Quarterly Travel Forecast

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Quarterly Travel Forecast
Prepared for the San Diego Convention and Visitors Bureau December 2011
Contents
Executive Summary San Diego Tourism Outlook
Visitor Trends Expenditures Hotel Performance
1 2
2 3 3
US Tourism Outlook US Hotel Sector US Economic Outlook Key Origin Economies
US Market Summary Mexico Canada Japan United Kingdom Eurozone
5 7 8 10
10 11 12 13 14 15
San Diego Forecast Tables Forecast Methodology Overview San Diego Convention Center Corporation Attendance Forecast San Diego Hotel Project Pipeline
16 19 21 22
December 2011
Executive Summary
  While the US economy is proving resilient, the volatile situation in Europe and weaker results from Asia are adding headwinds to an already strained recovery. The US labor market has improved, but the rate of improvement reflects only a partial recovery. Consumer confidence remains below “healthy” levels and the recovery has left many households and some industries behind. These persistent factors, along with recent trends and the downgrade to the US forecast, have led to a downgrade in the San Diego forecast for overnight visits 1.1% in 2012, down from 1.4% in our October report. Total visits to San Diego grew a respectable 2.6% in the third quarter of 2011 but at only about half the rate of growth experienced in the second quarter of this year (+5.1%) and somewhat below expectations. This slowdown in the growth of travel to San Diego had been expected, and is consistent with the smaller gains in travel observed nationwide during the third quarter. Encouragingly, overnight visitation to San Diego grew 3.7% in Q3, outperforming our last forecast slightly (3.5%). Overnight visits are forecast to grow 3.5% in the final quarter of 2011 but will slow to a growth rate of only 1.1% in 2012. Hotel room demand in San Diego grew 4.6% in the third quarter, with strong performance in July and September. This raised the average occupancy rate for the quarter to 78.9%. Accordingly, hotels responded with an increase in room rates, with ADR climbing 3.0%. For the year through November, room demand in San Diego increased 3.6% compared to 5.4% for California and 5.1% for the US. The 70.8% average occupancy rate enjoyed by San Diego through the third quarter still stands above both the US and California. Also, while ADR has grown more slowly in San Diego, San Diego’s ADR is still at a premium above both California and the US. However, hotel performance in San Diego during the last three months of 2011 will likely be weaker. Data from October indicate only moderate growth while November data showed no growth in demand and declines in ADR from last year. While room demand is trending with the previous forecast, ADR has not responded as expected. On the positive side, supply remains constrained and the general trend of rate rises remains intact, however, at a lower level. ADR is forecast to increase at a pace of 3.1% in 2012 and 3.9% in 2013. Visitor spending in San Diego continued to expand in the third quarter of 2011, increasing 6.6% over the same quarter of the prior year and is expected to increase 5.2% for the year. Traveler spending will be held in check largely by a subdued inflation outlook, growing 4.1% in 2012.
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San Diego Tourism Summary Outlook
(annual % growth, unless stated)
2009
Visits Day Overnight Expenditure Day Overnight Hotel Sector Room supply Room Demand Occupancy (%) ADR ($) -4.8% -4.8% -4.8% -12.1% -9.2% -12.4%
2010
0.9% -2.5% 4.5% 1.7% -4.3% 2.5%
2011
3.0% 2.6% 3.5% 5.2% 4.8% 5.2%
2012
2.2% 3.3% 1.1% 4.1% 4.6% 4.0%
2013
2.2% 3.3% 1.0% 4.1% 6.0% 3.9%
2014
3.1% 4.1% 2.0% 5.9% 7.6% 5.7%
2015
2.1% 2.0% 2.2% 6.1% 5.2% 6.2%
3.7% -5.8% 62.8 $124.28
1.2% 7.0% 66.4 $121.19
0.3% 3.4% 68.5 $124.36
0.9% 1.9% 69.2 $128.22
0.6% 1.5% 69.8 $133.19
0.7% 2.6% 71.1 $141.65
1.3% 3.5% 72.6 $150.98
1
SDCVB Quarterly Travel Forecast
San Diego Tourism Outlook
Visitor Trends
Total visits to San Diego grew a respectable 2.6% in the third quarter of 2011, slowing from the robust 5.1% growth posted in the second quarter and somewhat below expectations. Visitation in August was especially weak. The day trip market was once again a drag on growth, increasing only 1.7% during the quarter. Day visits from Mexico grew more than forecast but still only slightly at 0.3%, while the growth in domestic day visits slowed to 2.0%. More positively, overnight visitation grew 3.7%, slightly better than expected. Hotel guests led the gains, increasing 4.3% in volume over last year, followed by household and other overnight visitors at 3.0% and 2.9%, respectively. Visitor growth had been expected to moderate in the second half of 2011 as weakening economic performance in the U.S. and around the world took its toll. This expectation was realized during the third quarter but data from the early months of the fourth quarter suggest a moderate pick-up in both San Diego visitation and spending, reflecting the recently more positive economic and consumer environment. San Diego visitor growth of 3.2% is now expected in the fourth quarter of 2011, with day visits forecast to rise 4.2%. Overnight visitor growth of 2.4% is anticipated as hotel visitation rises an expected 2.8%. Visitation to San Diego for full year 2011 will likely reach approximately 30.8 million, surpassing 30 million visitors for the first time since 2008 and growing 3.0% above 2010 levels. Ovenight visits are forecast to rise 3.5% with hotel/motel visits climbing 4.3% above 2010. Despite this somewhat more positive performance in the near term, economic problems in the Eurozone continue to weigh negatively on the US economic forecast. While the US has experienced relatively modest economic growth throughout 2011 and indications point to the same for the fourth quarter, the economy remains fragile. Our US macroeconomic forecast (as well as the global forecast) has been dowgraded over recent months, reducing expected real GDP growth in 2012 and 2013; which has dampened travel industry prospects.
