Outbound Travel Outlook Caribbean and Mexico

Outbound Travel Outlook Caribbean and Mexico 2017-2021 June 2017

Table of Contents Background... 1 Forecast Assumptions and Risks... 1 Canadian Economic Trends... 2 Canadian Demographics... 3 Outbound Leisure Travel Forecast... 4 Caribbean & Mexico... 6 Tourism Performance... 6 Tourism Infrastructure and Airline Seat Capacity... 6 Outlook for the Caribbean and Mexico... 8 Regional Outlook, Selected Countries... 9 Mexico... 10 Cuba... 12 Dominican Republic... 13 Jamaica... 14 Bahamas... 16 Barbados... 17 Cayman Islands... 17 Other Caribbean Destinations... 18 i

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. Figure 1. Drivers of Outbound Travel Demand 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 terrorist 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 2017 will not change significantly during 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. Civil unrest, terrorist attacks, health crises, and significant weather events can have a short-term negative impact on travel to a destination. Since the end of the recession in 2009, Canada s economy grew at a rate that supported outbound leisure travel. This trend began to change along with economic performance in 2014, and has faltered somewhat in recent years. Looking forward, significant outbound growth is not anticipated, but Canada s leisure tourism activity is expected to be fairly stable throughout the forecast period. That said, regional differences will continue to occur. Population demographics continue to be a key factor in outbound travel performance. Canada s population will grow by just 4.1 per cent over the forecast period, leaving baby boomers (those born between 1946 and 1964) as the primary driver of outbound leisure travel performance. In addition, multi-generational travel will be further supported by the recent demographic shift; as of 2015 there were more seniors (65+) in Canada than children ( 14). A number of economic, demographic, and industrial factors will support outbound leisure travel during the forecast period. While the volume of outbound trips is forecast to increase over the next five years, not all destinations will share equally in this growth. Conference Board of Canada 1

Canadian Economic Trends Between 2010 and 2014, Canada s economy grew at a rate that supported outbound leisure travel. Then, the resource sector started to take a hit resulting in lackluster performance in 2015. While there were large regional differences in the country, business investment was weak in many sectors throughout 2016. The result was an economy that grew by a modest 1.2%. Looking forward, economic growth is projected to be more normal in 2017 but is expected to fall again in 2019. Growth will be fueled by federal government stimulus spending and a small recovery in energy investment, but weak business investment remains a concern. Provincially, the Conference Board of Canada forecasts strong economic growth in Alberta, British Columbia, Saskatchewan, and Ontario over the short-term. Ontario, Quebec, BC, and Alberta produce the highest volume of travellers so healthy economic growth in these regions should positively impact outbound travel activity. Figure 2. Per cent change in real GDP, basic prices (2007 $) 3.5% 3.3% 2.5% 1.9% 2.5% 2.6% 2.3% 1.9% 1.8% 1.8% 1.8% 0.7% 0.9% 1.2% 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017f 2018f 2019f 2020f 2021f -3.2% Source: CBoC forecast, May 2017 While household consumption will remain fairly flat, Canadians' real disposable income is forecast to see 2.1 per cent growth this year, and average 1.7 per cent throughout the forecast period. But inflation, especially travel prices, are rising faster than that. And, Canadian consumer debt is now a record 165% of disposable income. Most of that borrowing has gone to buying houses, but people are increasingly interested in consuming experiences, rather than buying more stuff. These income factors are sufficient to support outbound leisure travel, but growth will be modest as exchange rates continue to impact travel and spending patterns. After trading at par for an extended period, the loonie lost 25 per cent of its value against the U.S. dollar between 2013 and 2016. The most significant decline occurred in 2015 when the loonie dropped to its lowest level since 2004. In response, trips to the U.S. took a significant hit. The dollar has now stabilized somewhat, but is only expected to post an annual USD average in the mid- seventy-cent range through 2021. At the same time, the Euro is expected to average $1.62 CAD, and the Pound is forecast to average $1.86 CAD. Economic Indicators 2017f 2018f 2019f 2020f 2021f Real GDP, market prices (2007 $) (% change) 2.3% 1.8% 1.8% 1.7% 1.7% Real Disposable Income, basic prices (% change) 2.1% 1.4% 1.5% 1.6% 1.7% Household Spending, basic prices (% change) 2.0% 1.8% 1.8% 1.8% 1.7% CAD/USD $1.34 $1.33 $1.30 $1.29 $1.28 CAD/EUR $1.57 $1.63 $1.64 $1.58 $1.68 CAD/GBP $1.86 $1.87 $1.87 $1.85 $1.84 Source: Conference Board of Canada (May 2017 Outlook), Scotia FX World Outlook Conference Board of Canada 2

