OUTBOUND CANADA U.S. Regional Travel Outlook

OUTBOUND CANADA U.S. Regional Travel Outlook 2017-2021 June 2017

Table of Contents Background... 1 Forecast Assumptions and Risks... 1 Canadian Economic Trends... 2 Outbound Leisure Travel Forecast... 4 United States Tourism Performance... 5 Airline Seat Capacity... 7 Future Visits (Regional Outlook)... 8 New England... 8 North Central and Atlantic... 9 Mountain and Pacific Region... 9 Future Visits (Selected Destinations)... 10 Florida... 10 Orlando... 11 Arizona... 12 Phoenix... 12 Nevada... 13 Las Vegas... 13 California... 14 Los Angeles... 14 Hawaii... 15 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 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 United States Tourism Performance It is well-known that the early 2000s were wrought with many unforeseen challenges for the tourism sector. 9/11, SARS, and the war in Iraq occurred back-to-back. Trip volumes dropped off, then recovered a few years later as the value of the dollar increased. Combined with pent-up demand, there was a 70.7 per cent increase in overnight leisure visits to the States between 2004 and 2014. After reaching a peak of 18.1 million in 2014, leisure visits fell -12.2 per cent in 2015 and another -7.8 per cent in 2016 to settle at the lowest level since the global recession. Interestingly, the latest shock of a tumbling dollar had a more acute year-over-year impact than either the global recession (-3.0%) or 9/11 (-4.5%). This dreary performance was driven primarily by reductions in auto travel. About 6 in 10 overnight leisure trips to the U.S. are via automobile and auto travellers are much more price sensitive than people who travel by other modes. The good news is that the share of trips by air is growing. Twenty years ago, just one-fifth of visitors flew to their U.S. destination. This share has now increased to more than one-third partly because there is a lot more capacity available as the travelling population demands ease of access. It is also a result of the attractiveness of convenient and cost-effective air options as people increasingly take more frequent trips but of shorter duration. The story still isn t great for U.S. destinations, but it could be a lot worse. While an increasingly smaller share of outbound trips are currently destined for the States, the good news is that a large proportion of U.S. travellers are 55 or older, which is not only the fastest growing age cohort in the Country, but this group has also kept outbound leisure travel performance from dropping off more significantly over the past couple of years. And, six-in-ten visitors are from Ontario and Quebec provinces with healthy economies and excellent access to many U.S. destinations. Conference Board of Canada 5

Another reason trips stateside didn t fall more drastically in the last couple of years is because of snowbird activity. When overall outbound travel declined in 2015 and 2016, snowbird trips increased. Since 2000, Canada's snowbird market has grown at an average annual rate of 9.8 per cent. Although snowbird trips to countries other than the U.S. are growing, this trend will gradually reverse as more Canadian travellers move into the 65+ age category. Canadians are much more likely to travel domestically or to the U.S. as they get older. They also march to their own drum and don t let politics dictate their leisure activities. In January 2017, the Conference Board of Canada administered an online survey of Canadian adult travellers which focussed on people who are likely to vacation in the U.S. This group were asked questions regarding the Trump Presidency and any impact on their travel plans. Overall, 37 per cent of Canadians who said they are likely to take a leisure trip to the U.S. over the next few years reported that the Trump Presidency would negatively impact their travel intentions. However, the likelihood of the Trump Presidency negatively impacting travel to the U.S. reportedly decreases with age. A full half of travellers aged 18-24 said they are less likely to travel to the U.S. under the current regime compared with one-quarter (27%) of travellers aged 65+. Provincially, travellers from Quebec are the most ambivalent about impacts to their trip plans (56% say it will have no impact), while a large proportion of travellers from BC (44%) and Ontario (38%) reported being less likely to vacation stateside while Trump is in Office. In addition, while just 31 per cent of male travellers reported a negative impact on their travel plans, 43 per cent of women said they are now less likely to travel to the U.S. The Trump Slump could reduce performance regionally, but older travellers are less likely to be swayed by politics, which should help temper the impact. With a forecasted average exchange rate in the mid-seventies, overnight leisure trips stateside are estimated to gain some momentum this year. Throughout the forecast period, trip volumes are forecast to grow at an average annual rate of 3.6 per cent. Figure 7. Outbound Overnight Leisure Trips to the U.S., 2009-2021 (millions) 14.2 15.6 16.7 18.0 18.7 18.1 15.9 14.8 15.1 15.5 16.0 16.7 17.4 2009 2010 2011 2012 2013 2014 2015 2016p 2017f 2018f 2019f 2020f 2021f Source: Statistics Canada, CBoC. The vast majority of overnight leisure trips to the U.S. are via price-sensitive auto travellers. The exchange rate has stabilized, but the low value of the loonie will continue to affect the volume of auto trips. Trips by automobile are forecast to grow at an average annual rate of 2.8 per cent between 2017 and 2021, while trips by other modes are forecast to grow at an average annual rate of 4.9 per cent. Conference Board of Canada 6

