International Travel Update and Forecast

1Office of Travel & Tourism Industries, International Trade Administration, U.S. Department of Commerce

International Travel Update and Forecast

Presented by:

julie p. heizerOffice of Travel and Tourism IndustriesInternational Trade AdministrationU.S. Department of CommerceFebruary 6, 2013

Presented to:

The ONE Travel Conference


United Nations World Tourism Organization(UNWTO Spring 2012)

• Forecasts for world and world regions only.

• Includes INbound and OUTbound forecasts!

• Methodology based on changes in GDP and transport costs.1) assumes similar GDP growth trends as in the past;2) assumes air transport costs will cease declining in real terms:3) land transport costs to increase faster than air.


UNWTO 2030 ForecastArrivals growth by year

• Arrivals > travelers, reflecting multiple counting across multiple country visits on a trip.

• Growth rates decelerate through 2030 reflecting1) an ever-growing base, 2) assumption of increasing transport costs.

• = 43 million new travelers per year, on average to reach 1.8 billion arrivals by 2030. 1.4 billion if transport costs and GDP assumptions are worse.


Why International?international travelers walking around the U.S. account for...

• 4%-5% of travelers walking around...

• But 14% of travel demand in 2007.This increased to 17% in 2010.

• and could be 20% in 2013 based on recent domestic and international performances.

4%

14%17%

20%

0%

5%

10%

15%

20%

25%

Travelers TravelDemand

2007

TravelDemand

2010

TravelDemand

2013

Sources: U.S. Travel Association; BEA 2007; 2010.


The Current OTTI International Travel Forecast


Factors in Developing theOTTI Country Travel Forecast

Travel to USA: monthly

GDP Forecast (IMF)

UNWTO Experts

Demographics Employment Situation

Currency Exchange Rate Stock Market

Total Outbound

3.543.80

4.60

5.185.37

4.89 4.835.06

4.08

3.63

3.17

3.75 3.883.67 3.53

3.252.92

0

1

2

3

4

5

6

93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09

Travel to USA: annual


Overview: THE WORLD

OVERVIEW: UNWTO forecasts growth to N.A. to average 1.7% from 2010 to 2030, the lowest of any world region. PATA forecasts growth of 3% annually through 2014. OTTI’s forecast is relatively bullish, calling for 3.6-4.3% annual growth over the next couple of years, and 28% total growth from 2011 through 2017. Top contributions to total growth from 2011-2017 are Canada, China, Mexico, and Brazil.POSITIVES: BRIC(K)s exceeding expectations and visa wait times short. Even Western Europe doing well YTD through June, except U.K. IMF upward adjustments to many key origin markets through 2017. Brand USA starting to flex; May 2012 campaigns in Canada, U.K., and Japan. ESTA fees not an apparent negative. Adequate ESTA fee collections to provide max USG match available to Brand USA contributions.NEGATIVES: Low air capacity growth through April 2013. And some of the growth is likely Americans returning home. USA marketing level abroad low from U.S. state and city destinations, perhaps offsetting—or MORE than offsetting—Brand USA levels. Several key origin markets closely tied to China economy, perhaps even more so than China. Huh? If China imports slow, watch Australia, Brazil, Africa and other key commodity exporting countries and regions.

Outboundto USARecent Demos GDP Currency Jobs Markets TPA CS+ + ++ + + — + — — — + +

23) ZZZ THE WORLD 08 / 07 09 / 08 10 / 09 mo %Jan 32.7% -8.0% 9.8% 6.8%Feb 36.6% -9.1% 6.0% 6.4%Mar 30.5% -16.8% 13.0% 8.3%Apr 18.5% 0.8% 3.1% 8.4%May 31.1% -14.0% 18.7% 8.1%Jun 24.1% -12.5% 15.9% 7.8%Jul 13.6% -8.2% 14.6% 10.4%Aug 18.0% -7.2% 11.1% 10.7%Sep 12.9% 0.9% 7.6% 8.4%Oct 12.4% 1.7% 8.3%Nov 10.1% 4.6% 7.9%Dec 8.8% 9.6% 8.6%YTD 22.9% -8.3% 11.2% Sep