Canadian Demographics Canada s population is expected to surpass 38.1 million by 2021, an increase of 4.1 per cent compared to 2017. Impacted by provincial migration patterns, growth will be greatest in Alberta (7.2%) and Saskatchewan (5.8%). The most populous provinces Ontario and Quebec are expected to see some of the lowest population changes during the period, increasing 4.1 per cent and 3.1 per cent, respectively. In addition, the composition of the population is changing. According to the Census, the foreign-born population has tripled in the past twenty years, and continues to grow. Projections indicate that by 2031, Canada s visible minority population could rise to 12.8 million, an increase of 143 per cent. In conjunction with this increase, the place of birth of foreign-born persons in Canada will exhibit major changes through 2031. The proportion of Asian-born persons will continue to steadily increase, replacing the proportion of persons born in Europe. This change in the structure of the population, will impact where people travel. Figure 3. Canadian Population Forecast, 2017-2021 (% change) Atlantic Canada Quebec Ontario Manitoba Saskatchewan Alberta British Columbia Territories Canada 0.1% 2.8% 3.1% 4.1% 4.7% 4.5% 4.1% 5.8% 7.2% Source: CBoC forecast, December 2016 The aging of the population will also affect travel patterns as the share of Canadians aged 55+ continues to increase. Between 2017 and 2021, the proportion of Canadians aged 55-64 will increase 4.4 per cent, while the share of people aged 65 and older will increase 15.0 per cent. This trend applies across many of the provinces as well. For example, in Ontario, where the largest outbound travel market resides, the proportion of residents aged 55-64 will increase 7.2 per cent, while those aged 65+ will increase 14.8 per cent. This phenomenal rate of aging has resulted in a historical first. As of 2015, the number of Canadians aged 65+ outnumbered children age 14 and under. This is good news for organizations who rely on outbound travel performance. Figure 4. Per cent change in population by age and region, 2021 versus 2017 % change in population by age Atlantic Canada Quebec Ontario Manitoba Saskatchewan Alberta BC Canada under 15-0.9% 5.1% 3.5% 5.8% 8.0% 9.0% 3.4% 4.5% 15-24 -6.5% -5.2% -3.6% -1.4% -0.2% -1.3% -2.2% -3.2% 25-34 -3.7% 1.8% 5.1% 4.9% 3.1% 1.0% 4.1% 3.0% 35-44 -2.5% 4.1% 5.9% 8.5% 14.9% 15.2% 7.1% 6.7% 45-54 -9.3% -5.2% -6.4% -3.4% -2.0% -0.1% -4.5% -4.9% 55-64 1.2% 1.9% 7.2% 3.5% 1.3% 7.8% 3.2% 4.4% 65+ 14.4% 13.6% 14.8% 13.3% 13.1% 19.3% 16.2% 15.0% Source: CBoC forecast, December 2016 Conference Board of Canada 3

Since Canadians aged 55 and older are more likely to travel outside of Canada for leisure purposes than their younger counterparts Canada s aging population will help grow outbound leisure travel in the short-term. In fact, if Canadians 55 and older take the same proportion of pleasure trips in 2020 as they did in 2010, trips to the U.S. by this age cohort would see growth of 33.7 per cent and travel to non-u.s. destinations would increase 32.3 per cent. In contrast, the volume of trips by Canadians aged 35-54 would decline due to a drop in the number of Canadians aged 45-54. 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 travel over the next five years, but in the long-run, leisure destinations in the U.S., the Caribbean, and Mexico will be more popular for the older population due to their proximity to "home". In the short-term, the U.S. is expected to capture an average of 60 per cent of all Canadian outbound leisure trips, which is down from previous years as more Canadians explore other parts of the globe, and large increases in immigration continue to boost VFR trips to other countries. However, leisure destinations in the U.S. will slowly recapture their share of the outbound market. Outbound Leisure Travel Forecast In 2016, Canadians of all ages made an estimated 23.8 million overnight leisure trips to the U.S. and other destinations. While this was the second consecutive year of decline, unlike the shocks experienced in 2009 and 2002, trips to the U.S. took a huge hit compared to overseas travel. During the year, leisure travel to the U.S. declined -7.7 per cent while overseas trips grew 2.4 per cent. The acute declines in U.S. travel experienced of late are waning but trip volumes are still being affected by overnight automobile travel, which declined by more than three million trips since its peak in 2013. As a higher proportion of Canadians continue to visit non-u.s. destinations, the share of overseas leisure trips grew to 38 per cent in 2016; a trend that is not expected to reverse during the forecast period. Looking forward, outbound leisure travel is forecast to grow at a slower rate than what was experienced in the past decade. However, a shift in the demographics of travellers combined with increased visitation to overseas destinations will help overall outbound travel performance in the coming years. Some key factors to note are that aging boomers are more adventurous than the demographic that preceded them, and they have money to travel. Also, VFR trips related to immigration trends are expected to continue to increase, and a lot of new air capacity has come online for Europe and Asia. Figure 5. Outbound Leisure Trips to U.S. and Overseas Destinations (millions) 2009 2010 2011 14.2 15.6 16.7 7.1 U.S. Leisure Trips 7.6 Overseas Leisure Trips 7.9 2012 18.0 8.3 2013 18.7 8.1 2014 18.1 8.6 2015 15.9 8.9 2016p 14.8 9.5 2017f 15.1 9.9 2018f 15.5 10.1 2019f 16.0 10.4 2020f 16.7 10.6 2021f 17.4 11.0 Source: Statistics Canada, CBoC estimates. Conference Board of Canada 4

Outbound leisure travel is forecast to grow at an average annual rate of 3.4 per cent between 2017 and 2021. Overseas travel will be supported by a larger volume of older Canadians and immigration patterns. Following a couple of years of declines, leisure trips to the U.S. are forecast to return to a more normal growth scenario in 2017. Throughout the forecast period, trips to the U.S. are expected to post a compound average annual rate of growth of 3.6 per cent through 2021, while the average annual rate expected for overseas destinations is 3.0 per cent Figure 6. Annual Rate of Growth by Region, 2017-2021 4.2% 3.6% 2.9% 3.0% 3.0% 2.2% 2.2% 2.4% 1.6% Caribbean Mexico South America Central America Europe Asia Oceania Total Overseas U.S. Source: CBoC Conference Board of Canada 5