Millions of Overnight Leisure Trips Figure 8. Overnight Auto Travel and the Canadian Dollar, 2005-2021 13.0 Overnight Auto Trips $1.00 12.0 Average Annual Exchange Rate $0.95 $0.90 11.0 $0.85 $0.80 10.0 $0.75 9.0 $0.70 $0.65 8.0 $0.60 $0.55 7.0 $0.50 $0.45 6.0 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016p 2017f 2018f 2019f 2020f 2021f $0.40 Source: Statistics Canada, CBoC. Airline Seat Capacity Since 2012, direct capacity from Canada has increased at an average annual rate of 2.1 per cent to surpass 18.5 million scheduled seats in 2017. In volume terms, California, Florida, New York, Illinois, and Texas will account for over 9.6 million seats in 2017, which represents 51.9 per cent of direct capacity. However, even though they remain in the top five, both Florida (-5.3%) and New York (-2.9%) will see fewer direct seats this year compared to last. Compared to 2016, the South Central region will see the largest growth in seat capacity this year (+13.0%), followed by New England (12.7%) and the Pacific region (8.1%). From a State point-of-view, the biggest increases will be seen in Tennessee (64.6%), Utah (26.3%), Louisiana (24.2%), Indiana (22.8%), and Colorado (19.9%). Half of the new capacity to these destinations will be provided by Air Canada (50.9%). Figure 9. Direct Seat Capacity to U.S. Destinations by Carrier, 2012-2017 Carrier 2012 2013 2014 2015 2016 2017 CARG (2012-2017) Air Canada 5,607,327 5,601,187 5,896,443 6,625,152 7,490,023 8,221,551 8.0% WestJet 2,185,160 2,439,555 2,605,099 2,656,694 2,841,391 2,941,143 6.1% United 2,834,298 3,127,568 3,044,144 2,573,323 2,217,284 2,171,046-5.2% Delta 1,466,775 1,446,643 1,498,575 1,693,552 1,918,987 1,977,282 6.2% American Airlines* 2,507,786 2,376,905 2,288,302 2,050,629 1,661,418 1,526,876-9.4% Porter 603,680 618,170 669,254 676,878 694,490 724,682 3.7% Alaska Air 767,474 769,055 792,602 658,106 584,951 589,320-5.1% Other Carriers 693,688 349,381 354,909 439,732 460,709 367,473-11.9% Total 16,666,188 16,728,464 17,149,328 17,374,066 17,869,253 18,519,373 2.1% Source: OAG. *Includes US Airways. Conference Board of Canada 7

