total	5,928,426,211	143,103,311,446

Source: Statistics Canada, Survey on Financing and Growth of Small and Medium Enterprises

Tourism SMEs received 4.1% of the external financing that was authorized in 2023, down from 6.2% received in 2020, yet still sizeable. Almost 40% of authorized external financing in 2023 went to production industries such as agriculture, forestry, fishing and hunting, mining, oil and gas extraction; construction; and manufacturing (similar to 2020).

On average, tourism SMEs were granted similar terms and conditions on their external financing as compared to SMEs across all industries. Overall, interest rates and term lengths did not vary substantially. However, tourism SMEs were more likely to provide personal assets as financing collateral than the average SME (54.3% for tourism SMEs, compared to 41.9% for all SMEs).

Tourism SMEs in 2023, were more likely, on average, to get approved for term loans and credit cards (about 91% for tourism SMEs compared to 90% for all SMEs), and significantly less likely, on average, to get approved for non-residential mortgages^{Footnote 22} and lines of credit (about 64% for tourism SMEs compared to 82% for all SMEs), which speaks to a shift towards generally shorter term and less flexible external financing products compared to what tourism SMEs reported in 2020.

There were larger variations looking at SMEs across tourism industries. For example, transportation SMEs faced higher interest rates and shorter terms for non-residential mortgages, while food and beverage services SMEs faced lower rates and longer terms for the same product. Also, accommodations SMEs were more often asked to put up collateral (57.4%), compared to all SMEs (47.2%)^{Footnote 23} .

Intended Use of Debt Financing

Tourism SMEs who requested debt financing in 2023 were more likely to use this financing for working or operating capital, such as inventory, paying suppliers, etc. While this is the most commonly cited intended use across all industries regardless of sector, tourism SMEs report this as the intended use of their debt financing more frequently (61.6%, compared to 58.6% of SMEs across all industries). Other machinery or equipment (26.5%) or debt consolidation (13.5%) were the next most common intended uses among tourism SMEs. In fact, debt consolidation as the intended use of debt financing more than doubled relative to 2020 and was also higher than in 2017.

Table 11. Intended Use of Debt Financing, 2023

Intended Use of Debt Financing, 2023	Tourism SMEs	All SMEs
Working / Operating Capital	61.6%	58.6%
Other Machinery or Equipment	26.5%	19.7%
Debt Consolidation	13.5%	13.0%
Land and Buildings	11.0%	12.1%
Computer Hardware	10.3%	11.0%
Vehicles / Rolling Stock	9.10%	15.6%
Purchase a Business	7.9%	3.2%
Digital and Tech Investments	5.7%	5.1%
Computer Software	5.8%	8.8%
Enter a New Market	3.8%	2.6%
Other	3.1%	2.9%
Research and Development	2.1%	2.8%
Reducing Carbon Footprint	0.6%	0.5%

Source: Statistics Canada, Survey on Financing and Growth of Small and Medium Enterprises

10. Innovation and Adoption of Advanced Technology

Innovation is a key accelerator for business growth and increasing productivity. It constitutes a competitive asset for SMEs and is particularly important for attracting new or repeat customers in the context of very competitive tourism industries. Respondents are asked about their innovation activities in four key areas:

• Product innovation: a new or significantly improved good or service;
• Process innovation: a new or significantly improved production process or method;
• Marketing innovation: a new way of selling goods or services; and
• Organizational innovation: a new organizational method in business practices, workplace organization or external relations.

In the 2023 survey^{Footnote 24} , 27.4% of tourism SMEs reported themselves as an innovator, implementing at least one type of the above innovation activities over the last three years. This is in line with the average across all industries, where 27.1% of SMEs reported the same. This is lower than in 2020 where over 36% of tourism SMEs had implemented innovation activities between 2018 and 2020. This difference is strongly linked to the different economic environments faced in the period of 2021-2023 compared to 2018-2020, especially for tourism SMEs. Overall business focus may have been more on survival rather than innovation and expansion during the time periods compared.

This is consistent across all tourism industries, except for arts, entertainment and recreation, where 35.0% of SMEs implemented an innovation activity. For this industry, the main activities were around organizational innovations. Examples of these types of innovations for the arts, entertainment and recreation industry could include digital ticketing platforms, data-driven experience design, or incorporating technology to provide immersive virtual experience previews.

Over 14% of tourism SMEs reported implementing a marketing innovation, double that of SMEs across all industries. For other types of innovations, there were fewer tourism SMEs citing implementation compared to those across all industries (Figure 10)^{Footnote 25} .

In 2023, only one-third of all tourism SMEs indicated that the adoption or use of new technologies was not applicable to the business's activities, significantly fewer than the over half in 2020 who stated the same. In 2023, just under one half of tourism SMEs had adopted at least one new technology between 2021 and 2023, about double of those in 2020. Business intelligence technologies were the most frequent technology adopted by tourism and other SMEs, followed by security or advanced authentication systems and Internet of Things (IoT) systems, which include non-traditional computing devices and machines enabled with network connectivity (Table 12)^{Footnote 26} .