Caribbean & Mexico Tourism Performance Even though Mexico saw a larger volume of Canadians travellers in 2016 than in 2015, a drop in leisure travel to the Caribbean resulted in an overall decline in annual visitation to the region. Prior to 2016, the region saw a lengthy period of increased visitation, which pushed up travel prices. This inflation along with the steep decline of the Canadian dollar resulted in -2.2 per cent fewer visitors to Caribbean destinations in 2016. In contrast, attracted by a plethora of low-cost options and supported by significant direct access, Mexico welcomed more than 1.78 million Canadians in 2016, an increase of 1.9 per cent. As the average daily rate (ADR) started to fall throughout 2015, the Caribbean saw the highest overall level of occupancy the region has seen. But much of this boost was due to the strength of the U.S. and European markets. The Canadian market began to falter in 2015 and declined -2.9 per cent in 2016. Throughout the year, the ADR remained fairly stable but the occupancy rate fell to 66.7 per cent. While Canadians were drawn to the region by cost-effective packages and ample seat capacity to a number of destinations, the number of destinations recording decreases in Canadian arrivals far surpassed the number with increases. Throughout the year, the destinations with the largest year-over-year growth were Turks & Caicos (23.2%), Saint Vincent and the Grenadines (6.6%), and Barbados (5.9%). Even though some 3.3 million Canadians visited the Caribbean in 2016, Canada s market share dropped from 12.2 per cent to 11.3 per cent. In contrast, a larger share of visitors to Mexico were from Canada. Figure 7. Caribbean Occupancy Rates and ADR (USD$) 70.0% $230 Occupancy Rate ADR ($USD) $220 68.0% 66.0% 66.9% 67.8% 68.3% 66.7% $210 $200 $190 64.0% 64.2% 65.7% $180 62.0% 60.0% 61.8% 60.7% 60.3% 2008 2009 2010 2011 2012 2013 2014 2015 2016 $170 $160 $150 Source: STR, Caribbean Hotel and Tourism Association Tourism Infrastructure and Airline Seat Capacity In many Caribbean countries, the tourism industry attracts the majority of foreign investment, much of which is increasingly being funneled to projects that will appeal to high-yield tourists. According to STR, there were 241 thousand rooms available in 1,929 hotels throughout the region (excluding Cuba) in 2016 with another 13 thousand rooms under construction (as of May 2017). More than 80 per cent of these new rooms are planned for Mexico, Cuba, and the Dominican Republic. New developments, consistent brands, and growth in high-end, luxury options will help the region compete for the diverse Canadian market. Conference Board of Canada 6

Figure 8. Accommodation Supply, Occupancy and ADR in the Caribbean and Mexico Country Accommodation Supply Average Daily Rate (ADR) Occupancy Rate # Properties # Rooms 2016 ADR ($ USD) % change 2016 % change Anguilla 25 891 -- -- -- -- Antigua & Barbuda 48 3,723 -- -- -- -- Aruba 34 6,898 $273-5.2% 67.3% 1.1% Bahamas 116 13,190 -- -- -- -- Barbados 90 5,632 $280 0.6% 67.6% -1.5% Bermuda 23 2,067 $344-1.1% 57.7% 9.6% Bonaire 22 1,076 -- -- -- -- British Virgin Islands 32 1,033 -- -- -- -- Cayman Islands 59 3,985 -- -- -- -- Curacao 35 3,916 $148-2.3% 68.7% -3.9% Dominica 31 654 $133 0.6% 52.3% 5.9% Dominican Republic 239 66,604 $135 2.1% 72.8% 3.0% Guadeloupe 140 9,319 -- -- -- -- Grenada 39 1,643 -- -- -- -- Haiti 24 1,321 -- -- -- -- Jamaica 207 24,153 $232-4.2% 67.6% -4.9% Martinique 52 4,226 -- -- -- -- Puerto Rico 159 15,616 $183-4.0% 69.9% -6.0% Saint Lucia 55 4,093 $356 1.6% 74.7% -3.1% St. Kitts & Nevis 23 1,663 -- -- -- -- St. Maarten 40 3,657 -- -- -- -- St. Vincent & the Grenadines 34 868 -- -- -- -- Trinidad & Tobago 73 4,055 $159-0.4% 60.6% -8.3% Turks & Caicos 37 2,913 $962 6.8% 64.0% -7.6% U.S. Virgin Islands 78 4,726 $336 4.4% 77.2% 1.1% All Caribbean 1,929 241,053 $202-0.3% 66.7% -2.3% Mexico -- 365,793 $110 17.0% 60.3% 0.7% Source: STR December 2016, Caribbean Hotel and Tourism Association, Secretaría de Turismo de México In addition to accommodation offerings, tourism performance is directly dependent flight availability, and direct seat capacity from Canada has been expanding for the past few years. Between 2012 and 2016, carriers increased capacity to Caribbean destinations by 68.3 per cent and by 52.6 per cent to Mexico. Looking forward, carriers are planning to offer 224 thousand more seats to Mexico (10.9%) throughout 2017, but fewer seats to the Caribbean (-3.4%). Much of the decline to the Caribbean is connected to a reduction in service to Cuba. Most of the new seat capacity for Mexico will be destined for Mexico City, but an 8.0 per cent increase in direct service to Puerto Vallarta is also expected. Figure 9. Number of Seats on Scheduled Carriers; Caribbean and Mexico (2012-2017) 2017p 2,282,178 3,432,513 2016 2,058,131 3,554,930 2015 1,840,809 3,537,857 2014 1,608,853 3,012,053 2013 1,386,760 2,683,044 MEXICO 2012 1,348,941 2,112,479 CARIBBEAN Source: OAG Conference Board of Canada 7

