OUTLOOK ON DOMESTIC TRAVEL 1999 - 2000

1

U.S. TOURISM AN OVERVIEW2001-2002
2
UNDERLYING TRAVEL ATTITUDES UNSHAKEN

• 83 - Important to be able to travel whenever and
  wherever I want
• 80 - Important to visit out-of-town family and
  friends
• 67 - Important Americans travel as they did
  before attacks

Source Travel Industry Association of America
3
UNDERLYING TRAVEL ATTITUDES UNSHAKEN

• 64 - Leisure travel a good way to take mind off
  stressful times
• 62 - Inconveniences of travel wont stop me from
  traveling
• 61 - Leisure travel important to my well-being

Source Travel Industry Association of America
4
UNDERLYING TRAVEL ATTITUDES UNSHAKEN

• 60 - Travel in U.S. is safe
• 22 - Travel to destinations outside the U.S. is
  safe
• 83 - Travel and tourism is important to the
  health of the U.S. economy

Source Travel Industry Association of America
5
IMMEDIATE IMPACTSTIA CONSUMER SURVEY

• 78 million American adults had leisure travel
  plans for next 3 months prior to 9/11

Source Travel Industry Association of America
6
MOST LEISURE TRAVEL PLANNERS ARE NOT CHANGING
PLANS
53. 8 million
Among 78 Million Planners
9.4 million
8.5 million
6.3 million
Source Travel Industry Association of America
7
IMMEDIATE IMPACTS AIRLINES

• End of first week Load factors less than 30
• Now at 80 flight capacity, 85 seat-mile
  capacity, 45 - 55 load factors
• September traffic down 40 -50
• 9/11-30 Losses 5 billion 92,000 layoffs
• 15 billion government stabilization package

Source Air Transport Association
8
IMMEDIATE IMPACTSLODGING INDUSTRY

• First week - nationwide occupancies averaged
  52.3 - down 26
• ADR that week was down 15
• By 9/22 occupancy was 63.5, still down 19
• Big convention hotels, upper upscale, urban
  properties suffered most

Source Smith Travel Research
9
AMTRAK SEES INCREASING RIDERSHIP

• During Crisis week - Average daily ridership up
  17
• Most long distance trains were sold out
  ridership up 35
• Currently Systemwide ridership is up 12 - 15
• Adding capacity and seeking 3 billion from
  government

Source Amtrak
10
SURGE FOR GREYHOUND

• Surge in ridership during crisis week
• Now business as usual although long-distance
  (1,000 miles) remains strong
• Certain leisure segments, such as casinos,
  negatively affected
• Traffic crossing borders is down

11
NEW YORK CITY IMPACTS

• Hotel Occupancies fell to a low of 37 on 9/16
  now in 45 50 range versus nearly 90 last
  September
• Restaurants lost an estimated 20 million/day
• Broadway tickets sales off 80 during first week
  now down about 50
• Cancellations of major conventions limited
• 9/11 22 estimated NYC visitor spending loss of
  163.7 million
• Image of NYC significantly enhanced

Source NYC COMPANY
12
WASHINGTON, D.C. IMPACTS

• Occupancies fell to from 10 to 65 depending on
  location (compared to normal of 72)
• Occupancies now hovering in 35 45 range
• 12,000 job losses in hotel sector alone
• Smithsonian as much as 75 down in visitation
• Reagan National Airport will re-open on Thursday

Source Washington D.C. Convention and Tourism
Corporation
13
HAWAII IMPACTS

• 9/13 20 Domestic passengers down 31
• Bookings from U.S. West stronger than U.S. East
• 9/13 26 Japanese visitors down 64
• Approximately 70 of cancellations are rebooking
  for 4Q 01 or 1Q 02
• Potential visitor day decline of 20 and 1
  billion loss for September December period