Future Visits (Regional Outlook) When asked where in the U.S. they were most interested in visiting, Canadians again ranked New York City and Las Vegas at the top of the list. These two destinations ranked first and second for all age groups. Backed by interest from travellers aged 55+, Boston moved up two positions in the rankings, while Phoenix dropped one spot. Orlando took the third spot overall, but interest varies by age. Canadians aged 35-54 ranked Orlando higher than those aged 18-34 or 55+. Canadians aged 55+ remain less likely than younger travellers to identify Florida destinations as places they are interested in visiting, which will negatively impact visitor volumes. Even so, Florida will continue to be the top U.S. state for Canadian leisure travellers when measured in both visit nights and dollars spent. Figure 10. Interest in Visiting U.S. Destinations Sometime in the Future (% of Canadians by Age) age 18-34 age 35-54 age 55+ age 18-34 age 35-54 age 55+ New York City 49.7% 42.1% 27.4% Chicago 27.8% 18.4% 10.2% Las Vegas 49.2% 41.2% 26.1% Florida Keys 18.7% 19.4% 14.9% Orlando 37.2% 29.7% 14.2% San Diego 20.6% 15.8% 8.8% Maui 31.1% 24.6% 15.9% Texas 16.7% 13.7% 10.4% Los Angeles 39.1% 25.8% 8.4% Cape Cod area 10.4% 12.9% 15.1% Boston 28.0% 22.5% 17.5% Fort Lauderdale 13.1% 11.7% 8.8% Miami 39.3% 20.6% 7.7% Phoenix 10.1% 10.5% 8.5% Source: CBoC travel intentions survey, October 2016. Figure 11. U.S. States by Travel Region New England Atlantic North Central South Central Mountain Pacific New England Following significant expansion last year, new and expanded service will add another 87 thousand direct seats to the region in 2017. Most of the new capacity is being offered by Air Canada and WestJet and is destined for Boston. This increase in direct capacity along with healthy visit interest by older travellers and the size of the outbound market in the key markets of Ontario and Quebec will help trips to New England grow at an average annual rate of 4.0 per cent between 2017 and 2021. The region's overall market share is expected to average 10.3 per cent through 2021. Conference Board of Canada 8

North Central and Atlantic Following the trend that began with the decline in the value of the Canadian dollar, visitation to border states in the North Central and Atlantic regions will continue to be impacted by a weak overnight auto market this year. However, the reality of a sub-par dollar along with proximity to Canada's largest travel markets Ontario and Quebec will help trip volumes to destinations such as Michigan, Ohio, Pennsylvania, and New York recover by 2018. Over the forecast period, North Central should see an average annual rate of growth of 2.9 per cent, while the rate of growth in the Atlantic region, including Florida, is estimated to be 3.2 per cent. Florida will see more than 2.2 million direct seats in 2017, but this represents a -5.3 per cent decline compared to 2016. This reduction in capacity along with waning interest from key markets will negatively affect travel volumes in the short-term. Mountain and Pacific Region Now that the resource sector has begun to recover, trip volumes from Central Canada and Alberta are expected to stabilize. This activity, along with new air capacity and strong demand from British Columbia and Ontario, will help Mountain and Pacific destinations see some growth in the coming years. Direct air capacity to the Pacific region, including California, will see an increase of 347 thousand seats in 2017 (8.1%), while the Mountain region will see growth of 2.1 per cent. With capacity to Hawaii expected to decline slightly in 2017, arrivals are expected to follow suit. Solid visit interest and the strength of Hawaii s repeat market will help support arrivals, but the market will not be as robust as was between 2010 and 2015. Now that the Alberta economy is recovering, visitation to Arizona is expected to recover some of its lost market share throughout 2018. Las Vegas continues to be a destination Canadians intend to visit in the short-term, but high costs continue to reduce Canadian travel volumes to Nevada. Of key destinations in the region, California is expected to see decent growth in the short-term as carriers introduce new and expanded routes from Canada. Overall, the Mountain region is forecast to post an average annual rate of growth of 3.3 per cent, while the Pacific region is expected to see an average annual rate of growth of 4.3 per cent. Figure 12. Visits to the U.S. by Region, 2012-2021 (millions of visits) 2011 2,420 8,778 3,377 3,286 4,227 2012 2,412 9,500 3,481 3,314 4,684 2013 2,536 9,767 3,235 3,588 5,305 2014 2,552 9,535 3,194 3,494 5,382 2015 2,204 8,351 2,882 3,051 4,542 2016p 2,083 7,791 2,689 2,847 4,238 2017f 2,109 7,832 2,715 2,757 4,678 2018f 2,194 7,880 2,726 2,833 4,771 2019f 2,264 8,090 2,792 3,078 4,880 2020f 2,369 8,372 2,875 3,243 5,175 2021f 2,471 8,876 3,047 3,143 5,542 New England Atlantic North Central South Central Mountain Pacific Source: Statistics Canada, CBoC estimates. Note that the volume of visits amounts to more than the number of trips as more than one state can be visited during the course of a single trip. Conference Board of Canada 9

