California Travel & Tourism Outlook. April 2013

Transcription

1 California Travel & Tourism Outlook April 2013

2 California travel forecast overview California s travel economy expanded in 2012, driven primarily by domestic visitation and slowly improving US economic conditions. International visitation is estimated to have come in below expectations due to stagnant visitation from Mexico and ongoing weakness in Europe. Overall visitor volume is estimated to have finished 2012 with growth at 3.0%, versus previous expectations of 2.5%. Leisure travel is estimated to have outpaced business travel in 2012 and these expectations were revised up from the October forecast. Overnight travel is expected to have outpaced day travel, and a tightening lodging market led to robust price growth in key California metro area markets. Visitors from Asia and Latin America are driving growth in international visitation, while UK and France are the key drags in Europe. Expansion continued in early 2013, as room demand, occupancy, and prices increased in the first quarter, even if at a slower rate than in The forecast calls for total visitation growth of 2.3% in 2013, weaker than in 2012, but stronger than expectations of the previous forecast. 2

3 Economic overview Austerity is kicking in in the US, but fiscal adjustments will not significantly undermine growth. Strengths will outweigh the fiscal drag and US economic indicators point toward further expansion. Labor and housing markets are stronger than a year ago, and slowly improving business and consumer confidence will support spending and hiring in Although restrained, US near term prospects are better than in Europe, where fiscal drag is more severe. Emerging markets in Asia and Latin America continue to lead global growth. The Oxford Economics US forecast expects growth of 2.2% in 2013 and 3.0% in Global GDP will expand 2.3% in 2013 and 3.3% in Risks are more balanced than 6 months ago, but still weighted to the downside. 3

4 California travel forecast summary California Tourism Summary (Annual % change) Total Visits 5.9% 3.3% 3.0% 2.3% 2.4% 2.5% 2.8% Domestic Total Visits 5.6% 2.8% 3.0% 2.0% 2.1% 2.3% 2.5% Leisure Visits 4.9% 3.1% 3.1% 2.1% 2.2% 2.4% 2.6% International Total % change 9.0% 9.1% 2.5% 4.8% 5.0% 5.0% 5.3% Overseas 18.2% 10.5% 2.9% 5.2% 5.4% 5.7% 6.0% Mexico 1.8% 8.5% 1.9% 4.6% 4.8% 4.4% 4.9% Canada 10.0% 6.4% 3.6% 4.6% 4.6% 4.7% 4.1% Leisure % change 10.6% 9.1% 2.5% 4.5% 5.1% 5.5% 5.6% Overseas 18.2% 10.5% 2.9% 4.7% 5.8% 6.6% 6.6% Mexico 5.3% 8.5% 1.9% 4.4% 4.9% 5.0% 5.2% Canada 10.0% 6.4% 3.6% 3.8% 4.1% 4.0% 4.0% Total Expenditures ($ billions) % change 8.4% 7.1% 4.5% 5.3% 5.8% 6.5% 7.2% Domestic % change 8.3% 7.5% 4.2% 4.9% 5.3% 6.0% 6.5% International % change 8.9% 5.2% 6.1% 7.3% 8.0% 8.9% 10.1% Source: Tourism Economics. Historical sources: TNS Global (domestic); CIC Research, OTTI (international); Dean Runyan (expenditures) 4

5 California travel forecast summary Forecast Comparison Percentage Point Change in the Forecast, May 2013 versus October 2012 Vintage Total Visits (0.1) (0.2) Domestic Total Visits (0.1) (0.2) Leisure Visits (0.1) (0.2) International Total % change - - (3.3) (0.3) (0.0) 0.2 Overseas - - (2.2) (0.4) (0.1) 0.3 Mexico - - (5.0) (0.2) Canada (0.2) (0.3) (0.2) Leisure % change - - (3.0) (0.0) Overseas - - (2.2) (0.4) Mexico - - (4.7) Canada (0.2) (0.2) 0.2 Total Expenditures % change - - (1.9) Domestic % change - - (1.4) International % change - - (4.0) (0.6) (0.2) (0.1) 5 Source: Tourism Economics

