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October 29, 2010

California Tourism Outlook 2010-2011

Dan MishellDirector, Research

California Travel & Tourism Commission

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2008 2009 2010 2011 2012 2013 2014Total Visits -1.6% -5.8% 4.0% 3.1% 3.0% 2.7% 2.3%

Domestic

Total Visits -1.6% -5.6% 3.8% 2.9% 2.8% 2.5% 2.2%

Leisure Visits -1.0% -6.0% 3.2% 3.0% 2.9% 2.6% 2.2%

International

Total

% change -1.6% -7.9% 6.2% 5.9% 5.3% 4.2% 3.4%

Overseas 6.1% -13.7% 9.8% 5.5% 5.1% 4.5% 4.1%

Mexico -8.7% -3.4% 3.7% 6.5% 5.8% 4.1% 3.0%

Canada 9.5% -6.6% 5.1% 3.8% 3.5% 3.2% 2.9%

Leisure

% change 0.3% -7.5% 5.7% 6.6% 4.6% 4.1% 4.3%

Overseas 14.0% -13.7% 8.5% 5.9% 5.4% 5.2% 4.8%

Mexico -8.7% -3.4% 4.1% 7.8% 4.4% 3.6% 4.3%

Canada 9.5% -6.6% 5.0% 2.9% 3.3% 2.9% 2.8%

97.5 87.7 94.2 99.5 105.6 112.0 117.6

% change 2.5% -10.1% 7.4% 5.6% 6.2% 6.1% 5.0%Domestic 79.2 72.1 77.0 80.7 85.0 89.8 94.3% change 1.0% -9.0% 6.8% 4.8% 5.3% 5.7% 5.0%International 18.3 15.6 17.2 18.8 20.6 22.2 23.3% change 9.6% -14.8% 10.5% 9.0% 9.9% 7.7% 4.8%

California Tourism Summary(Annual % change)

Total Expenditures ($ billions)

Source: Tourism Economics. Historical sources: TNS Global (domestic); CIC Research, OTTI (international); Dean Runyan (expenditures)

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California Tourism Mission

California has over 100 destination marketing organizations, and over 50 tourism business districts. (CTTC, Civitas)

CTTC provides a statewide platform for promoting the California brand to leisure travelers.

MISSION: To develop and maintain marketing programs in partnership with the state’s travel industry that keep California top-of-mind as a premier travel destination.

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California’s Leisure Visitors

58%

42%

Spending

73%

27%

Person-Trips

DomesticInternational

36 million non-resident leisure person-trips in 2009

$24 billion in spending by non-resident leisure travelers

Sources: DK Shifflet & Assoc.; US Dept. of Commerce; CIC Research, Inc., Stats Canada

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Domestic Leisure Overview

Six primary states account for nearly half of non-resident visits and 1/3 of non-resident spending in California.

Sources: DK Shifflet & Assoc.; TNS TravelsAmerica

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International Market Overview, 2009

Canada UKJapan

Australia

Germany

Mexico (a

ir)

S. Korea

China India

France

Scandinavia

S. Americ

a0

200,000

400,000

600,000

800,000

1,000,000

1,200,000

1,400,000

$0$200,000$400,000$600,000$800,000$1,000,000$1,200,000$1,400,000$1,600,000$1,800,000

Visit

ors

Spen

ding

in M

illio

ns

Lead

Mature

Emerging

Secondary

2009

Mexico Total • 6.3million visitors• $760 million spending

Sources: US Dept. of Commerce; CIC Research; Stats Canada; CTTC

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California Lodging Inventory

11%

19%

11%

8%21%

22%

7% San Diego

LA County

Orange County

Riverside-San Bernardino

Central CA

SF Bay Area

Northern CA

Sources: Smith Travel Research

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04 05 06 07 08 09 10-60

-50

-40

-30

-20

-10

0

10

West region U.S.

Confidence Has Stabilized, but at a Low Level

Sources: ABC News, Washington Post

Consumer confidence index

The New Normal

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2009 2010E 2011F 2012F

Unemployment rate 9.3 9.7 9.8 8.2

CPI -0.3 1.5 1.9 3.1Real personal disp. income 0.6 1.5 2.5 3.3

Real consumer spending -1.2 1.3 2.9 4.5

Real GDP -2.6 2.8 3.4 4.9Total after-tax profits 2.6 26.0 2.0 10.8

% change yr ago except unemployment rate

The New Normal

Recovery Will Proceed at a Tepid Pace

Sources: Moody’s Analytics, BLS, BEA

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JapanFrance

U.K.Germany

CanadaAustralia

MexicoSouth Korea

IndiaChina

-10 0 10 20 30 40 50 60

2009-2014 2009

• China and India will remain growth leaders• Economies in Japan and Western Europe will be slower to recover• Australia shows no signs of slowing

New Normal – GDP

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Projected Changes in US Traveler Behavior in Next 12 Months

1 in 4 Americans spending less, staying with friends &relatives, and driving instead of flying

Source: SMARI

The New Normal

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Consumer Trends

• Recovery consumers are redefining value in a new era of consequences

• Consumers want transparency, trustworthiness and authenticity.

