CARIBBEAN TOURISM ORGANIZATION (www.onecaribbean.org)

OVERVIEW In every year over the past decade, we have used the January edition of this newsletter to provide an annual

round-up of important issues affecting our industry and regional economy, as well as to venture some

predictions and trends for the year ahead. 2009 already presents a formidable task for crystal-ballers, but as

we looked back at the January 2008 Brief, it struck us that we could reprint our assessment and predictions

almost verbatim to describe where our current economic and political troubles may take us. We were certainly

among the first to recognize that the US was already in recession, a fact that was only officially conceded some

11 months later, and that Europe would soon follow. We also postulated that the era of conspicuous

consumption and “shop ‘till you drop” was drawing to a close as consumers on both sides of the Atlantic were

zipping up their purses and wallets. Of course, we could not have predicted the magnitude of the global

economic disaster which was to create panic in financial markets everywhere, cause the collapse of such

venerable institutions as Lehman brothers, and the near-death of the US auto industry, but the handwriting

was already on the wall.

In the final quarter of 2008, major stock market indexes posted the steepest declines seen since the Great

Depression. Last November, alone, the Dow Jones Industrial Average suffered four of the largest daily

percentage drops on record and by the end of that month, US stocks had lost a staggering $10.4 trillion in

market value from their record high of a year earlier; of even greater concern, the world-wide nature of the

current economic crisis has shut the door on most alternative sources of credit in Europe and Asia that existed

in the previous recessions of the mid 1970s and early 1980s. This time, virtually all markets are affected,

including those recent stars of the firmament, Brazil, Russia, India and particularly China; although not equally

as we shall see in the details below.

GLOBAL ECONOMIC PROSPECTS After five years of uninterrupted growth in global stock markets, every major market suffered serious declines

at the end of 2008 which have continued unabated into the New Year. The Dow Jones World Index, excluding

the US, lost almost half its value as shares in Asian and Latin American markets tumbled along with Wall Street

and Western Europe’s bourses.

The Economist Economic Intelligence Unit has lowered its forecast for global GDPs once again and now

expects the world economy to contract by 0.9% in 2009 which would make it the worst performance since the

end of the second world war. The Economist group expects world growth to resume again in 2010 but at a

much slower rate than before the fall. They call the medium term outlook “subdued” which may be a serious

understatement. The uncontrolled excesses of the banking and investment communities that brought the

world to its knees will have a lasting impact that will not go away soon. The piper must be paid and one of the

world’s leading economists, Robert Shapiro of Yale University, the man who accurately predicted the end of the

technology bubble seven years ago and more recently the collapse of the housing market, now says “we could

have many years of a very weak economy. Big recessions are followed by years of weakness and, typically,

unemployment keeps rising.”

TOURISM EXECUTIVE BRIEFJanuary - 2009

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Although Professor Shapiro was speaking primarily about the US economy, we know from past experience that

whenever the US market goes cold, the rest of the world is generally quick to follow into winter and this time

around, it has proven near universal. We will devote this issue almost exclusively to the economy and follow

shortly with an analysis and predictions for the airlines and cruise industry.

1. THE UNITED STATES At the dawn of the Obama presidency, two of the biggest questions being asked on the economy are, first,

have we hit bottom yet or is there worse to come, as Obama himself cautioned in his inaugural address. On

the very day that he took the oath of office, the Dow dropped over 300 points slipping back to near its

November low and hardly a vote of confidence. In the days since the Dow has fluctuated above and below the

latest psychologically important level of 8000. The second and related question asks: how long will this

recession last? It is already well into a second year with little sign of early recovery and threatens to become

one of the longest recessions on record since the thirties.

There are as many different predictions on this score as there are economic pundits making them. The range

goes from the ultra-gloomy forecast of Professor Shapiro to a more optimistic vision of other economists who

see signs of a turnaround at year’s end. In any event, it becomes increasingly obvious that anyone’s forecast

can date very quickly in this environment even without factoring in further turmoil in the Middle East and Asia.

The best advice for our policy makers and business interests must surely be to hang in, cutback on all

unnecessary expenses without compromising standards and continue to promote your destination, service or

product to the extent possible in the expectation of a rebound whenever it occurs. It is hoped that the huge

pending government stimulus package will work quickly to restore consumer confidence and increase

aggregate demand. As we write, that package passed in the House and it goes on to the Senate where it will

face more opposition from disaffected Republicans before it reaches the President’s desk in mid February.

Details of the stimulus bill reveal that its total cost is nearing $900 billion with more than a third dedicated to

tax relief including a provision to exempt millions of middle-class Americans from the alternative minimum tax

in 2009.

The urgency to get relief flowing fast is underscored by a Labor Department report that shows unemployment

rates rising in every state of the Union and spreading rapidly in the Caribbean’s major markets of the Northeast

and Southeast. The cascading layoffs and plunging consumer confidence mean that most consumers in almost

every income group are cancelling or postponing trips and staying closer to home. For the first time in many

years, even the luxury category of hotels, cruise lines and airline premium seats has been hit as hard or harder

than the rest.

Is there any light at the end of this long tunnel? For those who read the tea leaves, there are small signs that

the public may react quickly to the Obama stimulus package if they like the details: although the Conference

Board Consumer Confidence Index is at record lows and consumers’ short-term outlook worsening for the six

months ahead in an ominous start to the year, the other respected consumer survey conducted by

Reuters/University of Michigan showed a small and unexpected rise in their numbers released in mid-January.

