August 2015

OUTBOUND CANADA

U.S. Regional Travel Outlook

2015-2019

i

Table of Contents

Background .................................................................................................................................................................................. 1

Forecast Assumptions and Risks .................................................................................................................................................. 1

Canadian Economic Trends .......................................................................................................................................................... 2

Outbound Leisure Travel Forecast ............................................................................................................................................... 4

United States Tourism Performance............................................................................................................................................ 5

Airline Seat Capacity ............................................................................................................................................................. 6

Future Visits (Regional Outlook) .................................................................................................................................................. 7

New England ......................................................................................................................................................................... 8

North Central and Atlantic .................................................................................................................................................... 8

Mountain and Pacific Region ................................................................................................................................................ 9

Future Visits (Selected Destinations) ........................................................................................................................................... 9

Florida ................................................................................................................................................................................... 9

Orlando .................................................................................................................................................................... 10

Arizona ................................................................................................................................................................................ 12

Phoenix .................................................................................................................................................................... 12

Nevada ................................................................................................................................................................................ 13

Las Vegas .................................................................................................................................................................. 13

California............................................................................................................................................................................. 14

Los Angeles .............................................................................................................................................................. 14

Hawaii ................................................................................................................................................................................. 15

1

Background

The Conference Board prepares annual five-year forecasts of

travel by Canadians to the USA, the Caribbean, Mexico,

Asia/Pacific, and Europe. Many data sources are used to develop

these forecasts. The main drivers of outbound leisure travel

demand considered within the forecasts are depicted in Figure 1.

The Conference Board is the largest economic forecaster in

Canada with econometric models of the economy at national,

provincial, metropolitan, and industrial levels. These models,

involving over one thousand variables, are an important input

into the outbound travel forecasts.

The data collected from the travel intentions surveys conducted

each year is another input into the travel forecasts. Other

sources used include planned air capacity, marketing/

development reports, event data, political and environmental

insights, and Canada’s demographic profiles.

The forecasts assume that no major economic, political, military or terrorists events will take place over the forecast period

and that no major health or environmental issues will occur.

Forecast Assumptions and Risks

Direct air capacity is always a crucial variable to a forecast for a specific destination. An increase or decrease in direct

capacity to a destination usually has a significant effect on arrivals. Additional capacity can occur either when a new carrier

enters a market, or an existing provider introduces new routes or an increase in service. Air capacity is also affected by the

demise of carriers which reduces available seats and can result in higher air fares. No carrier failures are anticipated over

the forecast period. As such, the current forecast assumes that seat capacity data filed with OAG as of May 2015 will not

change for the remaining months of the year.

Economic factors such as exchange rates and the growth in Canadian’s real disposable income impacts the volume of

outbound travel, while conflict, war, and other political, environmental and health issues influence travel patterns. Unrest

in the Middle East, health crises like Ebola, and weather events such as hurricanes and tsunamis can have a short-term

negative impact on travel to a destination.

Since the end of the recession in 2009, Canada’s economy has been growing at a rate that supports outbound leisure travel.

In fact, Canada has been one of the stronger outbound travel markets in the Western world – especially when compared

with the United States and Europe. This is expected to continue throughout the forecast period, though significant growth

is not anticipated.

Population demographics are also a key contributor to outbound travel forecasting. Canada’s population will grow by 4.6%

over the forecast period, and will age dramatically. Baby boomers (those born between 1946 and 1964) are expected to

continue to drive the outbound leisure travel market in the coming decade. Furthermore, multi-generational travel will be

supported by the demographic shift; by 2017 there will be more seniors (65+) in Canada than children (≤14).

Many economic, demographic and travel industry factors are in place to support an increase in Canadian leisure travel

during the forecast period. While outbound travel is forecast to grow over the next five years, not all destinations will share

equally in this growth.

Figure 1. Drivers of Outbound Travel

Demand

2

Canadian Economic Trends

Following lackluster performance in the first few months of the year, Canada’s economy is forecast to grow by a modest 1.6

per cent in 2015. Reduced activity in the energy and resource sectors in the prairies along with expectations of weak

business investment will result in average annual growth of 2.1 per cent between 2015 and 2019. Provincially, the

Conference Board forecasts strong economic growth in British Columbia, Central Canada, and Manitoba over the near term.

On the other hand, real GDP growth in Atlantic Canada will be negatively affected by economic conditions in Newfoundland

and Labrador, and Alberta and Saskatchewan will continue to struggle with the impact of lower oil prices.

