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Industry Forecast

Industry Forecast. 2014. Connecticut Westchester BTA Meeting November 12, 2013. Content. Outlook and risk factors. Air. Hotel. Meetings. Car rental. Rail. Appendix 1: Spotlights. Appendix 2: Historical data charts . Airlines are showing capacity restraint in mature markets.

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Industry Forecast

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  1. Industry Forecast 2014 Connecticut Westchester BTA Meeting November 12, 2013

  2. Content Outlook and risk factors Air Hotel Meetings Car rental Rail Appendix 1: Spotlights Appendix 2: Historical data charts

  3. Airlines are showing capacity restraint in mature markets Travel demand remainsgenerally weak 2014 Outlook Hotel rate increaseswill be low outside primary cities Business travel demand will gain momentum in 2014, in line with projected global economic recovery Oil price should remain stable

  4. Risk factors • Economic growth to pick up Global growth in 2013 will match 2012, pick up speed in 2014 U.S. economy will see best performance since start of economic crisis Growth to resume in Europe • Oil price stable for now Oil prices above US$100/barrel for most of the last year Supply and demand will keep prices at or below $110/barrel Fuel surcharges more likely to rise than fall • Safety and security concerns low

  5. Global economic outlook (GDP) Economic growth will firm up across all regions in 2014 U.S. 2012+2.2% 2013 +1.9% 2014 +2.5% China 2012+7.8% 2013 +7.7% 2014+8.0% Euro Area 2012 -0.5% 2013 - 0.8% 2014 +0.6% Emerging economies 2012+4.8% 2013 +5.1% 2014+5.6% World 2012+2.1% 2013 +2.1% 2014+2.7% Source: EIU forecast, July 15, 2013

  6. Airfares mostresilient inmature markets Capacity growth tolower fares in most emerging markets 2014 outlook Air Consolidation may lead to upward pressure onfares Capacity restraint supports small fare rises inNorth America andEurope While airlines in the U.S. and Europe are keeping a firm grip on capacity, soft demand will likely prevent significant fare hikes

  7. Airline key performance indicators IATA’s latest forecast for traffic and capacity confirms emerging economies’ strong position Source: IATA Financial Forecast, September 2013

  8. Airfare predictions for 2014 – North America Fares will be flat or increase slightly in 2014, with regional economy the most likely segment to see a rise Forecast of average development of airfares used by corporate clients in 2014 against 2013 (in $USD) Source: Advito 2014 Industry Forecast

  9. Airfare predictions for 2014 – Europe With demand weak, airlines continue to show restraint on capacity growth, keeping fare increases in the region low Forecast of average development of airfares used by corporate clients in 2014 against 2013 (in € EUR) Source: Advito 2014 Industry Forecast

  10. Airfare predictions for 2014 – Asia Weaker demand and down-trading will depress business fares, but more resilient demand will provide some support to economy class fares Forecast of average development of airfares used by corporate clients in 2014 against 2013 (in $USD) Source: Advito 2014 Industry Forecast

  11. Airfare predictions for 2014 – Latin America Airfares to rise across all segments Forecast of average development of airfares used by corporate clients in 2014 against 2013 (in $USD) Source: Advito 2014 Industry Forecast

  12. Airfare predictions for 2014 – Middle East Intense competition between Gulf airlines will deliver lower airfares across all segments Forecast of average development of airfares used by corporate clients in 2014 against 2013 (in € EUR) Source: Advito 2014 Industry Forecast

  13. Airfare predictions for 2014 – Africa Competition will lead to lower fares on intercontinental routes; rising demand will support increases on regional routes Forecast of average development of airfares used by corporate clients in 2014 against 2013 (in € EUR) Source: Advito 2014 Industry Forecast

  14. Airfare predictions for 2014 – Southwest Pacific Intense competition in Australian market will ensure that airfares remain largely unchanged Forecast of average development of airfares used by corporate clients in 2014 against 2013 (in $USD) Source: Advito 2014 Industry Forecast

  15. ADR increases will be minimal inEurope Mostother regions will seemodest ADR increases 2014 outlook Hotel Argentina andBrazil to see biggest rises inADR Latin America to seestrongest rise inADR Hotel companies will look to raise corporate rates by 4-6% for 2014, but are likely to achieve only half this level on average

