HVCB Market InsightsKaua‘i Visitors Bureau Membership Meeting

October 14, 2015

2015-’16: “The Road Ahead”

• North America: Following notable increases in 2015, continued but slower growth likely ahead.

• Developing Int’l Potential: Gains seen on Kaua‘i’s international front in 2015, though these markets are small and interisland air access is an issue.

• Never Been There, Never Done That: Longer-term, sustaining the market requires increased focus on North America “Never Beens”

Market Insights

Market Insights

Current Landscape: Growth from North America and beyond fuels 2015 increases

-10%

-5%

0%

5%

10%

15%

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov DecSources: Hawai‘i Tourism Authority

Year-Over-Year Growth in Total Kaua‘i Visitor Arrivals

Market Insights

Historical Kaua‘i Arrivals YTD through August

0

200,000

400,000

600,000

800,000

1,000,000

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015P

891,200

802,600

Continued Growth

Strong market conditions point to continued, but slower growth heading into 2016

Market Insights

Market Insights

Economic Indicators:

Continued Growth Forecasted into 2016

Source: Economist Intelligence Unit as of September 22, 2015

2014

+2.4%

Real North America GDP Growth

2015F

+2.5%

2016F

+2.4%

2014

+2.4%

2015F

+1.2%

2016F

+2.3%

U.S.

Canada

Market Insights

North America Leisure Travel Demand:

Continued Growth Forecasted into 2016

Sources: US Travel Association as of July 2015, Conference Board of Canada as of August 2015

2014

+2.7%

North America Leisure Person Trips

2015F

+2.0%

2016F

+1.8%

2014

-0.8%

2015F

-4.8%

2016F

+2.3%

U.S.

Canada

Market Insights

U.S. consumers Leisure Travel Sentiment is strong

70

80

90

100

110

120

130

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3

U.S. Air Leisure Traveler Sentiment Index

2007 2008 2009

March 2007 = 100

August 2015 = 116

2010 2011 2012 2013 2014

Source: MMGY Global, 2015 Q3

2015

Market Insights

10%

20% 21%17% 19%

32%38%

41%

Aug 2008 Aug 2009 Aug 2010 Aug 2011 Aug 2012 Aug 2013 Aug 2014 Aug 2015

Very/Extremely Likely to Visit Hawai‘i in the Next 24 Months

Future travel intentions for Hawai‘i are strong

Source: MMGY Global

Market Insights

Hawai‘i travel costs remain top barrier,but concerns ease…

2015 Q3 2014 Q3

Price of airfare 40% 42%

Price of vacation package 39% 43%

Price of hotel 33% 36%

Better value at another destination

23% 19%

Been to Hawai‘i before 16% 9%

Hawai‘i not unique, different enough

16% 9%

Which of the following explains why you decided not to visit Hawai‘i?

Market Insights

0

500,000

1,000,000

1,500,000

2,000,000

2,500,000

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015FInterisland North America

Scheduled overseas seats to Kaua‘i reach new high in 2015

Total Scheduled seats, 2004 – 2015F

Source: Airline schedules from Diio Mi

2.0 million(20% Overseas) 1.7 million

(40% Overseas)

Near-term Outlook for US-Mainland-Kauai Seats Positive, but….

12

Source: UD DOT T-100 and O&D data from Diio Mi

OnboardPassengers

Seats Load Factor O&DPassengers

Avg. One-Way Base Airfare

Revenue

2016 Q1 +8.0%

2015 Q4 -0.9%

2015 Q3 ? +1.9% ? ? ? ?

2015 Q2 +5.1% +7.1% 85.7% (-1.6 pts) ? ? ?

2015 Q1 +4.6% +4.9% 84.6% (-0.1 pts) +7.0% $340 (-5.0%) +1.6%

2014 Q4 +5.4% +12.0% 80.1% (-5.0 pts) +5.7% $355 (0.0%) +5.7%

2014 Q3 +7.0% +15.7% 84.4% (-6.7 pts) +2.7% $352 (+1.3%) +4.0%

2014 Q2 +3.5% +7.3% 87.3% (-3.1 pts) -3.3% $369 (+13.9%) +10.2%

2014 Q1 -6.6% -6.6% 84.7% (-0.1 pts) -7.4% $358 (+16.0%) +7.4%

2014-15 Quarterly YoY Performance IndicatorsUS Mainland – Kaua‘i (Average Each Way)