Figure 2. Per cent Change in Real GDP, basic prices (2007 $)

Source: CBoC forecast, July 2015

At the same time, household spending is expected to remain fairly stable and real disposable income is forecast to average

2.0 per cent average annual growth during the period. These factors are sufficient to support modest growth in outbound

leisure travel in the short-term.

The Canadian dollar has lost more than 20 per cent of its value against the U.S. dollar in the last two years. That said, the

loonie’s decline hasn’t been as drastic against other currencies when devaluation by other central banks is taken into

consideration. The dollar, which averaged USD $0.91 in 2014 after trading around par for an extended period, is expected

to post an annual average in the low- to mid-eighty cent range throughout the forecast period. Higher travel prices in the

U.S. and the Caribbean and Mexico combined with a less favourable exchange rate will result in lower growth to these

regions during the forecast period.

Source: Conference Board of Canada (June 2015 Outlook), Oxford Economics World Outlook

2.6%

2.0%

1.2%

-2.7%

3.4% 3.0%

1.9% 2.0% 2.4%

1.6%

2.1% 2.2% 2.2% 2.0%

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015f 2016f 2017f 2018f 2019f

Economic Indicators 2015f 2016f 2017f 2018f 2019f

Real GDP (% change) 1.5% 2.1% 2.2% 2.2% 2.0%

Real Disposable Income (% change) 2.3% 1.5% 2.2% 2.1% 2.3%

Household Spending (% change) 2.1% 2.3% 1.9% 2.0% 2.0%

CAD/USD $0.80 $0.81 $0.84 $0.86 $0.86

EUR/CAD $1.38 $1.28 $1.24 $1.26 $1.29

GBP/CAD $1.88 $1.79 $1.72 $1.70 $1.71

CAD/AUD $1.07 $1.05 $1.01 $1.00 $0.98

HKD/CAD HK$6.24 HK$6.44 HK$6.65 HK$6.70 HK$6.70

JPY/CAD ¥99.12 ¥109.76 ¥116.56 ¥118.86 ¥119.17

3

Canadian Demographics

Canada’s population is expected to reach almost 37.6 million by 2019, an increase of 4.6 per cent. Growth will be greatest

in Alberta (7.1%) and Saskatchewan (6.2%). In the most populous provinces—Ontario and Quebec—the population is

expected to increase 4.9 per cent and 3.4 per cent, respectively. The Atlantic Provinces are expected to experience a more

modest 1.2 per cent growth through 2019 to reach almost 2.4 million people.

Figure 3. Canadian Population Forecast, 2015-2019 (% change)

Source: CBoC forecast, March 2015

The share of Canada’s population aged 55+ is increasing dramatically. Between 2015 and 2019, the proportion of

Canadians aged 55-64 will increase 8.8 per cent, while the share of people aged 65 and older will increase 15.9 per cent.

This trend applies across the provinces as well. For example, the proportion of residents aged 55-64 will increase 18.0 per

cent in BC, 10.7 per cent in Alberta, and 10.6 per cent in Ontario.

By 2017, the number of Canadians aged 65+ is projected to outnumber children (14 and under) for the first time in

Canadian history. Canada’s aging population will help grow outbound leisure travel as the propensity to take leisure trips

outside the country increases with age. In fact, Canadians 55+ are about 40 per cent more likely to travel outside of Canada

for leisure purposes than their younger counterparts. This aging of Canada’s population will continue to be a positive

influence on outbound leisure travel. Canada’s aging boomers like to travel and are expected to maintain Canada’s

reputation as one of the best performing travel markets in the world.

As illustrated in Figure 4, if Canadians 55 and older continue to take the same proportion of pleasure trips in 2023 as they

did in 2010, outbound travel for this age group will see significant growth. Trips by older Canadians to the U.S. would see

growth of 40.7 per cent and travel to non-U.S. destinations would increase 38.2 per cent.

Figure 4. Outbound Pleasure Trips by Age Group (000s)

Source: Statistics Canada, CBoC estimates. *Assumes age groups will make the same ratio of overseas pleasure trips in 2023 that were made in 2010. Pleasure travel excludes trips to visit friends & relatives.