Future Visits (Selected Destinations) Florida While visitation from Canada declined in 2016, Florida remains the number one outbound travel destination for Canadians. Since the loonie started to lose value in 2014, Florida has seen its volume of trips decline, dropping from 4.2 million trips in 2013 to almost 3.4 million in 2016. At the same time, direct air arrivals grew 16.9 per cent, and now represent about almost half of visits. Ease of access and direct service to new destinations continues to be a key factor in tourism performance in the state, but visit interest from older Canadians is waning. However, even though a smaller proportion of Canadians aged 55+ indicate a desire to visit various destinations in Florida, 39.0 per cent of Canadian visitors to the State in the past two years were born between 1945-1965. Figure 13. Proportion of Travellers Aged 55+ Interested in Visiting Florida (in the Next Three Years), 2014-2016 6.0% 5.0% Orlando 4.0% Ft. Lauderdale 3.0% Miami 2.0% Florida Keys 1.0% Elsewhere in Florida 0.0% 2014 2015 2016 Source: Conference Board of Canada annual travel intentions survey While population trends and ease of access will help visitation to the state recover from the recent declines in travel volumes, the exchange rate will continue to negatively affect indirect arrivals and trips by automobile. Between 2014 and 2016, indirect arrivals, including auto trips, fell by more than one-third (-36.2%). The market is not expected to post significant growth in the short-term, but will recover some of its lost market share through 2017 and 2018. Overall, visitation is forecast to post an average annual rate of growth of 2.6 per cent during the forecast period. Figure 14. Visits by Canadians to Florida each year (000s) 2,485 2,872 2,644 3,102 3,319 3,559 4,187 4,016 3,797 3,240 3,292 3,348 3,468 3,552 3,647 2,098 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016p 2017f 2018f 2019f 2020f 2021f Source: Statistics Canada, CBoC estimates. Conference Board of Canada 10

425,705 372,337 384,045 447,992 455,483 394,380 483,824 441,838 528,906 469,484 529,721 481,573 503,807 570,851 537,031 614,628 584,283 595,312 690,794 684,915 Orlando Thanks to increased capacity to Orlando International, direct air arrivals in Orlando grew from 537 thousand in 2015 to 584 thousand in 2016. Even though there was a decline in indirect arrivals, growth in capacity to MCO along with new service to Sanford and Melbourne airports resulted in almost 1.2 million arrivals in 2016. While some Florida destinations faltered, Orlando saw a 1.9 per cent increase in overall arrivals during the year. With direct air arrivals now accounting for almost half of all leisure visits to Orlando, seat capacity is a key contributor to annual performance. Air Canada is planning some expansion in 2017, but other carriers are not reporting any new capacity, resulting in minimal growth in direct arrivals throughout the year. After falling to the lowest level since 2011, indirect arrivals are starting to regain some lost ground, but the proportion of visitors by land and through connecting traffic is not expected to post much growth throughout the forecast period. Overall, visits to Orlando are forecast to grow at an average annual rate of 1.5 per cent between 2017 and 2021. Figure 15. Orlando (MCO) Capacity and Direct Arrivals, Annual Seats Passengers 2008 2009 2010 2011 2012 2013 2014 2015 2016p 2017f Source: OAG, CBoC estimates. Figure 16. Canadian Visits to Orlando each year (000s) 910 865 960 1,015 1,085 1,140 1,170 1,180 1,192 1,215 1,236 1,263 1,275 1,291 2008 2009 2010 2011 2012 2013 2014 2015 2016p 2017f 2018f 2019f 2020f 2021f Source: Visit Orlando, CBoC estimates. Conference Board of Canada 11

