According to a recent report from Royal Bank of Canada economists, the Canadian economy is experiencing a significant boost from a growing "travel-at-home" ethos among citizens. However, this positive trend may not continue indefinitely as various economic factors come into play.
Shift Away from U.S. Travel Creates Domestic Opportunities
Royal Bank of Canada economists Nathan Janzen and Abbey Xu detailed in their April 9 report that Canadians have dramatically reduced travel to the United States, creating what they describe as a "sharp and persistent" decline in cross-border trips. This reduction has been particularly noticeable since Donald Trump assumed the U.S. presidency in January 2025.
The data reveals startling decreases: automobile trips to the U.S. fell by 26.3 percent in January 2026 compared to the previous year, while air travel decreased by 12.8 percent. Statistics Canada reported that trips by Canadians returning from the U.S. in March dropped 7.6 percent year-over-year, with automobile travel down 4.5 percent and air travel declining by 13.8 percent.
Domestic Spending Offsets International Decline
While international visitor spending in Canada contracted by 0.7 percent in 2025, domestic tourism spending increased by 2.7 percent during the same period. This shift reflects a broader "Buy Canadian" mentality that Canadians are applying across various spending categories.
The economists noted that "the larger offset has been increased spending on travel and tourism within Canada, helping to support the domestic sector." This reallocation of travel dollars has resulted in a 5.6 percent increase in dining accommodation and vehicle rental spending in 2025, with likely spillover effects in entertainment and recreation sectors.
Economic Impact and Future Projections
Total tourism spending in Canada grew by 1.7 percent in 2025 compared to 2024. More significantly, tourism gross domestic product (GDP) expanded at an annualized rate of 4.8 percent in the fourth quarter, while the overall economy contracted by 0.6 percent. This marked the third consecutive quarter where tourism growth outpaced the broader economy.
"Looking ahead, the reallocation in travel patterns is likely to persist in the near term, but not indefinitely," Janzen and Xu cautioned in their report.
Domestic tourism spending currently exceeds pre-pandemic averages by approximately 11 percent, demonstrating what the economists describe as "steady resilience" despite moderated growth from earlier post-pandemic surges.
Challenges on the Horizon
RBC projects a "mixed outlook" for travel in the coming period. While lower interest rates may provide some support, several factors could hinder continued growth:
- Slowing population growth
- Uncertainty surrounding trade disputes with the United States
- Increasing fuel costs
The bank is calling for "modest" GDP growth this year, noting that same-day trips by Canadians to the U.S. account for nearly half of total travel, and the "outsized drop in vehicle crossings suggests shorter, discretionary cross-border trips have been particularly affected."
International Travel Patterns Shift
Interestingly, while U.S. travel has declined, more Canadians are heading overseas. Between 2024 and 2025, overseas travel increased, with Statistics Canada reporting a 4.9 percent rise in Canadians returning from overseas getaways in March. For the third consecutive month, more Canadians returned from overseas destinations than from the United States.
This complex travel landscape illustrates how Canadian consumers are redirecting their spending in response to geopolitical and economic factors, creating both opportunities and challenges for the domestic economy in the years ahead.