Michigan’s base is smaller than the Conference Board ‘s but it apparently reacted more favorably to lower gas

and home heating oil prices and hopes that the new administration will somehow prevent a desperate situation

from getting worse. Home sales also posted a 6.5% gain in December over the previous month although that

increase was largely due to distressed sales of houses in foreclosure. Bargain-basement prices combined with

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historically low mortgage rates for those who can still get them are the key driver of sales activity, very much a

mirror image of what is selling in leisure travel. For what they’re worth, most industry forecasts see travel and

tourism sales suffering less than retail business at large although some of those sources may be conditioned by

an excess of optimism among some industry spokespersons, particularly in the cruise category. Travel to short

and medium haul destinations will fare better than long haul and after canvassing a number of major

wholesalers and airlines serving the region, we believe that the Caribbean can maintain a fair share of a

diminished US market but only at the price of heavy discounting and special promotions. Advance bookings for

six months out indicate that the Caribbean, not including Mexican coastal resorts, is down considerably from a

year ago but doing better than Hawaii and Europe.

2. CANADA Forecasts for the Canadian economy in a running survey of 20 economists released this month predicted that

Canadian GDP will contract by an annualized 1.1% this year. This represents a significant drop from their last

forecast made three months ago when the same group were convinced that Canada would narrowly escape

recession and predicted growth then of 1.1% for 2009. Much of the problem relates to declining commodity

exports, particularly of oil and lumber. There has been a sudden, if probably temporary, end to Alberta’s five-

year energy boom. Alberta, Canada’s richest province produces two-thirds of the nation’s oil and gas needs

and is a major exporter to neighboring USA.

On top of tumbling oil prices and the current credit crisis which have restricted further development, Alberta’s

oil production is largely extracted from tar sands in the north, which has come under fire from both sides of

the border for pollution and there are fears that the US government agencies may enforce a total ban on

buying oil produced from this source. The Bank of Canada made an expected rate cut earlier this month of a

half-percentage point to a 50-year low of one percent and there could be still another cut at the central bank’s

next policy meeting in March. The good news is that the Canadian economy should emerge from recession

during the second half of the year as the government’s own fiscal stimulus measures take effect. Canada’s

unemployment rate is expected to jump to 7.5% with the shutting down of many projects in the west as the

main culprit. The Canadian dollar continues to trade at around 81 cents US and is not likely to change much

this year. According to Canada Outbound Tourism, 69% of Canadians still plan a vacation this year with about

half of those planning trips outside their border. We project that Canadian travel to the Caribbean in 2009 for

both land-based and cruise vacations will be flat and price/value relationships will be even more important than

in the past in the choice of destinations and resorts within the region.

3. THE UNITED KINGDOM Recession is now official in the UK, too, as the economy in Britain turned in its worst performance since 1980

in the last quarter of 2008 and set the stage for what threatens to be a deep and prolonged downturn. The

UK banking system is in a similar crisis to that in the US prompting some observers to call the situation

“Iceland on the Thames.” On January 8, the bank of England made history when it cut its base rate to 1.5%,

the lowest since the central bank was founded in 1694. A survey of business purchasing managers showed

manufacturing to be mired in the deepest downturn in many years with construction activity near a standstill.

Consumer spending has fallen sharply on fears of rising unemployment, weak stock markets and fast-shrinking

household wealth. House prices fell by nearly 16% last year across the UK according to the Nationwide

Building Society. In past recessions, Britons have shown a remarkable resilience in their overriding desire to

travel but some recent polls suggest that there may be a growing reluctance to make overseas holiday plans in

2009. The rapid decline of sterling against the euro and the dollar does not help. This month saw the pound

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touch a 23-year low against the dollar and it is likely to weaken further in the weeks and months ahead as

foreign investors continue to sell UK financial assets. Some currency traders believe the pound will drop to

$1.25 by spring and fall below $1.20 by year-end. In spite of some encouraging words from Virgin Atlantic on

their advance bookings to the Caribbean and our belief that the high end of the British market will continue to

patronize their favorite resorts regardless of costs, we’ll take a wait-and-see position on predictions for the UK

market spectrum for now.

4. GERMANY European stocks are likely to take a lot more punishment this year and the Eurozone’s GDP is expected to fall

by 2% in 2009 with Germany leading the way. The world’s largest exporter is particularly vulnerable to

weakening demand for capital goods from emerging markets and German export revenues fell by close to 12%

in the 12 months ending in November (the last reported month.) In spite of the recession most German

consumers are still intending to go on holidays away from home this year, however, they are booking late,

choosing shorter trips and less expensive accommodations and destinations. Several surveys suggest that

booking trends in a down market include stronger demand for all-inclusive holidays and cruises.

Although some German operators are offering discounts for summer vacations, prices are much more stable

than in the bargain basement atmosphere of the US market. We expect that the decline of the euro against

the dollar will contribute to some diversion from long-haul travel to destinations like the Caribbean where

prices are still largely pegged to the dollar. Any further drop in the euro will also diminish prospects for other

large European markets like Spain, which is suffering with the highest rate of unemployment by far (13.9%) in

the EU.

5. LATIN AMERICA Thus far Latin America has shown the strongest resilience to the international economic crisis although its

financial markets have not escaped the wave of global contractions entirely. Countries like Brazil, Chile and

Peru with solid domestic markets have remained strong and most countries in the region have accumulated

enough foreign resources to cover external imbalances resulting from lower commodity prices and are able to

service their debt. According to Alfredo Coutino, Senior Economist for Latin America at Moody’s, the region

now stands in a position of a net lender instead of a net borrower as in the past. Mr. Coutino predicts some

regional deceleration in 2009 but no recession with an estimated growth in GDP around 2.8%. While other

financial institutions are somewhat less optimistic than Moody’s, none forecast a recession and the region at

large provides strong opportunities for much of the Caribbean.

6. RUSSIA A year ago we pegged Russia as a country with a rapidly growing middle class that was eager to travel and

recommended it as a most attractive market to pursue. Since then, there has been an abrupt reversal in

fortunes as the price of oil, Russia’s key export, has plunged and capital has fled the country. The ruble has

slid to an historic low against the dollar and has lost 21% of its value against a basket of dollars and euros in

the past two months alone. According to hospitality industry sources in Germany, the Russian market has all

but disappeared there as elsewhere in Europe. It seems to us now that serious marketing efforts in this

distant market would be best put on hold until recovery takes place in Russia and the ruble, which may well fall

further, stabilizes.

