TRAVEL & TOURISM CITY TRAVEL & TOURISM IMPACT 2017 LATIN AMERICA

TRAVEL & TOURISM CITY TRAVEL & TOURISM IMPACT 07 LATIN AMERICA

TRAVEL & TOURISM CITY IMPACT As the world rapidly urbanises, there is a need to manage that growth with effective planning. A successful city is one where business, infrastructure, resources, and environment meet with quality jobs and effective government support. Gloria Guevara Manzo, President & CEO World Travel & Tourism Council THE IMPORTANCE OF CITIES.% of the global population live in urban areas in, and is predicted to increase to 60% by 00..8BN international tourism arrivals per year expected by 00, with particular growth in cities. 6 global cities analysed in the latest research from the World Travel & Tourism Council. F or over years, the World Travel & Tourism Council (WTTC) has been quantifying the economic and employment impact of Travel & Tourism at the country and regional level. This data is a key source of information for decision-makers within governments, investment banks, academia, and multilateral organisations across the world, and particularly within the 8 countries for which we provide detailed reports. It allows us to state with confidence the fact that Travel & Tourism is one of the largest sectors in the world, supporting more than 0% of global economic activity and 9 million jobs: in 0 jobs worldwide. Now, for the first time, WTTC has produced research that looks at the economic and employment impact of Travel & Tourism in cities. Future growth and success for the sector requires recognising and monitoring the trends that will drive future travel habits. According to the UN, the urban population of the world has grown rapidly from 76 million in 90 to over four billion in and today,.% of the world s population lives in urban areas. This proportion is expected to increase further to 60% by 00, with nearly all of the increase concentrated in Asia and Africa. With international tourism arrivals set to rise to.8 billion a year by 00 (UNWTO), and billions more domestic travellers expected, the city share of these arrivals shows particular growth. Understanding the rate and concentration of city tourism compared to country tourism growth is an important need for policy makers. Our research looks at 6 global cities, chosen for being among the top ranked for arrivals and spending by visitors. Across all cities in our study, even despite being selected as key Travel & Tourism centres, there are enormously differing levels of importance. Travel & Tourism s share of city GDP in Cancún, for example, is as much as 9.%, whereas in Los Angeles, with its much more diversified economy, the sector represents only.% of its GDP. The difference in the share of employment is also just as marked, ranging from supporting 8.% of all employment in Cancún to just 0.8% in Osaka. With highest levels of growth concentrated in Asia, this research importantly provides forecasts for how these figures may change over the decade ahead. As the world rapidly urbanises, there is a need to manage that growth with effective planning. A successful city is one where business, infrastructure, resources, and environment meet with quality jobs and effective government support. Goal. of the UN Sustainable Development Goals calls out the need for cities to strengthen efforts to protect and safeguard the world s cultural and natural heritage. The role of Travel & Tourism in contributing to this goal in cities cannot be underestimated, both in creating civic pride and jobs, and, on a pure financial basis, through the export revenue generated by international visitors. Cities are growing increasingly large and influential and are accounting for a greater proportion of global tourism demand. WTTC is proud to provide the evidence base to help public and private bodies make the correct decisions for the future growth of a sustainable Travel & Tourism sector. Gloria Guevara Manzo President & CEO FOREWORD WTTC annual economic impact analysis https://www.wttc.org/research/economic-research/economic-impact-analysis/ For more information, please contact: ROCHELLE TURNER Research Director rochelle.turner@wttc.org EVELYNE FREIERMUTH Policy & Research Manager evelyne.freiermuth@wttc.org Cover: Aerial view, Hong Kong CITY TRAVEL & TOURISM IMPACT 07