Source Hawaii Visitors Convention Bureau
14
LAS VEGAS IMPACT

• Weekend after 9/11 occupancy was 67, last
  weekend was 84 (Normal is 90)
• Mid-week, occupancy still in the 60s, 20 points
  below normal
• 240 meeting/convention cancellations
• ADR down as much as 50
• International markets off the most
• 10,000 layoffs in restaurant sector
• Shifting advertising to domestic all in
  Southern California and within 2 hour flight

Source Las Vegas Convention Visitors Authority
15
CORPORATE TRAVEL

• Already weak and has taken an additional hit
• Business Travel Coalition Survey 88 of
  corporate travel managers report employees will
  cut back travel in coming weeks
• 56 said their confidence in the security of U.S.
  aviation system had eroded very significantly
• National Business Travel Association 58 of
  companies expect to reduce travel

Sources Business Travel Coalition, National
Business Travel Association
16
CVB UPDATE

• From 9/11 end of October Corporate meetings
  essentially dried up
• 25 of meetings scheduled for 9/11-31 have been
  cancelled, mostly by associations
• Of meetings planned for 2002, only 2 cancelled
  but lower attendance expected
• Drive business less affected
• Destinations not all the same in terms of impact
  urban destinations hurt most
• CVBs will face pressure on their budgets

Source International Association of Convention
and Visitor Bureaus
17
OTHER TRENDS

• RV rentals surged after attacks stranded
  travelers rented RV to get home RV business
  holding up better strong turnout reported at RV
  shows
• Regional parks outperforming destination parks

Sources Recreation Vehicle Industry
Association, Silver Dollar City
18
TRAVEL VOLUME SINCE 9/11 AMONG TIA MEMBERS
Source Travel Industry Association of America
19
LOSSES GREATEST AMONG

• Larger Companies (100 employees)
• Urban areas
• Northeast and South regions
• Businesses catering primarily to international
  visitors
• Airlines, tour operators and travel agencies

Source Travel Industry Association of America
20
LOSSES LEAST AMONG

• Mid-Size Companies (50 99 employees)
• Rural areas
• West region
• Businesses serving primarily domestic markets

Source Travel Industry Association of America
21
PERCENT OF BOOKINGS CANCELLED SINCE 9/11 AMONG
TIA MEMBERS
Source Travel Industry Association of America
22
CHANGE IN NEW BOOKINGS SINCE 9/11 AMONG TIA
MEMBERS
Among Companies with bookings
Source Travel Industry Association of America
23
TIA MEMBER EXPECTATIONS FOR REST OF 2001
Source Travel Industry Association of America
24
TIA MEMBER EXPECTATIONS FOR 2002
Source Travel Industry Association of America
25
PROSPECTS GOING FORWARD
26
AIR PROSPECTS

• Revenue Passenger Miles
• 4Q 01 -39 FY 2001 -11.8
• 1Q 02 -23
• 2Q 02 -13
• 3Q 02 Back to 2001 levels
• FY 2002 4.8
• Unprecedented losses of up to 24 billion since
  9/11/01 Bankrupted Carriers
• Expect discounting

Source Air Transport Association
27
AUTO TRAVEL PROSPECTS

• Could recover more quickly and increase due to
• Shifts from air
• Stable gas prices
• Shift to closer-to-home travel
• Increasing interest in family travel

Source AAA
28
HOTEL INDUSTRY PROSPECTS

• Sept. Oct. 2001
• Room demand -10 to - 12
• ADR -2
• 4Q 01
• Room demand -6
• 2001
• Room demand -2.4
• RevPar -4.7
• ADR 0.5
• Still profitable 16.7 billion in 2001

Source Smith Travel Research
29
HOTEL INDUSTRY PROSPECTS

• 1Q 02
• Room demand -4
• RevPar -6
• FY 2002
• Room Demand 1.2
• RevPar -0.5
• ADR No change
• Could take another 9 months to fully recover

Source Smith Travel Research
30
TRAVEL AGENT REVENUE PROJECTIONS 2000 - 2002
Billions of Dollars
Source American Society of Travel Agents
31
TOUR OPERATOR OUTLOOK