6 California Travel Outlook SUMMARY 6

7 France Australia U.K. Netherlands South Korea Oceania Germany Mexico Total Overseas Japan Asia Argentina South America Brazil Recent performance: a decent start to 2013 The hotel sector continued to expand in early 2013, but at a slower rate than in Room demand grew 3.0% through March and prices were 4.3% higher than a year earlier. Growth in CA room demand is outpacing that of the nation, while ADR is keeping pace. The market tightened in 2012; occupancy rose 2.4 ppt to 68.8%, led by the large metro markets, San Francisco, LA, and Oakland. Demand from emerging economies in Asia and Latin America continue to drive international visitation, while European demand stagnates. 7 Hotel Performance Through March 2013 % change year ago; change in rate for occupancy California Pacific US US Rooms sold Occupancy ADR RevPAR Source : STR Global International Arrivals in California % change year ago, through November Source: Department of Commerce FIA Data

8 and the outlook for moderate growth holds Domestic visits to California are expected to slow down in the near term with growth of 2.0% and 2.1% in 2013 and A weaker international outlook versus the October 2012 vintage will temper the contributions to growth from Europe and emerging economies. Overseas markets will still lead growth over the forecast horizon, but at a slower pace than previously expected. International visitor spending will play an increasingly important role for California s tourism industry. California Total Visits annual % growth 20% 15% 10% 5% 0% -5% -10% Overseas Mexico -15% Sources : Tourism Economics, OTTI, CIC Research, TNS Global US 8

9 California Travel Outlook DOMESTIC FORECAST 9

10 Business and leisure travel Changes to the outlook were minor, including a slightly improved domestic forecast for Domestic leisure travel to California is expected to outpace business travel over the forecast horizon, as businesses are increasingly cost conscious, seek alternatives to physical meetings, and are weighed down by uncertainty over federal fiscal policy. Business travel to CA will still outpace that at the national level, as has been the case since Domestic Business Travel annual % growth 10% 8% 6% 4% CA domestic business travel Origin State weighted GDP CA Domestic Business and Leisure Visits % growth 10% 8% 6% 4% 2% 0% -2% -4% -6% -8% Source : Tourism Economics US Domestic Leisure Travel annual % growth 6% 4% 2% Domestic Business (in Red) Domestic Leisure (in Blue) Origin State weighted GDP (orange) 2% 0% -2% -4% -6% US total domestic business travel 0% -2% -4% -6% CA domestic leisure travel (blue) US domestic leisure travel (red) 10-8% Source : Tourism Economics -8% Source : Tourism Economics

11 Day and overnight travel Domestic overnight travel will continue to outperform the overall travel market out to Fuel prices in CA were 5.6% higher in 2012 versus a year earlier and likely restrained some Day travel. Domestic visitor expenditures rose 5.9% in 2012 and are expected to grow 5.0% in Higher lodging and fuel prices and more confident visitors will contribute to spending growth. Returning room demand outpaced new supply in 2012 and this dynamic continued in early The higher occupancy rates are translating into increased pricing power for hoteliers, especially in San Jose, Sacramento, Oakland and Anaheim. 11 CA Domestic Day and Overnight Visits % growth 6% 4% 2% 0% -2% -4% -6% Domestic Day (red) -8% Source : Tourism Economics Total Domestic (orange) Domestic Visitor Expenditures % growth 10% 8% 6% 4% 2% 0% -2% -4% -6% -8% Domestic Overnight (blue) -10% Sources: Dean Runyan, Tourism Economics

