Financing Profile: Small and Medium-Sized Enterprises in Tourism Industries

Summary and discussion

Tourism is an important sector that supports SMEs and provides employment to Canadians across the country. Given the increasingly important role that tourism plays in the Canadian economy, it is critical to investigate SMEs in tourism industries to determine their unique characteristics. This report has presented a profile of SMEs in tourism industries and examined their differences compared with SMEs in non-tourism industries in terms of business and owner characteristics, access to financing, financing terms and conditions and obstacles to business growth.

The findings showed that SMEs in tourism industries have unique business characteristics compared to SMEs in non-tourism industries. Specifically, businesses in tourism industries were typically younger and more growth-oriented. Additionally, SMEs in tourism industries were more likely to be majority female-owned.

Compared with SMEs in non-tourism industries, those in tourism industries were less likely to request external financing and also less likely to be approved for external financing. It was also found that SMEs in tourism industries faced similar pricing loan conditions but less favourable non-pricing loan conditions.

After measuring the ratio of total amount of debt approved to total amount of debt requested, it is clear that SMEs in tourism industries had more difficulty obtaining financing than their non-tourism counterparts, especially in 2007. In particular, the accommodation industry, which required the most financing, had the most difficulty, receiving less than half of the debt financing they requested in 2007. The seasonality and risks associated with the industry as well as poorer financial performance relative to other sectors, may explain why businesses in tourism industries have more difficulties accessing financing.

In conclusion, the results presented in this report reveal that SMEs in tourism industries face unique challenges when it comes to access to financing, especially in the accommodation industry. Given the lack of research on the financing activities of businesses in the tourism sector, further research may be required to determine why these financing obstacles exist and what can be done to overcome them.