Current River Missouri Tourism Forecast FY2014-2018 St. Charles Fete de Glace St. Louis Missouri History Museum February 2014
Summary of key points Missouri s tourism economy will continue to expand over the five-year forecast horizon. After three years of recovery through FY2013, growth will gather more momentum in FY2015 and FY2016 as broader US economic conditions improve. Visitor volume is forecast to increase 1.6%, 2.3%, and 3.4% over the next three years. Visitor expenditures are forecast to increase 5.3% per year to $10.4 billion in FY2018. International visitors will make up a rising share over the forecast horizon. The forecast is based on several fundamental assumptions: Ongoing gradual recovery in the US economy in 2014. More improvement in housing markets and consumer confidence. 2 A graceful resolution to federal fiscal challenges, i.e., no debt default.
Summary of key points Since FY2010, visits to Missouri have grown by an average of 740,000 per year. Recent recovery brought Missouri visitation to an all-time high of 38.0 million in FY2013. In FY2014, 38.6 million visitors are expected to arrive in and around the state, an increase of 1.6% over the previous year. Growth will average 2.8% through FY2018, when Missouri will host 43.6 million visitors. Visitors spent $8.0 billion in FY2013, and the forecast calls for $10.4 billion in total visitor expenditures in FY2018. 3 Forecast of Total Visitation to Missouri Fiscal years, millions 45 40 38.0 35 30 25 20 05 07 09 11 13 15F 17F Source: Tourism Economics 43.6
Recent Performance
Recent performance Recovery in Missouri s tourism industry has been steady. Since the low point in FY2010, overall visitation has grown an average of 2.0% annually. Visitation reached a new peak of 38.0 million in FY2013. Nearly 47% of these visitors came from within Missouri, 52% came from other US states, and 1% were international. Missouri s key domestic markets were Kansas, Illinois, and Arkansas. Key international markets included Canada, Mexico, and the UK. Steady Visitation Growth Since 2010 Fiscal years 39 Total volume, mils (L) % change (R) 37 35 33 31 05 06 07 08 09 10 11 12 13 Source: Tourism Economics 4 2 0-2 -4 5
Recent performance: the hotel market Missouri s hotel market is tightening, driven by both demand growth and relatively restrained supply. These supply and demand fundamentals are boosting occupancy and room rates. Demand Growth is Outpacing Supply... 12-month moving sum, indexed, Jan 2006=100 115 110 105...And Rising Occupancy Drives Prices 6 4 2 0 100-2 95 90 Room supply Room demand 06 07 08 09 10 11 12 13-4 -6-8 Occ rate, yr ago ppt ch ADR, yr ago % ch 07 08 09 10 11 12 13 Source: STR, Tourism Economics Source: STR, Tourism Economics Note: "ppt ch" is percentage point change 6
Missouri Forecast in Detail
Drivers of Missouri tourism Missouri s tourism performance is determined by economic conditions in its key source markets, investment in its tourism infrastructure, and its ability to market itself as a destination. Factors considered in the forecast were production, income, housing and labor market conditions in key domestic and international source markets. Indicators included in the analysis for domestic and international source markets were: Gross domestic product Personal income growth Wage and salary income growth Consumption spending The level of employment and the unemployment rate 8
Key drivers in source markets Growth in Missouri s source markets in the Midwest region will drive visitation. 9 Key Drivers and Visitation to Missouri Fiscal years, annual % change 5 4 3 2 1 0-1 -2-3 Forecast >>>> Real GDP Real disposable income Domestic visitation 07 09 11 13 15F 17F Source: Tourism Economics Note: Drivers are weighted by Missouri's source markets
Domestic market opportunities Growth in Missouri s key domestic markets is forecast to be above average. Opportunity markets are those with robust growth forecasts and established links, and where more visitation could be enticed. Growth in Missouri's Domestic Markets Each dot is a state...red highlighted dots are opportunity markets 6 5 Horizontal axis: share of MO visitation, % Vertical axis: 5-yr avg ann GDP growth forecast, % 4 3 2 LA TN TX IA OK AR KS IL 1 0 3 6 9 12 10 Sources: TNS, Tourism Economics