12 Domestic forecast growth Annual Person Trips to California (Annual % change) Domestic Total 4.7% 4.0% 3.0% 2.0% 2.1% 2.3% 2.5% Business 8.1% 5.2% 2.6% 1.9% 1.9% 1.9% 2.1% Leisure 4.0% 3.7% 3.1% 2.1% 2.2% 2.4% 2.6% Day 4.7% 3.6% 1.7% 1.9% 1.9% 2.1% 2.4% Overnight 4.7% 4.3% 4.2% 2.1% 2.3% 2.5% 2.6% Source: Tourism Economics. Historical sources: TNS Global (domestic); CIC Research, OTTI (international) Domestic Person Trips to California (Annual % change) Drive 6.9% 4.8% 3.3% 2.1% 2.2% 2.4% 2.5% Fly -3.5% 0.4% 2.1% 1.8% 1.8% 2.0% 2.3% Gateway 5.5% 3.0% 3.0% 1.8% 1.9% 2.1% 2.1% Non-Gateway 2.5% 4.8% 3.3% 2.1% 2.2% 2.5% 2.3% Paid Accommodation 5.5% 6.1% 4.0% 2.2% 2.9% 2.6% 2.5% Non-paid 3.4% 1.3% 4.6% 2.0% 1.4% 2.2% 2.7% Source: Tourism Economics. Historical sources: TNS Global, STR Gatew ay is defined as visitation to one or more of the follow ing metropolitan areas: San Diego, Anaheim-Orange County, Los Angeles, San Francisco Bay Area; Non-Gatew ay is defined as visitation to one or more non-gatew ay destinations. 12

13 Domestic leisure forecast growth by market Annual Domestic Leisure Trips to California (Annual % change) Total 4.9% 3.1% 3.1% 2.1% 2.2% 2.4% 2.6% California 6.8% 3.0% 3.3% 2.0% 2.0% 2.2% 2.5% Primary Markets 2.3% 5.2% 2.9% 1.4% 2.3% 2.4% 2.6% Arizona 9.0% 5.2% 3.1% 0.9% 1.8% 2.1% 2.3% Nevada -1.0% 6.3% 3.2% 0.3% 2.9% 2.3% 2.4% Oregon -0.2% 2.6% 2.8% 1.7% 2.5% 2.8% 3.1% Washington -1.1% 6.5% 2.1% 3.3% 1.8% 2.4% 2.6% Utah -4.9% 4.9% 3.4% 2.4% 3.0% 3.1% 3.3% Colorado 3.8% 5.1% 2.4% 2.0% 2.3% 2.9% 3.1% Opportunity Markets 1.6% 3.5% 3.0% 2.8% 3.0% 3.1% 3.2% Texas 2.0% 4.4% 3.8% 3.5% 3.8% 3.8% 3.9% New York 1.8% 1.2% 2.6% 2.1% 1.9% 2.0% 2.2% Illinois 0.7% 5.1% 2.1% 2.6% 2.8% 3.1% 3.2% Rest of US -8.5% 1.3% 2.4% 3.1% 3.3% 3.3% 3.2% Source: Tourism Economics. Historical sources: TNS Global Note on volatility of historical data and treatment in forecast: Due to smaller sample sizes and relatively smaller visitor volumes in absolute terms, the historical data of origin markets tends to be more volatile than total visitor volumes. 13

14 California Arizona Nevada Oregon Washington Utah Colorado Texas New York Illinois Domestic market comparisons Projected trip growth by source market Average annual growth in visitors, 2012 to Source: Tourism Economics 14 Primary Markets Opportunity Markets Real State GDP by Origin Market % growth 5% 4% 3% 2% 1% 0% -1% -2% -3% -4% California Primary Markets Opportunity Markets Rest of US -5% Source : Tourism Economics Forecast >>>>

15 California Travel Outlook INTERNATIONAL FORECAST 15

16 California will track the US International inbound travel to California fell behind the US in 2012, but will keep pace over the forecast horizon. Links to fast growing Asia, and limited exposure to a weak Europe will benefit CA tourism. Much of CA underperformance in 2012 stems from stagnant visitation from Mexico. European source markets underperformed in 2012 and the forecast calls for restrained demand out to 2016, even in Germany, the main engine of the European economy. CA International Inbound Travel Annual % growth 15% 10% 5% 0% -5% -10% -15% Source: Tourism Economics CA inbound travel (blue) US inbound travel (red) 16

