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     Presentation To:
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2
    WTTC RESEARCH
       LAUNCH
         ITB, Berlin
        6 March 2008

3
                          Overview
    • A Changing World: Macro Drivers
       – Headwinds
       – Tailwinds

    • Global Travel & Tourism: The 2008 simulated Tourism
      Satellite Accounts
       – Recent developments in Travel & Tourism
       – Prospects for 2008 and the coming decade

    • The major stories:
       –   No repeat of 2001-03 contractions in T&T activity
       –   The impact of currency shifts
       –   The surge in the Middle East (Example of UAE)
       –   China’s growing role in travel and tourism

    • Summary Tables
4
    A Changing World:
      Macro Drivers


5
        Headwinds for the world in
                 2008

    • Credit crunch continues to be a worry on
      outlook
    • High oil prices may become a major constraint
      on growth
    • US housing in trouble
    • Weaker dollar
    • China to record another year with 2-digit growth


6
     The US housing market in
             free fall
    US: Housing activity
    Millions
    2.4                                     Permits

    2.2

    2.0

    1.8

    1.6
                                            Starts
    1.4

    1.2

    1.0

    0.8
      2002       2003        2004       2005          2006   2007   2008
    Source: Census Bureau/Haver Analylics



7
    Incomes being squeezed by
          high oil price
    Brent Oil Price
    $/barrel
    120


    100

     80


     60

     40             Brent crude


     20

      0
      1994      1996      1998    2000   2002   2004   2006   2008
    Source: Haver Analytics



8
          US Employment growth
               faltering…
    Employment and unemployment
     %                                                  change, 000s
    7.0                                                           400

                                               Employment
    6.5                                                          300
                                                 (RHS)

                                                                 200
    6.0
                                                                 100
    5.5
                                                                 0
    5.0
                                                                 -100

    4.5                        Unemployment rate                 -200
                                    (LHS)
    4.0                                                          -300
      Jan-03       Jan-04   Jan-05   Jan-06        Jan-07   Jan-08
          Source: BLS


9
                 …and consumer
                confidence slipping
     Consumer confidence
     1985=100
     130

     120

     110

     100

      90

      80

      70

      60

      50
       2001      2002     2003   2004   2005   2006   2007   2008
     Source: Conference Board




10
     Renewed slide in stocks,
     followed by volatility…
     Global stock markets
      % yr
      30
                                          FTSE
      20                                              S&P 500

      10


       0


      -10
                                                          Nikkei
      -20


      -30
     Jan.01.2007   Apr.09.2007    Jul.16.2007     Oct.22.2007   Jan.28.2008
      Source : Oxford Economics/Haver Analytics


11
                            Tailwinds

• Rapidly expanding economic growth in
  Emerging Markets, creating a new and dynamic
  source of visitors
• Responsive monetary policy – Quick and
  decisive response by central banks to economic
  situations
• Strong corporate profitability outside of the
  financial sector
          … policymakers already
          reacting to the risks…
     World: Short-term interest rates
      %
     8

     7

     6
                                                     Europe
     5

     4

     3

     2                                                        US

     1                                   UK

     0
     1995       1997       1999   2001        2003    2005     2007
     Source: Haver Analytics


13
        …consumer spending still
              resilient…
      US: Consumers' expenditure
     % m/m                                                        Bn ch 2000 $
     1.5                                         Level                   8400
                                                (RHS)

     1.0                                                                 7900


     0.5                                                                 7400


     0.0                                                                 6900


     -0.5            Growth                                              6400
                     (LHS)

     -1.0                                                                5900
        Jan-02   Jan-03     Jan-04   Jan-05   Jan-06     Jan-07     Jan-08
      Source: BEA/Haver Analylics


14
     …as wealth still growing
        more than debt




15
                     …and lower US$
     US: Real and nominal effective exchange rates
     Index                                                               Index
     140                                  Nominal effective rate (RHS)    140

              Real effective rate (LHS)                                  120
     130

                                                                         100
     120
                                                                         80
     110
                                                                         60
     100
                                                                         40

