P i s t a c h i o

For Atlantic Restaurant News, June, 2008

Modest performances were plagued by further decline in the Atlantic region, but the new budgets responded with substantial help in marketing and R&D dollars and some relief in personal tax credits. Newfoundland and Labrador enjoy their exceptional economic strength.

Richard Gautier, Corporate Spokesman for the Atlantic Canada Opportunities Agency said: “The latest interesting push has been in eco-tourism and adventure tourism – successful and with room to grow.”

To face the drop in visitors, added Gautier, “there’s a spirited focus on developing European and Asian markets.”

NEW BRUNSWICK
Tax Reform is a No-Show

Due mainly to the 10.9 per cent growth in construction — and despite a drop in manufacturing and agriculture — New Brunswick posted growth for 2007. The Real GDP was 2.5 per cent. Employment grew 2.1 per cent, and personal disposable income increased 4.6 per cent, contributing to an eight per cent retail sales rise.

Hospitality took a beating, however. Commercial foodservice sales down 6.5 per cent — the worst performance across the country.

Operators were happy that the new budget didn’t raise the harmonization sales tax. “The formula of returning itto 15 per cent because the GST came down two per cent this year might work for economists,” says Luc Erjavec, Atlantic Vice-President for the Canadian Restaurant and Foodservice Association (CRFA), “but for operators who are competing with grocery stores, that increase is make-or-break when you’re operating on a three- to four-per-cent margin.”

New Brunswick taxation is in disarray, unmitigated by the fact that the much-anticipated reformed tax system never materialized, even though the government promised to table a green paper on the subject in last month.

Budget Offers Marketing Help

The budget gave tourism a healthy infusion of $31.5 million for marketing and operations, making 2008 look very promising. “They’re definitely paying attention,” says Wanda Hughes, President of Hospitality Saint John. “The increase helps us do what we already do better,” she added.

A new direct flight from Gatwick to Fredericton was just announced in early May. It will boost New Brunswick’s plans to develop the UK market, a natural cultural match for the province.

To strengthen the business investment, the new budget provides $1.7 billion for the expansion of the potash mine near Sussex and new wind-farm projects on the horizon. Large corporation capital taxes continue their phase-out, complete by the end of 2008.

For small and medium business, the government offered nothing.

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NOVA SCOTIA

Good Food and Profit-Poor Drink

Job markets rebounded for Nova Scotia in 2007, particularly in construction, and in the professional and scientific sectors. Non-residential construction is going to provide an economic lift, with some large capital projects on the books. After several years of strong performance, housing is expected to cool off.

Nova Scotia’s real GDP for 2007 was 2.4 per cent. Employment inched up one per cent, and disposable income rang in at 4.3 per cent. Commercial foodservice sales fell 2.7 per cent.

“Foodies are our industry’s salvation,” says Gordon Stewart, Executive Director of the Restaurant Association of Nova Scotia. “The urban restaurant did better than its rural counterpart,” continues Stewart, “except for the restaurants in the higher-end category – they did better right across the board. And taverns and pubs are dying off, unless they have changed with the market.”

Culinary Tourism is Set to Rise
The Canadian Tourism Commission expects that leisure trips in Canada revolving around food and wine will grow by over 30 per cent. Nova Scotia has a number of restaurants spending about $1 million on their wine cellars, with 2 or 3 sommeliers on staff, Stewart says.

In tourism, the province had double-digit losses in U.S. visitors last year, and Stewart expects to see more. “The new economy for this sector is the ‘home market,’’’ says Stewart. Americans have been replaced by Atlantic Canadians, who unfortunately spend half what American spend when they visit the province on holiday.

Looking to the new budget for help, Stewart saw none. “For us, it was a non-budget,” declares Stewart, who says that the minimum wage increase could push some operators into bankruptcies, but that certainly there will be layoffs and cut hours. “When your profit margin is around 3.7 per cent, you don’t have much extra room to manoeuvre,” he says.