17 Inbound leisure forecast growth Annual International Leisure Trips to California (Annual % change) Total 10.6% 6.0% 2.5% 4.5% 5.1% 5.5% 5.6% China 49.1% 34.8% 38.8% 13.8% 15.1% 16.3% 14.0% India 17.2% 8.7% 7.0% 7.3% 7.5% 9.0% 9.6% Japan 19.3% 5.4% 5.2% 3.3% 4.6% 5.2% 5.3% South Korea 40.8% -0.5% -0.3% 4.8% 6.3% 7.5% 8.9% Australia 33.2% -2.2% -3.0% 4.5% 6.9% 7.4% 6.1% United Kingdom 3.0% -3.0% -3.9% 1.1% 1.5% 1.5% 2.8% Germany 9.3% 3.1% -0.6% 3.8% 4.1% 4.6% 5.3% France 38.8% 17.0% -16.9% 0.8% 1.3% 2.0% 2.4% Scandanavia 21.3% 4.5% 5.6% 0.7% 0.8% 1.2% 3.1% South America 20.2% 19.9% 16.0% 6.5% 7.1% 8.8% 11.8% Canada 10.0% 6.4% 3.6% 3.8% 4.1% 4.0% 4.0% Mexico 5.3% 8.5% 1.9% 4.4% 4.9% 5.0% 5.2% Rest of World 11.8% -4.9% 5.3% 5.6% 6.5% 7.0% 5.9% Source: Tourism Economics. Historical sources: CIC Research, OTTI Note on volatility of historical data and treatment in forecast: Due to smaller sample sizes and relatively smaller visitor volumes in absolute terms, the historical data of origin markets tends to be more volatile than total visitor volumes. 17

18 China South America India South Korea Australia Mexico Japan Germany Canada United Kingdom France Scandanavia International market comparisons Projected international leisure visits by market Average annual growth, Source: Tourism Economics 18

19 California Travel Outlook VISITOR SPENDING 19

20 Spending growth will moderate slightly in 2013 Domestic visitor spending still trumps international, but international visitors 15% are accounting for an increasing 10% portion of the total. 5% The international outlook for 2013 is 0% slightly downgraded from October -5% 2012, but international visitor spending -10% will continue to make an outsized -15% contribution to spending growth out to % 20 California Visitor Expenditures % growth Total (blue) Sources: Dean Runyan, Tourism Economics Direct Visitor Expenditures International (orange) Domestic (red) ($ Billions) Total Expenditures % change 8.4% 7.1% 4.5% 5.3% 5.8% 6.5% 7.2% Domestic % change 8.3% 7.5% 4.2% 4.9% 5.3% 6.0% 6.5% International % change 8.9% 5.2% 6.1% 7.3% 8.0% 8.9% 10.1% Source: Tourism Economics. Historical sources: Dean Runyan, CIC Research

21 Spending will pick up pace beyond 2013 Expenditures Will Outpace Visitors Index, 2007 = Domestic International Solid lines = visitors Dashed lines = expenditures Source: Tourism Economics 21

22 Macro forecast assumptions / CA travel model drivers US & GLOBAL ECONOMIES 22

23 Key points The key driver for California tourism is the ongoing US recovery. Although restrained, near term prospects are much stronger than in Europe. Emerging markets in Asia and Latin America continue to lead global growth. Austerity is kicking in in the US, but strengths will outweigh the drag from fiscal adjustments. US economic indicators point toward further expansion. Labor and housing markets are slowly healing, and improvements in business and consumer confidence will support spending and hiring in The Oxford Economics US forecast calls for growth of 2.2% in 2013 and 3.0% in Global GDP will expand 2.3% in 2013 and 3.3% in Risks are more balanced, but those to the downside still outweigh upside risks. 23

24 Oxford Economics baseline forecast 24 World GDP Growth % Change on Previous Year US Japan Eurozone of which: Germany France Italy UK China India Other Asia Mexico Brazil Other Latin America Eastern Europe MENA World World (PPP)

25 Global growth still weak G7 & Emerging Markets: GDP growth % year Emerging Markets G Source: Oxford Economics

26 but at a turning point? World: Stockmarkets Jan 1996= S&P MSCI Emerging Markets index FTSE Nikkei Source: Haver Analytics

27 Worst of the fiscal cliff has been avoided US: New orders Bn $ Durable goods orders (LHS) Nondefense capital goods excluding aircraft (RHS) Bn $ Source: Census Bureau/Haver Analytics

28 ECB has averted near-term Eurozone collapse 28

29 Signs that Chinese downturn is coming to an end 29 China: Industrial ouput, retail sales & exports % year % year 25 Retail sales 60 (LHS) Exports (US$) (RHS) Industrial output (LHS) Source: NBS