SUMMARY Latin America s share of the world's direct Travel & Tourism GDP stands at %. Not surprisingly, therefore, the sector also generates a relatively small proportion of GDP directly for the regional cities in this study, especially when compared across the 6 cities covered in the fuller global analysis. Despite being somewhat small on a global scale, the cities themselves hold a high level of importance for the respective national Travel & Tourism sectors, with many hosting significant hub airports for inter-continental flights and being important gateways for travel to other destinations in the region. Collectively these six cities represent one quarter of Travel & Tourism's GDP contribution to the whole of Latin America. However, this proportion is forecast to dip to % by 07 as new destinations are developed in the decade ahead. There is potential for significant expansion of the sector in the region as wealth in local source markets increase and connectivity to the rest of the world improves. Cities will remain important as gateways for travel to these countries. Buenos Aires is the largest Travel & Tourism destination city in the region included in this study, and the sector makes a higher contribution to GDP (.%) in Argentina s capital than in all the other Latin American cities studied. Buenos Aires is a particularly important city for Travel & Tourism within Argentina and directly generates over half of all sector GDP for the country. Rio de Janeiro is also a large tourism city in the region; Travel & Tourism directly generated.9% of Rio s GDP in. Lima is an important gateway city for Peru as the vast majority of international travel passes through the city. It accounts for 9.% of all Travel & Tourism GDP in Peru. Travel & Tourism is an important tool for job creation in the city The share of city employment directly generated by Travel & Tourism is broadly consistent with the sector s GDP contribution to that city. However, it is larger in Bogotá and Brasília, where tourism jobs are notably labour-intensive. Bogotá, Colombia SUMMARY LATIN AMERICA TRAVEL & TOURISM IN LATIN AMERICA % Latin America s share of global direct Travel & Tourism GDP..9% of all jobs in the region are supported by Travel & Tourism. Within the Latin American cities in this study, all apart from Santiago have a higher share of Travel & Tourism employment than in the country overall. In Santiago, the share for city and country is the same. Growth in tourism activity can have a disproportionately large impact on job creation. However across Latin America, despite some significant forecasts for GDP growth over the next ten years, expected growth in employment is relatively small for the same period. Differences in the importance of other sectors between and within cities means that Travel & Tourism s share of employment by city can differ greatly. International and domestic demand is important for large destinations The city destinations that generate the most Travel & Tourism GDP across the global study vary widely in their levels of demand from international and domestic markets. A focus solely on international demand would overlook some important destinations. Domestic travel demand must also be included to fully understand the importance of travel to cities as it contributes significantly to all the largest destination cities. The cities within this study are all more reliant on domestic than international demand. This is clearest for Rio de Janeiro and Brasília due to the very large domestic Brazilian market. Study includes: Bogotá, Brasília, Buenos Aires, Lima, Rio de Janeiro, Santiago. CITY TRAVEL & TOURISM IMPACT 07

SUMMARY FIGURE : TOP LATIN AMERICAN CITY DESTINATIONS, * Tourism Market Size (Tourism GDP, US$ bn) Share of City GDP (City tourism GDP % of total city GDP) Share of Country GDP (City tourism GDP % of country tourism GDP) DOMESTIC Buenos Aires. Buenos Aires. Buenos Aires 9. Rio de Janeiro 6. Rio de Janeiro.9 Lima 9. Brasília, Brazil Lima. Lima.6 Santiago 8.9 Santiago.9 Santiago. Bogotá 9. Brasília is the most extreme case where just % of Travel & Tourism activity was generated by international demand in. Business travel is important for the city, including large volumes of government-related travel. Growth has slowed more recently during the recession, but this follows some particularly strong growth in prior years as economic activity was booming, helped by increases in government spending. 6 Brasília. Brasília. Rio de Janeiro. 