500,472 426,693 461,106 465,627 560,927 570,184 494,150 507,454 438,302 423,132 593,840 533,425 503,414 617,676 Arizona As expected, the decline in economic performance in Arizona s key Canadian market, Alberta, resulted in a significant drop in visitation of late. Between 2014 and 2016 Canadian visits to the State fell -14.2 per cent, with much of the drop occurring in 2016. With close to half of visits to Arizona made by residents of the Prairie provinces, trip volumes to the state will regain ground as the Alberta economy continues to grow. Though travel performance will lag economic growth, Alberta is on track to post one of the largest increases in provincial GDP throughout 2017. That said, a reduction in seat capacity will negatively affect performance. Direct seat capacity from Canada grew significantly between 2008 and 2015, then fell to 536 thousand seats as American Airlines further reduced capacity from Alberta. Even though Air Canada has plans to increase capacity in 2017 and WestJet will begin service to Phoenix-Mesa Gateway Airport, continued route changes by American Airlines will reduce direct service by 30 thousand seats throughout the year. Throughout the forecast period, Arizona is expected to benefit from an average market share of 27 per cent of Canadian visits to the Mountain region. This is expected to result in an average annual rate of growth of 3.8 per cent. Figure 17. Visits by Canadians to Arizona each year (000s) 704 728 850 896 885 769 744 765 800 843 864 2011 2012 2013 2014 2015 2016p 2017f 2018f 2019f 2020f 2021f Source: Arizona Office of Tourism, Statistics Canada, CBoC estimates. Phoenix About six-in-ten Canadian visits to Arizona are to Phoenix, and most of those trips are by air. After a significant decline in capacity in 2016, both American Airline and WestJet are further reducing service to PHX throughout 2017. In contrast, Air Canada plans to add a significant number of direct seats during the summer months and WestJet has introduced new service to Phoenix-Mesa airport that will add more than 12 thousand seasonal seats from Edmonton and Calgary in 2017. These changes in capacity to the area will result in -5.6 per cent fewer available seats, bringing the annual passenger total to 423 thousand. Figure 18. Phoenix (PHX & AZA) Capacity and Direct Arrivals, Annual Seats Passengers 2011 2012 2013 2014 2015 2016p 2017f Source: OAG, US BTS, CBoC estimates. Includes PHX and AZA (as of 2017). Conference Board of Canada 12

866,939 776,197 903,690 789,913 874,884 789,081 1,075,516 894,649 1,097,747 912,529 1,064,931 884,602 1,029,632 874,079 Nevada While the CAD-USD exchange rate isn t as much of an acute shock for travellers now that the dollar s decline has slowed, travel prices are increasing faster than disposable income. With Las Vegas as the main destination in Nevada for Canadian leisure travel, prices are a key factor impacting visitation. The average daily rate at accommodations in Las Vegas increased from $108 CAD in 2012 to $167 CAD in 2016. In addition, a reduction in the share of Canadians aged 25-49 will dampen performance in the medium- to long-term as almost half of visitors to the state during the past three years fall into this age group. With the state is poised to receive close to half of all Canadian visits to the Mountain region throughout the forecast period, its performance is expected to resemble that of the region. Throughout the forecast period, the average annual rate of growth is estimated at 3.4 per cent. Figure 19. Visits by Canadians to Nevada each year (000s) 1,587 1,662 1,557 1,481 1,422 1,343 1,321 1,346 1,385 1,476 1,509 2011 2012 2013 2014 2015 2016p 2017f 2018f 2019f 2020f 2021f Source: Statistics Canada, CBoC estimates. Las Vegas Following a -3.0 per cent reduction in direct seat capacity, Las Vegas welcomed 884 thousand Canadian deplanements in 2016, down from 912 thousand the year prior. Direct air passengers arriving in Las Vegas represent two-thirds total overnight visits to Nevada each year. While Sunwing has cancelled air-only service, WestJet recently cancelled three routes (YOW, YUL, YXX) and reduced service on four others (YEG, YXE, YQR, YYJ). Air Canada now accounts for 48.0 per cent of direct capacity. With only Air Canada and WestJet providing direct service in 2017, overall capacity is expected to drop to 1.03 million seats resulting in 874 thousand direct arrivals. Figure 20. Las Vegas Capacity and Direct Arrivals, Annual Seats Passengers 2011 2012 2013 2014 2015 2016p 2017f Source: OAG, US BTS, McCarran International Airport, CBoC estimates. Conference Board of Canada 13