San Diego: Overnight Visits
% growth y-o-y 15% 10% 5% 0% ADR Forecast
-5%
-10% -15% -20% 2002 Average GDP growth by origin markets
Overnight visits
2004
2006
2008
2010
2012
Source : Tourism Economics/CIC Research
San Diego day visits
% growth 10% 8% 6% 4% 2% 0% -2% -4% -6% -8% -10% 2003 2005 2007 2009 2011 2013 Day visits from Mexico Forecast
San Diego day visits (excl Mexico)
Source : Tourism Economics/SDCVB
Given this backdrop, growth in visitation to San Diego is expected to slow to 2.2% in both 2012 and 2013, down from 3.0% in 2011. Overnight visits will continue to grow, but at a slower rate as we expect some substitution to day trips, which are anticipated to increase 3.3%. Overnight visitation is expected to grow just 1.1% in 2012, down considerably from the 3.5% growth expected in 2011. Growth in hotel / motel visits will be only slightly
2
December 2011
stronger at 1.1%. In 2013, a continued modest recovery in overnight visitors is expected, with growth forecast at 1.0%. Day visitors, however, will continue to show greater strength, increasing another 3.3% over 2012.
Expenditures
Visitor expenditures in San Diego recovered nicely in the third quarter. After underperforming visits in the second quarter, spending outpaced visits in the third quarter, rising 6.2%. These spending Overnight Visits & Expenditures gains were somewhat stronger than expected % growth and reflect the better- than-anticipated 15% performance of San Diego’s overnight visitor 10% market in the third quarter. The growth in spending occurred despite the decline in the average length of stay in San Diego during the third quarter. This affect on spending was largely offset by the increase in visitation. Overnight visitors spent 6.6% more in San Diego during the third quarter while their average length of stay declined 2.4%. Hotel/motel visitors led the increase with an 8.1% gain in spending as hotel ADR grew 3.0%. Visitor spending growth in San Diego is expected to slow in the fourth quarter (+5.7%), reflecting the modest slowdown in overnight visitation that is also forecast. But ongoing growth in visitor spending in the city will become more elusive in the next year or two as the rate of growth in visitation also slows. Household budgets remain constrained by economic conditions and, while improving, consumer confidence remains at low levels. Additionally, the inflation outlook remains fairly benign. Total visitor spending in San Diego is forecast to increase 4.1% in 2012 and 2013 when spending will regain the level set in 2008.
5% 0% -5% -10% -15% Overnight spending 2011 2012 2013 Overnight visits
Forecast
-20% 2005 2006 2007 2008 2009 2010 Source : Tourism Economics / CIC Research
Visitor Expenditures
Index, 2008=100 120 115
Forecast
Visitor Expenditures
110
105 100 95 90 85 80 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Source : Tourism Economics
Hotel Performance
The hotel sector continued to lead the recovery in San Diego’s travel industry in the third quarter. Hotel room demand in San Diego grew 4.6% in 2011Q3, with strong performances in both July (5.0%) and September (7.9%). This raised the average occupancy rate for the quarter to 78.9% compared to 75.4% last year. Accordingly, hotels responded with an increase in average room rates, as ADR climbed 3.0% to $135.82, boosting RevPAR 7.6%. For the year through November, hotel performance in San Diego was mixed but has generally lagged both the US and California. The number of rooms sold in San Diego has grown 3.6% for the year compared to 5.4% for California and 5.1% for the US. San Diego’s room supply (available rooms) increased 0.3% through November, more than the gains posted in
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SDCVB Quarterly Travel Forecast
California (+0.1%) but significantly less than the increase in room supply nationwide (+0.6%). California ADR is still performing quite strongly, up 5.5% through November, well above the national average rate of growth of 3.7% and San Diego’s 2.7%. That said, the 70.8% average occupancy rate enjoyed by San Diego through the third quarter of 2011 still stands well above both rates achieved by the US overall (61.8%) and in California (68.1%). Also, while ADR has grown more slowly in San Diego, San Diego’s ADR ($127) in the third quarter is still at a premium above both the average rate charged in either California ($117) or the US overall ($102). Early hotel industry data for the fourth quarter has turned quite soft, however. Demand for hotel rooms in San Diego grew only 1.1% in October, the slowest monthly rate of growth experienced since November 2009, and slowed even more to a rate of only 0.1% in November. Average daily room rates have also weakened appreciably, up only 0.9% in October but actually down 2.5% in November as compared to these same months in 2010. Consequently, the forecast for the final quarter of 2011 has been downgraded to reflect these recent trends. Moving forward the forecast has also been downgraded to reflect a weaker economic outlook. Room demand growth is forecast to slow in both 2012 and 2013, to 1.9% in 2012 and 1.5% in 2013. ADR will also be weaker than previously forecast, growing 3.1% and 3.9% in 2012 and 2013, respectively.
