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Lagging loonie is hurting some U.S. industries

If you’ve ever grumbled about Canadian shoppers taking all the good parking spots at Walden Galleria, or been annoyed waiting for a seat at a restaurant crowded with our neighbors from the north, you’ll have a lot less to complain about these days.

And stores, hotels, tourist sites, sports facilities and local county budgets are all suffering for it.

When the Canadian dollar began to plummet in value last year, the number of Canadians crossing the border to shop, eat and recreate dropped dramatically. The Canadian dollar dropped from 91 cents (U.S.) in 2014 to 78 cents in 2015. At the same time, cross-border trips fell a whopping 20 percent, according to data from Buffalo’s tourism bureau.

The declining dollar in Canada has been a boon for Americans seeking north-of-the-border bargains, but the international traffic is far from a two-way street; in February, Canadians made 117,047 fewer trips over Buffalo-Niagara’s bridges than they did during the same month in 2012, when the loonie was at par.

And it’s only expected to get worse. Most major U.S. and Canadian banks expect the loonie to continue to decline. Right now, the Canadian dollar is hovering around 77 cents. But economist David Doyle, with Macquarie Securities North America, is predicting record lows and forecasting a drop to 59 cents by the middle of next year.

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It has been a huge blow to industries that have relied on Canadian business to prop up their bottom lines. Now, they’re scrambling for ways to make up the difference.

To fill the void, Western New York businesses are trying to stem their losses in two ways: by marketing harder to locals, and by trying to lure Canadians back.

Missing sales tax

Canadian shoppers have contributed to record-high sales tax collections in years past. But last year, Erie County sales tax collections fell $15 million short of projections. That’s a problem, because sales tax is Erie County’s largest source of revenue.

The county Comptroller’s Office blamed the bulk of the shortfall on the drastic drop in cross-border shoppers. Although sales tax collections did grow from 2014 to 2015, it was at less than half the rate legislators were expecting.

Low gas prices also contributed to lower-than-expected collections, but only by about $1.4 million, a comptroller’s report said.

“Believe me, if I could hop in my car and bring as many of our neighbors to the north over to shop, I would,” said Stefan Mychajliw, Erie County comptroller. “It’s that bad.”

Shamrock Chic moved its location out of the Fashion Outlets into Walden Galleria, which is less dependent on Canadians, but which still relies on them for a healthy portion of traffic. The absence of Canadian shoppers is definitely being felt, said Marjorie Corrow, the store’s owner. She said national retailers have other stores to offset losses, but smaller, independent stores like hers have not done as well.

“It has been difficult for business,” she said.

Walden Galleria declined to comment.

The Fashion Outlets of Niagara Falls relies on Canadian shoppers for anywhere from 60 percent to 90 percent of its traffic. Store managers and mall representatives have been stepping up efforts to reintroduce Western New Yorkers to what some have long considered a mall for Canadians.

Managers hand out flyers and coupons at local events, such as a recent hockey tournament in Niagara Falls. The mall hosted a charity event with the Town of Niagara, where it donated $50,000 to local charities. It has also set up informational booths in the student union at the University at Buffalo and recently hosted a bus full of UB students who came from the school to shop.

The mall is expanding its reach to other domestic markets by advertising in Rochester. And it hasn’t given up on Canadians. It still circulates sales brochures to Canadian agencies, which specifically outline lower American prices on shoes and clothing, wider variety and lower sales tax rates.

“There are still millions of passenger vehicles crossing those bridges into Niagara and Erie counties,” said John Doran, general manager at the mall. “Canadians have not stopped coming to the United States.”

Advertising up north

Visit Buffalo Niagara has long advertised the region to Toronto and Southern Ontario and has had great success doing it.

Before the loonie’s decline, the VBN had committed to another $400,000 advertising campaign in Canada. It will stay the course with that campaign, but has shifted its messaging to focus on the dollars-and-cents bargains to be had in the states. Advertisements include side-by-side cost comparisons of attractions in Buffalo and Toronto. It compares a $67 show at Shea’s with a $107 ticket to the Royal Alexandra Theatre; tickets to a Sabres vs. a Maple Leafs game that cost $120 less at First Niagara Center than at Air Canada Centre; and tickets to the Buffalo History Museum that cost less than half of those at the Royal Ontario Museum.

Going forward, VBN will keep advertising in Canada, but it will ,also target Central New York, New York City, Western Pennsylvania and Eastern Ohio with additional marketing.

It is also more aggressively going after business with convention and sporting event travelers. Amateur sporting events have been especially helpful filling the void left by waning Canadian tourism.

“Travelers will give up some of their leisure travel to go to their kids’ sporting events, and sometimes they’ll turn that into the family vacation,” said Patrick Kaler, president and CEO of VBN. “When times get tough, they’ll always continue to go.”

Still, organizers of some events, such as the Aunt Rosie’s International Fastpitch softball tournament, have found it harder to book Canadian teams this year than in years past. Organizers have worked with the VBN and hotels to develop at-par deals and special packages.

Hotels are happy to do it. They said fewer Canadians are booking hotels, that they’re coming less often and not staying as long. Black Friday, for example, is usually a big day for local hotels, which customarily charge premium rates and end up selling out of rooms. Last year, though, some hotel bookings were down by as much as 40 percent.

Professional sports

The Buffalo Bisons, which are the Triple A affiliate of the Toronto Blue Jays, count on Canadians for a quarter of their ticket sales. The baseball team is running a promotion that will accept Canadian cash at par for single-game tickets at the Coca-Cola Field box office, at ballpark concessions and at Pettibones Grille.

The Bisons expect that deal, along with excitement surrounding the Jays’ American League East championship last year, to bring Canadians in this season, said Brad Bisbing, a Bisons spokesman.

First Niagara Center, which draws fans from Canada, said it does not track how many visitors attend Sabres games from across the border.

Groceries and gas

Two categories that are still drawing Canadians are groceries and gasoline – both of which are significantly less expensive here.

Some food prices in Canada increased by as much as 101 percent last year because of the weak loonie and other factors, according to an annual report by the Food Institute at the University of Guelph.

Canadian grocers, who source much of their fresh produce in the United States, have scrambled to buy things such as peppers and Brussels sprouts from other countries at lower prices. They are also working with domestic suppliers to ramp up Canadian production this season. Still, Canadians are faced with much higher grocery bills than in the past.

On a recent trip to Sobey’s supermarket in Fort Erie, a head of Dole iceberg lettuce from the states was priced at $3.49 Canadian, compared to $1.49 American at Wegmans in Amherst. A gallon of 2 percent milk cost more than twice as much as it would at Tops.

Gasoline prices are lower here, too. The cheapest gas price available in Fort Erie amounted to about $3.15 per gallon last week. On the same day, gas could be had for $1.89 across the border in Buffalo.

Sylvain Charlebois, a consumer studies professor at the University of Guelph, said gas and groceries are still well worth crossing the border for.

“The cheapest food basket in the world is in the United States,” Charlebois said. “I’m not sure you would gain shoppers, but you would retain some.”

For Erie County coffers, most groceries are not subject to sales tax, and gas prices are so low right now they bring in much less sales tax than in years past. So those two cross-border stalwarts won’t prop up the county budget much.

email: schristmann@buffnews.com