PORTLAND, Maine — The Canadian dollar this week hit its lowest value in more than a decade, creating more worry for retailers along the border and in Maine tourist destinations, which grappled with a widening exchange rate through the last year.
The forecaster who anticipated the loonie’s drop to 70 cents to the dollar this week predicted the Canadian currency would fall to 59 cents against the U.S. dollar by year’s end.
“Things get weird under 80,” Greg Dugal, executive director of the Maine Innkeepers Association, said.
There’s no good gauge for measuring how the exchange rate disparity has affected business in Maine so far, according to state economist Amanda Rector.
“Even with the exchange rates at the levels they are now, in many cases it’s still cheaper for [Canadians] to come here and buy whatever particular goods they’re looking for,” Rector said. “It might not have as much of an effect as you might think.”
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At Marden’s in Houlton, Maria Fullerton of Woodstock, New Brunswick, was heading into the store Thursday morning to shop for supplies she said she could get cheaper in the U.S.
“It is only a 15- or 20-minute trip across the border from my house,” she said. “With the loonie the way it is, you can sometime find better deals here in the United States.”
Even with the poor exchange rate facing Canadians, the lower U.S. prices at the pump still draw many drivers to gas stations in U.S. border towns. Gasoline stateside was about $1.60 (U.S.) cheaper than the average in Canada on Thursday, according to price tracking website gasbuddy.com.
In Madawaska, a cashier at Bob’s Service Center said there has been no discernible decline in Canadian customers. Several customers from just across the St. John River in New Brunswick, regularly cross the border to buy staples such as milk and bread, she said.
But the sagging Canadian economy has hurt some Maine retailers. In Fort Kent, Canadian shoppers at Paradis Shop ‘n Save are limiting their shopping to specific items, such as dairy products, that are cheaper on this side, according to Craig Paradis, one of the family owners.
Business overall has been down as a result.
“We have seen a change,” Paradis said by phone. “We are down about 15 percent.”
When will it end?
In Houlton on Thursday, Woodstock resident John Gates was headed into Andy IGA to shop.
“My wife is over here at Marden’s, and I am just going to pick up a few groceries that we can buy cheaper in the U.S.,” he said. “We have been facing the situation with the falling loonie for more than eight months now. I don’t know when the value is going to rise again.”
Neither do currency analysts.
The loonie was at its lowest level in 12 years Thursday, hurt by the continued fall of oil prices. The situation has prompted a growing number of analysts in a Reuters poll to speculate that Canada’s central bank could cut interest rates at its Jan. 20 meeting, a move that would put pressure on the loonie to fall further against the dollar.
And what if it falls further? At the Bangor Mall, general manager James Gerety said he stays away from speculation, but the value of the loonie has been a concern for the past year.
“I think that anybody in any sector, hospitality, entertainment and retail, has got to be a little concerned about the valuation of the Canadian dollar as it pertains to those Maritime citizens who come across the border and shop,” Gerety said.
Gerety said the dip hasn’t changed the way the mall does business, in part because it’s hard to know exactly how the disparity in the exchange rate changes behavior.
“The Canadian shopper has always been an important part of our business. And when they’re not shopping as much, it does have an impact on our business, but I can’t monetize that,” Gerety said. “There’s no metric for me to measure that.”
Lack of data
Rector, Maine state economist, said there are not much reliable data to measure the impact of the exchange rate on consumer behavior.
Retail sales from areas around border towns and Bangor since 2007 have tended to ebb and flow with the exchange rate.
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So have passenger vehicle entries to Maine at Canadian border crossings.
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But those numbers are the result of more than just the value of the loonie, with dips in passenger travel and sales that coincide with the Great Recession.
“You’re going to capture all of the different things that are going on in the economy and not just the exchange rates,” Rector said.
Export figures give a sense of broader economic trends between Maine and Canada and show what one would expect with a weakening Canadian currency.
Maine exports to Canada had fallen in 2015, as the loonie lost value and certain Canadian imports have gotten a boost. Reuters reported used cars imported into Canada in 2015 nearly doubled cars imported in 2014 and were at the highest level since 2002, when the exchange rate last was in the range of 60 cents to the dollar.
Travel travails
Maine’s Office of Tourism noted in its last summer survey that Canadian tourism to the United States dropped off sharply in 2014 but held steady last year.
In the Bangor area, retailers said they’ve felt the pinch, perhaps in unexpected parts of the economy.
Papa John’s Pizza on Stillwater Avenue is making fewer deliveries to Canadian guests at local hotels, according to General Manager David Sonnenberg. That’s cutting into the tips the pizzeria’s nearly 20 drivers are accustomed to earning, he said.
“It’s been tough on them,” he said.
As Sonnenberg sees it, the impact isn’t limited to Papa John’s.
“We’ve been hearing it from businesses all around town,” he said.
Heather MacKenzie, tour manager for Freedom Tours & Travel out of Saint John, New Brunswick, said Thursday the company used to offer monthly motor coach shopping trips to Bangor but has had to cut back because of the unfavorable exchange rates.
“It is having an impact,” MacKenzie said.
Until recently, the company was regularly filling its 54-seat buses to Bangor, she said.
“We love to shop in Bangor,” she said, noting Canadian shoppers say they can find goods and products here that aren’t available in their area.
This year, all bets are off, she said.
The company is planning only five runs to Bangor this year, one each in April, June, August, November and December, according to its website. Those trips won’t occur unless buses are at least half filled, a threshold that was lowered last year, she said.
Meanwhile, Canadian guests keep coming to Hollywood Casino Hotel & Raceway.
“We’re not seeing an appreciable fluctuation [in hotel stays by Canadians],” spokesman Dan Cashman said Thursday afternoon. “It’s been steady.”
The numbers from the state’s 2015 tourism survey suggest the continued fall of the loonie didn’t deter a core of visitors from Canada, including people from Quebec who make annual summer trips to southern Maine destinations like Old Orchard Beach.
Dugal of the Innkeepers Association said that most of those regular yearly visitors stuck to their summer plans. And for Canadian tourists who didn’t arrive this past summer, he said, hoteliers looked south.
“Most of them found a way to fill their rooms with other people from other places,” Dugal said. “So it didn’t seem to be, for anyone that I spoke to, anything that was catastrophic.”
Rector said the uptick in tourism from other parts of the United States this past summer in general likely helped to offset the drop in Canadian tourism.
Looking ahead, the challenge for Maine’s hospitality industry may deepen as the loonie languishes. Dugal said he’s hearing advance reservations for this summer are down again.
St. John Valley Times writer Don Eno and Bangor Daily News writers Dawn Gagnon and Jen Lynds contributed to this report.