• The definition of “luxury” is morphing and now consumers want meaning along with material goods

The New Normal

Compiled from: The New Experience of Luxury Synovate 06/10, : PwC The New Consumer Paradigm: Permanent or Fleeting 10/09, Brand Keys 02/10, A Darwinian Tale The Futures Co 11/09

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Forecast Overview

• Stronger than expected recovery in 2010 to date

• Visits will moderate in the second half of the year against headwinds from the economy and comparisons to late 2009

• The economic outlook is marred by uncertainty

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CA Hotel Regional Occupancy

Source: Smith Travel Research

•Business and international travel are up

•Leisure travelers trading up from day to overnight

United St

ates

California

Anaheim LA SD SF

Oaklan

d

Riversi

de/SB

Sacra

mento

San Jo

se

CA South/C

entra

l

CA North

CA North

Centra

l

CA Centra

l Coast

0.0

5.0

10.0

15.0

20.0

Room Demand % Change by Region YTD August

GatewayRuralOther

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Strong start to 2010…

-10%

0%

10%

20%

30%

40%

50%

60%To

tal

Chi

na

Indi

a

Japa

n

S. K

orea

Aus

tral

ia

U.K

.

Ger

man

y

Fra

nce

S. A

mer

ica

Mex

ico

(Air)

International Arrivals in California% change year ago, 2010H1

Source : CIC Research, OTTI

• International arrivals up 14% through June

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-8%

-6%

-4%

-2%

0%

2%

4%

6%

8%

2007 2008 2009 2010 2011 2012 2013

CA Domestic Business and Leisure Visits% growth

Source : Tourism Economics

Domestic Leisure

Domestic BusinessTotal Domestic

Domestic Forecasts

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Domestic Forecasts

-8%

-6%

-4%

-2%

0%

2%

4%

6%

2008 2009 2010 2011 2012 2013

Domestic Leisure Visits% growth

Source : Tourism Economics

Previous Forecast

Current Forecast

-6%

-4%

-2%

0%

2%

4%

6%

8%

2008 2009 2010 2011 2012 2013

Domestic Business Visits% growth

Source : Tourism Economics

Previous Forecast

Current Forecast

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-10%

-8%

-6%

-4%

-2%

0%

2%

4%

6%

8%

10%

12%

2006 2007 2008 2009 2010 2011 2012 2013

CA International Inbound Travelannual % growth

Source : Tourism Economics

US inbound travel

CA inbound travel

International Forecast

19

-2

-1

0

1

2

3

4

5

6

7

2009 2010 2011 2012 2013

Total Overseas Mexico Canada

International Forecast ComparisonPercentage point difference between forecasts (growth, current - previous)

Source : Tourism Economics

International Forecast

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-20%

-15%

-10%

-5%

0%

5%

10%

15%

2008 2009 2010 2011 2012 2013 2014

CA Visitor Expenditures% growth

Source : Dean Runyan, Tourism Economics

Total

Domestic

International

Spending Forecast

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Spending Forecast

-15%

-10%

-5%

0%

5%

10%

15%

2008 2009 2010 2011 2012 2013

Visitor Spending% growth

Source : Tourism Economics

Previous ForecastCurrent Forecast

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Expenditures recover ahead of visits

85

90

95

100

105

110

115

120

2007 2008 2009 2010 2011 2012 2013

California Visitors vs Visitor ExpendituresIndex, 2007 = 100

Source : Tourism Economics

Visitor Expenditure

Total Visits

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2010 2011

Total Visits 4.0% 3.1%

Domestic Visits 3.8% 2.9%

International Visits 6.2% 5.9%

Total Spending 7.4% 5.6%

Domestic Spending 6.8% 4.8%

International Spending 10.5% 9.0%

California Travel Forecast Summary

Source: Tourism Economics

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2008 2009 2010 2011 2012 2013 2014Total Visits -1.6% -5.8% 4.0% 3.1% 3.0% 2.7% 2.3%

Domestic

Total Visits -1.6% -5.6% 3.8% 2.9% 2.8% 2.5% 2.2%

Leisure Visits -1.0% -6.0% 3.2% 3.0% 2.9% 2.6% 2.2%

International

Total

% change -1.6% -7.9% 6.2% 5.9% 5.3% 4.2% 3.4%

Overseas 6.1% -13.7% 9.8% 5.5% 5.1% 4.5% 4.1%

Mexico -8.7% -3.4% 3.7% 6.5% 5.8% 4.1% 3.0%

Canada 9.5% -6.6% 5.1% 3.8% 3.5% 3.2% 2.9%

Leisure

% change 0.3% -7.5% 5.7% 6.6% 4.6% 4.1% 4.3%

Overseas 14.0% -13.7% 8.5% 5.9% 5.4% 5.2% 4.8%

Mexico -8.7% -3.4% 4.1% 7.8% 4.4% 3.6% 4.3%

Canada 9.5% -6.6% 5.0% 2.9% 3.3% 2.9% 2.8%

97.5 87.7 94.2 99.5 105.6 112.0 117.6

% change 2.5% -10.1% 7.4% 5.6% 6.2% 6.1% 5.0%Domestic 79.2 72.1 77.0 80.7 85.0 89.8 94.3% change 1.0% -9.0% 6.8% 4.8% 5.3% 5.7% 5.0%International 18.3 15.6 17.2 18.8 20.6 22.2 23.3% change 9.6% -14.8% 10.5% 9.0% 9.9% 7.7% 4.8%

California Tourism Summary(Annual % change)

Total Expenditures ($ billions)

Source: Tourism Economics. Historical sources: TNS Global (domestic); CIC Research, OTTI (international); Dean Runyan (expenditures)

tourism.visitcalifornia.com/research

Full Forecast Available Online