RankOrder2011

Region / Country2011

Actual2012 2013 2017

% Change11 / 10

% Change12 / 11

% Change13 / 12

% Change17 / 11

Grand Total 62.71 66.48 69.23 80.48 4.9 % 6.0 % 4.1 % 28.3 %

North America 34.83 36.57 37.75 42.27 4.2 % 5.0 % 3.2 % 21.4 % Overseas 27.88 29.91 31.48 38.21 5.8 % 7.3 % 5.2 % 37.0 % Europe 12.66 12.92 13.25 15.03 6 % 2 % 3 % 19 % Western Europe 11.99 12.21 12.51 14.16 5 % 2 % 2 % 18 % Eastern Europe 0.67 0.71 0.74 0.86 11 % 6 % 4 % 28 % Asia 7.25 8.24 8.93 11.90 3 % 14 % 8 % 64 % South America 3.76 4.31 4.72 6.01 16 % 15 % 10 % 60 % Caribbean 1.09 1.11 1.11 1.12 -9 % 2 % -1 % 3 % Oceania 1.24 1.33 1.40 1.75 14 % 7 % 6 % 41 %

1 Canada 21.34 22.40 23.30 26.48 7 % 5 % 4 % 24 % 2 Mexico 13.49 14.17 14.45 15.79 0 % 5 % 2 % 17 % 3 United Kingdom 3.84 3.84 3.91 4.53 0 % 0 % 2 % 18 % 4 Japan 3.25 3.54 3.65 3.91 -4 % 9 % 3 % 20 % 5 Germany 1.82 1.93 2.01 2.31 6 % 6 % 4 % 26 %

6 Brazil 1.51 1.78 2.03 2.76 26 % 18 % 14 % 83 % 7 France 1.50 1.58 1.64 1.83 12 % 5 % 4 % 22 % 8 Korea 1.15 1.28 1.39 1.73 3 % 12 % 8 % 51 % 9 China 1.09 1.54 1.94 3.91 36 % 41 % 26 % 259 %

10 Australia 1.04 1.12 1.19 1.51 15 % 8 % 6 % 46 %

11 Italy 0.89 0.88 0.89 0.99 6 % -1 % 1 % 11 % 12 Spain 0.70 0.67 0.67 0.71 9 % -5 % 0 % 1 % 13 India 0.66 0.74 0.78 0.98 2 % 12 % 5 % 47 % 14 Netherlands 0.60 0.62 0.63 0.68 5 % 3 % 2 % 14 % 15 Venezuela 0.56 0.65 0.70 0.81 14 % 16 % 7 % 45 %

16 Argentina 0.51 0.60 0.65 0.86 17 % 17 % 9 % 67 % 17 Colombia 0.50 0.57 0.59 0.71 0 % 14 % 5 % 43 % 18 Switzerland 0.48 0.50 0.52 0.61 22 % 4 % 5 % 28 % 19 Sweden 0.44 0.45 0.47 0.53 18 % 3 % 3 % 22 % 20 Ireland 0.35 0.33 0.33 0.36 -4 % -4 % -2 % 5 %

OTTI’s 2012 Fall Forecast


Fall Forecast Key Takeaways

• CAGR is 4.2% over six years--influenced by 2012’s +6%--, led by Asia (8.6%) and South America (8.2%).

• China, Brazil, Argentina, Korea have the highest growth RATES.• Canada (29%), China (16%), Mexico (13%), Brazil (7%) have the

highest growth VOLUME. % of total growth 2011-2017 in ().

• 2/3 of the growth from 4 countries.

• China and Japan might be neck and neck for #4 ranking by 2017, pushing Germany out of the top five.

• What about Taiwan, who recently attained VWP country status? Others?


Select Markets Overview: #1 Canada

OVERVIEW: For this #1 origin market, US is more than 2/3 of total outbound. 5% decline in 2009 more than offset by 10% increase in 2010 and additional 7% growth in 2011. 6-year forecast calls for total growth of 24% from 2011-2017, equating to 5.1M more travelers, the most of any origin country! By far! PATA forecast calls for 3.7% annual growth from 2010-2014, most of which will have been achieved by end of 2012. Population is entering into a age 55+ “sweet spot” for a decade.POSITIVES: Moderate, increasing then stable GROWTH in GDP. Exchange rate at par and IMF expects to decline a penny or so per year. Govt debt/GDP ratio--typically high--now better than most developed countries. Monthly volume up 32 of 33 consecutive months. Any WHTI impacts apparently over. May 2012 Brand USA marketing recipient...Canada travel industry concerned! GDP/capita nearly same as USA. New bridge at Detroit-Windsor border??? Canadians driving to/flying out of USA airports—mostly day trips at border???NEGATIVES: Potential border entry delays during peak season/days/hours if growth occurs as expected. Growth to Caribbean because Americans aren’t traveling there (price discounting). 20% of international TO Canada is through the USA, thus low growth TO Canada may impact travel from other markets. 10% of O/S arrivals enter the USA through US-Canada land borders. E.g., Blaine, WA is 5th largest U.S. POE for the Chinese. Relationship between currency and USA travel is strong; “Canadians KNOW the exchange rate.”

