1. Travel & Tourism Trends and Economic Impact January 2014 Monthly Update

2. Summary WTTC published the mid-year update of its economic impact research in October 2013, according to which global direct Travel & Tourism GDP growth was forecast to be 3.0% for 2013. This was marginally slower than 3.1% growth forecast in the annual update released at the beginning of 2013. In March 2014 WTTC will publish the results of its 2014 annual update economic research. Macroeconomic and industry developments since the mid-year update in October have not significantly altered the growth outlook for the Travel & Tourism industry in 2013. Growth is expected to be marginally higher than the 3.0% estimate in the mid-year update as a result of revisions to and new macro data. At a regional level, forecasts have also held up well since the mid year update in 2013, with the only upward revision to North America, largely as a result of new quarterly macroeconomic data for the USA. Asia remains the fastest growing region in 2013 with GDP growth of 5.3%. Particular highlights have included the success of Abenomic policies throughout the year which have boosted Japanese export competitiveness. China continues to grow but downside risks remain in the wake of rising debt levels, which could dampen economic growth. Travel & Tourism indicators covering most of 2013 support and are behind the message of a strong annual performance. UNWTO data shows world international tourist arrivals growing by 5.0% according to the latest UNWTO estimate, compared to 4.0% in 2012. International revenue per kilometre grew by 5.3% in 2013, according to latest IATA data. Additionally, strong hotels performance in Europe and the Americas has outbalanced weaker performance in North Africa, notably Egypt.

3. Wider economy update (1) Eurozone: The GDP growth forecast for 2013 remains largely unchanged for the Eurozone at -0.4%. On the downside, however, a lower than expected annual inflation rate outturn for the Eurozone (0.7% in January), suggests that deflation remains a risk which could potentially dampen consumer spending. There is also some downside risk from the recent financial turmoil faced by emerging markets and contagion cannot be ruled out entirely, although such a scenario seems unlikely at present. Performance was also very disparate geographically with Latvia, Malta and Luxembourg all posting moderately positive GDP growth figures in 2013. By contrast, sharp declines were recorded in Cyprus, Greece and Slovenia in terms of GDP. For the traditionally stronger Western economies, the picture in 2013 remains similar to before with Germany and France reporting positive GDP growth in 2013, albeit less than 1%. Whilst other Western economies remain stubbornly negative including Spain, Italy and Portugal. USA: The US economy GDP forecast for 2013 has been revised up following the release of new quarterly data for Q4 which turned out better than expected at 0.8%. This growth was driven largely by higher consumer spending. Increased business inventories was another factor which contributed to this stronger economic performance in 2013, however this is likely to drag in Q1 of this year. The unemployment rate has also continued to fall this year from 7.9% in January to 6.7% in December, however a proportion of this was due to a depressed labour participation rate, e.g. a lower proportion of the working age wanting to work. For 2014, ongoing QE tapering is likely to have some economic repercussions in other economies. However, there is a low expectation that emerging markets interest rate increases will derail much of the tapering in 2014. The gradual structured approach to QE is also likely to bolster investor confidence.

4. Wider economy update (2) UK: The publication of the quarterly GDP figure for Q4 of 0.7% resulted in full year growth of 2.8% in 2013, marking the fourth consecutive year of growth for the UK economy. Critically, growth this year was largely driven by consumer spending. The UK savings ratio is estimated to have fallen from 7.2% in 2012 to 4.9% in 2013, offsetting the fall in real incomes. Even as real incomes rise, a correction in saving rates may dampen future consumer spending growth. The UK remains susceptible to global, and particularly Eurozone risk, which makes up the bulk of the UKs export market. Any potential deflationary risks to the Eurozone could result in a devaluation of the euro, reducing the relative competitiveness of UK exports into the Eurozone. Africa: The GDP forecast for 2013 remains largely unchanged from December 2013 at 3.4%. However there is ongoing evidence of a widening North-South divide in growth paths between the two parts of the continent. In 2013, North Africas GDP growth is expected to end the year at around 2.0% (compared to 7.2% in 2012), while Sub-Saharan Africa GDP grew by 4.4% (compared to 4.8% the previous year), In North Africa, ongoing civil unrest throughout the year has deterred visitors to some countries in the region, unsurprisingly causing displacement of potential visitors and increased tourism in substitute markets elsewhere. In particular, continued unrest and protests in Egypt has deterred visitors to parts of the country, with travel advisory notices issued by several large origin markets. While growth in Sub-Saharan Africa was stronger than North Africa, 2013 remained a difficult year. Terrorism in Kenya, Mali and Nigeria in 2013 has hampered tourism growth in the region. By contrast, travel to arguably similar destinations which are perceived as safer, have grown strongly, gaining a greater market share of demand for the region.