6 Bogotá.8 Bogotá. Brasília.7 FIGURE : TOURISM MARKET SIZE & GROWTH* Lima, Peru Lima and Bogotá have the largest proportion of international demand, but domestic demand still generates more than half of all sector activity. The domestic markets are not particularly large in these countries and there is scope for future growth by attracting more international visitors and spending. INTERNATIONAL City tourism GDP % growth, -6 CAGR 0 9 8 7 6 0 Lima Brasília Santiago Rio de Janeiro Bogotá Buenos Aires 0 6 City tourism GDP, city GDP, The six Latin American cities here also tend to have a much lower reliance on inbound spend than other cities. Brasília relies on domestic spending for over 90% of demand, while for Santiago, domestic spend represents 76% of the total for the city. Many of these cities have large internal markets, but international demand could be improved in some cases by continuing to increase connectivity. Connectivity has aided city growth Aided by growing connectivity and rich cultural assets, travel demand to city destinations has grown more rapidly than overall travel demand over the past ten years. The share of travel to selected cities in countries within Latin America has fallen over the past decade as other destinations have gained in popularity. Total Travel & Tourism growth in these emerging market regions has been rapid over the past decade however, so a falling share still translates into rapid growth. FIGURE : % INTERNATIONAL SPEND OF CITY TRAVEL & TOURISM*.7% Brasília.6% Rio de Janeiro.6% Buenos Aires.% Santiago.% Lima 6.% Bogotá FIGURE : LATIN AMERICA CITIES SUMMARY* Bogotá Brasília Buenos Aires Lima Rio de Janeiro Santiago GDP Contribution Employment Contribution (000s) GDP Growth Employment Growth - -..6 0.9. 7.9 7.6.9.7.8..9.8.8.......6 6..9.9...7.7.0.7.0 9.0. 9.. 7.9..9. 0.9. 8.6 6.6.9.7 9.8.8 7.8.8 0.0..6.9 6.0.8 8.6..8... 7.. 7.0%.9% 6..6.9%.% 7.0. 8.%.% 8..7 7.%.% 00..6.% -0.6% 0.. 7.%.6% 6 WORLD TRAVEL & TOURISM COUNCIL *Source: Oxford Economics *Source: Oxford Economics CITY TRAVEL & TOURISM IMPACT 07 7

SELECTED CITIES BY MARKET SIZE (GDP) BUENOS AIRES Greater invetsment in connectivity and access could boost arrivals from international source markets Rio de Janeiro is highly dependent on domestic demand, with just 6% of spending coming from international markets. The deep recession of recent years in Brazil has therefore hampered tourism spending growth. Buenos Aires has a high reliance on domestic demand, comparable to the composition of demand for Argentina as a whole. Travel spending has been broadly flat over the past ten years in US$ terms, but has grown denominated in Pesos. Prices charged in pesos have increased with high inflation, but the weak currency means that the destination remains very affordable for foreign visitors (especially so from January 07 when the government introduced a scheme to allow international visitors to receive a refund of VAT on accommodation). Over the past decade, the number of overnight visits has more than doubled, including a notable growth in domestic demand and an increase in the share of domestic demand from % in 007 to 6% in. Improved affordability FIGURE : BUENOS AIRES DIRECT TRAVEL & TOURISM GDP, -6* Travel & Tourism GDP (LHS) Travel & Tourism % Total City GDP (RHS) US$bn 0 0 0 0 has not yet been sufficient to attract large volumes of additional international visitors. In real terms, revenue has fallen, consistent with the lacklustre economic performance over this period, and the limited improvement in earnings. Travel & Tourism's share of Buenos Aires' GDP has fallen over the past decade. Despite some increased affordability due to currency depreciation, there has been limited growth in international demand and spend. However, the largest international source market for Buenos Aires is Brazil which was hit by a large recession at the same time. The USA and Spain are the second and third ranked source markets, and greater connectivity and access may facilitate increased demand from these, and other, developed markets..% % Brazil % USA % Spain 6% 9% 8% 7% 6% % % % % % 0% RIO DE JANEIRO After two years of contributing over US$7 billion to the Rio de Janeiro economy in 0 and, the GDP contribution in the city fell in US$ terms in 0, with some improvement in. Despite a fall in visits and spending between and however, last year the share of both GDP and employment generated by Travel & Tourism increased to a decade high. Travel & Tourism GDP reached.9% of total economic activity, while Travel & Tourism employment contributed.% of all jobs in the city. As the wider economy recovers, so too is an increase in arrivals and spending expected to continue. As the recovery happens, the share of GDP and employment by the sector will fall back towards average historical rates. Hosting the Football World Cup in and the Olympics in had limited direct impact on overall Travel & Tourism GDP and employment. In, there was some uptick in the volume of visits and nights stayed. But then and in, and as is typically seen for mega-events, there was also large displacement to other destinations, with other travel postponed or deferred. Any improvements in international demand were also offset by lower domestic demand due to the recession. and employment contribution has rebounded strongly since a fall in visitors over a two-year period FIGURE 6: RIO DE JANEIRO DIRECT TRAVEL & TOURISM GDP, -6* Travel & Tourism GDP (LHS) Travel & Tourism % Total City GDP (RHS) US$bn 0 6% 9 % 8 7 % 6 % % % 0 0% Buenos Aires Summary Argentina Summary Rio de Janeiro Summary Brazil Summary..7.% 8.% 8.9..0% 8.% 6. 9..7%.% 6.8 08..% 6.7%.%.0% - -.%.% - -.9%.% - -.%.% - - 6.0 7.0 -.6%.% 7.7 70. -.%.6%.8 00..9% -0.6%,0.,7..%.%.8%.% - -.%.6% - -.%.6% - -.8%.% - - 8 WORLD TRAVEL & TOURISM COUNCIL *Source: Oxford Economics *Source: Oxford Economics CITY TRAVEL & TOURISM IMPACT 07 9