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7. CHINA We also devoted considerable attention last year to developments enabling Chinese tourists to travel overseas

more easily. Political barriers were coming down and the Chinese economic engine was in high gear. We

always believed that this was a long-term prospect which required careful preparation and ground work and as

with Russia, now is probably not the time to allocate scarce resources to this market, especially while there are

serious questions about where the yuan may be headed. China is sharing in the global economic pain, its

exports are falling rapidly and there has been a collapse in domestic housing construction. Thousands of

factories have closed and millions of Chinese workers migrating internally have lost their jobs.

GDP growth fell sharply in the fourth quarter and that fall is likely to continue during the first half of 2009 after

which the economy should pick up again as the government’s fiscal stimulus program kicks in. This is a market

for the future and we should stay on top of developments in their political and economic arenas for appropriate

action when better circumstances permit.

WHERE ARE OIL PRICES HEADED? The members of the OPEC cartel have seemingly put a stop to the slide in oil prices for now as they have

slashed output by more than three million barrels a day after crude fell by more than $100 a barrel from last

summer’s highs. However, demand continues to slide in both the West and developing nations. China’s thirst

for oil has also abated. Forecasts for 2009 differ with the Economist Intelligence Unit predicting an average of

$35 a barrel and the Energy Information Administration projecting crude to trade at a $51 per barrel average.

The chief energy economist of Deutsche Bank, Adam Sieminski, said last month that the demand for oil will

drop more than any other time in the last 25 years due to the weak global economy. However, others see the

supply/demand balance leading to higher prices by the end of the year and if OPEC members stay disciplined,

heretofore an impossible task, we could see prices returning to near the $80 a barrel level which the cartel has

set as an objective.

CONCLUSIONS This year will be one of stagnation at best for nearly all markets and the Caribbean with its dependency on

tourism is facing its worst downtown since the aftermath of the September 11 attacks in New York. On top of

the world economic crisis, the region at large has suffered sweeping cutbacks in airline capacity particularly

from its largest carrier American Airlines. This month non-stop services for all airlines from the US are down 9

percent and we are unlikely to see much improvement in the months ahead. Discounting for all products and

services is rampant in the Caribbean and advance-booking times are at their lowest level that we can recall.

This winter has been unusually cold in major US markets and the bargains out there may still attract business

from weather-weary prospects with the urge to get away overriding concerns about the economy. Currency

concerns will have a negative impact on European markets including the UK for those destinations price-linked

to the dollar.

We expect that both the wholesale and retail travel agency industry will shrink considerably through business

closings and consolidation and we will see more airline partnerships and mergers on both sides of the Atlantic

in 2009, of which more will be said in the next edition.

There should be a slow and weak recovery that may not have any real impact before early 2010. However, we

would like to close part one of this overview with some words of wisdom from our old friend, Geoffrey Lipman,

currently the assistant secretary general of the United Nations World Tourism Organization and a past speaker

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at many Caribbean tourism conferences, “It’s vital to position tourism as the logical sector to help economic

stimulus – whether it’s employment support because we create so many jobs or infrastructure programs

because our payback across the economy is so pervasive and wide ranging. We will deliver on tax breaks and

moratoria better than most industries and money spent on tourism promotion will provide massive export and

investment returns.” Geoffrey also said “such vision is not easy (in consideration of the future) but when the

big upturn occurs, because economies ultimately correct and mobility is hardwired into the human gene, the

big winners will be those who really understand the value of aligning short and long-term decisions.” Surely,

there is no place on earth where these words can better apply than in the Caribbean.

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TOURIST (STOP-OVER) ARRIVALS AND CRUISE PASSENGER VISITS IN 2008 Tourist Arrivals Cruise Passenger Visits

Destination Period Tourists % Change

2008/07 Period Cruise

Passengers % Change

2008/07 Anguilla Jan-Aug 53,077 -10.8 - - - Antigua & Barbuda * Jan-Dec 265,841 1.5 Jan-Nov 494,685 -14.0 Aruba Jan-Apr 295,359 15.9 Jan-Oct 403,845 19.9 Bahamas Jan-Aug 1,140,754 -0.3 Jan-Aug 1,871,229 -7.0 Barbados P Jan-Oct 464,520 -1.5 Jan-Oct 445,068 2.8 Belize Jan-Oct 204,219 -2.2 Jan-Oct 465,325 -5.4 Bermuda Jan-Nov 275,501 -5.2 Jan-Nov 286,408 -19.9 Bonaire Jan-Jun 39,876 7.9 Jan-Apr 95,613 116.1 British Virgin Islands P Jan-Sep 276,730 -0.5 Jan-Sep 411,176 8.4 Cancun (Mexico) ** Jan-Nov 1,972,820 6.4 - - - Cayman Islands Jan-Dec 302,879 3.9 Jan-Dec 1,553,053 -9.5 Cuba Jan-Oct 1,921,558 10.7 - - - Curacao Jan-Sep 266,164 30.9 Jan-Sep 226,905 -5.2 Dominican Republic * Jan-Dec 3,604,644 0.7 Jan-Aug 351,052 37.6 Dominica - - - Jan-Jul 236,424 9.4 Grenada Jan-May 56,539 -1.0 Jan-May 181,162 11.1 Guyana Jan-May 38,590 -25.8 - - - Jamaica Jan-Nov 1,587,657 4.4 Jan-Nov 968,289 -8.8 Martinique P Jan-Aug 354,545 -4.4 Jan-Aug 51,718 10.6 Montserrat Jan-Nov 5,908 -5.4 Jan-Nov 250 145.1 Puerto Rico Jan-Oct 1,115,603 -1.9 Jan-Oct 1,127,040 0.1 Saba Jan-Dec 12,043 3.2 - - - St. Eustatius Jan-Jul 7,146 4.0 - - - St. Lucia Jan-Dec 295,761 2.9 Jan-Dec 622,680 2.0 St. Maarten Jan-Oct 397,493 3.9 Jan-Oct 1,024,178 -7.5 St. Vincent & the G’dines Jan-Jul 52,899 -10.4 Jan-Jul 67,536 -33.3 Suriname Jan-Feb 23,450 -2.8 - - - Trinidad & Tobago Jan-Jul 267,317 1.1 - - - US Virgin Islands Jan-Dec 678,904 -2.1 Jan-Dec 1,757,067 -8.4