5. Wider economy update (3) Middle East: The GDP forecast for 2013 in the Middle East remains largely unchanged at 3.8%. In Saudi Arabia, GDP growth has been at its lowest rate since 2009, largely due to weaker investment and government spend, although consumption is holding up well. International tourism growth had a strong start to 2013, however visa restrictions for Hajj, ongoing construction work at Mecca, and concerns related to the MERS virus indicate a slowdown in H2 in Saudi Arabia. Overall international tourism is expected to record modest growth in Saudi, albeit weaker than indicated at the start of 2013. Ongoing unrest in Syria continues to pose risks to surrounding countries, such as Lebanon and Jordan. Asia-Pacific: Ongoing financial turmoil in the region, which has the potential to cause significant global upset, could yet manifest itself. China bears a large downside risk from rising debt (local government debt is approximately 30% of GDP, corporate debt is around 140%), the accumulation of which can only slow at the expense of economic growth. Earlier in the year China pushed up interest rates, encouraging other countries in the region to do the same, including India. The impact of this has increased pessimism amongst consumers, who will be less likely to borrow. It also increases the burden of debt on those who already hold it and, therefore, is likely to stifle consumption. Japan has enjoyed solid GDP growth in Q2 and Q3 of this year, with even stronger growth expected with the release of Q4 data. This is largely, if not exclusively, due to marked depreciation of the yen which has helped boost Japanese exports and induced a surge in international tourism, growing by 25% in 2013.

6. Likely impact on Travel & Tourism forecasts for 2014 WTTC published the mid-year update of its economic impact research in October 2013, according to which global direct Travel & Tourism GDP growth was forecast to be 3.0% for 2013. This was marginally slower than 3.1% growth forecast in the annual update released at the beginning of 2013 Macroeconomic and industry developments since the mid-year update in October have not significantly altered the growth outlook for the Travel & Tourism industry in 2013. Growth is expected to be marginally higher than the 3.0% estimate in the mid-year update as a result of revisions to and new macro data. In March 2014 WTTC will publish the results of its 2014 economic research annual update. As of January, some macroeconomic and industry developments since the mid-year update release in October have had some bearing on the growth outlook for the Travel & Tourism industry in 2014 and as such, there have been minor revisions within regions given the publication of the latest quarterly GDP data for Q4 2013 for the UK and USA. However, the outlook for global Travel & Tourism GDP for 2013 remains largely unchanged from the mid year update. Downside risks remain for emerging economies as interest rate policies continue to tighten in order counteract depreciating exchange rates, leading to increased expectations of a potential Volcker shock – last seen in the U.S. economy in the 1980s.

7. Likely impact on Travel & Tourism forecasts for 2013

8. Latest Travel & Tourism indicators YTD global international tourist arrivals to December 2013 grew by 5%, according to the UNWTO World Tourism Barometer; an increase on last years growth rate of 4.0%. All regions enjoyed some degree of growth in international arrivals. The Middle East saw the biggest percentage point swing but is still the slowest growing region (growth in 2012 was negative at 5.4%) with growth of 0.3% YTD to December. Europe enjoyed growth of 5.4% for the same period – 2 percentage points higher than its growth rate for 2012. All other regions, however, have seen their international tourist arrivals growth figures fall; the Americas by 1 percentage point from 4.6% to 3.6% growth (North America growth only fell by 0.2 percentage points from 4.5% to 4.3%), Asia- Pacific by 1 percentage point from 7% to 6% growth, and Africa by 0.2 percentage points from 5.9% to 5.7%, however, this is exclusively attributable to a fall in arrivals growth in North Africa, which actually offset growth in Sub-Saharan Africa (up 1 percentage point on 2012 at 5.4%). YTD international air passenger traffic growth to November, as measured by RPK (revenue per kilometre), grew by 5.3%, compared to 5.2% YTD growth in September. But overall 2013 YTD growth remains 1 percentage point slower than the 6.1% recorded in 2012. At a regional level, growth remains slower compared to last year for all regions except North America and Asia- Pacific. Latest regional hotel performance which now covers all of 2013 remains generally positive, with occupancy rates growing across most regions, with the exception of North Africa and Asia-Pacific. The latter has remained largely flat while North Africa has seen occupancy rates fall by 10.5 percentage points, largely related to ongoing unrest in Egypt. Performance in terms of revenue per available room (RevPAR) followed a similar trend; all regions experienced positive RevPAR growth with the exception of Asia-Pacific and North Africa, where Average Daily Rates (ADRs) either fell or remained static, leading to a decline in hotel revenues per available room in these regions.

9. Latest Travel & Tourism indicators