1.2%

3.4%

4.9%

5.2%

6.2%

7.1%

5.2%

4.2%

4.6%

Atlantic Canada

Quebec

Ontario

Manitoba

Saskatchewan

Alberta

British Columbia

Territories

Canada

2,080 2,169

5,775

7,510

2,315 2,330

5,841

10,508

19 and under 20-34 35-54 55+

2010 2023*

4

Canadians between the ages of 45-64 have the highest propensity to take overseas pleasure trips. This means that

Canada’s aging boomers (born between 1946 and 1964) will continue to be the main outbound pleasure travel market over

the forecast period. Even though travel frequency declines after age 74, older Canadians are now healthier, wealthier, and

more mobile than their predecessors. This will positively influence overseas pleasure travel over the next five years.

However, by 2031 when the oldest boomer will be 85 years of age and the youngest 67 years old, Canada’s aging

population will become an issue for overseas destinations. Over the long-term, leisure destinations in the U.S., the

Caribbean and Mexico will become even more popular for Canada’s aging population due to their proximity to "home".

This will make Europe, Asia, the Middle East and Africa more difficult regions to sell to Canada’s growing 65+ population.

Outbound Leisure Travel Forecast

After the 2009 global recession resulted in a slight drop in outbound leisure travel, trip volumes rebounded strongly in 2010

and have continued to increase each subsequent year. But this growth is slowing. Even though Canadians took more than

27 million outbound leisure trips in 2014, overall volumes increased just 1.6 per cent compared to 2013. The lackluster

growth was linked to a -0.8 per cent decline in travel to the U.S., as overall trip volumes were propped up by a 6.9 per cent

increase in trips to overseas destinations. This reliance on overseas travel growth is expected to continue in the short-term.

Figure 5. Outbound Leisure Trips to U.S. and Overseas Destinations (millions)

Source: Statistics Canada, CBoC estimates.

Outbound leisure travel is forecast to grow at a 3.4 per cent average annual rate between 2015 and 2019; slightly lower

than the rate seen from 2000 to 2014 (+4.0%). The rate stability will be propelled by increases in overseas travel, as growth

in trips to the U.S. is expected to be more modest due higher travel prices and a Canadian dollar that will average just USD

$0.84. Leisure trips to the U.S. are forecast to grow at an average annual rate of 2.2% between 2015 and 2019, which is

quite a bit lower than the 4.3% average annual rate expected for overseas destinations.

14.2

15.8

16.8

18.1

18.7

18.6

17.7

18.1

18.5

18.9

19.4

7.0

7.6

7.9

8.3

8.1

8.7

9.2

9.8

10.3

10.9

11.4

2009

2010

2011

2012

2013

2014

2015f

2016f

2017f

2018f

2019f

U.S. Leisure Trips

Overseas Leisure Trips

5

Figure 6. Annual Rate of Growth by Region, 2015-2019

Source: CBoC

United States

Tourism Performance

While the long term prospects for Canadian travel to the U.S. are decent, the market will only see modest growth over the

next five years. Leisure trips to the U.S. are forecast to grow at an average annual rate of 2.2% between 2015 and 2019.

With a forecasted exchange rate of just $0.80 USD in 2015, overnight leisure trip volumes stateside are estimated to

decrease -4.7% to 17.7 million during the year. Following that, GDP growth along with annual increases in disposable

income will converge with an increasingly aging population to help boost trips to the U.S. through 2019. On average, three

out of every four outbound trips made by Canadians over the age of 65 are to the U.S.

Figure 7. Outbound Overnight Leisure Trips to the U.S., 2000-2019 (millions)

Source: Statistics Canada, CBoC.

The minimal U.S. growth rate is driven by reductions in auto travel. Even as trips by other modes are forecast to increase,

auto travel is expected to decline in the short- to medium-term. About 6 in 10 overnight leisure trips to the U.S. are via

automobile and auto travellers are much more price sensitive than people who travel by other modes. As such, overnight

3.4%

4.3%

5.0% 4.7%

4.9%

4.4%

3.2%

4.3%

2.2%

Caribbean Mexico South America Central America Europe Asia Oceania Total Overseas U.S.

10.6 10.3

9.8 9.5

10.6 11.3

12.2

13.5

14.7 14.2

15.8

16.8

18.1 18.7 18.6

17.7 18.1

18.5 18.9

19.4

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015f 2016f 2017f 2018f 2019f

6

auto trips are forecast to grow at an average annual rate of 1.9% between 2015 and 2019, while trips by other modes are

forecast to grow at an average annual rate of 2.9% over the same period.

Figure 8. Overnight Auto Travel and the Canadian Dollar, 2000-2019

Source: Statistics Canada, CBoC.

Between 2015 and 2019, the U.S. is expected to capture an average of 65 per cent of all Canadian outbound leisure trips.