* Non-Resident Air Arrivals **Non-Resident Hotel registrations only - No Cruise Figures are Reported P Preliminary figures n.a. Figures not available

N.B: Figures are subject to revision by reporting countries

SOURCE - Data supplied by member countries and available as at February 5, 2009

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BARBADOS One Financial Place Collymore Rock St. Michael, Barbados Tel: 246-427-5242 Fax: 246:429-3065 ctobar@caribsurf.com

NEW YORK 80 Broad Street, 32nd Floor New York, NY 10004 USA Tel: 212-635-9530 Fax: 212-635-9511 ctony@caribtourism.com

LONDON 22 The Quadrant Richmond Surrey, TW9 1BP, England Tel: +44-208-948-0057 Fax +44-208-948-0067 ctolondon@caribtourism.com

CANADA 2 Bloor Street West, Suite 2601 Toronto, Ontario Canada M4W 3E2 Tel: 416-935-0767/1-866-997-0096 Fax: 416-935-0939 ctotoronto@caribtourism.com

CARIBBEAN TOURISM ORGANIZATION (www.onecaribbean.org)

INTRODUCTION

We start by quoting the first paragraph of a recent column in the New York Times by the widely-read and influential writer Frank Rich.

“And so it came to pass on the 20th day of his presidency, Barack Obama signed the stimulus bill. But the earth did not move. The Dow Jones fell almost 300 points. General Motors and Chrysler asked taxpayers for another $21.6 billion and announced another 50,000 layoffs. The latest mini-Madoff, R. Allen Stanford (of Caribbean-related infamy), was accused of an $8 billion fraud with 50,000 victims”

Since this column appeared on February 22 and the stimulus bill became law, the stock market has plunged to its lowest level in 12 years and has lost well over 50% of its value in less than a year. And the bottom may not yet been fully plumbed as consumer confidence has fallen to still another all-time low of 25 (1985 = 100) according to the latest Conference Board Index update. Mr. Rich went on to address a cultural phenomenon in his biblical parody that seems to have afflicted millions of Americans early in the 21st century and is demonstrated by their reluctance or inability to absorb and prepare for bad news. This in spite of unparalleled access to more information channels than any prior generation could have dreamed of. Putting it another way, Mr. Rich believes that America is a nation locked in denial with slow reaction times to adversity that may be the biggest hurdle to an early economic recovery.

This piece touched a nerve with us, since, as regular readers of this newsletter know, we have been writing in a similar vein for well over a year about the refusal of Wall Street, financial institutions and most economic pundits inside and outside of government to face up to economic reality as the walls came tumbling down.

Is there any light at the end of this long, dark tunnel? Well, perhaps.

Good news is very hard to find and for the economy to begin its inevitable recovery, consumers must open their wallets again for purchases beyond day-to-day essentials and credit must start to flow once more. We believe that there is some hope to be found in the continued high approval ratings for President Obama in recent polls and the mostly-favorable reaction by the public to his speech before Congress on the eve of the biggest budget proposal in American history.

If the stimulus program is not seen to be working by the second half of the year and the nation, along with much of the rest of the world, slides further towards a depression, that favorable rating will quickly change; but for now, its seems to us that some measure of consumer confidence can be restored and, barring any further grand disasters, we should see a return to a more-measured and careful rate of spending late this year or in early 2010.

TOURISM EXECUTIVE BRIEFIssue 2 – 2009

In fact, consumer retail spending stemmed its decline with a small increase in February after a disastrous final quarter of 2008 and a poor January. This may well be temporary but it gives us some cause for optimism. With that in mind, we continue with our look at the trends in the key industries that shape our present and future outlook.

1. AVIATION

i. THE AIRLINE INDUSTRY – BIG LOSSES, DOWNSIZING, FARE CUTS According to the International Air Transport Association (IATA), the world’s airlines lost nearly $8 billion last year, nearly doubling earlier estimates. Airline losses exceeded $4 billion in the fourth quarter of 2008 alone and IATA now predicts a further loss of $2.5 billion in 2009, a number which we consider to be understated. As a direct result, airlines are cutting capacity in most markets and a record number of jetliners are parked in the deserts of Arizona and California. Based on numbers from the London-based aviation data provider, Ascent, more that 11% of the world’s jet airliners are now in storage with at least 400 more aircraft scheduled to be cut this year. North American carriers moved more quickly to cut capacity than elsewhere with fleet reductions of around 800 aircraft made in the last eight months. European carriers grounded over 450 aircraft and Asia/Pacific airlines at least 230. Only the substantial drop in oil prices has given the airlines some breathing room and saved a number of carriers from extinction while they hustle to bring supply more in line with demand, reduce staff and close unnecessary and costly facilities along with fleet reductions.

All of our area markets have not been equally affected, so we follow with brief capsules on the most important:

NORTH AMERICA Though the global outlook is grim, IATA and the Air Transport Association of America (ATA) predict that US carriers, in particular, could eke out a small profit in 2009 due to their proactive actions in cost-cutting early last year. US airlines have already cut 10% in capacity and we believe that further cuts between two and three percent can be expected by year-end while the Caribbean may be further affected.

On the plus side, limited hedging by the major US carriers serving the region has made up for some of their losses as fuel prices came down. However, declining demand is still ahead of capacity cuts in most markets except for narrow bands around holiday peaks and fares have been slashed dramatically to fill up empty seats, erasing most, if not all, of 2008’s fare gains for the carriers. Leisure fares are under the most pressure as the recession deepens and with it demand. This is good news for vacationers but far from what the long-suffering airline industry had hoped for and it will keep their profits, if any, to a bare minimum this year.