• 90 of tour operators have had cancellations but
  only 2 report cancellations for 2002
• International inbound tours most severely
  affected
• Northeast, NY and D.C. hit hardest
• Renewed interest in motorcoach tours
• History and cultural tours show relative strength

Source National Tour Association
32
INTENTIONS TO TAKE LEISURE TRIPS - NEXT SIX
MONTHS

• 58 plan leisure trip in next six months
• Reasons for Not Taking Leisure Trips
• Dont have the money 21
• Worried about job/future income 3
• Dont have the time 16
• Health reasons/unable to travel 13
• High travel prices 10
• Travel not safe now 7
• Airline/airport safely/security 6
• Travel inconvenient now 4

Source Travel Industry Association of America
33
COMPLEX SET OF FACTORS COULD AFFECT OUR PROSPECTS

• Economy
• Consumer Confidence
• Consumer Confidence in Safety and Security of
  Travel
• Other Consumer Attitudes
• Shifting Travel Preferences
• Further Attacks
• Military Actions

34
U.S. ECONOMIC DEVELOPMENTS

• Economy was already slowing prior to 9/11
• Unemployment rising up to 4.9 in August
• Business confidence has tumbled
• Consumer spending slowing
• 9 interest rates cuts by Fed this year
• Government spending

35
RECESSION ALMOST CERTAIN FOR 3Q AND 4Q 2001,
FOLLOWED BY RECOVERY
Change in Real GDP
Source DRI-WEFA
36
DRI-WEFA ECONOMIC FORECAST 2001-2002

• Percent change from previous year
• 1Q 2Q 3Q 4Q 1Q 2Q
• 01 01 01 01 02 02
• Disp. Income 2.9 2.7 5.4 4.2 -0.1 1.7
• Unemp. Rate 4.2 4.5 4.9 5.4 5.8 6.0
• CPI 3.4 3.4 2.8 2.7 2.3 2.1

Source DRI-WEFA
37
DRI-WEFA ECONOMIC FORECAST 2001-2002

• Percent change from previous year
• 00 01 02 03
• Real GDP 4.1 1.1 1.6 4.0
• Disp. Income 2.6 3.5 2.6 4.1
  
• Unemp. Rate 4.0 4.8 5.9 5.5
• CPI 3.4 3.1 2.3 2.4

Source DRI-WEFA
38
DROP IN CONFIDENCE ALREADY IN PROGRESS BEFORE 9/11
Source The Conference Board, 1985100
39
CONSUMER CONFIDENCE1990 - 2000
Source The Conference Board, 1985100
40
OVERALL TRAVELER SENTIMENT INDEX (U.S. Average,
2000 100)
Note Survey conducted prior to 9/11/01
Source Travel Industry Association of America
41
FINANCIAL INDEX (U.S. Average, 2000 100 for
Ability to Take Pleasure Trip Based on Personal
Finances)
Source Travel Industry Association of America
Note Survey conducted prior to 9/11/01
42
EFFECTS OF RECESSION AND WAR, 1990-91 ON AIR
TRAVEL
Change in Revenue Passenger Miles over Prior
Year
1990
1991
Source Air Transport Association
43
EFFECTS OF RECESSION AND WAR, 1990-91 ON LODGING
Change in Room-Nights over Prior Year
1991
1990
Source Smith Travel Research
44
THE RALLY EFFECT

• 90 Approval rating for President Bush (CNN/USA
  Today/Gallup)
• 89 approve of military action (CNN/USA
  Today/Gallup)
• 87 think America will recover and move on
  (CNN/Time)
• 79 think attacks will change country for the
  better stronger and more united (Newsweek)

45
THE RALLY EFFECT

• 65 extremely/very confident American way of life
  will be preserved (CNN/USA Today/Gallup)
• 60 very confident U.S. economy will be
  prosperous in the long-term (CNN/USA
  Today/Gallup)
• 59 are optimistic about nations future 70
  optimistic about own future (Roper Reports)
• 43 say in good position to spend money, up from
  35 in April (Gallup)