Occupancy and ADR (12mma)
10%
Hotel Room Supply & Demand
Forecast % growth 75% 15% 10%
70%
Forecast 74% 72% 70% 68%
Occupancy rate (rhs)
5%
5% 0%
65%
0%
-5% ADR (year-to-year % growth) -5%
60%
Room Supply
66%
64% 62%
Occupancy rate, 12mma (rhs)
-10%
-10%
55% -15%
Room Demand
-15% 2006
60% 2006 2007 2008 2009 2010 2011 2012 2013
2007
2008
2009
2010
2011
2012
2013
Source : Tourism Economics / STR
Source : Tourism Economics / STR
4
December 2011
US Tourism Outlook
The slowdown in travel’s recovery and growth in the third quarter noted above was also apparent at the national level. Third quarter, 2011 travel and tourism satellite account results just released by the Bureau of Economic Analysis (BEA) show that real (i.e., after adjusting for inflation) spending on travel and tourism decreased at an annual rate of 1.0% in the third quarter of 2011, after increasing 3.2% (revised) in the second quarter. In comparison, real GDP rose 2.0%. But, as we approach the end of 2011 – yet another roller coaster ride for the U.S. travel industry - we see some more hopeful signs as the industry approaches the end of its recession-rebound cycle. A number of new surveys and sales results show increasing consumer optimism and willingness to spend, but also a new “resourcefulness” in the way they spend their discretionary income. Despite this, consumer confidence remains at historic lows, income growth will remain subdued, and consumers likely will go further in cutting debt levels. Travel intentions remain weak, as observed in U.S. Travel’s
Domestic Person Trips in the US
(Millions)
2006
Total
% change
2007
2004.5
0.2
2008
1964.9
-2.0
2009
1900.6
-3.3
2010
1965.7
3.4
2011
2004.9
2.0
2012
2035.8
1.5
2013
2072.1
1.8
2014
2114.0
2.0
2000.5
0.4
By purpose Business
% change
508.7
-0.2
494.3
-2.8
461.1
-6.7
436.5
-5.3
451.5
3.4
457.9
1.4
465.7
1.7
473.9
1.8
481.3
1.6
Leisure
% change
1491.8
0.6
1510.2
1.2
1503.8
-0.4
1464.2
-2.6
1514.2
3.4
1547.0
2.2
1570.0
1.5
1598.2
1.8
1632.7
2.2
By mode of transport Auto
% change
1718.5
0.8
1717.2
-0.1
1687.2
-1.7
1635.9
-3.0
1692.1
3.4
1725.5
2.0
1754.2
1.7
1786.0
1.8
1823.3
2.1
Air
% change
156.6
-6.7
158.1
1.0
151.9
-4.0
144.0
-5.2
147.3
2.3
149.5
1.5
151.3
1.2
153.3
1.3
155.3
1.3
Other
% change
125.5
5.2
129.1
2.9
125.8
-2.6
120.7
-4.0
126.2
4.6
129.8
2.8
130.2
0.3
132.8
2.0
135.4
1.9
By duration Overnight
% change
969.0
0.1
978.9
1.0
961.0
-1.8
911.5
-5.2
970.0
6.4
1001.0
3.2
1016.2
1.5
1039.9
2.3
1067.8
2.7
Day-trips
% change
1031.5
0.7
1025.6
-0.6
1003.8
-2.1
989.2
-1.5
995.7
0.7
1003.8
0.8
1019.6
1.6
1032.2
1.2
1046.2
1.4
TravelHorizons survey. As a result, our forecast for growth in total US domestic trips in 2011 has been lowered slightly from our spring forecast to 2.0% (down 0.1%), with travel expected to exhibit a slowdown towards the end of the year. In the first half of 2011, domestic person trips showed greater strength, growing around 2.6% while in the second half of 2011, trip growth is forecast to average 1.4%. The medium term forecast remains positive but has been tempered. US domestic travel is forecast to grow 1.5% in 2012 and 1.8% in 2013.
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SDCVB Quarterly Travel Forecast
At least partially offsetting relatively weak domestic travel has been the robust and better than expected growth in international inbound travel to the U.S, This has resulted in an upward revision to the short term forecast for this segment. Total international visits are now forecast to grow at a rate of 4.1% in 2011, as compared with our spring forecast of a 3.5% gain. The strength in international visitation is being led by overseas markets, especially emerging markets, such as China and India. Overseas travel to the U.S. is forecast to grow 5.9% in 2011, followed by an additional 3.4% gain in 2012. Asia/Pacific and Latin America markets continue to be the brightest lights while European inbound markets continue to struggle and are forecast to generate the same number of visitors to the United States as they did in 2009.
6
December 2011
US Hotel Sector
The US hotel industry continues to surprise on the upside when it comes to demand. Room demand increased 5.1% for the year-to-date through November. While demand growth slowed a bit in late summer/ear/y fall, it was renewed in November when room demand rose 5.3%. Occupancy now averages 61.2% for the year nationally, up 4.4% over 2010. And room rates are also slowly recovering, rising 3.7% year-to-date through November and helping to push RevPAR up 8.2%. Hotel performance is expected to slow through the rest of this year and into next year. Room demand growth is forecast to slow to 4.7% for 2011 followed by a modest 1.1% increase in room demand in 2012. Room rates, however, are expected to continue their recovery, rising 3.6% in 2011 followed by a 3.7% gain in 2012.
Summary US Lodging Forecasts
2010 Q1
Rooms (mn roomnights) Room Supply Room Demand Occupancy (% balance) ADR ($) RevPAR ($) 427.9 222.3 52.0% $96.34 $50.06
2011 Q3
445.8 285.0
2012 Q3
448.7 298.1
Q2
438.8 266.2 60.7% $97.99 $59.45
Q4
442.4 236.8 53.5% $98.37 $52.66
Q1
431.4 236.7 54.9% $99.43 $54.55
Q2
441.9 279.9 63.4% $101.48 $64.29
Q4
445.6 243.5 54.6% $101.98 $55.73
Q1
434.5 237.2 54.6% $102.44 $55.94
Q2
445.6 281.1 63.1% $104.86 $66.14
Q3
452.9 302.8 66.9% $106.99 $71.54
Q4
450.4 249.0 55.3% $106.41 $58.82
63.9% $99.20 $63.41
66.4% $103.04 $68.45
(year-to-year % growth)
2010 Q1
Room Supply Room Demand Occupancy (% balance) ADR RevPAR 2.5% 4.7% 2.2% -4.3% -2.2%
2011 Q3
1.5% 8.2% 6.6% 1.7% 8.4%
2012 Q3
0.6% 4.6% 3.9% 3.9% 7.9%
Q2
2.1% 8.2% 6.0% 0.0% 6.1%
Q4
1.1% 8.2% 7.0% 2.0% 9.1%
Q1
0.8% 6.5% 5.6% 3.2% 9.0%
Q2
0.7% 5.2% 4.4% 3.6% 8.1%
Q4
0.7% 2.8% 2.1% 3.7% 5.8%
Q1
0.7% 0.2% -0.5% 3.0% 2.5%
Q2
0.8% 0.4% -0.4% 3.3% 2.9%
Q3
0.9% 1.6% 0.7% 3.8% 4.5%
Q4
1.1% 2.2% 1.1% 4.3% 5.5%
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SDCVB Quarterly Travel Forecast
US Economic Outlook
Although economic growth in 2011Q3 was revised down to an annual rate of 2.0% from the original 2.5%, the outlook continues to improve. Most of the downward revision to Q3 was in stockbuilding, and the strong drag from destocking is likely to be at least partially reversed in Q4. Growth prospects in the near term are also being boosted by positive indicators from a number of sectors. Consumer confidence rebounded strongly in November and car sales and chain store sales seem to have benefited. The start to the holiday season appears to have been strong enough to offset a slower pace of sales earlier in the month.