International market opportunities Missouri s international visitors tend to come from high growth markets. More visitors could be drawn to Missouri from opportunity markets, where expectations are for relatively strong growth and that country s share of Missouri s international visitation could be even higher. Growth in Missouri's International Markets Each dot is a country...red highlighted dots are opportunity markets 10 8 6 Horizontal axis: share of MO int'l visitation, % Vertical axis: 5-yr GDP growth forecast, % India China 4 2 South Korea Brazil Australia UK Mexico Canada Mkt share 51% Growth 2.5% 0 0 3 6 9 12 15 11 Sources: Tourism Economics
Visitation levels by segment The share of international visitation to Missouri is rising. In FY2005, 0.7% of Missouri visitors were international, and this share will increase to 1.1% by FY2018. Missouri Visitor by Market Segment FY, millions 45 0.6 40 0.5 35 0.4 30 25 Domestic (L) International (R) 05 07 09 11 13 15F 17F 0.3 0.2 Source: Tourism Economics 12
Growth in Missouri visitation by segment International visitation is expected to outpace growth in domestic visitation over the forecast horizon. Missouri Visitor Forecast by Market Segment Fiscal years, annual % change 10 8 6 4 2 0-2 -4 Domestic International 05 07 09 11 13 15F 17F Source: Tourism Economics 13
Total visitor expenditures Visitor expenditures totaled $8.0 billion in FY2013 and will rise to $8.3 billion in FY2014, a 3.5% increase. Over the forecast horizon, visitor expenditures are expected to increase 5.3% per year to $10.4 billion in FY2018. Vistor Expenditures Forecast Fiscal years 11 10 9 8 7 6 5 4 Visitor expenditures, $bils (L) % change, (R) 05 07 09 11 13 15F 17F Source: Tourism Economics Note: Includes visitor spending only; excludes air transportation and seasonal/second homes 8 6 4 2 0-2 -4-6 14
Tightening in the hotel market will continue Growth in demand is expected to exceed supply growth over forecast horizon, and rising occupancy rates will drive price growth. Missouri Hotel Market Metrics Fiscal years 95 70 90 Average daily rate, $ (L) Occupancy rate, % (R) 65 85 60 80 55 75 06 08 10 12 14F 16F 18F By fiscal years >>>> 50 Sources: STR, Tourism Economics 15
Summary table 1 Missouri Visitor Forecast Summary Table Forecast >>>> Fiscal Years 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Total Visitors, millions 37.4 37.4 36.7 35.8 36.7 37.5 38.0 38.6 39.7 41.1 42.4 43.6 Domestic 37.1 37.0 36.4 35.5 36.3 37.2 37.6 38.2 39.3 40.6 42.0 43.1 International 0.3 0.3 0.3 0.3 0.3 0.4 0.4 0.4 0.4 0.4 0.5 0.5 Total Visitor Expenditures, $ bils 7.2 7.4 7.1 7.0 7.4 7.8 8.0 8.3 8.8 9.3 9.9 10.4 Domestic 7.0 7.1 6.9 6.8 7.2 7.6 7.8 8.0 8.5 9.0 9.5 10.0 International 0.2 0.2 0.2 0.2 0.2 0.3 0.3 0.3 0.3 0.4 0.4 0.4 Total Economic Impact, $ bils 12.0 12.3 11.8 11.7 12.4 13.0 13.4 13.9 14.7 15.6 16.5 17.4 Tourism-related employment, ths 93.4 93.1 89.8 88.3 89.0 90.3 91.1 92.0 93.2 94.5 95.8 97.0 Hotel sector metrics Average daily rate, $ 85.0 86.9 84.1 80.4 81.4 85.0 87.1 88.3 89.6 91.3 93.1 94.6 Occupancy rate, % 57.5 56.7 53.0 52.3 54.6 56.3 57.0 58.1 59.4 60.8 62.3 63.5 Supply, mils. of room nights 40.3 40.3 41.2 42.6 42.3 41.0 41.0 41.1 41.6 42.0 42.3 42.7 Demand, mils of room nights 23.2 22.9 21.9 22.3 23.1 23.1 23.4 23.9 24.7 25.6 26.4 27.1 Room revenues, $bils 2.0 2.0 1.8 1.8 1.9 2.0 2.0 2.1 2.2 2.3 2.5 2.6 Note: Visitor expenditures included only; excludes air transportation or the value of seasonal/second homes. 16
Summary table 2 Missouri Visitor Forecast Summary Table, Change Forecast >>>> Fiscal Years 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Total Visitors, % - (0.1) (1.8) (2.5) 2.5 2.3 1.3 1.6 2.9 3.4 3.4 2.8 Domestic - (0.2) (1.8) (2.5) 2.5 2.3 1.2 1.6 2.9 3.4 3.3 2.8 International - 6.5 (0.9) 1.6 6.8 5.8 5.5 5.9 5.4 5.4 5.2 5.0 Total Visitor Expenditures, % - 2.0 (3.7) (0.9) 5.4 5.4 2.9 3.5 5.6 6.3 6.0 5.3 Domestic 1.7 (3.6) (0.8) 5.3 5.3 2.7 3.3 5.5 6.2 6.0 5.2 International 11.7 (4.7) (1.5) 9.9 9.8 8.4 8.8 8.4 8.4 8.2 7.9 Total Economic Impact, % 2.0 (3.7) (0.9) 5.4 5.4 2.9 3.5 5.6 6.3 6.0 5.3 Tourism-related employment, % (0.3) (3.6) (1.6) 0.8 1.4 0.9 1.0 1.3 1.4 1.4 1.2 Hotel sector metrics Average daily rate, % - 2.2 (3.2) (4.5) 1.3 4.3 2.5 1.3 1.6 1.9 1.9 1.6 Occupancy rate, ppt change* (0.8) (3.7) (0.8) 2.3 1.8 0.7 1.0 1.3 1.5 1.5 1.1 Supply, % - 0.0 2.3 3.3 (0.8) (2.9) (0.0) 0.2 1.2 1.0 0.8 0.9 Demand, % - (1.4) (4.3) 1.8 3.6 0.3 1.2 2.0 3.4 3.5 3.3 2.8 Room revenues, % - 0.8 (7.4) (2.8) 4.9 4.6 3.7 3.4 5.1 5.4 5.3 4.4 *Note: ppt change indicates percentage point change 17
Recent US Inbound Performance