SELECTED CITIES BY MARKET SIZE (GDP) LIMA SANTIAGO Lima is a pivotal hub and gateway to Peru with 90% of visitors spending at least one night in the capital T&T in Santiago is forecast to go from strength to strength, growing at a rate of 7.% p/a to.6% % USA % Argentina 7% Brazil 6% Spain % Mexico % Peru is one of the fastest growing economies in South America according to the Inter- American Development Bank. Capitalising on this growth is the capital Lima, which accounts for 9% of tourism activity within Peru and is both an important destination and gateway for travel to the rest of the country. Almost 90% of foreign visitors to Peru spend at least one night in Lima. However, as many of these visitors enter the country in Lima and then move on to spend time elsewhere in Peru, the average length of stay in the city is lower than for the country as a whole. Lima attracts a significant proportion of visitors from outside Latin America and its airport is a gateway for arrivals from long-haul markets. The top source market for the city is the USA which is the second largest market for the country as a whole (after Chile). This high concentration of Travel & Tourism in the city is reflected in a higher contribution to GDP:.6% of city GDP is directly generated by the sector compared with.9% for the country as a whole. A similar gap has been evident over the past decade and is expected to persist in coming years. Lima will remain the main gateway for travel to Peru. Travel & Tourism in Santiago has seen 7.% growth over the past decade, with its contribution to the Chilean capital s GDP doubling to US$.9 billion. This trend is set to continue, with a further doubling of revenue over the next ten years and a growth rate of 7.%, mirroring that in the country at large. Although the sector s importance to Santiago s economy has strengthened since, its share of overall city GDP is still relatively low at.% and is expected to remain roughly at that level in the coming decade. The city relies heavily on other industries such as clothing production and copper mining. in. Nearly a third of the international demand comes from the USA. In contrast, US visitors comprise only % of all international spend throughout Chile, suggesting that many Americans do not venture beyond the capital..% % USA 9% Argentina 9% Brazil % Spain % Mexico % FIGURE 7: TOURISM SHARE OF TOTAL GDP, -6* Lima Peru.% %.% %.% %.% Nevertheless, around half of Chile s Travel & Tourism activity takes place in Santiago. It is already an important hub city for domestic and international flights, but the sector should benefit more from additional connectivity once the city opens a new international terminal in. Visitor numbers for Santiago reached their highest level yet in, as did the number of jobs in the city directly related to tourism. Employment prospects look rosy for the sector, with jobs predicted to increase by an additional 0,000 to 0,00 by. FIGURE 8: SANTIAGO DIRECT TRAVEL & TOURISM GDP, -6* Travel & Tourism GDP (LHS) Travel & Tourism % Total City GDP (RHS) US$bn 9 8 7 6.%.%.% %.9%.8%.7%.6% %.% The international market is now playing a bigger role in Santiago s tourism; its share of spending rose from % in to %.% 0.% Lima Summary Peru Summary Santiago Summary Chile Summary. 9.0 8.9% 7.% 7.6.6 8.% 7.%.9 7.9 7.% 7.% 8. 6. 6.% 7.%.6%.% - -.9%.% - -.%.% - -.%.% 8.6 8..%.% 0. 66..%.%. 0..%.6% 69. 0..0%.8%.%.7% - -.%.9% - -.%.% - -.%.% - - 0 WORLD TRAVEL & TOURISM COUNCIL *Source: Oxford Economics *Source: Oxford Economics CITY TRAVEL & TOURISM IMPACT 07