As we have noted before, capacity cuts to the Caribbean by the largest carrier serving the region, American, have been offset to a degree for many destinations by new or expanded services by Delta and others. All in all, tourism interests in the Caribbean should be reasonably well served by the carriers in this market considering the hostile economic environment and more dramatic cuts elsewhere.

EUROPE

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European carriers are likely to be hit much harder than those in the US by the current crisis. The really steep economic slowdown across the European Union only began to affect them in the last few months of 2008 and most carriers started capacity cuts and other cost-trimming measures too late according to IATA’s Director General, Giovanni Bisignani. He expects that EU carriers will lose close to a billion pounds this year and that his old airline, Alitalia, which was recently saved from death’s door by government intervention, and Britain’s bmi will be among the hardest hit. The European giants of the industry, Air France/KLM and British Airways are also among the big losers. BA has been hit hard by falling demand at home and in some of its most profitable long-haul markets, together with some bad hedging bets on fuel and the decline of sterling. BA recently announced a preliminary operating loss of £150 million for its fiscal year to March 2009 compared to an operating profit of £875 million for the prior fiscal year of 2007-2008, not a pretty picture.

ASIA/PACIFIC The reversing fortunes of the two main driving forces of the economy in this region, China and to a lesser extent India, are expected to more than double their airline losses in 2009. Passenger numbers will fall by an estimated 5 percent but profitability is hit even harder by the huge decline in cargo revenues as the import/export flow between China and the west deteriorates. Carriers like Cathay are parking freighters, halting construction of cargo terminals and furloughing employees. Even Singapore Airlines which seemed impervious to hard times took a 36% decline in profits in its last reported quarter. As we opined in the last Brief, this is probably the time when Asia/Pacific markets should take a back seat in consideration of new business sources for short-to-medium term planning.

INTRA-CARIBBEAN Financial results for most Caribbean-based carriers are sparse and hard to come by in a timely manner but we have to give a tip of our hat to LIAT’s current management who narrowly escaped what would have been a disastrous tie-up with R. Allen Stanford after merger negotiations between Caribbean Star and LIAT in 2007, which might have meant joint ownership, ended with LIAT surviving and Stanford out of the picture.

Since then, LIAT has managed to turn things around and in spite of higher fuel bills and decreased demand in 2008, it managed to cover operating costs without any government financial support last year.

We believe that is a considerable achievement for an airline that serves 22 countries in the region with around 1000 flights a week and is the literal lifeline for many of the smallest destinations. We are happy to see LIAT creating some imaginative promotions with tourist boards this year with community appeal like the one-dollar tickets to Barbados for cricket spectators in February. This company is a fine example of survival in crisis and deserves everyone’s support.

ii. AIRLINE MERGERS – 2009 UPDATE

Ironically, the problems of the airline industry which led to a rash of mergers and takeovers in 2008 have taken a backseat to the global recession and the debilitating credit squeeze in 2009, particularly in the US where the huge Delta-Northwest merger may be the last of its kind for some time to come.

Speculation about a potential merger between United and Continental continued throughout the year even after the talks were officially called off. The problems of debt assumption and big loan

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acquisition are likely to put it to rest now in favor of a closer working partnership for this and other megamergers in today’s environment. Continental will end its membership in SkyTeam in the fourth quarter of 2009 and join United and its Star Alliance partners. The two carriers will pool assets including sharing of ground operations at many airports in addition to customer-linked benefits like improved transfers and reciprocal frequent flier miles.

Like American/BA/Iberia, the companies are also seeking broad, world-wide antitrust immunity that would allow them to coordinate schedules with each other and other Star Alliance members including Air Canada and Lufthansa. This partnership also should end any idea of a once-discussed merger between United and US Airways and the latter’s options appear to be evaporating.

EUROPE The situation in Europe is becoming increasingly fraught as its largest carriers are battling it out for supremacy in a declining market with Air France/KLM, BA and Lufthansa as the main antagonists. The on-again, off-again merger between BA and Iberia which seemed dead in January now appears to be headed for a favorable resolution as this edition of the Brief went to bed. There are of course implications for the Caribbean in the outcome of this one as in yet another struggle involving Lufthansa, bmi and possibly Virgin Atlantic. Back in October 2009, Lufthansa announced it was increasing its share of bmi, the former British Midland, to 80% by buying out bmi chairman, Sir Michael Bishop’s shares.

It also proposed to acquire the remaining shares owned by SAS, itself a candidate for takeover. The deal, which requires regulatory approval, was expected to take place in early 2009 but it was postponed until at least March. We will be watching with anticipation, particularly as it may affect bmi’s operations to the Caribbean. If finalized, Lufthansa’s acquisition of bmi would make it the second largest operator out of London’s Heathrow after British Airways and it has attracted the attention of Sir Richard Branson who has offered to combine Virgin’s operation with bmi in some unspecified way.

In other minor wars, Air France/KLM and Lufthansa squared off for control of Alitalia and Austria Airlines. Air France/KLM was the winner in the Alitalia struggle and Lufthansa prevailed with the purchase of Austrian. The possibilities for further mergers are shrinking rapidly and Ryanair’s CEO Michael O’Leary suggests in a self-serving prediction that Europe will eventually have only four airlines – Air France/KLM, British Airways, Lufthansa and of course his own Ryanair with or without coin-operated toilets!

iii. AIRPORTS VS. AIRLINES – WAR OF WORDS

We close this section on aviation with an argument that is rarely reported on beyond the technical press but is of considerable significance to the Caribbean. Airlines individually and through the pleadings of IATA have long been calling for airports around the globe to reduce landing fees and other charges within port authorities’ control. At an International Civil Aviation Organization (ICAO) workshop held in Bangkok in late February, the IATA delegate said “the airline industry is over-regulated while engaged in strong competition, yet infrastructure providers are often allowed to operate as unregulated monopolies in the same market causing significant distortion. This leads to increased consumer prices and has a negative effect on the economy and competition.” The paper also said” Despite strong ICAO policies, airports and ATC providers in 41% of the states in the world do not consult with users, 47% have no transparency at all and 48% have discriminatory charges.” These are serious accusation indeed and the other side of the coin was presented in

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London by the head of the global association of airports, Director General Angela Gittens. She criticized the airlines at large for having no commitment to their communities or destinations and suggested they back off from their attempts to pressure airports in these difficult times.