This share is down slightly from previous years as more Canadians explored other parts of the globe, and large increases in

immigration boosted VFR trips to other countries. However, the U.S. will slowly recapture its share of the Canadian

outbound leisure travel market In the medium- to long-term, as Canadians aged 65+ are almost three times more likely to

travel stateside for pleasure purposes as they are to travel to other destinations.

Airline Seat Capacity

As carriers continue to add capacity and an aging population demands ease of access, an increase in air travel is expected in

the coming years. However, a decrease in the drive/fly travel market is expected as U.S. carriers reduce capacity from

select border cities and the exchange rate is no longer sufficient enough to counter the savings provided by lower taxes and

fees. From 2010 to 2015 direct capacity from Canada increased at an average annual rate of 2.2 per cent to surpass 17.4

million seats. Seat capacity to Pacific (+4.6%), Mountain (+3.5%), and Atlantic (3.4%) states posted the largest growth

during the period, with the biggest increases registered in Hawaii (+9.5%), Arizona (8.8%), Nevada (7.4%), Florida (6.8%),

and California (4.7%). These five states will account for almost 7 million seats in 2015, which represents 39.5 per cent of

direct capacity.

$0.50

$0.55

$0.60

$0.65

$0.70

$0.75

$0.80

$0.85

$0.90

$0.95

$1.00

6.0

7.0

8.0

9.0

10.0

11.0

12.0

13.0

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015f 2016f 2017f 2018f 2019f

Mill

ion

s o

f O

vern

igh

t Le

isu

re T

rip

s

Overnight Auto Trips

Average Annual Exchange Rate

7

Figure 9. Direct Seat Capacity to U.S. Destinations by Carrier, 2010-2015

Carrier 2010 2011 2012 2013 2014 2015 CARG (2010-2015)

Air Canada 5,260,286 5,439,772 5,607,327 5,601,187 5,896,443 6,574,795 4.6%

WestJet 1,573,621 1,803,307 2,185,160 2,439,555 2,605,099 2,682,974 11.3%

United 2,154,042 1,968,248 2,834,298 3,127,568 3,044,144 2,596,010 3.8%

Delta 1,551,133 1,452,349 1,466,775 1,446,643 1,498,575 1,695,053 1.8%

American Airlines* 2,292,499 2,466,170 2,507,786 2,376,905 2,288,302 2,136,439 -1.4%

Porter 438,760 497,412 603,680 618,170 669,254 671,328 8.9%

Alaska Air 846,720 814,513 767,474 769,055 792,602 670,939 -4.5%

Other Carriers 1,536,012 1,470,755 693,688 349,381 354,909 402,130 -23.5%

Total 15,653,073 15,912,526 16,666,188 16,728,464 17,149,328 17,429,668 2.2%

Source: OAG. *Includes US Airways.

Future Visits (Regional Outlook)

Coinciding with the growth in available air capacity is intended travel demand. In a recent travel intentions survey,

Canadians ranked Orlando third when asked which popular American destinations they intended to visit during the next

three years. Furthermore, almost one-third of respondents identified Orlando as one of the top places in the U.S. they

would like to visit sometime in the future. Interest in visiting Orlando is highest amongst Canadians aged 25 to 34 (43.2%)

and lowest amongst those aged 65+ (18.9%). Compared with other age groups, Canadians aged 55+ were least likely to plan

on visiting Orlando sometime during the next three years. Since Canada’s population is aging, the diminished interest in

visiting Orlando by older Canadians will dampen visit growth going forward. Even so, Florida will continue to be the top U.S.

state for Canadian leisure travellers when measured in visit nights and dollars spent.

New York City and Las Vegas ranked highest in terms of intention to visit sometime during the next three years. These two

destinations ranked first and second for all age groups.

Figure 10. Future Visit Intentions, Select U.S. Destinations (% of Canadians)

Source: CBoC travel intentions survey, June 2015.

29.0%

26.3%

16.7%

13.5%

12.1%

11.4%

9.1%

8.5%

7.1%

6.9%

6.9%

6.1%

6.1%

5.8%

New York City

Las Vegas

Orlando

Los Angeles

Miami

Boston

Chicago

Maui

Fort Lauderdale

Florida Keys

San Diego

Texas

Phoenix

Cape Cod

8

Using travel intentions data, demographic and economic trends, as well as information related to seat capacity and hotel

inventory, future visitation by region can be estimated.