SELECTED CITIES BY MARKET SIZE (GDP) BRASÍLIA BOGOTÁ One of the smaller cities in the study, but Brasília's growth rate of 8.% has outpaced Brazil as a whole Increased connectivity yields a positive outlook for international arrivals to Bogotá over the next decade Travel & Tourism spending in Brasília - US$. billion in - is relatively low in comparison to most cities in the study. Demand has grown over the past decade, but Brasília has remained one of the smaller cities in this study over the period. It is therefore no surprise that Brasília s impact on the whole country s tourism GDP and employment is also small contributing just.7% of Brazil s tourism GDP and.% of all its tourism jobs. The modern, purpose-built capital city of Brasília has seen tourism revenue more than double over the past ten years however, and its impressive growth rate of 8.% has outpaced that of Brazil as a whole. There was a downturn in 0 during the recession, but this followed some particularly strong growth in prior years as economic activity boomed, helped by increases in government spending. Brasília s reliance on domestic demand is the greatest of all 6 global cities in the full global study; Brazilian visitors generated 96% of all Travel & Tourism activity in. Business travel is important for the city, including large volumes of government-related travel. FIGURE 9: TOURISM SHARE OF TOTAL GDP, -6* Brasília Brazil % Share.%.%.%.9%.7%.%.%.%.% % USA 9% Argentina 7% Portugal % France % Germany % The Colombian capital generated US$.8 billion in tourism revenue in the smallest of all Latin American cities in the study, but a significant 9.% of all of Colombia s Travel & Tourism GDP. Travel & Tourism s share of the city s overall GDP stands at just.%, but a higher proportion than the sector s. of the country s overall GDP. Visitor numbers peaked in 007 before dropping sharply in amid a recession and the depreciation of the peso. The city has seen a gradual rise in arrivals in recent years but connectivity is vastly improving with a number of new airline routes opened in 07. It should be just another year or two for arrivals to get back to, and then grow beyond, 007 levels. FIGURE 0: BOGOTÁ DIRECT TRAVEL & TOURISM GDP, -6* Travel & Tourism GDP (LHS) Travel & Tourism % Total City GDP (RHS) US$bn Travel & Tourism demand to the city has risen by % over ten years. However, this belies notable fluctuations in annual figures, as were seen in Colombia as a whole. In and 0, for example, the sector experienced negative growth; positive growth albeit very modest - returned in. Bogotá has a greater reliance on international visitors than any of the other Latin American cities in the study, and most trips are for leisure rather than business purposes. Even so, domestic demand still forms 9% of its tourism revenue, and spending from Colombian arrivals is forecast to double by. Tourism activity overall is set to grow by 7% over the next ten years..% % USA 7% Mexico 0% Spain % Brazil % Argentina % %.% %.% Despite the prediction of a slight dip in Travel & Tourism s share of the city s GDP and employment by, the sector will grow by.9% in Brasília..9%.7%.% 0 % 0.% 0% Brasília Summary Brazil Summary..7 8.%.9% 6.8 08..% 6.7%.%.0% - -.%.% - -.6 6..%.%,0.,7..%.%.9%.6% - -.8%.% - - Bogotá Summary Colombia Summary.8..0% 7.0% 6..9 6.6% 6.9%.%.7% - -.%.% - - 0 7..%.9% 60 70.7.0%.%.%.% - -.7%.9% - - WORLD TRAVEL & TOURISM COUNCIL *Source: Oxford Economics *Source: Oxford Economics CITY TRAVEL & TOURISM IMPACT 07

METHODOLOGY WORLD TRAVEL & TOURISM COUNCIL, AND OXFORD ECONOMICS City and Metro Definitions A wide geographic definition of cities has been used in this study to include metros or greater city areas rather than measuring just the urban core. The bulk of the reliable and consistent economic data across cities is available for this broader definition. Hence, to ensure consistent estimates of economic contribution this definition was adopted. Consistent definitions across cities have been used in all cases to ensure comparability. In the instances where travel data are only reported for a narrow city centre definition or for a wider geographic area, estimates are based on multipliers using all available sector or industry data. City travel data are collated in Oxford Economics Global City Travel (GCT) database using a narrow definition of the city in many cases, consistent with widespread reporting. GCT data used in this study have been adjusted accordingly. Further details are in the methodology appendix. GVA Methodology Calculation of economic impact reconciles two methodologies for cities consistent with the country level economic impacts estimated as part of the WTTC annual economic research. Results from the two methodologies are used as cross-checks to refine assumptions and derive a final combined estimate. Supply-side: Sectoral output by city is the starting point for analysis. Tourism ratios consistent with country level estimates are imposed to understand the proportion of output generated by tourism activity. As an example, if a city has a high concentration of activity in the hotels and restaurants sector then it is fair to assume that a large proportion of this activity is generated by tourist spending. This city will therefore have a large economic contribution from tourism. Demand-side: Tourism spend for each city as a destination is calculated first according to GCT definitions of cities which quantifies arrivals, overnights average spending and total tourism revenue. Where necessary, this is grossed-up to the wider metro definition for consistency. A ratio of GVA to Gross Output is then applied, consistent with the WTTC annual economic research and the industrial structure for the country and the city. Employment Methodology Tourism employment by city is derived from the Travel & Tourism GVA and labour productivity. Labour productivity for tourism characteristic sectors is estimated for the cities and the countries. A productivity multiplier is derived for the city relative to the country according to this sectoral detail and is then applied to country labour productivity from WTTC s annual economic research. METHODOLOGY The World Travel & Tourism Council is the global authority on the economic and social contribution of Travel & Tourism. WTTC promotes sustainable growth for the Travel & Tourism sector, working with governments and international institutions to create jobs, to drive exports and to generate prosperity. Council Members are the Chairs, Presidents and Chief Executives of the world s leading private sector Travel & Tourism businesses. Together with Oxford Economics, WTTC produces annual research that shows Travel & Tourism to be one of the world s largest sectors, supporting over 9 million jobs and generating 0.% of global GDP in. Comprehensive reports quantify, compare and forecast the economic impact of Travel & Tourism on 8 economies around the world. In addition to the individual country reports, WTTC produces a world report highlighting the global economic impact and issues, and further reports that focus on regions, sub-regions and economic and geographic groups. To download reports or data, please visit www.wttc.org Assisting WTTC to Provide Tools for Analysis, Benchmarking, Forecasting and Planning. Founded in 98 as a commercial venture with Oxford University s business college, Oxford Economics is one of the world s foremost independent global advisory firms, providing reports, forecasts and analytical tools on 00 countries, 00 industrial sectors and over,000 cities. Their best-of-class global economic and industry models and analytical tools give an unparalleled ability to forecast external market trends and assess their economic, social and business impact. Headquartered in Oxford, England, with regional centres in London, New York and Singapore, Oxford Economics has offices across the globe in Belfast, Chicago, Dubai, Miami, Milan, Paris, Philadelphia, San Francisco, and Washington DC. The company employs over 00 full-time staff, including more than 00 professional economists, industry experts and business editors one of the largest teams of macroeconomists and thought leadership specialists underpinning the in-house expertise is a contributor network of over 00 economists, analysts and journalists around the world. For more information, please see www.oxfordeconomics.com, or email: mailbox@oxfordeconomics.com WORLD TRAVEL & TOURISM COUNCIL CITY TRAVEL & TOURISM IMPACT 07

THE AUTHORITY ON WORLD TRAVEL & TOURISM WORLD TRAVEL & TOURISM COUNCIL (WTTC), The Harlequin Building, 6 Southwark Street, London SE 0HR, United Kingdom Tel: + (0) 07 8 8007 Email: enquiries@wttc.org www.wttc.org World Travel & Tourism Council: City Travel & Tourism Impact 07 - October 07. All rights reserved. The copyright laws of the United Kingdom allow certain uses of this content without our (i.e. the copyright owner s) permission. You are permitted to use limited extracts of this content, provided such use is fair and when such use is for non-commercial research, private study, review or news reporting. The following acknowledgment must also be used, whenever our content is used relying on this fair dealing exception: Source: World Travel & Tourism Council: City Travel & Tourism Impact 07 - October 07. All rights reserved. If your use of the content would not fall under the fair dealing exception described above, you are permitted to use this content in whole or in part for non-commercial or commercial use provided you comply with the Attribution, Non-Commercial.0 International Creative Commons Licence. In particular, the content is not amended and the following acknowledgment is used, whenever our content is used: Source: World Travel & Tourism Council: City Travel & Tourism Impact 07 - October 07. All rights reserved. Licensed under the Attribution, Non-Commercial.0 International Creative Commons Licence. You may not apply legal terms or technological measures that legally restrict others from doing anything this license permits.