Ms. Gittens said that airports globally had made record capital expenditures in 2008 as enterprises with high fixed costs and a necessary long-term outlook that requires such investments even while operating in a serious economic downturn. To quote from her address at the Airport Council International AGM in February “This long-term perspective is tied to the strong community role played by airports.

They are catalysts for economic growth and employment and a cornerstone for community business development. They have a service commitment that does not change just because there is a cyclical downturn. Airports cannot move to a stronger market location – they have to make their market location stronger.” She added in direct response to IATA’s claims “Airports are not the comfortable monopolies one sometimes hears about.

They do not get to watch the crisis from the sidelines. They have to pay back their debt, maintain their facilities and keep up the highest levels of safety and security regardless of the drop in traffic.”

We take no sides in this argument, nor do we know how Caribbean airports stack up in the IATA complaint, but we are sure that Ms. Gittens makes a strong case which is worthy of study by the airlines and port authorities of the region. Among her suggestions to the airports:

• Look at your market, constantly reevaluate your situation.• Build up cash reserves while you can• Understand your dependency on your carriers but also on your community,

government, regulators and investors.• Recognize the importance of customer relations but be wary of short-sighted

overreaction.• Keep the customer in mind no matter what the traffic numbers say.

Invest in quality service and environmentally sound and efficient facilities.• Pursue investments in staff training and modernization of technology that position

you for the future.• Move to diversify by encouraging facilities that spread financial risk.

We can obtain Angela Gitten’s complete address from the AIC headquarters in Geneva for any reader who is interested, contact myoungman@caribtourism.com.

2. CRUISE INDUSTRY UPDATE – NOTABLE TRENDS MORE BERTHS – SHRINKING DEMANDS– BARGAIN FARESThere are an estimated 21,112 more cruise ship berths for sale globally than at this time last year and still more capacity will come into the market this year at a time when consumers everywhere are cutting back their vacation plans or canceling and staying home. The cruise industry has certainly not been immune and prices started to plummet in the second half of 2008 continuing throughout the current winter season with bargain prices not seen since the period immediately following 9/11. In the North American market, the Wave Season has been marked by special promotions like free shore excursions, cabin upgrades, third person in cabin free etc., which added

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to the very low up-front fares available though agents and online seem to have kept volume up if not profitability in the first quarter.

Princess Cruises, Oceana and Regent Seven Seas are among several cruise lines reporting record bookings in January and February; Caribbean seven-day cruises and Mexico have been the best sellers. Carnival says their volume is up by 10% to March but at much lower prices than last year while three out of four travel agents report their business is as good or better than during the 2008 wave season. However, all is not well in relations between agents, consortia and the cruise industry at large, which still relies on agents for the bulk of its business.

NON COMMISSIONABLE FEES (NCF)The cruise industry, like the airlines, has been struggling to come up with incremental pricing devices to boost their bottom lines. 2008 saw fuel surcharges brought on by record-high oil prices but when the cost of oil came down as fast as it went up, most cruise lines continued to charge them until passenger and agent outcry plus charges from the Florida Attorney-General’s office caused them to be dropped in late December. Now the hot button arousing agents’ wrath is the spread of non-commissionable fees for items like shore excursions and some on-board amenities which could be pre-sold.

Beyond question, the entire agency system is in serious jeopardy during this financial crisis and shops are closing at an unprecedented rate.

While agents have been forced to adapt to a market where they are required to charge fees rather than live on commissions alone, the cruise industry has been a lifeline in the past for agents and many see the cruise lines’ recent actions on NCFs as the beginning of the end towards a growing switch to increased direct sales for the cruise product. Where is this likely to go? In our view, the major cruise lines are perfectly capable of changing their key distribution channels and are technically capable of doing it quickly. However, we suspect that a full-blown recession is neither the time not the place. In fact several cruise lines have already backed off on the NCF issue and are trumpeting their loyalty to the agency system. What happens after the recession is over will be the real test.

LUXURY LINES DISCOUNTING LIKE THE REST It used to be a truism that one could count on the high end of the market to stay solid in hard times – the well-heeled would still buy expensive clothes, business and first-class sections on planes would be full when the back of the aircraft was half-empty and the luxury cruise lines would see little drop in demand in pricing.

But the current global recession has hit harder at the wealthy and frightened them more than at any time since the Great Depression. The American Affluence Research Center (AARC) which tracks retail sales and travel habits of the wealthiest 10% of US households released a report in December which said only 14% of respondents to their biannual survey expressed interest in taking a cruise in 2009, down from 22% a year ago. We suspect that percentage would be even higher if the survey were taken now.

Crystal, Seabourn, Silversea, Windstar all have space available for peak season sailings and are offering discounts up to 60% as well as increased commissions and other incentives for agents. Deals are especially attractive for sailings from European ports throughout the summer of 2009 and

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a number of sailings have already been cancelled due to lack of demand. This is a comparatively minor niche for the Caribbean and may even work to the region’s advantage although we see little crossover possibility for this segment to the really huge ships that now ply our waters.

SHIPS RETURN TO US PORTS IN TREND REVERSAL We have been reporting for several years now that the cruise industry was moving an unprecedented amount of inventory away from the Caribbean and home ports in the US to Europe and other international venues.