Ireland Italy Sweden Spain UK Mexico Germany France Japan Canada S Korea Neth Australia Brazil India Argentina Venezuela Colombia Taiwan China / HK Emergers continued to surge in 2013 US Inbound Growth, 2013 estimates % change 20% 15% 10% 5% 0% -5% 19
Emerging markets gaining but not dominant Distribution of US Inbound % by market 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% 23% 16% 21% 29% Europe 19% 18% 15% Asia 17% 21% Mexico 22% Canada 35% 31% Latin 10% 10% America 13% 2000 2013 2020 20 Source: Tourism Economics
50% 45% 40% 35% 30% 25% 20% 15% 10% 5% US market shares are stabilizing US Share of Long Haul Outbound Travel % out-of-region travel by source Europe Asia South America 95% 0% 90% 1996 1998 2000 2002 2004 2006 2008 2010 2012 85% Source: Tourism Economics 80% 75% After a declining trend, visa wait times down, there are more air service options, the US image is improving, and marketing efforts are reaping returns US Share of North American Outbound % out-of-region travel by source Mexico 70% 65% Canada 60% 55% 21 50% 1996 1998 2000 2002 2004 2006 2008 2010 2012 Source: Tourism Economics
US Economy and Travel Markets
US economy should accelerate into 2014 Labor market trends support consumer spending. Housing activity will provide boost to growth. Reduced fiscal drag Fed tapering of extraordinary bond purchases will end by the second half of 2014, but first rate hike is not expected before the latter part of 2015. Real GDP growth will come in at 1.9% in 2013 and 3.1% in 2014. 23
US manufacturing now very competitive Unit labor costs in emerging markets have risen much faster than in the US, creating more of an incentive to produce domestically. 24 Note: data are indexed, to January 2000 = 100
and business surveys point to strong growth Surveys of purchasing managers reflect expansion and usually are a good indicator of future production activity. 25 Note: PMI means Purchasing Managers Index
The labor market continues to improve Since late 2010, the US economy has steadily added jobs and the unemployment rate has declined. 26
Confidence is rebounding Although still low relative to historic trends, consumer confidence has trended higher for more than three years. 27
Consumer spending will gradually accelerate As housing and labor markets improve, consumer confidence will gain momentum and translate into rising consumer spending. 28 Note: Forecast is on a calendar year basis
US economy summary Strength in corporate sector continues Household balance sheets improved with healing in labor and housing markets. Fiscal drag is lessening Result: US leads developed economies in growth Biggest risks to the US: Europe, China, policymakers 29
Overnight travel remains pace-setter Growth in overnight trips will outpace that of day trips. Person Trips % growth 6 5 4 3 Forecast Overnight Person Trips 2 1 0 Day Person Trips -1-2 2011.1 2012.1 2013.1 2014.1 2015.1 30 Source : Tourism Economics Note: Forecast is presented on a quarterly basis; 2011.1 indicates 2011Q1
Room demand hits a new peak (again) Room demand reached a new peak in 2011 and has continued to grow since then. US total room demand Millions 1,100 1,050 1,000 950 900 850 2007 2008 2009 2010 2011 2012 2013 Source: Smith Travel Research 31
More upside? GDP outpacing room demand Through the late 1990s, room demand kept pace with GDP growth; since then GDP growth has outpaced 32
Room demand growth is slowing down Room demand in the US is still growing, but at a rate that is less than that of recent years. US total room demand % change year ago 8% 6% 4% 2% 0% -2% -4% -6% -8% 2008 2009 2010 2011 2012 2013 2014 2015 Source: Smith Travel Research 33
Canada and Mexico
Mexico to outpace Canada Visits to the US from Mexico will outpace those from Canada, driven by its faster growing economy. US Inbound from North America % change 12 10 8 6 4 2 0-2 -4-6 Canada Mexico 09 10 11 12 13 14F 15F 16F 35 Source: Tourism Economics
Mexico visits to accelerate Mexico s economy will expand over the next three years and arrivals to the US will follow. US Inbound from Mexico % change 10 8 6 4 2 0-2 -4-6 Mexico GDP Mexico arrivals 06 07 08 09 10 11 12 13 14F 15F 16F 36 Source: Tourism Economics
Exchange rates will suppress visits from Canada Canada s economy will expand over the next three years, but the Canadian dollar will lose some purchasing power. US Inbound from Canada % change 12 10 8 6 4 2 0-2 -4-6 -8 Canada GDP Canada arrivals $C/$US 06 07 08 09 10 11 12 13 14F 15F 16F 37 Source: Tourism Economics
