Power of Travel Promotion Evolution

Power of Travel Promotion Evolution

Promotion More Important than Ever

Power of Promotion $7 million Median state = marketing budget FY 2014-15 OR 45 seconds worth of Super Bowl ads $100 million = Presidential election TV advertisements through early August 2016

Travel Drives America s Economy

Revenue Generator

Educator

Travel Promotion s Virtuous Cycle

Case Studies

Halo Effect

Influencer

Economic Driver

Building U.S. Market Share

Partner

$ millions Economic Risks of Cutting Tourism Promotion $30 $25 Total Budget $20 $15 $10 $5 $- 2008-2009 2009-2010 2010-2011 2011-2012 2012-2013 2013-2014 2014-2015* Pennsylvania United States Average Source: U.S. Travel Association *Note - 46 states reporting in FY 2014-15

Economic Risks of Cutting Tourism Promotion 2014/2010 Growth Rates U.S. total Competitive region 0% 5% 10% 15% 20% 25% Direct Travel Spending State and Local Travel Tax Revenues Travel Employment Note - The nine-state region includes: PA, NY, NJ, DE, MD, DC, VA, WV, OH. Source: U.S. Travel Association

Weathering the Storm

Back in the Game

Key Takeaways 1. Travel gives back to local communities. 2. Investment in travel promotion helps destinations compete and thrive. 3. Enhanced travel-related offerings help states and destinations attract visitors and businesses. 4. Brand USA boosts tourism to the United States. 5. Decreases in travel promotion investments have an immediate and long-term negative impact.

Resources

The Rising Dollar and International Travel to the United States With post-brexit update

Currency movements and global economy impact trade Percent growth 20% 15% 10% Value of Dollar (Jan 1997=100) 120 100 5% 80 0% -5% -10% -15% 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 60 40 20-20% Exports Trade-Weighted GDP Growth (Outside U.S.) Dollar 0 Source: U.S. Department of Commerce, Federal Reserve and Oxford Economics

Travel not as adversely affected as other sectors Percent growth 25% Value of Dollar (Jan 2007=100) 140 20% 120 15% 10% 5% 100 80 0% -5% 2011 2012 2013 2014 2015 60 40-10% 20-15% Manufacturing Exports Agriculture Exports Travel Exports Dollar 0 Source: U.S. Department of Commerce and Oxford Economics

Remarkable scale of U.S. dollar appreciation in 2015 Largest single-year appreciation in 33 years Appreciation against all major currencies in 2015 Appreciation against the U.K. pound has been relatively low Foreign currency per U.S. dollar 2.0 1.8 1.6 1.4 1.2 1.0 0.8 0.6 0.4 0.2 0.0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Australia Canada Eurozone United Kingdom Source: Oxford Economics

Appreciated currency = higher relative prices A 12% increase in U.S. prices compared to OECD average; not seen since 2002 Total (OECD = 100) 115 110 105 100 95 90 United States OECD 85 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Source: The Organization for Economic Cooperation and Development (OECD)

What has happened in first part of 2016? A slight reversal of dollar appreciation trends Changes in U.S. dollar exchange in first half of 2016 United Kingdom (pound) 11.2% Mexico (peso) 7.5% China (yuan) 2.1% India (rupee) 1.9% South Korea (won) -1.9% Australia (dollar) -1.9% Eurozone (euro) -2.0% Canada (dollar) -6.2% Japan (yen) -14.9% Brazil (real) -19.2% Slight depreciation of U.S. dollar against many currencies. But significant appreciation against the U.K. pound. This was due to Brexit. Source: x-rates.com

Major fluctuations against top inbound markets over past year U.S. dollar appreciation, June 30, 2015-June 30, 2016 Change in value of U.S. dollar 25% 20% 15% 10% 5% 0% -5% -10% -15% #1 Overseas United Kingdom #2 Overall Mexico China India Canada Australia South Korea Brazil Eurozone Japan #2 Overseas -20% Source: x-rates.com