The Cruise Lines International Association (CLIA) said in its January report that non-North American cruise passengers have been accounting for much of the cruise industry’s growth as a consequence with a 30% jump in international passengers in the third quarter alone in 2008.

Johanna Jainchill, Travel Weekly’s cruise expert put it well in February when she wrote “It wasn’t so long ago that cruise executives were hunting for new exotic ports around the globe in which to place their growing fleets. Consumers were flush with cash, boomers had plenty of vacation time, and a been-there-done-that attitude pervaded Caribbean itineraries which offered far lower yields than the ships sailing out of Venice, Barcelona and Singapore. But what a sea-change a few years can bring.”

Currently, as we have detailed in a previous edition, Carnival has canceled its scheduled operations out of Dover, England this summer in favor of sailings to the Caribbean from Miami; Celebrity pulled its 2009/2010 sailings out of Australia and New Zealand for cruises from San Juan; and Royal Caribbean canceled its South America itineraries for Radiance of the Seas and will stay in San Diego for sailings to Mexico. In February, Royal Caribbean Cruise Lines conditioned its fourth-quarter earnings report by saying “to the extent there is relative weakness, it is in newer, more internationally-oriented products” as well as in Alaska.

Although cruise lines have the ability to move their assets to places where their customers are more likely to want to board, its still an expensive proposition in direct costs and necessary changes to sales and promotion. Given the instability in world markets, we anticipate that there will be no big rush to change gears again.

In the UK and Ireland, there has been a similar story, where Celebrity, Carnival and RCI have all reported big increases in sales for a smaller European-based inventory during the first quarter thus far over the same period a year ago and for the same reasons – heavy discounting, added value offerings and a blizzard of advertising and promotion.

Summing up, the cruise industry is once again relying on North America as its core market and the Caribbean and Mexico as its key destinations. So far this year, cruise lines are keeping their ships full through deep discounting and changes to shorter, less costly itineraries. Although there is a significantly larger number of berths in operation already this year and there are several new ships arriving in 2009/2010; after that, orders taper off rapidly and most industry executives say that they’re unlikely to be ordering any more soon. Cruising is holding up better than most land-based vacations in the current climate but people are deferring purchases until the last minute and advance booking times for cruises are at their lowest level ever. This is not unique to cruise business as agents and tour operators are reporting the same phenomenon for most vacation bookings.

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3. THE HOTEL INDUSTRY – RESORT DEVELOPMENT STALLED

The same economic conditions that have put the airlines and cruise lines in survival mode are even more critical for the hotel and casino-resort industry which unlike the other two has no moveable assets.

Speakers at the Reuters Travel and Leisure Summit held in New York in the first week of March said the dry spell in development for the lodging industry is likely to last for years as this capital-intensive industry comes to grips with the credit crisis.

In tandem with the US housing market, hotel and resort real estate assets have declined dramatically in value and owners and developers are struggling to cope as recession-weary consumers cut back on vacations and travel expenses says Reuters. Arne Sorenson, CFO at Marriott International, expects lower growth for the lodging industry in the United States and internationally to last at least into 2012 and a partner at industry consultant Bain & Co. was even more gloomy telling the summit, “I would say it’s probably at least seven years if not up to 10 years until I could imagine a new development boom happening, because there are asset-backed opportunities in other sectors where you can get far better returns.” Marriott sees the problem as particularly true of higher-end, full service hotel projects while there is still liquidity for good hotel owner-operators in the lower end of the market. In the meantime, the downturn in the existing hotel industry is so acute with declining occupancies and RevPAR, it is putting many properties in danger of missing mortgage payments. According to PKF Consulting, the US hotel industry is seeing its steepest decline in revenue per available room since 2001 and RevPAR will fall by nearly 10% this year.

Unfortunately, while we have no specific figures for Caribbean hoteliers, our discussions with several locally-based owners of late suggest that the situation is equally desperate in the region with hotels losing pricing power due to decreasing demand.

In the next issue, we will deal with technology developments, agent issues and an update on President Obama’s likely future relations between the US and Cuba and his administration’s approach in US policy towards the OAS.

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BARBADOSOne Financial PlaceCollymore RockSt. Michael, BarbadosTel: 246-427-5242Fax: 246:429-3065ctobar@caribsurf.com

NEW YORK80 Broad Street, 32nd FloorNew York, NY 10004USATel: 212-635-9530Fax: 212-635-9511ctony@caribtourism.com

LONDON22 The QuadrantRichmondSurrey, TW9 1BP, EnglandTel: +44-208-948-0057Fax +44-208-948-0067om

CANADA2 Bloor Street West, Suite 2601Toronto, OntarioCanada M4W 3E2Tel: 416-935-0767/1-866-997-0096Fax: 416-935-0939

CARIBBEAN TOURISM ORGANIZATION (www.onecaribbean.org)

“GLIMMERS OF HOPE” AND “GREEN SHOOTS”

The metaphors coming out of Washington recently to describe the economy have been multiple, slightly mixed

but more optimistic. With the largely symbolic milestone of President Obama’s first 100 days dissected and now

in our rear-view mirror, we thought it timely to examine those glimmers of hope etc., portrayed by the new

administration to see if they are reflected in the reality of the marketplace and in the opinions of those people

we regularly interview in our own intelligence gathering on the current health and resilience of the travel and

tourism industry. Few would dare argue that any other president in US history outside of Franklin Delano

Roosevelt ever faced a first 100 days like these for the scope and magnitude of the economic, military, and

political problems left in the lap of Mr. Obama. Consider that in the first month alone of his presidency the

nation lost nearly three-quarters of a million jobs, 275,000more US homes went into receivership and the stock

market was in the worst tailspin in decades before starting to recover in March. After that, actions by

President Obama produced what the Wall Street Journal described in an analysis of his first 100 days as, “a

mind-numbing series of giant initiatives,” including the successful passage of an unprecedented $787 billion

economic stimulus bill and an additional $350 billion in rescue funds for the financial sector. Mr. Obama made

decisions on troop withdrawal from Iraq and moved quickly to drop restrictions on Cuban Americans’ travel to

Cuba and allowed them to send additional funds to family members still living there. Many feel that this was

the first step in normalizing relations, of which more later. Recent weeks have seen the bankruptcy of

Chrysler, with General Motors following in its footsteps, and near-panic caused by the advent of the H1N1

swine-flu epidemic which continues to spread around the world, and saber-rattling by North Korea which

detonated its second atom bomb, launched several missiles and threatened war against its neighbor South

Korea and the United States.