46
BUT CONFLICTING CONCERNS

• 77 following news very closely (Gallup)
• 66 believe attacks represent major change in
  terms of our sense of freedom/security (NBC/Wall
  Street Journal Poll)
• 63 attacks have shaken their sense of security
  (Los Angeles Times Poll)
• 49 very/somewhat worried about attack affecting
  their family (Gallup)

47
BUT CONFLICTING CONCERNS

• 66 think further attacks at least somewhat
  likely over next several weeks (CNN/USA
  Today/Gallup Poll)
• 66 worried about traveling by air because of
  risk of terrorism (CNN/Time Poll)
• 43 less willing to fly (CNN/Time Poll)
• 88 support new security procedures (CNN/USA
  Today/Gallup)

48
PROSPECTS FOR TOTAL U.S. DOMESTIC TRAVEL

• 3Q 01 - 5
• 4Q 01 -10
• FY 2001 - 5
• 2002 1
• Still below 2000 Levels

Source Travel Industry Association of America
49
POSSIBLE EFFECTS ON TRAVEL

• Residential, closer-in, drive markets likely to
  do better
• Domestic better than outbound
• More interest in VFR
• Shift in activity preferences increased
  popularity of Americana, heritage, more serious
  endeavors

50
TOP 10 ACTIVITIES AMONG DOMESTIC TRAVELERS, 2000
1. Shopping 33 2. Outdoor Recreation 17 3.
Historical Places/Museums 14 4. Cultural
Events 10 5. Beaches 10 6. National/State
Parks 10 7. Theme/Amusement Parks 9 8.
Gambling 8 9. Nightlife/Dancing 7 10.
Sports Events 6
Sources Travel Industry Association of America
51
PARTICATION IN CULTURAL/ARTS/HERITAGE ACTIVITIES
of 143.3 million travelers
Sources Americans for the Arts, Travel Industry
Association of America
52
TRAVELER INTENTIONS

• More Less Same
• Visit Family/Friends 35 8 57
• Weekend Getaway 24 20 56
• Small Town/Rural 23 18 59
• Week Vacation 21 26 53
• City/Urban Area 10 35 55

Source Travel Industry Association of America
53
REACHING TODAYS TRAVELER
54
MEDIA USED IN PAST YEAR TO PLAN TRIP/VACATION,
2001
of 135 Million U.S. Travelers
Source Travel Industry Association of America
55
MEDIA JUDGED TO BE MOST USEFUL, 2001
of 82.0 Million U.S.Travelers who use Media
Source Travel Industry Association of America
56
MEDIA JUDGED TO BE BELIEVABLE, 2001
of 82.0 Million U.S.Travelers who use Media
Source Travel Industry Association of America
57
TRAVELERS USE OF THE INTERNET 2001 EDITION
58
95 MILLION ONLINE TRAVELERS BUT GROWTH SLOWING
Millions of U.S. online travelers
Source Travel Industry Association of America
59
ONLINE TRAVEL PLANNERS UP 9 TO 65 MILLION IN
2001
Millions of Online U.S. Travel Planners
Source Travel Industry Association of America
60
31 MILLION ONLINE TRAVELER BOOKERS AND GROWTH
CONTINUES
Millions of U.S. Online Travel Bookers
Source Travel Industry Association of America
61
CORE CONSUMER VALUES

• Shifts in consumer values already underway but
  may be accelerated
• Family
• Community
• Integrity
• Balance
• Authenticity
• Security

Source Yankelovich
62
WHAT TO DO NOW

• People dont buy things, they buy solutions to
  problems
• Make sure product orientation reflects core
  consumer values
• Redirect marketing first contribute to greater
  good by giving more than receiving
• Business leaders need to bolster confidence

• Source Yankelovich