Outboundto USARecent Demos GDP Currency Jobs Markets TPA CS++ ++ ++ + + + + - ++ +



Select Markets Overview: #2 Mexico

OVERVIEW: USA accounts for 95% of outbound from this #2 origin market. Growth in 11 of 13 recent months. 2013 should break 2007 record of 14.33M. Border states dominate destinations, but air portion accounts for more than a tenth and more geographically dispersed. 6-year forecast calls for total growth of 17% from 2011-2017, or 2.3M additional visitors. PATA calls for 0.3% annual growth from 2010 to 2014, which will be surpassed by the end of 2012 if YTD growth through June holds up.POSITIVES: GDP solid and only slowly declining. Unemployment enviable and declining. Increasing population. Any WHTI legislation impacts likely over. Good candidate to benefit from Brand USA advertising due to current visitor volume and impact on southern destinations (geo-equity). USA a likely benefit of a July 2009 Canada visa requirement change placed on Mexico travelers. 30M “super-elite” not sensitive to economic conditions or exchange rate. Stable and moderate govt debt/GDP ratio (43%).NEGATIVES: Long-term decline in exchange rate, expected to stabilize but still half of $0.14 in the mid 90s. No strong correlation between exchange rate and travel to USA. No Brand USA activity so far.

Outboundto USARecent Demos GDP Currency Jobs Markets TPA CSeh eh + + + — + + … ?



Select Markets Overview: #3 United Kingdom

OVERVIEW: Total outbound flat for several years for the #3 origin market. 15% drop to USA in 2009 the start of a 3-year decline and is now a million travelers down from peak in 2000. 6-year forecast calls for total growth of 18% from 2011-2017, lowest among top 10 countries, 700K more. The potential for the return of the “missing million” will have to wait for additional time due to low or no growth for a year or two. PATA calls for 0.7% annual growth from 2010 to 2014, putting the total volume by then very similar to that of OTTI’s forecast.POSITIVES: Population growing slowly. GDP annual growth improving from a 2012 recession in 2012 to +2.7% in 2017. FTSE 100 not fully recovered from 2007 but getting there. May 2012 Brand USA marketing recipient. WTM travel show 2012-11. Exchange rate down from 2007 sweet year of $2.00, but same as a decade ago and expected to remain stable.

NEGATIVES: Total outbound had consistent growth up to 2006, then flat for several years. Recent outbound to US in decline…US share of total outbound down. Declines continuing in 2012 YTD through June. Unemployment high but improving slowly over six years. Govt and household finances are not strong. Air capacity is currently flat, and six-month outlook is negative. APT tax of $US100 or so per traveler doesn’t help. Brand USA marketing may be more than offset by continued lower effort by U.S. destinations.

Outboundto USARecent Demos GDP Currency Jobs Markets TPA CS— —— — + — — —+ — ++ +



Select Markets Overview: #4 Japan

OVERVIEW: #4 origin market showing a rebound of +14% in 2012 YTD, following declines in five of six past years. Trend is similar to most non-Asia countries. Travel to Italy is down 75% from 1M in late 90s. Low growth expected each of next several years. 6-year forecast calls for total growth of 20% from 2011-2017—but volume will remain well below 1997 record of 5.37M--down 2.5M. Only growth is to China and other close-in Asia. PATA calls for 0.8% annual growth 2010-2014, again ultimately similar to that of OTTI’s forecast.POSITIVES: May 2012 Brand USA marketing recipient. Currency exchange rate on 5-year upward trend and forecast to increase a tiny bit more. Decent air capacity increases for the past year basically offsets losses following tsunami, with low growth, but growth to continue through winter 2013. Lower fuel surcharge.Open-skies agreement signed in November 2010.NEGATIVES: Total outbound in decline for years. Long-term decline to U.S., N.A. and W. Europe. Spending peak 1995. Population declining and aging (oldest in the world). GDP decline in 2011 from tsunami, but recovery has been “no wow.” 1% growth annually through 2017. Unemployment stubbornly high for Japanese standards and forecast to remain stable. Stock market up and down after long-term massive decline. Huge public debt-to-GDP ratio—highest in world. Geo-equity index of 7 lowest among top 10 visitor origin markets.