Source: US DOT T-100 and O&D data from Diio Mi

The Kaua‘i Air Service Cycle: Seats vs. Airfares

Market Insights

Sources: Air seats data from Diio airline schedules. O&D airfare data from U.S. Dept. of Transportation

-15%

-10%

-5%

0%

5%

10%

15%

20%

25%

30%

Q 1 Q 2 Q 3 Q 4 Q 1 Q 2 Q 3 Q 4 Q 1 Q 2 Q 3 Q 4 Q 1 Q 2 Q 3 Q 4 Q 1

Airfares Growth

Air Seats Growth

2012 20152013 2014

Year-Over-Year Growth in U.S. Mainland – Kaua‘i Air Seats and Airfares

Oil Change: Lower prices forecasted to continue

$53$60

$0

$20

$40

$60

$80

$100

$120

2010 2011 2012 2013 2014 2015F 2016F 2017F 2018F 2019F

Oil (US$/barrel; Brent)

Source: Economist Intelligence Unit, Global Forecasting Service as of September 22 2015

Reductions in interisland air service ahead, following suspension of Island Air Service

15

Source: UD DOT T-100 and O&D data from Diio Mi

OnboardPassengers

Seats Load Factor O&DPassengers

Avg. One-Way Base Airfare

Revenue

2016 Q1 0.0%? -6.4% 79%?

2015 Q4 0.0%? -11.5% 79%?

2015 Q3 0.0%? -8.4% 79%? ? ? ?

2015 Q2 +7.9% +0.1% 77.5% (+6.5 pts) ? ? ?

2015 Q1 +3.4% +3.0% 73.7% (+0.5 pts) -1.0% $75 (+2.5%) +1.5%

2014 Q4 +2.1% +8.1% 68.8% (-5.0 pts) -1.8% $73 (-5.3%) -7.0%

2014 Q3 -6.7% +5.0% 72.8% (-9.6 pts) -8.6% $75 (-10.2%) -18.0%

2014 Q2 -5.6% +7.1% 71.0% (-10.9 pts) -0.8% $78 (+1.7%) +0.9%

2014 Q1 -0.2% +8.8% 73.2% (-6.9 pts) +2.8% $73 (+1.6%) +4.5%

2014-15 Quarterly YoY Performance IndicatorsInterisland – Kaua‘i (Average Each Way)

Source: US DOT T-100 and O&D data from Diio Mi

Market Insights

Source: US DOT and IATA/ARC O&D passenger data from DiioMi, 12-month period ending March 2015

North America & Non-North America % Flying Nonstop to Neighbor IslandsThe vast majority of passengers traveling between North America and the Neighbor Islands travel aboard nonstop flights, rather than via interisland connections

93%

0%

73%

0%

75%

0%

North America Non-NA North America Non-NA North America Non-NA

Maui Kaua‘i Hawai‘i Island

Nearly three-quarters of Kaua‘i Travelers fly nonstop

Visitor Arrivals Forecast: Slower growth ahead

Market Insights

YTD Thru August(YoY %Chge)

Forecast(YoY %Chge)

% of Kaua‘i

Kaua‘i State State Kaua‘i

Total +4.5% +4.4% +1.6% 100%

North America +2.7% +5.2% +1.3% 88%

US West +5.9% +7.7% +1.2% 51%

US East -1.2% +2.3% +1.3% 30%

Canada -2.7% +0.3% +1.1% 7%Source: Hawai‘i Tourism Authority

Visitor Arrivals Forecast: Slower growth ahead

Market Insights

YTD Thru August(YoY %Chge)

Forecast(YoY %Chge)