Europe
Europe emerges from recession After two years of contraction, Europe s economy is slowly starting to expand. 39 Note: % q on q growth indicates quarter-to-quarter growth
Fears over breakup continue to abate Bond spreads in the periphery countries, an indication of perceived risk, are significantly lower than two years earlier. Weighted average peripheral bond spread % spread over German bunds 8.0 7.0 6.0 5.0 4.0 3.0 2.0 1.0 Periphery = GR IE PT ES IT 0.0 1-Jan-10 1-Jan-11 1-Jan-12 31-Dec-12 31-Dec-13 Source : Oxford Economics 40 Note: Periphery countries are Greece, Ireland, Portugal, Spain, and Italy; German Bunds are government bonds.
And surveys point to modest recovery in 2014 Purchasing managers appear more optimistic and suggest expansion over the next year. 41 Note: PMI indicates Purchasing Managers Index
Factors shaping the recovery Gradual recovery in prospect particularly for the Eurozone Led initially by the external sector A number of factors restrict the pace of recovery Less, but still some, fiscal tightening Fragile banks and weak lending High unemployment and cautious consumers The ogre of deflation 42
Asia and South America
EM worries reflected in equity performance Equity markets in emerging markets have trended down since 2011, while US stock markets are at all time highs. Emergers: equity markets Index, Jan 3, 2011 = 100 150 Emerging Mkts Index (MSCI) 140 US SP-500 130 120 110 100 90 80 70 Jan-11 Jul-11 Jan-12 Jul-12 Jan-13 Jul-13 Jan-14 44 Source: Haver Analytics
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Visa wait times at historic lows The hassle and costs of getting a visa are barriers to travel; less of a wait time should boost travel to the US. 48 US Visa Wait times by City Avgerage number of days to... 8 7 6 5 4 3 2 1 0 Sao Paulo Hong Kong Source: US Department of State Moscow Rio De Janeiro Finish processing Get interview/appointment Delhi Buenos Aires Beijing
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 China to continue to set pace from Asia US Inbound: Asia Pacific Thousand visits 3,000 2,500 China 2,000 1,500 1,000 S Korea Australia 500 0 India Taiwan Source : OTTI, Tourism Economics 49
South America will still lead growth in arrivals US Arrivals by Region Index, 2006=100 350 Asia Pacific 300 Europe Middle East and Africa 250 North America (Can & Mex) South America 200 Forecast >>>> 150 100 50 0 06 08 10 12 14 16 Source: Tourism Economics 50
Final Thoughts
Conclusions European travel has been resilient and should accelerate in 2014. US inbound will benefit from strength in North America and a rebound in UK travel. Emerging markets, including Latin America, will slow but still represent the highest growth opportunity. Domestic US demand will slow in 2014, despite economic growth. Key risks to the forecast are: deflation in Europe, investment collapse in Asia, and policy errors in the 52 US.
Methods and data sources 53 Historic estimates of visitor volume, expenditures, and hotel sector metrics are based on the report covering fiscal 2013 Economic Impact of Tourism in Missouri. Estimates in that report were based on several sources including: Smith Travel Research (STR) data on hotel room demand, supply, and revenues. State level sales tax data from the Missouri Department of Revenue. Visitor profile and volume, and spending estimates from TNS, a national consumer survey and research firm. Data on international visitor volume and expenditures were obtained from the US Office of Travel and Tourism (OTTI) and estimates based upon aggregate Visa card data from VisaVue Travel. Industry data on employment, wages and sales from the U.S. Census, the Bureau of Economic Analysis, the Bureau of Labor Statistics, and the Missouri Department of Labor and Industrial Relations. Visitor expenditures in this analysis exclude air transportation spending and the value of seasonal/second homes. Forecasts were generated with econometric models designed specifically for relevant variables, including domestic and international visitation volume, expenditures, and select hotel sector metrics. Forecasts of driver variables for US states and other country markets were generated by the Oxford Economics Global Economic Model, and weighted by state shares of domestic visitation to Missouri, and country shares of international visitation.
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