  16. Hotel average daily rate (ADR) 2014 forecast by region In 2014, ADR will grow only slightly in Europe, but we expect stronger rises in other regions—especially Latin America Europe +0-2% • North America • +2-4% Asia +1-3% • Middle East • +2-4% • Latin America • +6-8% Southwest Pacific +1-3% • Africa • +3-5% Source: Advito 2014 Industry Forecast

  17. Hotel ADR: 2014 forecast by market DK-NO +0-1% FI + +1-3% TR +4-6% ES-IT-PT +1-3% DE-FR-UK+1-3% AT+1-2% CH +0-2% BE-SE +0-1% IE-NL -1% to +1% CZ -2% to +1% RU -2% to +1% CA -1% to +1% JP +2-4% CN +0-3% US +3-5% KO +0-2% IN -1% to +1% MX -1% to +1% AE -1% to +2% SG +2-3% SA +3-5% BR +6-8% ZA +3-5% AU +1-3% AR +7-9% Forecast of average development of hotel rates used by corporate clients in 2014 against 2013 (local currency) Source: Advito 2014 Industry Forecast

  18. Demand growth issteady Supply remainstight inNorth America and Europe 2014 outlook Meetings Hotels to look for higher increases in2014 Rates torise faster in first-tier cities Availability will become an increasing problem, especially as booking lead times continue to shrink

  19. Competition will keep rates in check Rate rises unlikely to stick 2014 outlook Car rental 2014 outlook Car rental Multinational agreements becoming more popular Stricter capacity control may make it harder to find cars at airportlocations Intense competition should keep corporate car rental rates in check, with increases staying at or below 4% 19

  20. China high-speed rail back on track High-speed fares inEurope may start to fall 2014 outlook Car rental 2014 outlook Rail Californiawon’t see high-speed rail before 2020 Corporate rail bookings are increasingly moving online to reduce booking fees

  21. Appendix 1Spotlights

  22. Spotlight Four carriers would control 80% of U.S. air traffic THE SCOOP American Airlines and US Airways merger • Legal challenge from U.S. DOJ based on industry capacity, pricing • Airlines appealing • Deal likely to succeed (with concessions)

  23. Spotlight Full-service model Hybrid model Low cost model Example hybrid airlines THE SCOOP Hybrid airlines • Actively pursuing corporate traffic • Starting to fly long haul leisure routes • Pay for legroom, baggage, fast track and lounge

  24. Unbundling Spotlight THE SCOOP Unbundling • Unbundling trend continues • Reporting remains major challenge • Loyalty program membership helps some travelers avoid these charges—at least for now

  25. Spotlight THE SCOOP Integrating travel and meetings • Increasing interest in merging transient travel and meetings programs • Improved leverage of spend • Better risk management • Initial focus is often sourcing • Under pressure to integrate travel and meetings, some hotels are reluctant to do so

  26. 3 Global players International corporate car rental agreements • Spotlight THE SCOOP • Multinational corporate contracting on the rise • Competitive international marketplace • But each player has gaps

  27. Appendix 2 Historical Data Charts

  28. Air

  29. Cost per mile North America Source: Advito

  30. Cost per mile Europe Source: Advito

  31. Cost per mile Asia Source: Advito

  32. Cost per mile Latin America Source: Advito

  33. Cost per mile Middle East Source: Advito

  34. Cost per mile Africa Source: Advito

  35. Cost per mile Southwest Pacific Source: Advito

  36. Economy class ratio North America Source: Advito Based on weighted average for first five months in each year

  37. Economy class ratio Europe Source: Advito Based on weighted average for first five months in each year

  38. Economy class ratio Asia Source: Advito Based on weighted average for first five months in each year

  39. Economy class ratio Latin America Source: Advito Based on weighted average for first five months in each year

  40. Economy class ratio Middle East Source: Advito Based on weighted average for first five months in each year

  41. Economy class ratio Africa Source: Advito Based on weighted average for first five months in each year

  42. Economy class ratio Southwest Pacific Source: Advito Based on weighted average for first five months in each year

  43. Advance booking North America Source: Advito Based on weighted average for first five months in each year

  44. Advance booking Europe Source: Advito Based on weighted average for first five months in each year

  45. Advance booking Asia Source: Advito Based on weighted average for first five months in each year

  46. Advance booking Latin America Source: Advito Based on weighted average for first five months in each year

  47. Advance booking Middle East Source: Advito Based on weighted average for first five months in each year

  48. Advance booking Africa Source: Advito Based on weighted average for first five months in each year

  49. Advance booking Southwest Pacific Source: Advito Based on weighted average for first five months in each year

  50. Hotel rates

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