% of Kaua‘i

Kaua‘i State State Kaua‘i

Outside North Am. +19.9% +2.6% +2.2% 12%

Europe +6.1% +1.1% +2.0% 3%

Australia +13.2% +11.3% +1.5% (Oceania) 2%

Japan +7.9% -1.1% +1.1% 1%

Korea +39.6% -7.0% +6.0% < 1%

China +17.3% +6.2% +7.0% < 1%

New Zealand +4.3% +5.5% +1.5% (Oceania) < 1%Source: Hawai‘i Tourism Authority

Never Been There, Never Done That

Longer-term, keeping the market growing requires increased focus on “Never Beens”

Market Insights

Market Insights

Source: Qmark/Anthology Group research conducted for the Kaua‘i Visitors Bureau

First- Time visitors to Kaua‘i

“Excellent”

Very/Somewhat likely to return

41%

88%

90%

Market Insights

The Hawai‘i Target Traveler Targeting the Never Visited

Never Visited Hawai‘i Target

Travelers (35%)

Hawai‘i Target Travelers

(26.0 million adults)

U.S. Overseas Travelers(50.0 million U.S. adults)

Source: TravelStyles, 2014

Previous Visited Hawai‘i Target Travelers

Hawai‘i’s Appeal: For Vacationers, Hawai‘i’s strongest appeal is the state’s natural beauty. Travelers express a broader appeal for the state

0%

10%

20%

30%

40%

50%

60%

70%

80%Q) Which of the following aspects of Hawai‘i appeal to you (select all that apply)?

Vacationers TravelersSource: Environics, 2015

Leisure Trip Elements: Vacationers put greater emphasis on Fun, Relaxation and Escape, but Travelers express a broader range of travel interests

59%

62%

65%

72%

74%

78%

82%

80%

86%

88%

49%

51%

58%

61%

66%

76%

83%

87%

89%

94%

Keep to an itinerary of things to see and do

Get close and interact with nature

Immerse myself in the local scene

See as many major landmarks & sites as possible

Learn new things

Engage in new experiences

Freedom and flexibility

Relaxation and escape

Create memories with people in my life

Have fun

Q) How important are the following elements in a leisure trip to you (Top 3 box score)

Vacationers

Travelers

Source: Environics, 2015

Market Insights

Travel Values: “Travelers” express a broader range of travel motivations

70%

77%

78%

80%

85%

89%

91%

90%

57%

72%

72%

76%

78%

87%

88%

90%

I need to be stimulated when I travel. If it means takingsome risks, so be it

I like to make a list of main attractions to see and checkthem off as I go

Travel is a way for me to get in touch with my authenticself and find true meaning in life

I want a free-spirited vacation filled with spontaneity

Vacations are an opportunity to meet new people andstrengthen bonds in current relationships

Travel is an indispensable way to learn about the historyand way of life of other cultures

The best part about travel is learning new things,gaining new perspectives about the world

I like to return from vacation completely recharged andreenergized

Please indicate if the following views describe you:

Vacationers

Travelers

Source: Environics, 2015

Market Insights

#LetHawaiiHappen – Kaua‘i

Much/Slightly more favorable impression of Kaua‘i

Extremely/Very likely to visit Kaua‘i

78%

71%

Among Avid Travelers who recall seeing the Kaua‘i television commercial:

What do Avid Travelers think the Kaua‘itelevision commercial is saying?:

"Enjoy yourself on Kauai, make new friends -- WaimeaCanyon, Waimea Plantation."

"Hawaii is a place where spontaneity is a constant, where moments become memorable, where a passerby acquaintance can become a lifetime friend."

Source: TNS, 2015

Market Insights

#LetHawaiiHappen

60%

23%

41%

15%

0%

10%

20%

30%

40%

50%

60%

70%

Hawai‘i Visitors Never Beens

% Planning to Visit Hawai‘i in Next Two Years

Marketing No Marketing

Nearly half (47%) of U.S. Avid travelers recall at least one of HVCB’s marketing efforts (e.g., paid advertising, website, social media, PR, etc.)

Source: TNS, 2015

2015-’16: “The Road Ahead”

• Continued Growth Ahead: Stable market conditions point to continued, but slower growth heading into 2016

• Never Been There, Never Done That: Longer-term, sustaining the market requires an increased focus on North America “Never Beens”

Market Insights