      90                                                                 20

      80                                                                 0
       1973 1977 1981 1985 1989 1993 1997 2001 2005
     Source : Oxford Economics/Haver Analytics


16
                 …boosting exports
     US:Trade weighted dollar and net exports
     % of GDP, 4 qtr average                                            TWI
     3.0                                                                  60
     2.5
                                                                            70
     2.0                                   Real trade weighted
                                           dollar (RHS, inverted)           80
     1.5
     1.0                                                                    90
     0.5
                                                                            100
     0.0
     -0.5                                                                   110
     -1.0                                                                   120
     -1.5                                    Net exports, contribution to
                                             GDP growth (LHS)               130
     -2.0
     -2.5                                                                   140
         1973 1977 1981 1985 1989 1993 1997 2001 2005
     Source : Oxford Economics/Haver Analytics


17
      …with drop sharpest against
       developed economies…
     US$: depreciation against various currencies
     % depreciation from end-2005

       Taiwan dollar
       Chinese Yuan
      Japanese Yen
          India rupee
        Korean Won
       Mexican peso
     Canadian dollar
             Sterling
     Australian dollar
                 Euro

                     0        5       10       15      20   25
           Source : Oxford Economics/Haver Analytics


18
            So weak US growth but no
                  recession…
     US: GDP growth
     % quarter annualised
     8
                                                               F'cast

     6


     4


     2


     0


     -2
       1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008
         Source: Oxford Economics



19
          …and global growth to slow
                 moderately
     World: GDP growth
     % year
     14
                                                      Forecast
     12

     10           China

      8

      6
              Eurozone
      4                         US

      2

      0

     -2               Japan

     -4
      2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
     Source: Oxford Economics


20
     World: GDP growth
         % year
     6
                                                             Forecast

     5                                PPP
                                    exchange
                                      rates
     4


     3


     2


     1


     0
      1996        1998     2000      2002      2004   2006   2008
         Source: Oxford Economics

21
                  Summary global view
     • Plenty to worry about but fundamentals do not signal
       that a deep recession is likely in the US

     • Eurozone less affected by credit crunch (and oil) but
       strong Euro is making life very difficult for US$
       exporters

     • UK hit by financial services and housing but lower
       interest rates will ease the pain

     • Despite increased downside risks, it remains likely that
       the slowdown in world GDP growth will be limited
       because:
        - still rapidly expanding emerging economies
        - the easing in monetary policy by central banks; and
        - strong corporate profitability outside of the financial
22     sector
     Global Travel & Tourism:
        Where We Stand



23
Key Findings
Key Findings
                    Key Findings

     • Travel & Tourism growth last year was robust at
       4.1% but slowed from 2006’s 5.2% pace

     • 2008 to see a further slowdown (to 3%) but no
       repeat of 2001-03 contraction in activity

     • Prospects for the coming decade look bright
       when you look past present cyclical downturn –
       trend growth of 4%pa forecast

     • Nonetheless, challenges do still exist


26
          World Economy* GDP
     • Travel & Tourism GDP associated with
       T&T Demand (Direct and Indirect)
     • US$ 5.3 Trillion in 2007 (up 12.0% in current
       terms)
     • 9.9% of Total Gross Domestic Product
       in 2007 (vs. 9.8% in 2006)

       2007




27
                                     T&T Economy GDP
                                                                                    World Average
                                                Caribbean
                       18%                                  Middle East          North Africa
                              European Union

                       15%                                       Oceania
                                                                               Southeast Asia
                                                                                Northeast Asia
                       12%
2008 T&T Economy GDP




                       9%     Other                                             Central and
                              Western                                           Eastern Europe
                       6%     Europe
(Percent of Total)




                                   North America
                       3%                               Sub-Saharan Africa
                                        Latin America                            South Asia
                       0%
                             0%            2%               4%            6%            8%
                                  T&T Economy GDP Growth 2009-2018
                                  (Percent Annualized)
                                T&T Industry Worldwide
                                                  2007 saw continued broad-
           Total Demand
                                                  based strength in the
           Personal T&T
        Business Travel
                                                  tourism economy.
     Government Expend.
                                                  All aspects of travel &
      Capital Investment
                                                  tourism were strong in 2007,
          Visitor Exports
       T&T Industry GDP
                                                  including domestic leisure
            Employment                            and business travel, and –
         T&T Econ. GDP                            critical to sustaining the
            Employment                            industry’s success –
                            0      2          4    6
                                                  investment in new facilities
                                  2008 2007
                                                  and infrastructure.
29
     Results in 2007 better than
              forecast