Figure 10. Number of Direct Seats to Caribbean and Mexico, by Carrier (2013-2017) 2013 2014 2015 2016 2017 % Change (17 vs.16) CARG 2013-2017 Air Canada 888,276 971,011 1,045,815 1,209,813 1,406,153 16.2% 12.2% Air Transat 706,678 877,494 1,152,189 1,183,989 1,198,472 1.2% 14.1% Sunwing 1,132,650 1,348,893 1,560,006 1,498,581 1,346,247-10.2% 4.4% WestJet 1,062,436 1,136,858 1,156,398 1,226,111 1,121,597-8.5% 1.4% Other Carriers 277,174 286,650 464,258 494,567 642,222 29.9% 23.4% Total 4,067,214 4,620,906 5,378,666 5,613,061 5,714,691 1.8% 8.9% Source: OAG Figure 11. Scheduled Direct Air Capacity by Country Country 2016 2017 % Change Country 2016 2017 % Change Antigua 26,735 26,286-1.7% Haiti 36,831 44,306 20.3% Aruba 40,066 45,787 14.3% Jamaica 487,721 463,270-5.0% Bahamas 134,670 119,515-11.3% Martinique 13,903 19,512 40.3% Barbados 109,303 119,718 9.5% Puerto Rico 19,194 21,224 10.6% Bermuda 50,098 49,432-1.3% Saint Kitts & Nevis 2,170 2,440 12.4% Cayman Islands 22,630 22,977 1.5% Saint Lucia 43,886 47,604 8.5% Cuba 1,531,762 1,335,817-12.8% St Maarten 67,339 65,433-2.8% Curacao 14,045 20,041 42.7% Trinidad & Tobago 110,900 128,628 16.0% Dominican Republic 762,698 818,560 7.3% Turks & Caicos 54,426 50,990-6.3% Grenada 8,024 9,538 18.9% Caribbean 3,554,930 3,432,513-3.4% Guadeloupe 18,529 21,027 13.5% Mexico 2,058,131 2,282,178 10.9% Source: OAG Outlook for the Caribbean and Mexico Even though Canadian travel to the Caribbean faltered a bit in 2016, the most recent winter travel season saw an uptick in activity. The winter travel period runs from November through April and is when most Canadians visit southern destinations. Reporting from 23 countries indicates that more than 3.0 million visitors were welcomed to the region in 2016. While a lack of direct seat capacity to some destinations negatively impacts trip volumes, tourism performance in 2016 was primarily affected by economics and the CAD/USD exchange rate. Caribbean countries also face competition from Mexico and Latin America, which continue to grow in popularity. There was a record 1.78 million Canadian arrivals in Mexico in 2016, an estimated 90.0 percent of which were leisure travellers (1.6 million). Popular destinations in Latin America, including Belize, Costa Rica, Guatemala, and Panama, welcomed 305 thousand Canadian visitors throughout the year, a similar volume as reported in 2015. Modest growth in Canada s economy combined with an aging population, a less favourable exchange rate, and higher prices will continue to impact visitation to the Caribbean and Mexico in the coming years. After declining in 2016, trips to the Caribbean are forecast to recover in 2017 and grow at an average annual rate of 2.2 per cent through 2021. Mexico is expected to post an average annual rate of growth of 2.9 per cent over the same period. The distribution of trip destinations will vary during the forecast period as the exchange rate and operator supply support travel to mass market sun destinations and fewer trips to comparatively expensive countries. While other destinations are growing in popularity, Cuba and the Dominican Republic accounted for 66.5 per cent of reported arrivals in 2016, a slightly higher share than the previous two years. Throughout the forecast period, the share of overseas trips to Mexico is expected to remain stable around 13.5 per cent, while the share of trips to the Caribbean is expected to average 22.0 per cent. Conference Board of Canada 8

Figure 12. Number of Leisure Visits from Canada to the Caribbean and Mexico each year (000s) Caribbean (000s) Mexico (000s) 1,101 1,022 990 1,314 1,407 1,415 1,439 1,509 1,573 1,603 1,683 1,728 1,782 1,845 1,886 1,695 1,973 2,104 2,218 2,346 2,407 2,525 2,699 2,852 2,770 2,800 2,865 2,935 3,000 3,056 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016p 2017f 2018f 2019f 2020f 2021f Source: Statistics Canada, Caribbean Tourism Organization, Conference Board of Canada. Regional Outlook, Selected Countries The following table presents the number of Canadian arrivals to Mexico and 22 Caribbean destinations from 2012 through 2016 and the visitation forecast through 2021. Historical arrivals data is obtained from country's various tourist boards and statistical agencies and includes trips for all purposes. Figure 13. Forecast of Canadian Arrivals (all trip purposes) to Caribbean Destinations (000s) 2012 2013 2014 2015 2016p 2017f 2018f 2019f 2020f 2021f Anguilla 3,291 3,575 3,703 3,397 3,501 3,670 3,785 3,908 4,092 4,270 Antigua & Barbuda 24,185 30,235 27,701 23,270 21,196 20,489 20,960 21,463 21,935 22,686 Aruba 45,520 44,338 43,767 44,166 42,059 44,647 45,987 47,090 49,109 50,042 Bahamas 131,064 123,720 144,141 151,739 127,593 125,379 132,955 137,748 140,778 146,789 Barbados 72,020 67,295 65,814 74,494 78,903 82,566 84,778 87,133 90,032 92,744 Bermuda 30,565 27,613 29,170 24,986 23,744 25,993 26,904 27,870 28,810 30,025 Cayman Islands 24,092 23,640 24,908 24,299 23,274 23,853 24,714 24,987 25,536 26,022 Cuba 1,071,696 1,105,729 1,175,077 1,300,081 1,243,148 1,253,787 1,266,982 1,281,373 1,299,741 1,324,436 Curacao 9,743 9,561 12,532 18,501 17,960 18,348 18,770 18,900 19,643 20,350 Dominica 2,553 2,636 1,832 2,935 3,096 3,364 3,598 3,684 3,798 3,903 Dominican Republic 685,889 684,071 712,245 750,898 768,486 792,026 813,371 832,892 851,216 874,061 Grenada 7,822 9,038 10,347 10,790 11,303 11,926 12,201 12,493 12,866 13,178 Guyana -- -- 26,672 24,178 24,019 24,158 24,401 24,666 24,882 25,021 Haiti -- -- 32,606 37,155 38,989 40,060 40,669 41,324 41,906 42,035 Jamaica 403,200 399,331 419,898 391,409 372,137 388,368 403,557 410,039 422,334 433,694 Puerto Rico 23,904 22,451 21,935 22,184 20,612 19,877 20,021 20,182 20,626 21,018 Saint Lucia 37,709 35,985 41,502 38,677 37,772 39,754 40,669 43,246 44,198 46,038 St. Kitts & Nevis 7,073 6,611 6,217 9,293 6,870 6,728 6,726 6,791 6,875 7,006 St. Maarten 40,426 46,300 51,146 49,343 57,001 55,044 55,685 56,701 57,321 59,049 St. Vincent 7,424 7,089 7,203 7,515 8,010 8,043 8,228 8,425 8,512 8,674 Trinidad & Tobago -- -- 54,866 53,191 47,111 47,399 48,489 50,294 50,746 51,376 Turks & Caicos 37,877 31,797 37,989 36,512 44,974 45,870 45,048 45,489 45,507 46,372 Mexico 1,571,543 1,599,425 1,676,681 1,748,531 1,781,469 1,814,975 1,863,980 1,921,763 1,989,025 2,032,783 Sources: 2012-2016 from tourist boards and government agencies in respective countries; Conference Board of Canada forecast for 2017-2021. Conference Board of Canada 9