Figure 11. U.S. States by Travel Region

New England

Supported by the large traveller population in Ontario and Quebec, New England is expected to see an average annual rate

of growth of 2.5 per cent between 2015 and 2019. Visitors to this region are high-yield and as such the exchange rate is

unlikely to have a significant impact on overall trip volumes. The drive market from Quebec is expected to decrease in the

short-term, but key demographic segments in Ontario's air market will keep the region's overall market share around 10

per cent, which will result in stable visitation volumes. Furthermore, Cape Cod and Boston are ranked highly by older

travellers as places they intend to visit in the short-term.

North Central and Atlantic

The significant drive market for border states in the North Central and Atlantic regions will impact trip volumes to

destinations such as Michigan, Ohio, Pennsylvania, and New York in the short-term. A weak overnight auto market is

expected to result in fewer cross-border excursion trips in 2015. However, trip volumes are forecast to recover by 2017 as

the resource sector recovers and Canadians return to the reality of a sub-par dollar.

Even though Florida will boast 2.15 million direct seats in 2015, the lower exchange rate and higher hotel costs will

negatively affect travel volumes. In addition, older Canadians are less likely to list cities like Orlando and Miami as places

they intend to visit in the coming years and this group is driving population growth. However, both regions will benefit from

proximity to Canada's largest provinces, Ontario and Quebec. Over the forecast period, North Central should see an

average annual rate of growth of 1.0 per cent, while the rate of growth in the Atlantic region, including Florida, is estimated

to be 2.2 per cent.

New England

Atlantic

North Central

South Central

Mountain

Pacific

9

Mountain and Pacific Region

Over the next five years, Mountain and Pacific states are expected to benefit from a strong economy in British Columbia

and large increases in direct air capacity. In fact, four of the top five states with capacity growth are in these two regions.

Even though the average room rate is one of the highest in the country, destinations in Hawaii will continue to see growth

due to repeat visitors who stay in condos and timeshares. According to the Hawaii Tourism Authority, since 2007, the state

has seen a 97 per cent increase in condo stays, and an 84 per cent increase in timeshare visits.

With both Arizona and California appearing in the top five U.S. destinations for travellers aged 55+, visitation to these states

will be supported by population demographics. In addition, trip volumes to Phoenix and other Arizona destinations are

expected to grow at a faster rate once the Alberta economy stabilizes. Nevada will also see some fluctuations in trip

volumes over the short-term as fewer Canadians from the Prairie Provinces take outbound trips. That said, the availability

of package incentive deals combined with stiff competition to fill the significant hotel inventory in Las Vegas will help

overall visitation grow over the forecast period. Furthermore, Las Vegas is one of the top destinations Canadians intend to

visit in the short-term. At 2.2 per cent, both regions are expected to see an average annual rate of growth that is

comparable to the U.S. as a whole.

Figure 12. Visits to the U.S. by Region, 2011-2019 (millions of visits)

Source: Statistics Canada, CBoC estimates.

Future Visits (Selected Destinations)

Florida

Welcoming millions of Canadians each year, Florida is Canada’s number one outbound travel destination. In fact, Canadians

made more than 4.6 million visits to Florida in 2014–double the volume seen a decade ago. Since 2002, visits have risen

every year but one, growing at an average annual rate of 9.3 per cent. At the same time, direct air arrivals have posted an

average rate of growth of 6.6 per cent since 2008. Direct air arrivals represent about 40 per cent of total visits each year.

Despite competition from the Caribbean and Mexico, Canadian visits to Florida have been on an upward trajectory since

2002. Ease of access will continue to be the main driver of travel to the state, but the combination of a lower Canadian

dollar and increased travel prices will impact overall demand. Last year, the average daily rate in the state increased 13.6

per cent to CAD $137 and continues to rise. As of May 2015, the average room rate was already CAD $180.

Accounting for about 80 per cent of visits, the vast majority of visitors reside in Ontario (57%) and Quebec (23%), and tend

to be older than average. Forty-three per cent of Canadians who visited Florida in 2014 were born between 1945-1965.

2,420

2,412

2,536

2,545

2,520

2,517

2,646

2,736

2,778

8,778

9,500

9,767

9,800

9,614

9,720

9,975

10,162

10,496

3,377

3,481

3,235

3,246

3,058

3,115

3,054

3,127

3,178

3,286

3,314

3,588

3,600

3,425

3,489

3,562

3,648

3,739

4,227

4,684

5,305

5,323

5,382

5,483

5,598

5,732

5,876

2011

2012

2013

2014p

2015f

2016f

2017f

2018f

2019f

New England Atlantic North Central South Central Mountain Pacific

10

While Canada's aging population will help keep visitation to the state stable, given that accommodation and transportation

costs are rising faster than the disposable income of Canadians, visits are forecast to grow at a slower 2.2 per cent average

annual rate of growth during the forecast period.

