Canada's international travel deficit hit its worst levels on record after foreign travellers curtailed spending in Canada, according to a report released Thursday.

The travel deficit widened from from $3.2 billion in the second quarter to $3.3 billion in the third quarter of 2009, Statistics Canada said.

"The challenge for us is that our biggest inbound market, which is the U.S., is at the front line of the economic crisis," said Randy Williams, president and CEO of the Tourism Industry Association of Canada.

A 0.8% drop in tourist dollars in Canada was the main contributor to the under-performing travel portfolio. Foreign visitors spent just over $3.7 billion within our borders, representing the smallest influx of tourism cash in six years.

Countries everywhere are feeling the pinch and generally low global consumer confidence means travellers are willing to spend less, Williams told QMI in a telephone interview on Thursday.

Meanwhile, Canadians spent little over $7 billion travelling outside the country, an increase of 1%.

Canada closed in on its travel deficit with the U.S. by $111 million as a result of lower spending by Canadians in the U.S.

But the travel deficit with overseas destinations reached a record-high adding $152 million in the latest quarter and hitting the $1.1 billion mark. Canadians spent 4.3 % more overseas in the third quarter for a total of $3.1 billion.

Williams cited other factors that hinder Canada's competitive edge when it comes to tourism such as tightening of the border at land crossings, the high cost of air travel, the absence of a visitors rebate program and our geography.

"If you remove the U.S., we're an island and everybody else has to fly to get here," he said.