Source: Statistics Canada, Survey on Financing and Growth of Small and Medium Enterprises

Tourism SMEs were also more likely than other SMEs to have an online presence in 2023, with more than four-fifths (81.5%) of tourism SMEs reporting being active online, compared to only 59.2% of all SMEs.

Tourism SMEs also reported being more active on social media in 2023 than SMEs across the economy: 76.4% of tourism SMEs reported having social media accounts compared to only 67.1% of all SMEs. Tourism SMEs were more likely to have adopted digital marketing services and e-commerce platforms, with over one in five tourism SMEs indicating they had an e-commerce payment system for their customers; compared to one in seven SMEs across the whole economy (Table 13).

Table 12. Advanced Technology Adopted Between 2021 and 2023

Advanced Technology Adopted Between 2021 and 2023	Tourism	All Industries
Business or Enterprise Software Solutions	27.0%	33.0%
Design or Information Control Technologies	3.7%	7.5%
Information Technology (IT) Security and Authentication Systems	13.7%	16.7%
Material Handling, Supply Chain or Logistics Technologies	5.9%	5.6%
Processing or Fabrication Technologies	1.4%	3.3%
Integrated Internet of Things (IoT) Systems	2.4%	3.6%
Clean Technologies	8.2%	7.6%
Industry-Specific Business Software	16.5%	17.0%
Other	0.2%	1.1%

Table 13. Online Activities, 2023

Online Activities, 2023	Tourism	All Industries
Digital Marketing Services	32.4%	28.6%
Social Media Accounts	76.4%	67.1%
Google Reviews	63.8%	47.0%
Company Website	77.3%	79.7%
E-Commerce Platform	15.8%	12.2%
Digital Payment Systems	22.9%	17.3%
Other	1.4%	1.3%

Source: Statistics Canada, Survey on Financing and Growth of Small and Medium Enterprises

11. Financial Performance

This section of the profile examines the financial performance of Canadian businesses with annual revenues between $30,000 and $5,000,000 using complete financial data for 2023. The analysis in this section uses data obtained through ISED's Financial Performance Data (link available in References at the end of this report).This section uses a definition of small business based upon annual gross revenue, as opposed to the definition based upon the number of employees used elsewhere in this profile, because the Financial Performance Data is not available by the number of people employed by a business.^{Footnote 27} The definition of tourism industries is consistent with the definition as described in the Appendix.

On average, small businesses in tourism industries had lower total revenues, and total expenses than the average for small businesses in all industries. In 2023, the average revenue of small businesses in tourism industries was $530,117 compared with $643,881 for small businesses in all industries. A similar proportion of small businesses in tourism industries (74%) were profitable in 2023 compared with small businesses in all industries (75%). The average net profit of these small businesses in tourism industries was $74,994 compared with $122,118 for small businesses in all industries. In turn, a similar share of small businesses in tourism industries were not profitable, but these businesses reported a smaller net loss (-$72,279) on average, compared with non-profitable small businesses in all industries (-$263,233) in 2023.

Table 14. Average Revenues, Expenses and Profitability, 2023

Average Revenues, Expenses and Profitability		Tourism	All Industries
All Businesses	Number of Businesses	176,824	2,438,880
	Average Total Revenue	$530,117	$643,881
	Average Total Expenses	$493,082	$619,508
	Average Net Profit	$37,075	$24,378
Profitable Businesses	Percentage	74%	75%
	Average Total Revenue	$550,787	$650,764
	Average Total Expenses	$475,829	$528,654
	Average Net Profit	$74,994	$122,118
Non-Profitable Businesses	Percentage	26%	25%
	Average Total Revenue	$470,507	$623,626
	Average Total Expenses	$542,839	$886,856
	Average Net Profit	-$72,279	-$263,233

Source: ISED, Financial Performance Data, 2023

Among small businesses in tourism industries, those engaged in accommodations, and travel services industries had the highest average net profit in 2023 at $65,272 and $53,946, respectively. Despite having the highest average net profit, only 70% of small businesses were profitable in the accommodations industry. The food and beverage services industry had the highest average total revenue and highest average total expenses of all tourism industries, and as such it also had the second lowest average net profit ($23,645) and the lowest percentage of profitable businesses at 59%.

Looking only at profitable small businesses, the accommodations industry had the largest average net profit at $137,270 compared to the transportation industry, which had the lowest average net profit of profitable small businesses at $35,607. Looking at only non-profitable small businesses, those in the accommodations industry experienced the largest average net loss (-$101,530), whereas businesses in transportation experienced the smallest average net loss (-$59,096).