Figure 13. Visits by Canadians to Florida each year (000s)

Source: Statistics Canada, CBoC estimates.

Orlando

After four years of strong gains, Canadian visits to Orlando reached almost 1.2 million in 2014. During this period, direct air

arrivals grew from 394 thousand to 506 thousand. Visits to Orlando from Canada are not expected to grow at the same

average annual rate over the next five years when compared with the previous five years.

Canadians have easy access to Orlando with plenty of travel options – fly direct, through a border city or via a US

connection, or drive to their destination. While the proportion of indirect arrivals (by land and through connecting traffic) is

expected to decrease, additional direct capacity will boost overall arrivals in 2015. Major carriers are reporting the addition

of 38 thousand seats in 2015. Assuming carriers maintain their load factors of the past 12 months and planned seat

capacity, Orlando should see about 541 thousand direct arrivals in 2015.

Figure 14. Orlando Capacity and Direct Arrivals, Annual

Source: OAG, CBoC estimates.

1,669 1,911 2,038 2,098

2,485

2,872 2,644

3,102 3,319

3,559

4,171

4,641 4,646 4,739 4,881 4,979 5,078

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015f 2016f 2017f 2018f 2019f

21

2,1

38

23

7,2

15

27

9,9

99

32

8,7

08

38

2,7

34

40

6,4

12

42

5,7

05

44

7,9

92

45

5,4

83

48

3,8

24

52

8,9

06

52

9,7

21

57

0,8

51

60

8,8

56

58

2,9

35

18

0,4

77

20

7,1

22

26

1,0

44

27

4,8

79

30

1,3

05

33

5,5

93

37

2,3

37

38

4,0

45

39

4,3

80

44

1,8

38

46

9,4

84

48

1,5

73

50

6,2

62

54

1,1

07

54

8,8

62

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015f 2016f

Seats Passengers

11

A snapshot of fourth quarter airfares indicates that flight costs are tracking slightly higher than the previous year (1.4%). In

addition Orlando’s hotel rates grew by an average 3.8 per cent during the first half of 2015 (compared to the same period in

2014) but are up 17.0 per cent when the lower dollar is taken into account. After hitting a low of USD $90, the average daily

rate increased by 19.3 per cent between 2010 and 2014. Meanwhile the Canadian dollar has fallen significantly below par

increasing the average daily rate by 28 per cent. The lower Canadian dollar and rising room rates has made it more

expensive for Canadians to visit Orlando and other U.S. destinations. Canadians paid, on average, $1,054 for a seven night

stay in an Orlando hotel during March 2015 versus $897 in March 2014–an increase of 17.5 per cent. With travel prices

rising much faster than incomes, a slower rate of growth in Canadian outbound leisure travel to Orlando and other

destinations can be expected.

Figure 15. Orlando Average Annual Room Rate ($CAD)

Source: Visit Orlando, CBoC estimates.

The exchange rate, combined with higher room rates and airfares, will make it more expensive for Canadians to vacation in

Orlando during the winter 2015-16 season. However, air travellers are less sensitive to fluctuations in the dollar than those

who travel by other modes and approximately 45 per cent of Canadian visits to Orlando are via direct air transportation.

Furthermore, two-thirds of Canadians planning a trip to Florida during winter 2015-16 intend to fly. If airlines maintain

current load factors and deliver the seat capacity currently being reported, direct passenger arrivals are estimated to grow

by 1.8 per cent compared to last winter.

Even though direct air arrivals will be boosted by additional seat capacity, total visits from Canada are forecast to fall -0.7

per cent in 2015 due to higher prices and household economic uncertainty. Direct capacity is not expected to increase

significantly in 2016, but modest growth in Canadian visits to Orlando are expected over the next few years. Visits to

Orlando are forecast to grow at an average annual rate of 2.8 per cent between 2015 and 2019.

Figure 16. Visits by Canadians to Orlando each year (000s)

Source: Visit Orlando, CBoC estimates.