30
               Middle East is the region with the
             fastest avg. growth in tourist arrivals


                                     Growth In Tourists
                                          Middle East     World Average

     2005                                     6.4              5.4

     2006                                    13.1              5.5

     2007(*)                                 14.8              6.7

     (*) based on data up to Q3.
     Source UNWTO/Oxford Economics




31
     Tourism from China is expected to
         continue to grow strongly
      Trends in outbound tourism flows
       Tourists mn                                                    Tourists mn
      100                                                    Forecast         100


       80                                        UK                          80


                 US
       60                                                                    60


       40                                                                    40

                             China
       20                                                     India          20


        0                                                                    0
        1995   1997   1999    2001     2003   2005    2007    2009    2011
       Source: WTTC/Oxford Economics



32
     with growth in tourist arrivals in 2007
     exceeding 6%, to nearly 900mn…
        Global trends in international tourist arrivals
        Tourists mn                                            % year
       1000                                                         14
                                          Growth
                                          (RHS)                     12
        900                                                         10
                                                                    8
        800
                                                                    6
                                                                    4
        700
                                                                    2

        600                                                         0
                             Levels
                             (LHS)                                  -2
        500                                                         -4
          1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007
        Source: WTTC/Oxford Economics



33
     …buoyed by rising per capita
             incomes




34
     Tourism growth has been particularly
        rapid in developing countries
     International arrivals by world regions
     % year
     20                      Middle East

     15

     10

      5
               Africa
      0

      -5
                                           Latin America
     -10
       1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007
     Source: WTTC/Oxford Economics

35
     …meanwhile developed economies
      enjoying a rise in inbound flows
       International arrivals by world regions
       % year
       20

       15       Europe
                                                          Asia
       10

        5

        0

        -5
                                                North America
       -10
         1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007
        Source: WTTC/Oxford Economics


36
     Prospects for 2008
      and the coming
          decade

37
Prospects
             Prospects for Travel &
                   Tourism
     • Subdued growth in the US and Europe will be partly
       offset by a continued strong performance in emerging
       markets (eg China, India and the UAE)

     • Even in countries where economic growth slows, we are
       likely to see a switch from international to domestic
       travel rather than a contraction in demand for Travel &
       Tourism

     • And innovation by the Travel & Tourism industry will
       create new products and markets which will underpin
       longer-term growth


39
      Prospects generally bright…
           World Travel & Tourism Economy
                                 (% year)

                                            2008   2009-2018

      Personal consumption                  3.0       3.5
      Business travel                       3.0       3.4
      Visitor Exports                       3.1       5.1
      Govt individual spending              2.0       2.7

     Tourism consumption                    3.0       3.8
      Govt collective spending              2.4       3.1
      Investment                            3.7       5.5
      Merchandise TT excports               5.1       5.9
     Total Tourism demand                   3.3       4.3
      Imports                               4.3       5.5
     Tourism economy GDP                    3.0       3.9

     Tourism employment (000s)              2.4       2.2




40
              …after near-term, modest
             cyclical overall slowdown...
     Industry direct T&T GDP and economy as a whole
     % y on y
      8                                  Forecast

      6
                T&T economy
      4             GDP

      2                                  TT direct
                                         industry GDP
      0

     -2

     -4
      1999         2003           2007      2011        2015
      Source : Oxford Economics

41
          … prospects of a healthy growth led
             by Asia and the Middle East
     Industry direct T&T GDP growth
     % y on y
     12

     10                                 Middle East
             Asia
      8

      6

      4

      2

      0
                                    North America
     -2

     -4                Europe      Forecast
     -6
      1999          2003         2007           2011   2015
     Source : Oxford Economics