Outboundto USARecent Demos GDP Currency Jobs Markets TPA CS— — + — — + — — ++ +



Select Markets Overview: #5 Germany

OVERVIEW: #5 market up and down since 1996 record of 2.00M. 6-year forecast calls for total growth of 26% from 2011-2017 (+500K). PATA forecasts 3.0% annual growth from 2010-2014 to reach 1.94M, a bit below the 1999 record and the OTTI forecast for 2014. Propensity for outbound travel has cooled the past few years, like so many developed countries.

POSITIVES: Unemployment relatively high compared to other countries, low for Europe, and improvement continues from 2005 level of nearly 11%. DAX market still down from 2007. Good candidate for Brand USA marketing based on size of market and tourism exports, and past interest from U.S. state travel offices. In fact, ITB travel show in 2013-03. Geo-equity index of 17 2nd highest among top 10 origin countries.NEGATIVES: Total outbound flat over last decade. Outbound to USA up and down. GDP growth declining from +3.3% in 2010 to +1% through 2017. Traveler volume relationship to currency is decently strong—before and after euro—which depreciated in 2012 and expected to decline a bit through 2017. German decline to USA similar for Canada and countered by its growth to Turkey, Croatia, Egypt, Bulgaria, and China. Seat capacity flat for 18 months, now -4% to -8% into spring 2013.

Outboundto USARecent Demos GDP Currency Jobs Markets TPA CS— —+ ++ — — — —+ —+ + —



Select Markets Overview: #6 Brazil

OVERVIEW: Smokin’ hot market has been firing on all cylinders. Outbound traveler volume still increasing, but increasingly some economic issues. 6-year forecast calls for total growth of 83% from 2011-2017 (+1.3M). Tough to forecast because USA share of total outbound fluctuates wildly…33% in 1995, 10% in 2004, 23% recently. Leapfrogged over France for #6 spot in 2011, could surpass Germany by end of 2013. PATA forecast calls for 11% annual growth from 2010-2014, bearish versus OTTI.POSITIVES: Recently, “just about everything!” Strong GDP growth linked to commodity exports to Asia softer in 2011 and 2012, but expected to resume 4%+ through 2017. Population growth. Likely beneficiary Brand USA marketing efforts, in fact, Brand USA representation at WTM travel show 2013-04. Open-skies agreement being phased in over next few years. Double-digit increases in air capacity from Jan 2010 through Mar 2013.NEGATIVES: Currency actual already lower than IMF forecast of decline slightly from 2012 forecast of $0.55. Geo-equity index of 10 same as UK, but 80% to FL and NY.

Outboundto USARecent Demos GDP Currency Jobs Markets TPA CS++ ++ +++ + + —— —+ — + ?



Select Markets Overview: #7 France

OVERVIEW: #6 visitor origin market often shows wild swings in volume over past decade, often flying in the face of economic factors. Record volume in 5 of 6 past years, including 2012 if +5% May YTD holds up. 6-year forecast calls for total growth of 22% from 2011-2017 (+300K). PATA forecast calls for 5.8% annual growth from 2010-2014, a rare bullish outlook versus OTTI’s forecast.

POSITIVES: CAC-40 down from 2007 high, but improving. Likely beneficiary of TPA marketing efforts, in fact Brand USA representation at IFTM travel show 2013-09. Like many in Western Europe, the French are stressed out and could use a break.

NEGATIVES: Total outbound has been flat for seven years. GDP growth revised downward…ZERO to low. Unemployment rate at typical 8%-10% level. IMF expects Euro to decline a bit through 2017. Seat capacity negative -3% to -9% past 12 months and expected through March 2013.