$122 $125

$133 $134 $139

$119

$113 $112 $114 $114

$112

$107

$93 $93 $96

$104

$119

$139

$90

$100

$110

$120

$130

$140

1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015e

789

910 865

960 1,015

1,085 1,140 1,170 1,162 1,194

1,235 1,270 1,295

2007 2008 2009 2010 2011 2012 2013 2014 2015f 2016f 2017f 2018f 2019f

12

50

0,4

72

56

0,9

27

57

0,1

84

59

5,5

01

62

1,4

69

61

9,4

54

42

6,6

93

46

1,1

06

46

5,6

27

49

4,1

50

50

1,7

35

49

9,7

93

2011 2012 2013 2014 2015f 2016f

Seats Passengers

650 704 728

773 825 805 802 819 839 860

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

Arizona

As one of the top five U.S. destinations for travellers aged 55+, Canada's aging population will support visitation to Arizona

in the coming years. In addition, with close to half of visitors residing in the Prairie provinces, trip volumes to the state are

expected to grow at a faster rate once the Alberta economy stabilizes. Since 2010, seat capacity has grown at an average

annual rate of 8.8 per cent, and is expected to grow 6.6 per cent in 2015. If seat capacity remains stable, Arizona is

expected to maintain an average market share of 23 per cent of Canadian visits to the Mountain region. Since outbound

travel from key Canadian markets is slowing due to the decline in the resource sector, Canadian travel to Arizona is

expected to see an annual rate of growth of 1.7 per cent between 2015-2019. This follows an average annual rate of 6.1

per cent between 2010-2014 when the Alberta economy was booming.

Figure 18. Visits by Canadians to Arizona each year (000s)

Source: Arizona Office of Tourism, Statistics Canada, CBoC estimates.

Phoenix

The vast majority of Canadian visits to Arizona are to Phoenix, and most of those trips are by air. In fact, an estimated 60

per cent of total visits to Arizona in 2014 were direct air passengers who deplaned in Phoenix. Historical market share data

suggests that Phoenix will welcome about 500 thousand direct air passengers in 2015 and 2016.

Figure 18. Phoenix Capacity and Direct Arrivals, Annual

Source: OAG, US BTS, CBoC estimates.

13

1,366 1,481

1,587 1,662 1,585 1,561 1,570 1,603 1,642 1,683

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

86

6,9

39

90

3,6

90

87

4,8

84

1,0

75

,51

6

1,0

78

,87

6

1,0

74

,64

4

77

6,1

97

78

9,9

13

78

9,0

81

89

4,6

49

89

5,6

46

90

4,8

21

2011 2012 2013 2014 2015f 2016f

Seats Passengers

Nevada

More than one-third (36.8%) of Canadians who vacationed in Nevada in the past 12 months reside in the Prairie provinces.

This market was followed by Ontario (29.9%). As fewer Canadians from Alberta and Saskatchewan take outbound trips

during the current period of economic hardship, some fluctuations in trip volumes over the short-term are expected.

Furthermore, since half of Canadian visits to the state are by travellers aged 25-49, a slowdown in this population cohort

will affect overall trip volumes in the medium- to long-term. A decline in overnights visits is expected in 2015, but not to

the same extent as recorded in 2014. Visits are forecast to rebound in 2016 but will not be back at the record levels seen in

2013 until 2019. While the state is poised to receive close to half of all Canadian visits to the Mountain region throughout

the forecast period, the average annual rate of growth is estimated at just 1.9 per cent between 2015-2019.

Figure 19. Visits by Canadians to Nevada each year (000s)

Source: Statistics Canada, CBoC estimates.

Las Vegas

With more than one million seats offered, Las Vegas welcomed almost 895 thousand Canadian visitors by direct air in 2014.

Passengers arriving by direct air represent more than half of total overnight visits to Nevada each year. If carriers maintain

an 84 per cent load factor, direct passengers are forecast to surpass 904 thousand by 2016.

Figure 20. Las Vegas Capacity and Direct Arrivals, Annual

Source: OAG, US BTS, McCarran International Airport, CBoC estimates.

14

1,451 1,476 1,543 1,594 1,600

1,668 1,700 1,735 1,777 1,821

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

California

Benefitting from proximity to BC and significant air access from Ontario, California welcomed 1.6 million Canadians in 2014.

Over the next five years, the state is expected to benefit from large increases in direct air capacity as well as strengthening

economies in British Columbia and Ontario—two of the country's most populous provinces. Of Canadians who visited

California in the last 12 months, 35.3 per cent reside in BC, and 24.5 per cent reside in Ontario. Since California attracts a

younger travel market (approximately half of visitors are aged 25-49), visitation is expected to grow at an average annual

rate of 2.2 per cent between 2015-2019. From 2010-2014, the state experienced an average annual rate of growth of 2.5

per cent.