42
      Visitor growth to slow in 2008 to
      5% - still above trend, with some
     regions doing better than others…
      Regional visitor number changes
      % y on y
      12
             2008
      10     10-yr trend


       8


       6


       4


       2


       0
           EUROPE    AMERICAS   MIDEAST   AFRICA   ASIA   WORLD

        Source : Oxford Economics


43
     …and visitor spending following suit

      Regional visitor export volume changes
      % y on y
      10
       9     2008
             10-yr trend
       8
       7
       6
       5
       4
       3
       2
       1
       0
           EUROPE     AMERICAS   MIDEAST   AFRICA   ASIA   WORLD
       Source : Oxford Economics



44
           Greater integration also
          boosting business travel…
     Global business travel
     % year
     25
                                            Forecast
     20
                 International
     15


     10


      5


      0
                          Domestic
     -5
      1999                2003       2007              2011
      Source : Oxford Economics

45
     ...with strong growth forecast in
        Asia partly offsetting weaker
        results in the EU and the US
     International business travel
     % year
     25                                 Forecast
     20

     15
              Asia
     10

      5

      0

      -5
              Europe
     -10
       1999              2003        2007          2011
      Source : Oxford Economics

46
      Domestic travel is expected to be
       less volatile than foreign travel
     US travel and tourism spending
     % year
     15
           Residents                                      Forecast
     10    abroad


      5


      0

                                      Residents
      -5
                                      at home

     -10
                       Foreign visitors

     -15
       1999     2001        2003          2005    2007   2009        2011
      Source : Oxford Economics

47
2008 - 2018
     The Major Stories




49
              No repeat of the 2001-03
                   contractions
                         The last global downturn
                                     (% year)
                                   2000     2001      2002   2003   2004
     The overall economy
           Real GDP                4.1          1.6   1.8    2.8    4.1
           Real GDP at PPPs        4.5          2.1   2.4    3.3    4.8


     Travel & Tourism
           Real spending abroad    7.5      -0.4      3.1    -1.0    7.6
           Tourist arrivals        5.4       2.6      2.8    -1.6   11.4
           Real visitor spending   7.1      -0.8      0.5    -1.2    9.6

           Direct industry GDP     3.3      -1.4      -2.0   -1.7   2.0
           Economy GDP             3.6      -0.3      -1.4   -1.3   3.5




50
            The impact of currency
                    shifts
     • Euro appreciated vs. US$ by 9% last year and forecast to
       gain another 6% this year (average = US$/€1.45). To fall
       thereafter
     • Currency shifts boost travel to the dollar bloc but to deter
       international travel from that bloc
     • European spending on travel abroad to increase by
       2.25% in 2008 after two years of 1.6% gains
     •    US travel spending abroad increased by just 0.8% last
         year & only a weak 1.5% gain is expected in 2008
     •    Growth in tourist arrivals in Europe is expected to
         weaken in 2008 but still to rise 3% (partly due to dynamic
         intra-European travel)
     • International tourist arrivals to the US increased by 10%
       last year & a further 6% gain is likely in 2008. Rise in
       tourism receipts also forecast
51
          The surge in the Middle East
     Tourism's share of investment & GDP in the Middle East
     %
     15
     14
              Investment
     13
     12
     11
     10
                           GDP
      9
      8
      7
      6
      2000         2004           2008   2012    2016
      Source : Oxford Economics
52
       The rise of China as a key
      source of outbound flows…
     Chinese outbound tourism market
     Tourist mn                                US$ bn
     120                                              120
                  Outbound Chinese
                  tourists (LHS)
     100          Travel spend (RHS)                  100

      80                                              80

      60                                              60

      40                                              40

      20                                              20

       0                                              0
          2000 2001 2002 2003 2004 2005 2006   2020
      Source : UNWTO and Oxford Economics


53
     …as well as a main tourist
           destination
     China's share of the global tourism economy
     %
     25


     20                                        GDP


     15

                                        Visitor exports (value)
     10


      5
                                               Overnight stays

      0
      2000        2004           2008   2012          2016
     Source : Oxford Economics
54
Key Findings
56

				
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