Consumer confidence
1985=100 140 120 100 80 60 40 20 2001
2003
2005
2007
2009
2011
Source: Conference Board
Both ISM indexes remained in positive territory in November, with the manufacturing index rising a bit and the nonmanufacturing index falling slightly. New orders fell in September and October, but are still up 7.5% from a year earlier. Manufacturing output has averaged 0.4% monthly growth since July, and is up 4.1% in the year to October. And the labor market continues to improve. Payrolls added 120,000 jobs in November despite another 20,000 loss in the government sector, and the previous two months’ gains were revised up a total of 72,000. The unemployment rate dropped 0.4 percentage points to 8.6%, its lowest reading in more than two and a half years. About half of that improvement reflected a drop in the labor supply, but the other half was due to a fourth consecutive strong gain in household employment. Even the housing market produced some good news, with pending home sales up 10.4% in the latest month.
Private payrolls and the unemployment rate
Change, 000s
400 200 0 -200 -400 -600 -800 -1000 2007
2008
Unemployment rate (RHS)
% 11 10 9 8 7 6
Employment (LHS) 2009 2010 2011
5 4
Source : Bureau of Labor Statistics
Despite the improvements listed above, many of the indicators remain at weak levels. Even with the 15 point jump, consumer confidence was still only at 56 in November – it needs to be over 80 to reflect a healthy consumer sector. Similarly, initial unemployment claims have improved considerably from the summer levels, but they’re hovering around 400,000, a level consistent with weak growth in employment. And there are a couple of key uncertainties. The super committee failed in its efforts to come to a deficit reduction agreement, so by law automatic spending cuts of $1.2 trillion over 10 years are scheduled to begin. But it had been hoped that an agreement would have addressed a number of other fiscal measures set to expire at the end of the year unless Congress acts. These include the emergency unemployment benefits and the payroll tax holiday, which if not renewed would cut disposable income by about $150 billion in 2012. But there are other more routine measures as well, such as alternative minimum tax relief, the investment tax credit, and the prevention of steep cuts in Medicare payments to providers. The continuing
8
December 2011
resolution funding the government is set to expire on December 16 (need to update – what happened?) , so Congress must enact another to prevent a partial shutdown. It is probable that all of this will be worked out before the end of the year – indeed that is the assumption implicit in our forecast – but it will most likely be another case of putting it off to the last possible moment.
Contributions to growth
GDP Consumption Fixed Investment
Stockbuilding
It now appears that recession cannot be avoided in Net Exports Europe, but so far we expect that recession to be mild. Central banks around the world made a Government coordinated move at the end of November to try to -2 -1 0 1 ease the funding problems of European banks, Source: BEA percentage points and there are discussions underway to provide greater fiscal coordination across the Eurozone. Contributions to growth But the financial situation in the Eurozone % points Consumption 8 Fixed priv investment remains very dangerous and it is yet possible Stockbuilding 6 that a severe credit crunch could ensue and 4 spread to the United States. Even without a 2 severe crunch, there is evidence that European banks are curtailing lending into the US in order 0 to shore up their balance sheets, which means -2 less support to US activity. This volatile -4 situation remains a key risk to the US forecast. -6
-8 Another round of quantitative easing by the Federal Reserve is perhaps less likely now, -10 2005 2007 2009 given that domestic economic prospects have Source: BEA/Oxford Economics improved, but it remains a possibility if conditions deteriorate. And there are other means it could employ to be supportive, including stating actual targets for inflation and the unemployment rate.
2011Q3 Second 2011Q3 Advance
2
3
Government Net exports GDP growth
Forecast
2011
2013
2015
As mentioned earlier, growth in Q4 is expected to be supported by a turnaround in stockbuilding and faster growth in consumer spending. Those will be offset to a degree by a sharper decline in government spending, slower growth in fixed investment and a mild deterioration in real net trade. Overall growth is forecast at an annual rate of 2.7%. Over the course of 2012, we continue to expect moderate growth of about 2.5%. That will reflect continued constraints on consumers, who are still trying to rebuild their balance sheets, on businesses faced by continued uncertainty, and on goverments still struggling with deficits. Residential investment is expected to turn mildly positive, the first annual increase in seven years. GDP is expected to advance 2.4% in 2012 and 2.6% in 2013 after growth of 1.7% in 2011.
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SDCVB Quarterly Travel Forecast
Key Origin Economies
US Market Summary
Key DMA Economy Comparisons
Nonfarm Payroll Employment
2 year trend, 12 mma ann. % change last mo Oct 2011
Unemployment Rate
2 year trend last mo Oct 2011
Housing permits
2 year trend, 12 mma
House Price Index (Average of MSAs)
2 year trend last q ann. % change 2011 Q3
Real GDP
ann. % change last yr 2010
Los Angeles Sacramento San Francisco Phoenix Las Vegas Salt Lake City Denver Dallas
0.9% 0.1% 1.6% 2.0% 1.4% 2.7% 0.9% 1.6%
11.4% 12.7% 9.2% 8.1% 13.1% 6.3% 7.5% 8.0%
-5.3% -10.2% -5.2% -12.2% -15.2% -5.1% -2.0% -2.5%
1.5% -1.5% 4.5% 0.7% -1.9% 1.7% 1.7% 2.5%
Real Gross State Product
% growth 12 10 8 6 4 2 0 -2 -4 -6 -8 California Colorado Texas Nevada Arizona Utah Forecast
Unemployment Rate
% of labor force 16 Nevada 14 12 10 8 6 4 2 Utah Forecast Arizona Texas Colorado California
-10 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Source : Oxford Economics
0 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Source : Oxford Economics
10
December 2011
Mexico
Seasonally adjusted GDP grew by a stronger than expected 1.3% on the quarter in Q3 driven by services, which expanded 1.6%. This partly offset slower growth in manufacturing, up 0.5%, as the faltering US economy exerted a heavier toll on Mexican exports. In annual terms, GDP grew 4.4% in Q3 after a 3.6% rise in Q2. Our overall growth forecast for 2011 is now 3.9%. This is slightly higher than our previous forecast of 3.8%, with the resilience shown in Q3 largely offset by much weaker growth in Q4, expected to be just 0.1%. Looking further ahead, we have lowered our GDP growth forecast for 2012 to 3.8%, albeit this is above the more cautious consensus forecast of 3.3%.
