High gas prices will eat into tourism operators' profits

High gas prices aren't going to deter tourists from coming to the Yukon, said the head of the Yukon tourism association, but it will cut into tourism operators' profits.

"It is a hit to the cost of production of tourism products at every level and that can't be ignored, said Neil Hartling, chair of the Tourism Industry Association of the Yukon.

He said an increase in any input cost for a business affects their bottom line.

"And when you see increases, … [it's] always challenging and sudden sharp increases, you know, can be debilitating," he said.

He said that for most tourism operators in the territory, it's too late to raise prices to offset the cost of more expensive gas.

"They'll take the hit on top of the huge hit they already took from COVID, and we'll have to increase prices for next year accordingly," he said.

He said most tourism products involve some sort of transportation, and the impact on operators will vary.

"For example, if you're using charter aircraft like float planes, the largest part of your budget could be going to aviation fuel. That's a huge hit," he said. "If [you're in] hotels and hospitality, the hospitality industry, it's keeping their infrastructure running, which is a hit, but not to the same degree as aviation, for example."

Tourists will still come to the Yukon

Hartling said he doesn't expect the gas prices to keep tourists away.

"Pent-up demand is super strong right now," he said, but added the industry is not quite back to normal yet.

He said most tourists have already bought their flights and packages, and most won't feel the hit that high gas prices are causing.

He added he thinks that the rubber traffic, or people coming to visit the Yukon by road, are also likely to come this spring and summer.

"If they're coming from our target markets … they'll probably still come because the traveler in our target markets right now is highly motivated," he said.

Hartling described the territory's target market as the Canadian market, as opposed to the international market.

More expensive flights coming

Joe Sparling, president and CEO of Air North, said the sudden surge in gas prices is "probably the most sudden and most dramatic change in fuel pricing we've seen in 44 years."

He said they will have a "huge impact" on the cost and the demand for air travel.

Sparling said, while Air North buys its jet fuel based on contracts, they are tied to market indices.

"So when we see a dramatic change in the jet fuel price indexes, then our price of fuel goes up relatively instantaneously," he said.

He expects that in the short term, the airline will be filling its planes with expensive fuel for flights on which passengers bought tickets when fuel prices were lower.

In the longer run, he said prices for airline tickets will go up "pretty significantly."

"You're probably going to see a need to consolidate some flights in order to make sure the flights are fuller so that we can mitigate or lessen the requirement to raise prices," he said.