Good morning, this is Jason Kirby here, filling in for your usual Business Brief chief Chris Wilson-Smith who is away this week on vacation.
Fortunately, he’s not in Barcelona, where some visitors there just found themselves surrounded by a crowd of angry anti-tourism protesters. Barcelona is but one front in a wider and growing backlash against over-tourism that’s broken out in travel hot spots around the world. And yet tourism means big bucks for cities at a time when economies are slowing. We’ll dig into that puzzle below.
In the news
- Ontario’s pharmacy regulator blasts exclusive deals between pharmacies and insurers
- The CEO of DRI Healthcare Trust exits amid expense claim investigation, sending shares into freefall
- Inside the tech race to conquer the “yuck factor” of all those kitchen scraps
- Help (desperately) wanted: Nuclear engineers are needed for a booming industry
Up top
No boing for Boeing’s reputation, or its stock
A Boeing 737 Max jet preparing to land at Boeing Field following a test flight in 2020 in Seattle.Elaine Thompson/The Associated Press
Boeing agreed to plead guilty to a criminal fraud conspiracy charge over two crashes of its 737 Max jetliners that killed 346 people after the U.S. Department of Justice found the company violated an earlier controversial agreement that shielded it from prosecution over the disasters.
As part of the deal Boeing will pay a US$243.6-million fine and spend US$455-million over three years on compliance and safety. Families of the victims had been hoping for much more – they’d asked federal prosecutors to seek a fine of US$24-billion. All told Boeing has spent roughly US$20-billion in fines, payments to victims, airline reimbursements and costs related to the grounding of its 737 Max fleet by the U.S. Federal Aviation Administration.
That hasn’t helped Boeing resuscitate its corporate image, which took an additional blow in January when a panel blew off a Max jetliner mid-flight over Oregon. Last month the president of Emirates Airlines, Tim Clark, said it would take years for Boeing to turn around from its crisis of quality shortfalls and production delays.
After the plea deal was announced, investors initially seemed to spot a path through the clouds for Boeing shares, pushing the stock price up 3.5 per cent only to watch as the market erased nearly all those gains. Boeing’s shares are down 26 per cent this year and far below their peak before the pandemic.
In focus
The contradiction at the heart of the anti-tourism movement
Protesters shoot water from water guns at tourists during a protest against mass tourism in Barcelona, Spain, over the weekend.Bruna Casas/Reuters
Over the weekend a patio full of tourists in Spain’s second-largest city were targeted by a crowd of anti-tourist protesters carrying water pistols and placards that read, “Tourists go home, you are not welcome,” and “Dear Tourist, Balconing is fun!” That, by the way, is a mocking shot at visitors to the city who’ve fallen while climbing on balconies.
There were signs even before the pandemic that some tourism destinations were done with the traveling masses. But the movement picked up after lockdowns were lifted and as experience-starved tourists took to the skies in growing numbers.
From hot spots to not spots: There’s no shortage of destinations recently trying to clamp down on what they consider excess tourism.
- This month Spain’s government said it will conduct a sweep of listings on short-stay rental sites such as Airbnb and Booking.com to ensure the homeowners have tourism licences.
- In 2018, Venice first proposed a tourist tax. It came into force in April, imposing a €5 ($7.38) “access fee” for day-trippers.
- Last week local officials near Mount Fuji, Japan, introduced a $17 tax and daily cap on visitors to combat over-tourism.
Why the hostility? A few reasons. You don’t have to go to tourist traps to sense that since the pandemic people have become surlier and less patient, and that goes for both travellers and locals. It only takes one fool tourist with a Sharpie scrawling on the frescoed wall of an ancient Roman house to spark outrage and calls for restrictions.
But at a more basic level, the same anger over rising prices for homes and rent (and food, and everything else) that’s upending the political order here and abroad has inspired resentment against mass tourism and what it represents. And among the main targets of anger are the short-stay rentals that are accused of squeezing housing markets and driving up vacancies.
▶️ More Like This: The professional Airbnb landlord class is simply the worst
And so late last month Barcelona Mayor Jaume Collboni vowed to punt all short-term rentals from the city starting in November, 2028, to solve the city’s housing crisis. (Closer to home, B.C. recently imposed its own new restrictions on the sector.)
So problem solved? Hardly. There’s little evidence yet that taxes or rental restrictions will slow down the deluge of tourists. Airbnb’s share price is up 13 per cent this year even in the face of widespread political rhetoric about bans. Meanwhile many local residents in Venice have reacted angrily to that city’s new tax, arguing it’s too small and has too many loopholes for it to make a dent. A cynic might say that is by design. On the new tax’s first day, it pumped $40,600 into the city’s coffers.
And that’s at the crux of the tension between mass tourism and local economies that depend on all those tourist dollars. On a worldwide basis, tourism still has yet to reclaim its prepandemic peak, though it’s close. In May UN Tourism reported that international travel in the first quarter reached 97 per cent of what it was during the same period in 2019.
Residents might not welcome a full recovery, but their governments likely won’t mind, even if they won’t admit it.
Charted
Sahm-thing wicked this way comes
Recession indicators haven’t had a good run when it comes to signalling the next recession, to say the least. After decades of reliably waving the red flag of impending economic gloom, many indicators have been incorrectly warning a recession was imminent longer than most recessions last. And yet the U.S. economy has powered on. But then there’s the Sahm Rule, the brainchild of American economist Claudia Sahm, which holds that the U.S. is in recession when the three-month average of the unemployment rate climbs 0.5 percentage points from its prior 12-month low. Last week’s U.S. employment report, showed the jobless rate rose to 4.1 per cent in June, translating into a 0.43 percentage point reading for the Sahm Rule. That recession trigger is getting unnervingly close.
The outlook
On our radar and reading list
Economy: Later this morning U.S. Federal Reserve Chairman Jerome Powell will be grilled by lawmakers, marking his last scheduled public address before the presidential election. Expect fireworks.
Politics: After France’s shock election results of a hung parliament, with the far left holding the balance of power, here are four far-reaching consequences of the vote, from the British perspective.
Hollywood handover: After Paramount Global agreed to be bought by Skydance for US$8-billion on Sunday night, its current leaders – a trio of CEOs – told staff “until the transaction closes, it’s business as usual,” according to Deadline. After that, though, it’s cuts, cuts, cuts.
Capital gains crunch: A former client of Royal Bank of Canada said he’s out $30,000 because the firm failed to sell his holdings before higher capital gains taxes came into effect.
Markets this morning
Global markets were mixed as investors awaited testimony from the Fed’s Jerome Powell for indications on when interest rate cuts could begin. Wall Street and TSX futures pointed higher.
Overseas, the pan-European STOXX 600 slid 0.29 per cent in morning trading. Britain’s FTSE 100 declined 0.22 per cent, Germany’s DAX gave back 0.41 per cent and France’s CAC 40 fell 0.83 per cent.
In Asia, Japan’s Nikkei index jumped 1.96 per cent, touching a record high, while Hong Kong’s Hang Seng closed flat.
The Canadian dollar traded at 73.30 U.S. cents.