Mexico: Exchange and interest rates
per US$ 16 14 12 10 40 8 30 6 4 2 0 1990 Short term interest rates (RHS) 20 10 0 1993 1996 1999 2002 2005 2008 2011 2014 F'cast Exchange rate (LHS) 60 50 % 70
Source: Oxford Economics
During the first half of November, annual inflation accelerated to 3.4% from 3.2% (following a monthly increase of 1% in the CPI), though the main culprit was higher energy costs owing to the end of temporary electricity subsidies. The core CPI was more stable, rising only 0.3% on the month. We expect inflation to be 3.4% at the end of2011. The peso continues to be strongly affected by the global financial market turmoil, with a sharp slide in the last two weeks. It was trading at over MXN14 to the US$ at the time of writing compared with MXN11.7 at the end ofJuly. But provided some sort of stability returns to financial markets, the MXN is expected to recover some of the lost ground.
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SDCVB Quarterly Travel Forecast
Canada
After falling marginally in Q2, Canadian GDP bounced back at an annualized rate of 3.5% in Q3. The rise was driven by net trade, as export volumes rose and imports contracted. On the downside, stockbuilding, which tends to move with imports, deducted 2.6% points from quarterly GDP growth. Recent economic indicators suggest another quarter of reasonable GDP growth in Q4. We expect it to average 2.4% in 2011 as a whole. In 2012, we forecast a slowdown in growth to 2.1%.
Canada: Consumption and investment
% year 20 15 10 5 0 -5 -10 -15 Investment Consumption F'cast
Although the external environment remains weak, -20 1985 1988 1991 1994 1997 we have become more positive about the outlook Source: Oxford Economics for exports. The US economy, the destination for three-quarters of Canada’s exports, has generally been stronger than expected in recent months. Combined with a weaker Canadian dollar and rising fuel exports, we now expect export volumes to rise by 4.3% in 2012. On the domestic side in 2012, we expect moderate growth in consumer spending, although the risks to this forecast are on the downside. Business investment growth will slow from an expected 12% in 2011, and residential fixed investment will increase at a modest rate. Meanwhile, the government will make a smaller contribution to growth. Slower growth and stable oil prices will lead to a moderation in inflation to 1.9% in 2012. As a result, we expect the Bank of Canada to hold interest rates until end-2012.
2000 2003 2006 2009 2012 2015
12
December 2011
Japan
GDP growth was around 1.5% in Q3, as the Japanese economy rebounded from the slump caused earlier this year by natural disasters. However, within this figure investment actually fell, including on plant and equipment. And with Q4 likely to see a slight decline in output, growth for 2011 as a whole is forecast at -0.5%. Recent monthly indicators have shown worrying signs that the rebound in activity is stalling. Real consumer spending has fallen for three straight months while October’s rise in retail sales did no more than offset the steep decline in the previous month. And unemployment jumped to 4.5% in October.
Japan: Consumer spending
% month 5 4 3 2 1 0 -1 -2
Apr-11 May-11 Jun-11 Jul-11 Aug-11 Source : Oxford Economics/METI/Cabinet Office Sep-11 Oct-11
Real consumption Retail sales
Meanwhile, the recovery in industrial production has stalled, and November’s manufacturing PMI pointed to contracting activity. Floods in Thailand were partly to blame, but slower exports to China and the Eurozone are also playing a role. With the situation in the Eurozone highly uncertain and some troubling signals from China, downside risks to Japanese growth remain significant. We have downgraded our GDP forecast for 2012 to 1.7% from 2% last month. Against this background, we expect continued efforts by the authorities to prevent appreciation of the yen, and the recent unwelcome rise in Japanese bond yields may also need to be tackled.
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SDCVB Quarterly Travel Forecast
United Kingdom
While the second estimate of GDP saw quarterly growth for Q3 unrevised at +0.5%, the fact that stockbuilding and government consumption together contributed 0.9 percentage points suggests there is little underlying strength. Indeed, we expect to see a modest decline in GDP in Q4. Manufacturing output dropped sharply in October and, while the surveys have continued to report rising activity in the services sector, growth has slowed considerably compared with earlier in 2011.
UK: Contributions to quarterly GDP growth
%pts
0.8 0.6 0.4 0.2 0.0 -0.2 -0.4
2011Q2
2011Q3
-0.6 UK prospects remain heavily dependent on the Consumer Investment outcome of events in the Eurozone and the spending escalation of the crisis in recent weeks has further Source : Haver Analytics damaged confidence. Our central forecast continues to assume that the authorities are able to agree to a solution which contains the financial crisis, though the probability attached to such an outcome has fallen over the past month. Under these circumstances, we expect UK GDP to grow by just 0.4% in 2012, compared with our November forecast of 1.0%, with the UK enduring a mild recession around the turn of the year.
Govt. Inventories consumption
Net trade
The Chancellor’s Autumn Statement saw significant downgrades to the forecasts for economic growth, bringing them closer to our own. He announced a series of small-scale, pro-growth, initiatives, but was forced to announce further cuts in current spending – to take place in the next parliament – in order to remain on track to meet his fiscal plans.
14
December 2011
Eurozone
We have further downgraded our Eurozone forecast this month. We expect the Eurozone to enter recession in 2011Q4 and for GDP growth to be around zero in 2012. Moreover, the recovery in 2013 is expected to be weak as well with growth of just 1.3%. The deepening crisis in Eurozone financial markets has caused a severe loss of confidence. Firms appear to be postponing investment projects until the economic outlook is more favourable. And consumers - hit by austerity measures, stubborn inflation and growing unemployment – are cutting back on spending.
Eurozone: Contributions to GDP growth
% year 5 4 3 2 1 0 -1 -2 -3 -4 -5 2002 2005 2008 2011 2014 Domestic demand F'cast Net exports GDP
1990 1993 1996 1999 Efforts to stem the crisis are ongoing, with further Source: Oxford Economics austerity measures in Italy – which faces a potential debt refinancing crunch early next year - and efforts by Eurozone leaders to toughen up budgetary rules in the single currency area.