Table 15. Average Revenues, Expenses and Profitability, 2023, by Tourism Industry

	TransportationFootnote 28	Travel Services	Arts, Entertainment and RecreationFootnote 29	Accommodations	Food and Beverage Services
All Businesses
Number of Businesses	46,658	5,214	43,989	14,535	66,428
Average Total Revenue	$166,333	$555,296	$305,566	$593,383	$857,042
Average Total Expenses	$151,853	$501,350	$256,183	$528,090	$833,491
Average Net Profit	$14,502	$53,946	$49,383	$65,272	$23,645
Profitable Businesses
Percentage	78%	82%	83%	70%	59%
Average Total Revenue	$138,789	$564,800	$285,100	$656,672	$991,839
Average Total Expenses	$103,183	$478,400	$208,400	$519,402	$904,927
Average Net Profit	$35,607	$86,400	$76,700	$137,270	$87,007
Non-Profitable Businesses
Percentage	22%	18%	17%	30%	41%
Average Total Revenue	$262,385	$512,000	$403,400	$446,759	$663,066
Average Total Expenses	$321,573	$605,900	$484,600	$548,217	$730,692
Average Net Profit	-$59,096	- $93,900	-$81,200	-$101,530	-$67,534

Source: ISED, Financial Performance Data, 2023

12. Conclusions

In 2023, tourism industries accounted for 1.8% of Canada's GDP, over 3% of Canada's total exports and almost 4% of jobs across the country. More than 99% of tourism businesses are SMEs and almost 8% of all Canadian SMEs are concentrated in tourism industries. Tourism SMEs were younger and were more likely to be owned by women, visible minorities, immigrants to Canada, and people identifying as part of the 2SLGBTQ+ community.

While generally the likelihood of tourism SMEs to introduce innovations was overall in line with SMEs in all industries over the 2021-2023 period, they were more likely to introduce new methods of selling their goods or services (marketing innovation) given the need that exists to rebrand and attract more tourists post-pandemic.

Credit providers tend to view tourism SMEs as operators in relatively risky industries compared with SMEs operating in other industries. Compared with all SMEs, tourism SMEs found it slightly harder to obtain debt financing in 2023 for various reasons including being perceived as risky, insufficient cash flow and/or managing debt loads, to name a few. They obtained most of their debt financing from domestic charter banks, and were more likely than other businesses to use government institutions and alternative online lenders as their provider of debt financing.

Tourism businesses were slightly less likely to be profitable in 2023 than the rest of the economy. The most acute challenge to profitability was seen in the food and beverage services industry, where, due to tight profit margins, only 59% of businesses reported being profitable. Though tourism businesses were slightly more likely to be unprofitable in 2023, their average net loss was significantly less than that of unprofitable businesses across the rest of the economy.

Statistics Canada's Survey on Financing and Growth of Small and Medium Enterprises for the year 2026 is expected to be conducted again in 2027, providing updated insights into tourism industries during, what is largely expected to be, a period focused on how to sustain growth for the sector. In particular, it will be interesting to see if and how SMEs address debt loads, adopt new technologies, and apply lessons learned from the pandemic period to become more flexible and agile in handling periods of uncertainty in order to influence growth in this unique sector.

References

Industry Sector, Tourism Branch. SME Profile: Tourism Industries in Canada, 2020. Available at /site/canadian-tourism-sector/en/tourism-industries-canada-2020

Business Development Bank of Canada, BDC 2024 Annual Report. Available athttps://www.bdc.ca/globalassets/digizuite/47516-bdc-annual-report-2024.pdf

Innovation, Science and Economic Development Canada, Canada Small Business Financing Program Open Data. Available at

https://open.canada.ca/data/en/dataset/3f718801-099d-4037-bb0a-1d41ba8aca8b

Innovation, Science and Economic Development, Financial Performance Data, 2017, 2020 and 2023. Available at https://www.ic.gc.ca/eic/site/pp-pp.nsf/eng/home.

Statistics Canada. Table 36-10-0230-01 – Tourism demand in Canada, quarterly (dollars). Available athttps://www150.statcan.gc.ca/t1/tbl1/en/tv.action?pid=3610023001

Statistics Canada, Survey on Financing of Small and Medium Enterprises, 2017.Available athttp://www.ic.gc.ca/eic/site/061.nsf/eng/03087.html

Statistics Canada, Survey on Financing of Small and Medium Enterprises, 2020.Available athttps://www150.statcan.gc.ca/n1/daily-quotidien/210211/dq210211d-eng.htm

Statistics Canada, Survey on Financing of Small and Medium Enterprises, 2023.Available athttps://www150.statcan.gc.ca/n1/daily-quotidien/250220/dq250220e-eng.htm

Statistics Canada, Provincial-Territorial Human Resource Module of the Tourism Satellite Account, 2019. Available at https://www150.statcan.gc.ca/n1/daily-quotidien/201030/dq201030c-eng.htm

Statistics Canada, Canadian Business Counts, December 2023. Available at https://www150.statcan.gc.ca/n1/daily-quotidien/240213/dq240213b-eng.htm

Statistics Canada, Tourism Satellite Account Handbook, Available at http://www.statcan.gc.ca/pub/13-604-m/13-604-m2007052-eng.pdf

Appendix – North American Industry Classification Codes for Tourism Industries