The rise of the dollar in perspective Change in value of U.S. dollar Total U.S. dollar appreciation, through June 30, 2016 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Brazil (2011) Mexico (2011) India (2010) Australia (2012) Source: x-rates.com and U.S. Travel Association Canada (2011) Japan (2011) Eurozone (2011) United Kingdom (2014) Eurozone (2014) South Korea (2014) China (2014)

So why is Brexit so significant for the U.S. travel market? 1. Was quite sudden, and affected a relatively strong currency Dollars per Pound 1.5 June 23, 2016 Brexit Referendum $1.48 1.4 1.3 1.2 Source: x-rates.com

So why is Brexit so significant for the U.S. travel market? 2. Visitations from the U.K. to the U.S. are relatively sensitive to currency rate fluctuations Growth in visitations from the U.K. 15% Fluctuation of dollar/pound exchange rates -15% 10% 5% 0% -5% -10% -15% 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014-10% -5% 0% 5% 10% 15% -20% Visitations from the U.K. Source: U.S. Department of Commerce and Oxford Economics U.S. dollar/u.k. pound nominal exchange rate 20%

So why is Brexit so significant for the U.S. travel market? 3. The U.K. is our largest overseas market Other Overseas, 40% Italy, 3% India, 3% Australia, 4% Source: U.S. Department of Commerce United Kingdom, 13% Japan, 10% China, 7% Brazil, 6% Germany, 6% South Korea, 5% France, 5% Top long-haul U.K. outbound markets U.K. % of total LH to each country % of total LH from U.K. United States 13% 24% United Arab Emirates 11% 6% India 20% 5% Thailand 12% 5% Egypt 11% 5% Canada 14% 4% Australia 9% 3% China 8% 3% Mexico 10% 3% Morocco 5% 2% Source: Oxford Economics

Brexit: Impact on U.K. Inbound Travel To the U.S. Annual Percent Change in U.K. Visitations to the U.S. 6% 4% 2% 2.7% A percentage point loss of 7.7% in 2017 0% -2% 2015 2016 2017-4% -6% U.K (pre-brexit) U.K (post-brexit) -5.0% Source: Oxford Economics

A projected loss of half a million U.K. inbound travelers in 2017 Visitations from the U.K. (thousands) 2015 2016 2017 U.K. (pre-brexit) 4,901 + 2.3% 5,014 +2.7% 5,150 U.K. (post-brexit) 4,901-0.7% 4,867-5.0% 4,624 Loss to Brexit (visitations) 147 525 Loss to Brexit (%) -2.9% -10.2% Source: U.S. Travel Association based on data from U.S. Department of Commerce and Oxford Economics 10.2% loss in U.K. visitations next year 10.2% * 12.8% (U.K. share in overseas) = 1.3% loss in Overseas visitations

Signs of change in demand from the U.K. in Second Half of 2016 YoY % change in share of searches 30% 20% 10% 0% June 23rd - Polling day for EU referendum -10% -20% -30% -40% -50% -60% U.K. Demand for U.S. Search Week Source: Nsight

Overall Current Travel Indicator (CTI) Index (>50=expansion, <50=decline) 55 54 53 52 51 50 Mar-05 49 Feb-06 Jan-07 Dec-07 Nov-08 Oct-09 Sep-10 Aug-11 Jul-12 Jun-13 May-14 Apr-15 Mar-16 48 47 46 Financial crisis 45 Source: Oxford Economics and U.S. Travel Association

Domestic vs. International Current Travel Indicators (CTI) Index (>50=expansion, <50=decline) 65 60 55 50 Mar-05 Feb-06 Jan-07 Dec-07 Nov-08 Oct-09 Sep-10 Aug-11 Jul-12 Jun-13 May-14 Apr-15 Mar-16 45 40 International (3 month moving average) Domestic (3 month moving average) 35 Source: Oxford Economics and U.S. Travel Association