But it is unclear whether the proposals made by European leaders so far will be sufficiently strict and credible to restore market confidence. And political obstacles to a big expansion of ECB sovereign bond purchases – a possible short-term expedient - still remain significant. At the December meeting, the ECB cut interest rates by 25bp to 1% and extended loans to banks to 3-year maturities to combat growing funding strains. Inflation remains above target but we believe it will fall to 1.7% in 2012, leaving room for the ECB to cut interest rates further.
15
SDCVB Quarterly Travel Forecast
San Diego Forecast Tables
San Diego Visitor Forecast
(millions)
2008
Visits Total Overnight Hotel / Motel Household Other Day Visitors Day (excl Mexican) Mexican Day Visitors 31.1 15.2 7.7 6.7 0.8 15.9 12.1 3.9 0.0
2009
29.6 14.4 7.3 6.4 0.7 15.2 11.5 3.6 0.0
2010
29.9 15.1 7.8 6.5 0.8 14.8 11.2 3.6 0.0
2011
30.8 15.6 8.2 6.6 0.8 15.2 11.5 3.6 0.0
2012
31.5 15.8 8.3 6.7 0.8 15.7 12.0 3.6 0.0
2013
32.1 15.9 8.4 6.7 0.8 16.2 12.5 3.7
2014
33.1 16.3 8.6 6.8 0.8 16.9 13.1 3.8
2015
33.8 16.6 8.9 6.9 0.8 17.2 13.4 3.8 0.0
(year-to-year % growth)
2008
Visits Total Overnight Hotel / Motel Household Other Day Visitors Day (excl Mexican) Mexican Day Visitors -1.5% -1.3% -1.2% -1.5% -0.7% -1.6% 0.0% -6.3%
2009
-4.8% -4.8% -5.0% -4.7% -3.1% -4.8% -4.5% -5.8%
2010
0.9% 4.5% 7.0% 1.6% 4.5% -2.5% -2.6% -2.0%
2011
3.0% 3.5% 4.3% 2.6% 4.4% 2.6% 2.8% 1.7%
2012
2.2% 1.1% 1.2% 1.0% 1.6% 3.3% 4.3% 0.2%
2013
2.2% 1.0% 1.5% 0.5% 0.6% 3.3% 3.9% 1.4%
2014
3.1% 2.0% 2.6% 1.4% 1.5% 4.1% 4.7% 2.0%
2015
2.1% 2.2% 3.4% 0.8% 2.3% 2.0% 2.0% 2.0%
San Diego Visitor Forecast
(millions)
2010 Q1
Visits Total Overnight Hotel / Motel Household Other Day Visitors Day (excl Mexican) Mexican Day Visitors 5.9 3.3 1.8 1.4 0.2 2.7 1.8 0.9 0.0
2011 Q3
9.8 4.5 2.3 2.0 0.2 5.4 4.4 0.9 0.0
2012 Q3
10.1 4.7 2.4 2.0 0.2 5.4 4.5 0.9 0.0
Q2
7.7 3.8 2.1 1.5 0.2 3.9 3.0 0.9 0.0
Q4
6.4 3.5 1.7 1.7 0.2 2.9 2.0 0.9 0.0
Q1
6.0 3.4 1.9 1.4 0.2 2.6 1.7 0.9 0.0
Q2
8.1 4.0 2.2 1.6 0.2 4.1 3.2 0.9 0.0
Q4
6.6 3.6 1.7 1.7 0.2 3.0 2.1 0.9 0.0
Q1
6.1 3.4 1.9 1.4 0.2 2.7 1.8 0.9 0.0
Q2
8.3 4.0 2.2 1.6 0.2 4.3 3.3 0.9 0.0
Q3
10.3 4.7 2.4 2.0 0.3 5.6 4.7 0.9 0.0
Q4
6.7 3.7 1.7 1.7 0.2 3.1 2.2 0.9 0.0
(year-to-year % growth)
2010 Q1
Visits Total Overnight Hotel / Motel Household Other Day Visitors Day (excl Mexican) Mexican Day Visitors 1.3% 3.3% 7.0% -0.9% 1.3% -1.2% -0.9% -1.6%
2011 Q3
1.7% 5.1% 5.7% 4.3% 6.2% -1.0% -0.6% -2.6%
2012 Q3
2.6% 3.7% 4.3% 3.0% 2.9% 1.7% 2.0% 0.3%
Q2
0.8% 3.8% 7.6% -1.3% 4.5% -2.0% -2.3% -0.9%
Q4
-0.5% 5.4% 7.9% 3.1% 5.4% -7.0% -8.7% -2.9%
Q1
1.0% 2.6% 4.8% -0.4% 3.1% -1.0% -4.1% 5.5%
Q2
5.1% 5.3% 4.9% 5.6% 7.5% 4.8% 5.9% 1.4%
Q4
3.2% 2.4% 2.8% 1.7% 4.4% 4.2% 6.2% -0.2%
Q1
2.0% 1.4% 1.3% 1.4% 3.0% 2.7% 4.7% -1.0%
Q2
2.5% 1.2% 1.3% 1.0% 1.8% 3.7% 4.8% 0.2%
Q3
2.3% 0.9% 1.1% 0.7% 0.9% 3.4% 4.1% 0.1%
Q4
1.9% 1.1% 1.2% 1.0% 1.0% 3.0% 3.5% 1.7%
16
December 2011
San Diego Visitor Expenditure Forecast
($ million)
2008
Expenditure Total Overnight Hotel / Motel Household Other Day Visitors Day (excl Mexican) Mexican Day Visitors 7,916 7,047 4,983 1,407 657 868 634 234
2009
6,958 6,170 4,319 1,239 611 788 581 208
2010
7,080 6,325 4,490 1,216 620 754 561 193
2011
7,447 6,656 4,788 1,222 647 791 594 196
2012
7,751 6,924 4,990 1,266 668 827 628 199
2013
8,072 7,195 5,215 1,297 683 877 671 205
2014
8,548 7,605 5,552 1,346 707 943 730 213
2015
9,068 8,077 5,952 1,388 736 991 770 221
(year-to-year % growth)
2008
Expenditure Total Overnight Hotel / Motel Household Other Day Visitors Day (excl Mexican) Mexican Day Visitors 0.2% 0.2% 1.0% -1.8% -0.7% 0.0% 1.2% -3.2%
2009
-12.1% -12.4% -13.3% -11.9% -7.1% -9.2% -8.5% -11.2%
2010
1.7% 2.5% 3.9% -1.9% 1.4% -4.3% -3.3% -7.2%
2011
5.2% 5.2% 6.6% 0.6% 4.3% 4.8% 5.8% 1.8%
2012
4.1% 4.0% 4.2% 3.5% 3.3% 4.6% 5.7% 1.4%
2013
4.1% 3.9% 4.5% 2.5% 2.2% 6.0% 6.9% 3.2%
2014
5.9% 5.7% 6.5% 3.8% 3.5% 7.6% 8.7% 3.8%
2015
6.1% 6.2% 7.2% 3.1% 4.2% 5.2% 5.6% 3.6%
San Diego Visitor Expenditure Forecast
($ million)
2010 Q1
Expenditure Total Overnight Hotel / Motel Household Other Day Visitors Day (excl Mexican) Mexican Day Visitors 1,571 1,448 1,021 273 153 123 80 43
2011 Q3
2,108 1,832 1,302 361 170 275 226 50
2012 Q3
2,239 1,954 1,407 374 173 285 236 49
Q2
1,863 1,659 1,196 293 171 203 160 44
Q4
1,538 1,385 971 288 126 153 96 57
Q1
1,669 1,544 1,127 254 163 125 80 46
Q2
1,914 1,695 1,231 289 175 219 173 45
Q4