Mexico From 2010-2016, Canadian visitation to Mexican destinations grew at an annual average rate of 3.4 per cent. When other sun destinations saw fewer Canadian visitors in 2016, arrivals in Mexico grew 1.9 per cent to 1.78 million 1. This growth is linked to a relatively favourable exchange rate and the vast availability of vacation options. Seven Canadian tour operators serviced Mexico during winter 2016-17, offering 974 all-inclusive packages at an average cost of $2,097 CAD 2. While the region still offers numerous cost-effective options for Canadians, the value proposition is much different now than in previous years. In October 2016, the average overall winter package price increased 6.1 per cent compared to winter 2015-16. According to STR, the average daily rate in Mexico increased 17.0 per cent in 2016, with all five key markets in the country posting double-digit growth in RevPAR. In addition, the occupancy rate increased to 60.3 per cent throughout the year. Following a number of years with little change in hotel room supply, there are currently 8,649 new rooms under construction in 61 projects throughout the country, which will help augment the attractiveness of the destination for Canadians. Figure 14. Hotel Supply, Occupancy Rates, and Air Capacity by Destination 2016 Canadian Arrivals Arrivals (annual % change) Direct Seat Capacity Seat Capacity (annual % change) # Rooms (2016) Occupancy Rate (2016) Occupancy Rate (annual % change) Mexico 1,781,469 1.9% 2,058,131 11.8% 365,793 60.3% 0.7% Cancun 958,863-1.2% 1,063,253 5.2% 31,662 76.8% -0.3% Cozumel 28,151 4.9% 30,222 9.9% 4,350 58.7% 2.0% Huatulco 43,695 23.3% 48,919 38.5% 3,656 54.9% -1.0% Ixtapa 37,178-0.4% 37,811 23.0% 5,209 60.2% 5.2% Los Cabos 139,427-0.1% 131,223-0.8% 12,602 68.1% -2.3% Manzanillo 15,373-18.8% 16,168 16.5% 3,551 47.2% 4.1% Mazatlan 35,111 4.5% 32,705 10.2% 9,278 61.4% 2.4% Mexico City 141,623 27.5% 326,644 41.7% 51,777 66.7% -0.4% Puerto Vallarta 332,668 1.2% 358,435 10.7% 12,291 71.9% 5.8% Source: Secretaría de Turismo de México, OAG Throughout the forecast period, Mexico will continue to be Canada s top outbound travel market after the U.S. Increased access and excess supply will keep prices competitive leading to an average of 1.8 million annual leisure visitors from Canada between 2017-2021. Figure 15. Canadian Leisure Visits to Mexico, 2011-2021 (000s) 1,314 1,407 1,415 1,439 1,509 1,573 1,603 1,683 1,728 1,782 1,845 2011 2012 2013 2014 2015 2016p 2017f 2018f 2019f 2020f 2021f Source: Mexico Tourist Board, Statistics Canada, Conference Board of Canada 1 Secretaría de Turismo de México 2 Represents the average online price for all available 7-day all-inclusive packages from Toronto in November 2016 through April 2017 departing on or around the second Saturday of each month, as of the first week of October 2016. Conference Board of Canada 10

Recognizing the ongoing demand for authentic, experiential tourism, Mexico has placed greater emphasis on promoting the country s historical, cultural, and activity based resources. More than half of Canadians who reported an intended trip to Mexico during winter 2016-17 indicated that they would participate in a guided tour and/or cultural activity during their visit. In addition, close to half planned to participate in water sports (48%) and/or cultural activities (46%). According to the World Travel and Tourism Council, investment in Mexico s tourism industry will grow at an average annual rate of 6.7 per cent to reach USD $15.1b in 2026. Figure 16. Intended Activities of Canadian Winter Travellers to Mexico City/sightseeing tour 54% Water sports (snorkeling, scuba diving, surfing) Cultural activities (museum, heritage site, art gallery) 46% 48% Go boating motorboat, sailboat, kayak) 38% Experiencing the nightlife Get a spa treatment Visit a National/Provincial/State park 27% 30% 31% Attend a festival or concert Wildlife viewing or bird watching 20% 22% Source: Conference Board of Canada, Winter Travel Intentions Survey (October 2016) Looking forward, Mexico will remain the top destination for Canadians travelling outside of Canada and the U.S. The winter season continues to attract most Canadians to Mexico, but the summer months are growing in popularity. Summer season arrivals have grown at an average annual rate of 13.5 per cent since 2009. In 2016, almost 415 thousand Canadians travelled to Mexico between May-October, while there were 1.45 million visitors during the winter travel season. Figure 17. Canadian Arrivals in Mexico by Season, 2011-2016 2011 2012 2013 2014 2015 2016 CARG 2009-2016 SUMMER (May - October) 347,280 335,488 361,249 377,446 410,754 414,659 13.5% WINTER (November - April) 1,234,825 1,216,705 1,286,187 1,333,084 1,336,655 1,454,950 3.8% Source: Mexico Tourist Board By 2021, Mexico will welcome more than 2 million Canadian visitors, half of whom will arrive in Cancun. In 2016, Canadian arrivals in Cancun fell slightly (-1.2%), but still accounted for 53.8 per cent of arrivals in Mexico. After this downturn, the destination welcomed a record number of arrivals during the winter 2016-17 season. Even though the average daily room rate was up 2.8 per cent to USD $208, Cancun continues to have the highest occupancy rate of the main beach areas (76.8%). Conference Board of Canada 11