Figure 21. Visits by Canadians to California each year (000s)

Source: Statistics Canada, CBoC estimates.

Los Angeles

According to the LA Tourism and Convention Board, visits from Canada reached 739 thousand in 2014, an increase of 4.4

per cent. After growing 10.5 per cent in 2014, direct air arrivals from to LAX are expected to grow by 6.0 per cent in 2015

due to an increase in capacity from Air Canada rouge and American Airlines.

Figure 22. Los Angeles Capacity and Direct Arrivals, Annual

Source: OAG, US BTS, Los Angeles International Airport, CBoC estimates.

1,0

57

,96

8

1,0

38

,98

6

1,1

04

,83

6

1,2

13

,54

0

1,2

84

,44

6

1,2

63

,90

3

87

5,3

22

86

0,8

36

91

1,4

32

1,0

06

,80

2

1,0

66

,82

5

1,0

80

,00

0

2011 2012 2013 2014 2015f 2016f

Seats Passengers

15

Unfortunately, even though more than 1.28 direct seats will be available throughout the year, the lower dollar and higher

travel prices will offset potential growth. Compared to the previous year, a 7.0 per cent increase in LA’s average hotel rates

along with a Canadian dollar that dropped to an average $0.91 from $0.97 drove up room rates by 14.6 per cent (in CAD$)

in 2014. Average room rates were also up in Anaheim, San Diego, and San Francisco.

Overall visits (air and land) to LA from Canada are forecast to grow at an average annual rate of 2.2 per cent between 2015

and 2019 to reach 838 thousand. Canadian visits to LA grew at an average annual rate of 2.5 per cent between 2010 and

2014.

Hawaii

Growing 142 per cent between 2004 and 2014, Canadian arrivals outperformed other major international travel markets for

Hawaii during the past decade. Japan provided 73.4 per cent of international arrivals to Hawaii in 2004 compared with

Canada’s 10.8 per cent. In 2014, the proportion of arrivals from Japan fell to 56.2 per cent while Canada’s share nearly

doubled, accounting for 19.5 per cent international arrivals.

Like California, Hawaii benefitted from a strong western Canada outbound travel market. Of travellers who vacationed in

the state in the past year, more than two-thirds reside in BC and the Prairies. Even though the average room rate is one of

the highest in the country and not competitive with most other destinations in the U.S., the Caribbean, and Mexico, nearly

four-in-ten visitors to the state have a household income of $100 thousand or more. In addition destinations in Hawaii see

a lot of repeat visitors who stay in condos and timeshares. Between 2007 and 2014, the number of Canadians staying in a

condo or timeshare when visiting Hawaii grew by 94.4 per cent. Hotel only stays grew by just 44.6 per cent during the same

period.

Because of this shift in accommodation preferences, Hawaii has become a destination of repeat visits for Canadians. Direct

air capacity is less important to repeat visitors as they are less pressed for time, however with the expansion of Air Canada

rouge, direct service has increased 62.7 per cent since 2009. Historically, lower taxes and fees resulted in an increase in

Canadians flying to Hawaii via the U.S., but new direct capacity and a lower Canadian dollar is reversing this trend. Between

2013-2014, visitors arriving directly from Canada increased 7.7 per cent while Canadian deplanements from U.S. airports

declined -6.7 per cent.

Figure 22. Direct (International) and Indirect (Domestic) Passengers

Source: Hawaii Tourism Authority, US BTS, OAG

0

50,000

100,000

150,000

200,000

250,000

300,000

350,000

0

50,000

100,000

150,000

200,000

250,000

1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

Via U.S. Direct from Canada

16

406

478 499 517 526 517 521 532 545 558

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

Hawaii will continue to be an attractive destination for travellers from BC, and is growing in popularity for Ontario residents.

These two provinces will see some of the largest increases in the baby boomer population, which is an added bonus for the

island nation. Canadians aged 50+ are more likely to have visited Hawaii in the past 12 months than Canadians in other age

categories. Boosted by a wealthy older population, arrivals to Hawaii are forecast to fall slightly in 2015, but grow at an

average annual rate of around 2.0 per cent over the forecast period.

Figure 23. Visits by Canadians to Hawaii each year (000s)

Source: Hawaii Tourism Authority, CBoC estimates.