1,625 1,463 1,023 305 135 161 105 56
Q1
1,735 1,605 1,171 265 170 129 84 45
Q2
1,995 1,766 1,284 301 181 229 183 46
Q3
2,332 2,032 1,469 386 178 300 250 50
Q4
1,689 1,520 1,067 314 139 169 111 58
(year-to-year % growth)
2010 Q1
Expenditure Total Overnight Hotel / Motel Household Other Day Visitors Day (excl Mexican) Mexican Day Visitors -0.2% 0.2% 1.2% -1.7% -2.8% -4.1% -2.3% -7.3%
2011 Q3
2.8% 3.8% 4.4% 1.2% 5.7% -3.7% -3.2% -5.7%
2012 Q3
6.2% 6.6% 8.1% 3.6% 1.8% 3.6% 4.7% -1.2%
Q2
0.7% 1.3% 3.0% -5.5% 2.1% -3.8% -3.1% -6.2%
Q4
3.5% 4.8% 7.6% -2.1% 0.3% -6.4% -4.8% -9.0%
Q1
6.2% 6.6% 10.3% -7.0% 6.3% 1.9% -0.7% 6.8%
Q2
2.7% 2.1% 2.9% -1.3% 2.7% 7.4% 8.6% 3.2%
Q4
5.7% 5.6% 5.3% 5.8% 7.6% 5.7% 9.5% -0.6%
Q1
3.9% 4.0% 3.9% 4.3% 4.1% 3.2% 6.0% -1.6%
Q2
4.3% 4.2% 4.3% 4.0% 3.4% 4.7% 5.4% 2.2%
Q3
4.1% 4.0% 4.4% 3.1% 3.0% 5.0% 5.7% 1.7%
Q4
4.0% 3.9% 4.3% 3.0% 2.7% 4.9% 5.9% 2.9%
17
SDCVB Quarterly Travel Forecast
San Diego Hotel Sector Forecasts
2008
Room Supply Room Demand Occupancy (% balance) ADR RevPAR 20.2 13.9 69.2% $141.94 $98.20
2009
20.9 13.1 62.8% $124.28 $78.11
2010
21.2 14.1 66.4% $121.19 $80.51
2011
21.2 14.5 68.5% $124.36 $85.21
2012
21.4 14.8 69.2% $128.22 $88.74
2013
21.5 15.0 69.8% $133.19 $92.97
2014
21.7 15.4 71.1% $141.65 $100.78
2015
22.0 16.0 72.6% $150.98 $109.65
(year-to-year % growth)
2008
Room Supply Room Demand Occupancy (% balance) ADR RevPAR 2.2% -2.9% -5.1% 2.4% -2.8%
2009
3.7% -5.8% -9.2% -12.4% -20.5%
2010
1.2% 7.0% 5.7% -2.5% 3.1%
2011
0.3% 3.4% 3.1% 2.6% 5.8%
2012
0.9% 1.9% 1.0% 3.1% 4.1%
2013
0.6% 1.5% 0.9% 3.9% 4.8%
2014
0.7% 2.6% 1.9% 6.4% 8.4%
2015
1.3% 3.5% 2.1% 6.6% 8.8%
San Diego Hotel Sector Forecasts
2010 Q1
Rooms (mn roomnights) Room Supply Room Demand Occupancy (% balance) ADR ($) RevPAR ($) 5.2 3.2 62.2% $114.60 $71.24
2011 Q3
5.3 4.0
2012 Q3
5.3 4.2
Q2
5.3 3.6 68.3% $120.44 $82.20
Q4
5.4 3.2 59.8% $115.18 $68.89
Q1
5.2 3.4 64.9% $122.47 $79.54
Q2
5.3 3.7 70.1% $121.37 $85.10
Q4
5.4 3.2 60.1% $114.79 $69.01
Q1
5.3 3.5 65.9% $125.89 $83.01
Q2
5.3 3.8 71.2% $125.47 $89.30
Q3
5.4 4.3 79.5% $139.59 $110.96
Q4
5.4 3.3 60.2% $118.89 $71.55
75.4% $131.91 $99.50
78.9% $135.82 $107.10
(year-to-year % growth)
2010 Q1
Room Supply Room Demand Occupancy (% balance) ADR RevPAR 1.4% 7.0% 5.5% -9.4% -4.4%
2011 Q3
1.1% 5.7% 4.5% 1.8% 6.4%
2012 Q3
0.1% 4.6% 4.5% 3.0% 7.6%
Q2
1.4% 7.9% 6.4% -3.7% 2.4%
Q4
1.0% 7.8% 6.7% 0.8% 7.5%
Q1
0.7% 5.2% 4.5% 6.9% 11.7%
Q2
0.3% 3.0% 2.7% 0.8% 3.5%
Q4
0.1% 0.6% 0.5% -0.3% 0.2%
Q1
0.5% 2.0% 1.5% 2.8% 4.4%
Q2
0.9% 2.4% 1.5% 3.4% 4.9%
Q3
1.1% 1.9% 0.8% 2.8% 3.6%
Q4
1.0% 1.1% 0.1% 3.6% 3.7%
18
December 2011
Forecast Methodology Overview
Forecasts reported in this document represent the baseline outlook with a business as usual marketing effort. This does not take any specific marketing programs directed at key markets into account. The forecasts are primarily based upon expected economic developments in key origin markets as well as anticipated costs. Previous tourism trends relative to economic demand and travel conditions have been tracked and relationships have been quantified. Estimated relationships are applied to the economic and broader tourism forecasts. Forecasts do account for the impact of important events which would influence visits and/or spend, such as air service restrictions and special events in San Diego such as hosting the Superbowl or US Open. Summary of Main Model Relationships
Oxford Economics & Tourism Economics Existing models Economic trends by market (income, output, spend employment etc) Outbound trends by market
Visitor Spending Visits
•Day visits •Overnight visits
Combine forecasts of average spending by market with visits
Hotel ADR Supply-side factors New attractions Events, conventions etc Travel Constraints Hotel room demand Hotel Occupancy Hotel room supply

Overnight Visitors. Trends in overnight visits have been identified and are forecast separately for stays in hotels and in private households. Forecasts account for different trends according to purpose of visit (business and leisure) as well as by origin market. Economic developments in key origin markets at the city, state, national and international level are included. Day Visitors. Travel patterns from nearby drive markets tend to differ from those from longer-haul markets. For day visitors the impact of economic developments in key origin markets and tourism costs (such as hotel room rates) differs from the impact on overnight visits. Mexican visitors represent a significant proportion of day visitors to San Diego and trends have been separately identified. For nonMexican day visitors, business and leisure trends have again been separately identified taking developments in origin markets into account. Visitor Days. Visitor days spent in San Diego are calculated from the number of overnight visits multiplied by average length of stay, plus day visits. Differences in the