Cuba After surpassing one million Canadian visitors in 2011, travel to Cuba increased each year until 2016 when higher prices and increased demand from Americans resulted in a slight decline in arrivals (-4.4%). Along with this decline in visitation, Cuba s share of Canadian trips to the Caribbean dropped to 41.1 per cent. However, in terms of total volume, Cuba still remains one of the top three destinations in the region for Canadians. Since 2010, Canadian travel to the country has seen an average annual growth rate of 4.7 per cent. While visitation during the 2016 summer season dropped to 355 thousand trips (-4.6%), travel recovered slightly during winter 2016-17 posting a 2.3 per cent increase. The rapid rise in the total number of tourists to Cuba resulted in hotel room shortages and elevated pricing. Canadians have had to spend more to visit as the industry switched to U.S. pricing in advance of increased travel from the States. The currency difference resulted in price increases of 15-20 per cent for Canadians. The Ministry of Tourism had announced plans to build 108 thousand new rooms by 2030 in hotels, golf resorts, and new marinas, but this work may be stalled as the Trump administration is expected to reinstate the embargo on U.S. travel to Cuba. There are currently two projects underway, which will introduce 1,318 new rooms this year. In addition, Airbnb recently reported that Cuba has become its fastest growing market, adding four thousand private rooms to its website over the past year. Figure 18. Canadian Arrivals in Cuba, by Season (000s) 653 Winter Summer 721 762 778 824 932 886 278 273 300 310 326 372 355 2010 2011 2012 2013 2014 2015 2016 Source: La Oficina Nacional de Estadísticas de Cuba Large pricing increases negatively affected Canadian arrivals in 2016, and this has led carriers to reduce the volume of seats available in 2017. Service declines by Air Transat, Cubana, Sunwing, and WestJet will reduce direct seat capacity by -12.8 per cent throughout 2017. With more than 89 per cent of the 1.33 million scheduled seats departing from cities in Ontario and Quebec, these regions continue to be the main source markets for travel to Cuba. With plenty of direct seat capacity, numerous package options, and the opportunity to experience the authentic culture of Cuba alongside modern development, Canadian arrivals are forecast to again surpass 1.3 million, growing at an average annual rate of 1.4 per cent through 2021. Figure 19. Canadian Visits to Cuba, 2011-2021 (000s) 1,002 1,072 1,106 1,175 1,300 1,243 1,255 1,268 1,283 1,301 1,326 2011 2012 2013 2014 2015 2016p 2017f 2018f 2019f 2020f 2021f Source: La Oficina Nacional de Estadísticas de Cuba, Conference Board of Canada Conference Board of Canada 12

Dominican Republic As other destinations in the Caribbean saw a decrease in Canadian arrivals, the Dominican Republic managed to increase its market share in 2015 and 2016. After posting double-digit gains three summers in a row, the 2016 season saw Canadian arrivals grow 6.4 per cent. Furthermore, the winter 2016-17 season saw almost 600 thousand visitors, and increase of 7.3 per cent. Figure 20. Canadian Arrivals by Season, Summer 2011 - Winter 2016-17 2016-17 2015-16 2014-15 2013-14 2012-13 2011-12 598,718 557,904 548,188 530,822 526,271 552,580 2016 2015 2014 2013 2012 2011 207,169 194,794 176,774 153,666 138,300 129,476 Winter (Annual Rate of Growth: 1.6%) Summer (Annual Rate of Growth: 9.9%) Source: Banco Central de la República Dominicana With plenty of direct seat capacity and attractive off-season prices the destination continues to grow its off-season market. In summer 2010, 20.3 per cent of Canadian trips to the Caribbean were to the Dominican; this increased to 24.6 per cent during summer 2016. Compared to 2016, carriers are reporting a 9.2 per cent increase in capacity for summer 2017, which will help support visitation throughout the season. Eighty per cent of the new capacity will be offered by Sunwing out of Montreal (+44.2%) and Toronto (+23.1%). In addition, service increases by Air Canada will help to counter capacity reductions by other carriers. Canadian visits to the Dominican Republic are forecast to grow at a compound average annual rate of 2.5 per cent between 2017 and 2021. While the largest volume of visitors will arrive in Punta Cana, destinations such as Puerto Plata, La Roma, and El Catey are expected to capture a larger share of the Canadian market going forward. Figure 21. Canadian Visits to the Dominican Republic, 2011-2021 (000s) 666 686 684 712 751 768 794 815 835 853 876 2011 2012 2013 2014 2015 2016 2017f 2018f 2019f 2020f 2021f Source: Banco Central de la República Dominicana, Conference Board of Canada Conference Board of Canada 13