Outboundto USARecent Demos GDP Currency Jobs Markets TPA CS+— + + —+ — — — — + — +



Select Markets Overview: #8 South Korea

OVERVIEW: #8 origin market has been moving up the rankings. Attained VWP status in late 2008. Declines in 2008 and 2009 followed up with 49% jump to the US, exceeding 30% jump to rest of world. 6-year forecast calls for total growth of 51% from 2011-2017 (+600K). PATA forecast calls for a 4.5% annual growth from 2010-2014, bearish versus OTTI.

POSITIVES: Strong total outbound and outbound to USA in 2010 still below 2007 level. Modest growth to USA last year followed up with 12% gain YTD in 2012 and despite decline in exchange rate. GDP growth revised upward to reach and maintain 4% through 2017. GDP/capita growth is strong. Low and declining government debt/GDP ratio of 33%. Continued strong air capacity growth since fall 2010 to continue through winter 2013.NEGATIVES: population growth is small. Currency down in 2012 and expected to remain stable.

Outboundto USARecent Demos GDP Currency Jobs Markets TPA CS++ +— ++++ —+ + +— + + + ?



Select Markets Overview: #9 China

OVERVIEW: #9 origin market was #16 just a couple of years ago…#11 in 2010. MOU for group leisure travel in effect June 2008. SIAT travel profile reflects increases in group, leisure, touring, etc. traveler profile. 6-year forecast calls for total growth of 259% from 2011-2017!!! An additional 2.8M visitors by 2017. PATA forecast calls for 17.6% annual growth from 2010-2014. That rate of total growth may be achieved by end of 2012.POSITIVES: Just about everything! High spending per visitor. This will likely become lower as group travel increases—this is not a bad thing…just an algebraic thing! Even geo-equity index of 17 is above average!. Low unemployment rate. Equity markets declining lately. Brand USA representation at CITM travel show 2012-11. Deceleration of GDP growth may impact other countries from which China imports commodities (Australia, Brazil). NEGATIVES: GDP/capita is only US$4K!, but has a large “travel-possible” population from HHI perspective. Low vacation/leisure % of total US visitor volume (9%) but increasing. Slightly declining exchange rate forecasted through 2017, but from a high level. High air capacity growth is tailing off, now flat and flirting with declines.

Outboundto USARecent Demos GDP Currency Jobs Markets TPA CS+++ +++ +++ ++ ++ —+ + — + +



Select Markets Overview: #10 Australia

OVERVIEW: Pushed to #10 origin country by China in 2011. 7 consecutive record volume years, including 2009! 6-year forecast calls for total growth of 46% from 20011-2017 (+500K). PATA forecasts 9.8% annual growth from 2010-2014, to reach 1.316M, the same as OTTI and similar to BMI online. USA outbound share stable at 12% for a decade.

POSITIVES: Just about everything! Volume to USA should produce the 8th consecutive record in 2012! GDP/capita of US$50K highest among top 10 markets. CS comments positive, including positive sentiment toward USA and increase in air capacity. High spending per visitor average; high vacation leisure average.

NEGATIVES: Geo-equity index of 14 is average, but visitation is concentrated in CA, NY, NV, and HI. Currency exchange rate forecast by IMF to decline, but from 30-year record high.

Outboundto USARecent Demos GDP Currency Jobs Markets TPA CS+ + + + + + + + + — … +



Select Markets Overview: #13 India

OVERVIEW: #13 origin market had very strong growth in the mid 00s, then low growth and a decline in 2009. 2011 was a record, but on tiny growth. Original OTTI forecasts were overly frothy. 6-year forecast calls for total growth of 47% from 2011-2017 (+300K). India will be a top 10 origin country someday, looks like later rather than sooner. PATA forecast calls for 2.3% annual growth from 2010-2014.POSITIVES: High growth rate for total outbound and to USA but from low base. GDP growth rate similar to China over the past, but fell off in 2012. To increase to +6% to +7% through 2017. Population growth rate high; to surpass China within 20 years. High spending per visitor level due to long stays, but $/V/night is low.

NEGATIVES: GDP/capita is only $1K!, but has the largest “travel-possible” population from HHI perspective. Low vacation/leisure % of total US visitor volume (7%). Exchange rate expected to continue on 7-year slide since 2010, but visitor volume doesn’t correlate. Air capacity has been negative since spring; huge declines in summer is misleading—reflects missing airline data. April 2013 turns positive for now.

Outboundto USARecent Demos GDP Currency Jobs Markets TPA CS+ + + ++ ++ ++ — … + … ?



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International Travel Update and Forecast

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