The budget provided a 13.8 per cent increase in some personal income tax credits over four years and $10 million in energy rebates for low-income Nova Scotians and seniors, in addition to what was already a strong energy rebate program in 2006.

Steward would like to see the government give hospitality a break on alcohol. “It’s the only product in our industry that has no discount and no wholesale pricing,” he said.

Up until just last year, when the industry and consumer prices for alcohol were on par, restaurants, bars and hotels were actually paying more for alcohol.

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PRINCE EDWARD ISLAND
Tech Tourism Project Offers Hope

PEI saw some growth in 2007, despite posting the second deficit in a row. Despite being in the red for another year, the province improved its bottom line by about five per cent.

Overall manufacturing grew 5.3 per cent, thanks predominantly to the province’s strong food processing sector. Retail spending rose 5.6 per cent and personal consumption increased 4.8 per cent. Real GDP was 1.9 per cent, employment rose only one per cent, and the province’s disposable income grew 4.6 per cent.

Commercial foodservice sales fell 4.2 per cent, relatively in line with the region’s performance, with per capita sales down 3.4 per cent. Tourism saw an increase of 1.1 per cent in visitations, and revenue grew 4.4 per cent. The Canadian Tourism Resource Institute predicts an increase of 2.9 per cent in visitation for 2008.

“We have some enthusiasm,” declares Don Cudmore, Executive Director of the Tourism Industry Association of PEI, “but we also have a lot of catching up to do.”

The Island’s key markets are the US – which is fighting a troubled economy, high fuel prices and the strong Canadian dollar — and Ontario and Quebec, both of which took a hit to manufacturing last year, “so there’s going to be a push-back there,” says Cudmore. “People are going to stay close to home.”

Taxation Give and Take

The new budget raises personal income tax, and drops small business taxes. Agriculture is getting an innovation fund to support sustainability and diversification, but farmers were offered no direct grants.

For tourism, the budget’s high point was a $1 million to fund the Integrated Tourism Solution, a technology program that will manage a database, take bookings for accommodations, restaurants and attractions and close sales on-line.

Industry representatives had pre-budget meetings with the government and presented a business case for a $6-millon tourism budget, “but we got considerably less than that,” says Cudmore. “Still,” he added, “the government appears to be committed to providing more funding, as needed.”

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NEWFOUNDLAND AND LABRADOR

No Disappointments

Officially out of the league of “have-nots,” Newfoundland and Labrador performed like champions in 2007, leading the country with a 9.0 per cent GDP, nearly four times the national average.

Industrial production rose 21 per cent, conveniently offsetting the 18 per cent drop in construction, because the sector is transitioning out of construction and into production. Unemployment fell 1.2 per cent to the lowest it’s been in 26 years. Personal income rose 4.3 per cent, and retail sales are growing at 10 per cent on a year-to-year basis.

On the foodservice side, commercial sales fell 1.9 per cent and per capita sales rose 1.3 per cent.

“There were no disappointments in the budget. All of our wish lists were granted,” said Tony Marx, Government and Industry Relations Manager for Hospitality Newfoundland.

The payroll tax exemption threshold rose to $1 million, removing 308 employers from the tax rolls, lowering tax for 578 others, retroactive to the start of the year.

Beginning July 1, 2008, personal income tax will drop one per cent in each bracket, the second year the government has reduced personal taxes. Retail sales tax has been cut from insurance premiums.

Opportunities Newfoundland and Labrador was given $5.3 million to boost employment, including $1.38 million for youth retention and attraction strategy.

For tourism specifically, the budget handed over another $1 million for marketing, taking the tourism budget to $12 million, double what it was four years ago, and to great effect — tourism has grown 15 per cent since 2003.

Additionally, tourism gets $425,000 of new money research to study global trends, spending habits and new markets. “We want to make sure we’re spending our budget in the best possible way,” says Marx. Money has also been designated for professional development and to improve the sector’s quality of service.

The province will also spend $59 million for business development, innovation, farm loans, agriculture research, fishing renewal and capital equity investment into aquaculture.

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