400,000 350,000 300,000 250,000 200,000 150,000 100,000 50, 000 0 15. 0% 10. 0% 5.0 % Jamaica Jamaica steadily grew its share of Canadian trips to the Caribbean between 2004 and 2012, and reached a record high of 420 thousand arrivals in 2014. Then the dollar tanked and Canadian trips took a huge hit, falling -6.8 per cent in 2015, and -4.9 per cent in 2016. Compared to the peak year of 2014, Canadians made 48 thousand fewer visits in 2016. This reduction in activity brought the country s share of Canadian trips to the Caribbean down to 12.3 per cent; this share was 14.3 per cent in 2014. Figure 22. Jamaica's Share of Canadian Visits to the Caribbean, 2006-2016 Arrivals Market Share 12.7% 13.4% 14.7% 14.9% 14.7% 378,938 403,200 399,331 14.3% 419,898 12.6% 391,409 12.3% 372,137 11.0% 10.3% 290,307 325,191 9.3% 236,193 190,650 153,571 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Source: Jamaica Tourist Board, Conference Board of Canada After significant increases in package prices during winter 2015-16, the average cost of an all-inclusive package to Jamaica stabilized during the 2016-17 winter season. Even though it is the most expensive of the top four Caribbean destinations for Canadians, average prices had increased by just 1.9 per cent at the beginning of the season; the smallest increase amongst the destinations scanned 3. While higher prices did have a negative effect on visitation over the last couple of years, demand seems to be on the rise again. After reaching a record high of 420 thousand Canadian visits in 2014, activity fell -6.8 per cent in 2015 and another -4.9 per cent in 2016. The annual volume of trips from Canada settled at 372 thousand last year. While there was no year-overyear change in the number of summer visits in 2016, the 2016-17 winter travel season saw visits start to recover. Overall, there were 249 thousand Canadian visitors between November 2016 and April 2017, an increase of 4.7 per cent. Even so, the last two winter seasons have recorded the smallest volume of visits since winter 2009-10. Since 2011, the volume of summer arrivals has grown at an average annual rate of 5.3 per cent, while winter season visits have declined by an annual average of -2.9 per cent since 2011-12. 3 Based on a scan of 7-day all-inclusive packages offered by six operators from Toronto to Cuba, the Dominican Republic, Jamaica, and Mexico during the winter months of November through mid-april. Prices for a one-week package around the second week of each month were captured in both 2015-16 and 2016-17. Conference Board of Canada 14

Figure 23. Canadian Arrivals by Season, Summer 2011 - Winter 2016-17 2016-17 2015-16 2014-15 2013-14 2012-13 2011-12 249,130 237,962 267,526 278,869 264,605 288,961 2016 2015 2014 2013 2012 2011 132,237 132,057 141,984 126,098 115,659 102,115 Winter (Annual Rate of Growth: -2.9%) Summer (Annual Rate of Growth: 5.3%) Source: Jamaica Tourist Board Accounting for about two-thirds of Canadian trips, any change in activity from Ontario has a measurable impact on visitation. The volume of visits from Ontario fell -3.6 per cent in 2015, and -2.6 per cent in 2016, but activity from this market is again on the upswing. Some of this performance is connected to air access. Of all the direct seats available in 2017, 84.2 per cent are from cities in Ontario. Even though Air Transat (-10.1%) and WestJet (-10.5%) are reducing service this year, total direct capacity is currently reported as 464 thousand seats. Figure 24. Seasonal Arrivals in Jamaica by Province of Residence Nov - April Winter 2011-12 Winter 2012-13 Winter 2013-14 Winter 2014-15 Winter 2015-16 Winter 2016-17 % Change % Share (2016-17) Ontario 168,153 157,380 168,944 167,614 155,846 168,042 7.8% 67.5% Quebec 38,861 37,370 37,678 34,890 27,317 27,657 1.2% 11.1% Alberta 26,756 24,036 26,411 23,040 17,472 17,601 0.7% 7.1% BC 10,258 7,756 7,696 7,092 6,937 7,100 2.3% 2.8% Prairies 24,450 18,837 18,507 17,428 15,139 14,904-1.6% 6.0% Atlantic 20,046 18,854 19,256 17,087 14,905 13,471-9.6% 5.4% Other 437 372 413 375 346 355 2.6% 0.1% Total 288,961 264,605 278,905 267,526 237,962 249,130 4.7% 100.0% May - Oct Summer 2012 Summer 2013 Summer 2014 Summer 2015 Summer 2016 % Change % Share (2016) Ontario 83,383 93,335 101,754 97,746 97,394-0.4% 73.7% Quebec 17,003 16,146 20,150 15,669 15,090-3.7% 11.4% Alberta 6,203 7,195 9,443 8,513 8,875 4.3% 6.7% BC 3,071 3,213 3,549 3,331 3,793 13.9% 2.9% Prairies 1,880 1,997 1,956 1,982 1,907-3.8% 1.4% Atlantic 3,971 4,097 5,015 4,700 5,035 7.1% 3.8% Other 148 115 117 116 143 23.3% 0.1% Total 115,659 126,098 141,984 132,057 132,237 0.1% 100.0% Source: Jamaica Tourist Board Conference Board of Canada 15

While the Ontario economy is performing well, a decrease in seat capacity along with competition from other package destinations will present a challenge for Jamaica. The destination is certainly in a more favorable position to grow arrivals now that the market has adjusted to increased prices, but a rebound to pre-2014 volumes is not anticipated for a couple of years. Between 2017 and 2021, Canadian visits to Jamaica are forecast to grow at an average annual rate of 2.8 per cent. Figure 25. Canadian Visits to Jamaica, 2008-2021 (000s) 403 420 379 399 325 290 236 391 372 389 404 411 423 435 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017f 2018f 2019f 2020f 2021f Source: Jamaica Tourist Board, Conference Board of Canada Bahamas After successfully growing Canadian visitation during the economic downturns experienced in 2014 and 2015, the Bahamas experienced a -15.9 per cent drop in arrivals last year. At 127 thousand, the number of visitors welcomed in 2016 is similar to the volume recorded in 2012. More than two-thirds of Canadian arrivals occur during the winter months and the last two seasons saw visits drop off due to the accelerated decline of the loonie, and other extenuating factors such as extreme weather (Hurricane Joaquin) and a reduction in direct capacity. Following a -2.8 per cent decrease in direct capacity last year, air service to the Bahamas from Canada is scheduled to decrease by another 15 thousand seats in 2017 (-11.3%). Most of the decline has stemmed from reductions in service by Sunwing. The airline increased capacity by a whopping 656 per cent between 2012 and 2015, but has since reduced service by almost half. Sunwing will offer 23 thousand direct seats in 2017, while Air Canada and WestJet will have 96 thousand seats available. Eighty-eight per cent of direct capacity will depart from Toronto in 2017. Of Canadians who have vacationed out of the country in the past three years, one third of those who visited the Bahamas reside in Toronto. Canadian arrivals to the Bahamas grew at a compound average annual rate of just 1.1 per cent between 2010 and 2016. Another slight decline is expected in 2017, but visitation to the Bahamas is expected to recover in 2018 and grow at an average annual rate of 4.0 per cent through 2021. Figure 26. Canadian Visits to the Bahamas, 2008-2021 (000s) 115 107 119 124 131 124 144 152 128 126 133 138 141 147 2008 2009 2010 2011 2012 2013 2014 2015 2016p 2017f 2018f 2019f 2020f 2021f Source: Bahamas Ministry of Tourism, Conference Board of Canada Conference Board of Canada 16