30 So risk has greatly diminished 30

31 despite austerity spreading to US 31

32 Austerity has strangled UK growth 32

33 But critical differences with European austerity Don t have the excessive degree of tightening being enforced in some European economies Don t have problem of monetary union without banking and fiscal union Don t have overly-cautious central bank But, then, neither does the UK and austerity has crippled its growth So, why are we optimistic about US growth prospects? 33

34 Sequencing of deleveraging is critical - banks Financial corporation debt/gdp ratios Financial corporation debt as a % of GDP US UK EuroZone Japan Source: Oxford Economics

35 so credit conditions in US much less severe Global credit standards surveys Balance tightening (+)/loosening (-) corporate credit Tightening credit Eurozone US UK Loosening credit Source : Oxford Economics/Haver Analytics

36 with US banking sector now lending again 36

37 Sequencing of deleveraging is critical - households 37

38 Contrasting behavior in house prices House Prices Index, 2007= US Japan UK EuroZone Source: Oxford Economics

39 So US consumer now has some momentum 39

40 and is willing and able to borrow again US: Consumer credit Bn $ Level (LHS) % Growth (RHS) Source: Federal Reserve/Haver Analytics

41 Home prices are also rebounding strongly 41

42 fuelling construction US: Housing activity Millions Starts Permits Source: Census Bureau/Haver Analytics 42

43 Spending will also be supported by pent-up demand 43

44 Lower event risk helping manufacturing as well US: Durable goods orders Bn $ Non defense capital goods (RHS) Bn $ Total (LHS) Source: Census Bureau/Haver Analytics

45 as capacity utilization nears pre-crisis levels 45

46 US manufacturing now very competitive Unit labour costs in manufacturing in US$ 2000= China 220 Brazil 180 India 140 Germany 100 US Mexico Source : Oxford Economics/Haver Analytics

47 at its most favorable for over 30 years US: Relative unit labour costs 2008= Source : Oxford Economics

48 US manufacturing output recovering healthily Manufacturing Production Index: 2007Q1 = US EuroZone UK Japan Source: Oxford Economics

49 and investment back to pre-recession levels 49

50 Striking contrast between Brazil and Mexico Unit labour costs in manufacturing in US$ 2000= China 220 Brazil 180 India 140 Germany 100 US Mexico Source : Oxford Economics/Haver Analytics

51 with Brazil struggling to compete Brazil: Industrial output & retail sales volumes 2007=100 (seasonally adjusted) Retail sales Industrial output Source: IBGE

52 but Mexico becoming major production base Mexico vehicle production Units, millions Domestic market Exports Source : Oxford Economics/Haver Analytics 52

53 Energy boom also driving growth 53

54 So US can still grow despite austerity Contribution to the Recovery Baseline GDP Forecast Of which: Fiscal Tightening Shale Production Boom Housing Recovery Competitiveness Other (percentage changes)

55 Policy mistakes Forecast risks are more balanced Disorderly unwinding of QE (5%) Growth initially surprises on the upside Inflation starts rising, led by higher commodity prices. Central banks initially accommodate, keeping QE programmes untouched Inflation scare in bond markets. Rates rise Central banks respond with sharp unwinding of QE Eurozone exits (20%) Fiscal austerity in peripheral countries becomes unbearable: No growth pushes unemployment yet higher. Pro-exit parties gain popularity. No real progress on banking and fiscal union. Run on banks, debt defaults 6 or more countries exit Eurozone in 2014 Faster upturns in US & EMs (15%) Resolution of outstanding fiscal issues encourages investment and hiring in the US, offsetting impact of fiscal tightening Japanese policy easing boosts growth across Asia Momentum in EMs builds as trade picks up Business and consumer confidence rise as conditions improve. Oxford forecast (55%) Steps to ensure Eurozone survival are taken, although they are not enough to kick start significant growth Risk premia fall, and consumer and business confidence gradually recover Recovery limited by public and private deleveraging and weak job growth EMs robust as policy eases and growing middle class support domestic demand 55 Corporate stress

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