19
SDCVB Quarterly Travel Forecast
average length of visit according to origin markets are taken into consideration as well as any impact of economic developments.  Visitor Spending. Average spending per day is calculated for different market segments and applied to visitor days. This takes tourism-related price inflation in both San Diego into account (such as hotel room rates), as well as spending patterns according to origin market and the impact of more general tourism costs (such as airfares and fuel costs). Hotel Rooms sold. Hotel room demand largely follows the trend in overnight visitor days. The impact of local demand on rooms is also accounted for as locals tend to use more rooms in economic downturns as a replacement for longerhaul travel. Hotel Rooms supply. Supply is calculated as the current stock of hotel rooms plus planned and current hotel construction. Probabilities are applied to the current timetable of projects underway to determine when new capacity will be available. It is assumed that almost all hotels under construction are completed, while a smaller proportion of those in the planning stage are completed according to plan. Hotel Occupancy. Occupancy is simply determined as the ratio of room demand to supply in terms of room nights. Hotel Average Daily Rate (ADR). The cycle in daily rates follows occupancy closely, with a slight lag. Over time, more general price inflation also needs to be taken into consideration and price developments in San Diego as well as in origin markets are important factors.


 
20
December 2011
San Diego Convention Center Corporation Attendance Forecast
San Diego Convention Center Corporation Primary Convention Attendance CY 2011 vs. 2012
2011 2012 153 144 160 140 120 100 80 60 40 20 0 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 28 20 54 44 34 19 15 23 29 33 30 22 35 40 29 25 25 24 22 8 96 84
Summary 2011 72 Conventions 550,697 Estimated Attendance 2012 48 Conventions 481,800 Estimated Attendance Sources: Source of past months’ (January – October 2011) attendance is SDCCC actual reported attendance post event. Source of attendance of future months (November 2011 onward) is the estimated attendance provided by the meeting planners to SDCCC, and reported in the 18-month calendar.
Thousands
21
SDCVB Quarterly Travel Forecast
San Diego Hotel Project Pipeline
Potential Hotels Rating Scale: (5) Hotel is under construction. (4) Financing for hotel is secured. (3) City approved the project and all permits. (2) Architectural design/renderings, environmental documents prepared and ready to obtain permits and approval from city. (1) Conceptual idea only.
Property Name Na vy Lodge North Is l a nd Corona do (Addi tiona l Rooms ) Hya tt Pl a ce Vi s ta/Ca rl s ba d Hi l ton Ca rl s ba d Ocea nfront Res ort & Spa Sea coa s t Inn (Re-openi ng a fter renova tion) Surfer's Poi nt Res ort Stone Brewi ng Compa ny Boutique Hotel Vi eja s Ca s i no a nd Res ort Legol a nd Hotel La Terra za Spri nghi l l Sui tes by Ma rri ott Hol i da y Inn - Mi s s i on Va l l ey The Inns a t Heri tage Pa rk - Ol d Town (B&B) Lumi na Ma rri ott Rena i s s a nce Hotel Source: SDCVB Hotel Database Address Corona do Na va l Ba s e 2645 S. Mel ros e Dri ve 7205 Ponto Dri ve 800 Sea coa s t Dri ve 2005 N. Coa s t Hwy. 101 Ci tra ca do Pkwy. 5005 Wi l l ow Roa d One Legol a nd Dri ve 300 La Terra za Boul eva rd 625 Hotel Ci rcl e So. 2460 Heri tage Pa rk Row NWC of Col umbi a /As h J Street, 5th a nd 6th Vi s ta Ca rl s ba d Imperi a l Bea ch Enci ni tas Es condi do Al pi ne Ca rl s ba d Es condi do Sa n Di ego Sa n Di ego Sa n Di ego Sa n Di ego City Corona do Potential Opening Hotel Date Rooms Ja nua ry-12 Ma rch-12 June-12 Augus t-12 December-12 2012 Total Ja nua ry-13 Ja nua ry-13 June-13 September-13 December-13 December-13 December-13 December-13 2013 Total 205 150 215 78 7 655 50 150 250 105 87 80 140 362 1,224 Potential Rating 5 4 5 4 4 3 4 4 4 4 4 3 3
22
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