Barbados As a place that competes with other relatively expensive destinations, the Barbados is a lower volume but high-yield destination. Canadian travel to the Barbados declined in 2013 and 2014, but rebounded strongly posting two years of growth to reach a record high of 79 thousand arrivals in 2016. This positive performance corresponds to an increase in direct seat capacity by Air Canada. The carrier added more than 19 thousand seats between 2014-2016, and plans to add another 7 thousand seats from Toronto and Montreal this year. This will help grow arrivals, even as higher than average accommodation prices are expected to keep growth restrained at an average annual rate of 2.9 per cent. Average room rates in Barbados were USD $280 in 2016, making the destination one of the most expensive in the Caribbean, especially when the Canadian exchange rate is taken into account. More than seven out of ten arrivals occur during the winter months, making the November through April winter travel season the most important period for Canadian travel to Barbados. Figure 27. Visits to the Barbados, 2005-2021 (000s) 48 49 53 57 64 72 72 72 67 66 74 79 83 85 87 90 93 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017f 2018f 2019f 2020f 2021f Source: Barbados Statistical Service, Conference Board of Canada Cayman Islands With almost three-quarters of Canadians arriving in the Cayman Islands in the winter months, the November to April period remains the most important season for the destination. Following the introduction of WestJet flights in 2010, the volume of winter arrivals has not fluctuated too much over the past six seasons, posting an average annual rate of growth of -1.1 per cent. With both Air Canada and WestJet serving the destination, direct capacity is expected to remain around 23 thousand seats this year. With no foreseeable increase in seat capacity, arrivals are forecast to grow at an average annual rate of 2.2 per cent throughout the forecast period. Figure 28. Canadian Visits to the Cayman Islands, 2012-2021 24,092 23,640 24,908 24,299 23,274 23,907 24,770 25,043 25,594 26,081 2012 2013 2014 2015 2016f 2017f 2018f 2019f 2020f 2021f Source: Cayman Islands Department of Tourism, Conference Board of Canada Conference Board of Canada 17

Other Caribbean Destinations Rounding out the top ten destinations in terms of annual Canadian arrivals are St. Maarten, Turks & Caicos, Trinidad & Tobago, Aruba, and Saint Lucia. In 2016, these five destinations welcomed 229 thousand Canadians and accounted for a combined total of 7.6 per cent of the Canadian market. Pricing in many of these smaller destinations is significantly more than that of the region s high-volume countries making it virtually impossible to compete for the mass market traveller. Appealing to niche markets and high-end travellers is crucial for growth. Given economic conditions and the accelerated decline in the value of the loonie, it is not surprising that the relatively more expensive destinations of Aruba (-4.8%) and Saint Lucia (-2.3%) recorded fewer Canadian arrivals in 2016. In contrast, with 23.2 per cent growth, Turks & Caicos became the fastest growing Caribbean destination in 2016. With 57 thousand Canadian arrivals, St Maarten also experienced growth in 2016. While direct seat capacity from Canada to St. Maarten (-2.8%) and Turks & Caicos (-6.3%) is expected to decrease in 2017, the carriers serving Aruba (14.3%), Saint Lucia (8.5%), and Trinidad & Tobago (16.0%) plan to increase the number of available seats. Air Canada s new seasonal service to Trinidad & Tobago will add 26 thousand seats from Canada in 2017. The carrier is also responsible for much of the new service offered to Aruba and Saint Lucia, while additional capacity to St. Maarten by Air Transat will offset the decline in service from Sunwing and WestJet. After adding capacity in 2016, WestJet plans to scale back service to Turks & Caicos in 2017 (-37.5%), but further expansion by Air Canada (31.6%) will help offset this decline. With more capacity, travel to Aruba is expected to recover this year and grow at an average annual rate of 2.9 per cent through 2021. In addition, new capacity to Saint Lucia will help the Canadian market grow at an annual average rate of 3.7 per cent over the next five years. The loss of service and higher prices will dampen overall growth in St. Maarten and Turks & Caicos, but arrivals in these destinations over the forecast period will be supported by a wealthier, niche markets who seek out unique travel opportunities. Figure 29. Canadian Arrivals in Select Lower-Volume Destinations, 2014-2021 2014 2015 2016p 2017f 2018f 2019f 2020f 2021f CARG 2017-2021 Aruba 44,338 43,767 42,059 44,748 46,091 47,197 49,220 50,155 2.9% Saint Lucia 35,985 41,502 37,772 39,844 40,761 43,344 44,298 46,143 3.7% St. Maarten 46,300 51,146 57,001 55,169 55,811 56,829 57,451 59,183 1.8% Turks & Caicos 37,989 36,512 44,974 45,870 45,048 45,489 45,507 46,372 0.3% Trinidad & Tobago 44,103 54,866 47,111 47,507 48,599 50,408 50,861 51,493 2.0% Source: respective tourism agencies, Caribbean Tourism Organization, Conference Board of Canada Conference Board of Canada 18