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Many Canadians opt for vacation over mortgage payment, Transat says

Pools will be decidedly busier this year, Canadian tour operator Transat believes, as more U.S. travellers invade resorts throughout the Caribbean.
Transat says some Canadians are indulging in a vacation south two or three times a year nowadays -- unheard of a decade ago, when packaged vacations were costlier. Getty Images

With home prices as high as they are in several cities, some consumers appear to be electing to skip the endless grind of saving up for a down payment and instead escape on an annual holiday package.

Or two. Or even three, each year.

“You have people that travel three times a year now. That’s something that 10 years ago never happened,” the head of Transat A.T. Inc., the country’s biggest vacation package operator, said Thursday.

“There were very few [people]” who went on vacations that much, Jean-Marc Eustache, Transat’s chief told a conference hosted by CIBC.

“When people don’t have money to buy big things, they are buying holidays because holidays are cheap at the end of the day,” Eustache said. And they’re getting cheaper.

Vacation prices fall

Eustache said that prices on packaged tours such as all-inclusive trips to the Caribbean and Europe have been falling in recent years as competing operators like Sunwing and Air Canada Vacations have jostled for market share.

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New resorts are also being built to accommodate more and more vacationers — hotels with 1,000 rooms rather than 250, he said — putting downward pressure on prices. “For sure the prices are going down because of over-capacity,” Eustache said.

Transat’s sales were up 1.6 per cent in the latest three-month stretch. Profits however fell by 37 per cent as it lowered pricing to certain destination, such as Dublin.

The Transat chief was asked whether near-record high levels of debt currently being carried by Canadians were having an adverse effect on the packaged vacation business.

“We don’t see that,” Eustache responded.

MORE: Are Canadians taking on too much consumer debt?

Doing it all

Still, it appears many Canadians are doing it all – buying homes, new vehicles and taking trips around the world.

New vehicle sales this year are on pace to break 2013’s record high. More than 171,000 new vehicles were purchased by Canadians last month – the best August on record.

MORE: Canadians keep truckin’ as car models fall further out of favour

Home sales too are moving quickly. The number of residential properties bought and sold in August increased for the seventh month in a row, and were running at highest clip since January 2010 – and just below the all-time peak set in February 2007, according to numbers released by the Canadian Real Estate Association.

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Total outstanding debt on home loans rose in the spring by 1.4 per cent, or by $16 billion, Statscan said last week (latest data available).

Debt accumulated on credit-cards, bank loans and other forms of non-mortgage credit – collectively called “consumer debt” – edged up 1.2 per cent, or by $8 billion.

“Household debt growth is exceeding that of household disposable income,” RBC economist Laura Cooper said last week.