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Weak Dollar Sends Canadian Tourists Flocking to U.S. Border Towns

Ken Sweet
FOXBusiness
                                 

The weakening of the U.S. dollar has provided a boom for three cities’ economies on the U.S./Canada border, especially in tourism.

For two rust-belt cities--Buffalo, N.Y., and Detroit--the massive influx of Canadian tourists have provided a boost to their economies in the wake of the subprime meltdown and the decades-long manufacturing slowdown for the areas.

However, for the technology-friendly Seattle, the city is seeing not only an influx of Canadian tourists, but also an influx of Canadian investment dollars.

"It used to be that we would see a 60/40 split for the amount of Canadians heading into the U.S. versus the amount of Americans going into Canada," said Matt Morrison, executive director of the Pacific Northwest Economic Region, an organization that gauges the economic activity for the northwestern U.S. and southwestern Canadian provinces. "Now that ratio is closer to 70/30."

While the U.S. dollar has steadily weakened against several major world currencies, it has especially weakened against the Canadian dollar, commonly called the Loonie, in the last few years. The Loonie was worth about 70 cents as recently as 2003, and now trades basically one-for-one with the dollar.

"It’s not the fact that the Loonie is now worth as much as a U.S. dollar, it’s the volatility of this exchange rate that hurts Canadian businesses," said Perrin Beatty, president and chief executive of the Canadian Chamber of Commerce and a former member of the Canadian Parliament.

But U.S. cities aren’t complaining.

Andrew Rudnick, president and CEO of the Buffalo Niagara Partnership, said Buffalo has seen big increases in retail sales in their high-end malls. Another benefactor of the weak U.S. dollar is Buffalo’s airport, which has seen massive influxes of Canadian tourists crossing the border to take advantage of cheaper flights because of the exchange rate.

"You can’t get a parking spot at our airport," Rudnick said. "A Canadian passenger gets an automatic 10%-or-more discount on their flight if they come to Buffalo right now. It’s great."

In Detroit, business officials said Canadian day trippers are coming from Windsor into Detroit in ratty clothing, buying new outfits at the luxury goods stories, and leaving their rags behind.

"We have piles of clothing being left in dumpsters near our malls," said Sarah Hubbard, vice president of governmental relations for the Detroit Regional Chamber.

However, on the other side of the border, things are not as glamorous on the tourism side

Beatty said day trip levels for Americans going into Canada are at the lowest levels since 1972, citing the weak U.S. economy and increased security on the border. The Canadian economy is highly dependent on the U.S. economy - with 80% of the country's exports going into the U.S.

"We have so many eggs in the American basket right now," he said. "When the dollar weakens like it has, we take a double whammy."

It's not all bad though. While the U.S. dollar has weakened, it is also the Loonie that has gotten stronger in recent years. Canada's economy has been buoyed by record-high oil and other commodity prices, so as the U.S. economy has been hurt by subprime and oil, Canada's economy has soared - unemployment is at a 30-year low and the government is paying off the national debt.

Despite tourism, most of Canadian businesses are floating high on a strong economy. Morrison with PNWER said that a group of Canadian investors recently purchased Puget Sound Energy, a utility company with 1.5 million customers, for $7.4 billion.

"There's been a massive flood of Canadian petro-dollars into our economy here in recent months," he said. "It used to be that all our oil in Washington State came from Alaska - now it's all Canadian. They're awash in cash."