1,038,986 860,836 911,432 1,104,836 1,024,537 1,067,130 1,241,345 1,106,077 1,280,700 1,311,122 1,220,977 1,443,792 California Even though California welcomed an estimated 1.5 million Canadian visitors in 2016, this represents the second annual decline in as many years. Looking forward, the State is expected to benefit from increases in direct air capacity as well as strong demand from the key markets of British Columbia and Ontario. California is also expected to benefit from strong demand from younger travellers as well as significant increases in connecting traffic destined for Asia-Pacific destinations. Throughout the forecast period, visitation is expected to stay fairly stable growing at an average annual rate of 2.5 per cent between 2017-2021. Figure 21. Visits by Canadians to California each year (000s) 1,476 1,543 1,567 1,625 1,579 1,541 1,580 1,622 1,664 1,708 1,746 2011 2012 2013 2014 2015 2016p 2017f 2018f 2019f 2020f 2021f Source: Statistics Canada, CBoC estimates. Los Angeles An estimated 708 thousand Canadians visited LA in 2016; the same volume as seen in 2013 before the loonie started its steep decline. Direct air service is scheduled to grow 10.4 per cent this year, which is estimated to result in 1.2 million direct arrivals in 2017. Of these passengers, 711 thousand are expected to stay in the L.A. area. Overall visits (air and land) to L.A. are expected to account for around 46 per cent of total Canadian visits to California, resulting in an average annual rate of growth of 3.4 per cent between 2017 and 2021. Figure 22. Los Angeles Capacity and Direct Arrivals, Annual Seats Passengers 2012 2013 2014 2015 2016p 2017f Source: OAG, US BTS, Los Angeles International Airport, CBoC estimates. Conference Board of Canada 14

Hawaii Benefitting from a strong outbound travel market in western Canada and new direct capacity from Toronto, Canadian arrivals in Hawaii more than doubled between 2005 and 2015. Then, the market fell -6.5 per cent in 2016 as the value of the loonie dropped to an annual average of $0.76 USD. During the year, direct arrivals grew 3.0 per cent to surpass 359 thousand, while indirect arrivals from U.S. ports declined -26.9 per cent. This was the third consecutive year of decreases in indirect volume, pushing the overall share of visitors arriving from a Canadian airport up to 75 per cent. This share was 61 per cent in 2014 when the dollar averaged $0.91 USD. Historically, lower taxes and fees resulted in a larger volume of Canadians flying to Hawaii via the U.S., but new direct capacity is reversing this trend. Compared to 2015, WestJet offered additional capacity from Calgary and Edmonton throughout the year, while Air Canada offered a slightly higher volume of direct seats from Toronto and Vancouver. These changes resulted in a 1.6 per cent increase in direct capacity during the year. In contrast, Alaska Airlines seasonal service from Bellingham offered -19.0 per cent fewer seats to Honolulu and Kahului in 2016. Looking forward, carriers are currently reporting a decline of nine thousand direct seats in 2017, which along with higher costs for indirect travel is expected to result in another year of stagnant growth. Figure 22. Direct (International) and Indirect (Domestic) Passengers 250,000 Via U.S. Direct from Canada 200,000 150,000 400,000 350,000 300,000 250,000 200,000 100,000 50,000 0 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 150,000 100,000 50,000 0 Source: Hawaii Tourism Authority, US BTS, OAG Proximity will continue to attract travellers from BC to Hawaii and increased access will help the Ontario market grow. These two provinces will see some of the largest increases in the baby boomer population, which is good news for the destination. A high volume of repeat travellers is also beneficial to overall visitation. Two-thirds of Canadians who visited Hawaii in 2016 were repeat visitors. A decrease in capacity in 2017 is expected to produce higher load factors, but the decrease in seats is forecast to result in an estimated 472 thousand arrivals throughout the year. After that, Hawaii should regain its share of Pacific region travellers, and grow at an average annual rate of 2.8 per cent over the forecast period. Conference Board of Canada 15