However, in spite of all these disasters, there are growing signs that we may have hit bottom and the worst of

the recession may be over. Two major reputable consumer confidence surveys produced monthly in the US

are excellent and historically accurate indicators of where the economy is likely to be headed. In mid-May, the

smaller Reuters/University of Michigan Index offered the first pointer that consumer spirits are on the rise

when it reported that the Future Expectations Index jumped nearly six points to 69 which was its third straight

monthly increase. Later in May, the Conference Board Consumer Confidence Index, which had seen a big gain

in April, posted an even bigger gain to its highest level in eight months. As in the Michigan survey, the largest

growth was in the expectation component, which rose well above predictions to 72.3 from 51.0 in April. While

consumers are less confident about their present situation, there was encouraging growth in that index also.

The number of consumers expecting jobs to be more plentiful in the months ahead, jumped by 6% over the

previous month. We note that the sample size of the Conference Board Survey is ten times larger than

Michigan’s causing the stock market to rally upon the release of their report.

Confidence is also on the rise in Europe where a widely-tracked index of consumer sentiment turned positive

for the first time in two years. In the UK, Britons are at their most confident in a year according to a survey

TOURISM EXECUTIVE BRIEFJune - 2009

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published in mid-April. The GfkNOP Sentiment Index showed that British consumers believed that the

following 12 months would be better for the British economy at large as well as for their personal finances.

Still other signs that the economies of major markets may be improving include gains of more than 20%

reported by two-thirds of the 42 banks tracked regularly by the Economist Group. Housing starts and home

property sales are improving in the US and UK, although prices are still falling to new lows. Elsewhere, China’s

economy, never affected as badly as in the West, is said to be on the mend and India’s prospects and markets

have been buoyed by the huge victory of the moderate Congress Party in the recent elections.

NOTE OF CAUTION While all this is welcome news indeed and it seems as though consumers may be opening their wallets a crack

again, no one should assume it means a return any time soon to a full-blown recovery, and that people,

particularly in America, are likely to return to their free-spending habits and long-term debt creation of recent

years. Arnie Weissmann of Travel Weekly quotes the president of a consumer research company in the US

which tracks societal changes and advises some of the largest consumer retail brands in the world. Ms.

Hochstein believes, as we do, that the culture of excess has largely vanished. She finds that consumers at all

levels of society are finding virtue in thrift and bargain hunting as well as savings. Americans have been

shocked by the severity and sudden impact of this recession and are spending less and saving more. At the

same time, they are becoming more self-reliant. Household chores, for example, like cleaning, laundry and

mowing the lawn, which were regularly performed by outside help, are rapidly becoming part of a do-it-

yourself philosophy which is no longer entirely about the money but includes some inner satisfaction and

bragging rights. Opinions are divided on how this new way of life and attitude will affect discretionary travel.

It’s safe to say that most consumers who have cut back on vacation travel out of caution or necessity will start

to travel again as conditions improve, but many of them are likely to change their purchase options to conform

with these new values and seek products and services that better match their economic, social and

environmental goals.

WHAT ARE AGENTS AND WHOLESALERS SAYING? We start with still another quote from Mr. Weissmann who is constantly in touch with leaders from the agency

world. Arnie says he recently had a voice-mail left by the president of the upscale agency Protravel

International who knew that he was conducting a “How’s Business” survey. Their president said simply,

“Enough with the flu and gloom. It’s over.” Whether you agree with her or not, Protravel and other

bellwether agencies are starting to report that phone volume and bookings are slowly but surely improving. It

is worthy of note that most of these agencies are not sitting on their hands and waiting for business to come

back. They are creating promotional nights in their communities and bringing in participation from

destinations, airlines, and hotels to share in reaching their valued client lists.

WHOLESALERS/TOUR OPERATORS Our discussions with several of the leading wholesalers who serve the region reveal a similar story. In sharp

contrast to the gloomy responses to our surveys of a month ago, we got a muted but generally positive

reaction in regard to advance bookings for the Caribbean. It is difficult to say with any certainty how much of

this is due to the Mexico effect, but it has been and continues to be a major factor as business to Mexico,

already hampered by the media exposure of drug violence in US/Mexico border towns, virtually dried up as

Mexico was revealed as the source of the swine flue epidemic.

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Tourists from both sides of the Atlantic rebooked in droves to Caribbean destinations with the Dominican

Republic as the major beneficiary by far and Jamaica a good second with smaller countries like the Cayman

Islands also benefiting. It goes without saying that this bonanza will not last and as soon as the Center for

Disease Control (CDC) lifted its recommendation against non-essential travel to Mexico in mid-May, the

Mexican travel industry, both government and private sector, sprang into action together with their US travel

company partners with massive promotions and discounts up to 70%. Apple Vacations has already reported a

rebound in Mexico sales including many new clients attracted by the unusual bargains. Both Carnival and

Royal Caribbean are resuming calls to Mexico with most cruises starting up again in June. Our opinion,

informed by the operators and airlines, is that the huge drop in travel demand for Mexico will be comparatively

short-lived. The most important factor for the Caribbean is that the key wholesalers say that the bleeding has

stopped for the region at large and business should slowly return as the year progresses.

ONLINE TRAVEL AGENCIES Online agencies were no less affected than traditional operators in the first quarter. Orbitz reported an

operating loss of $4 million for the quarter plus a $332 million write-off of devalued assets and stocks.

International bookings were the most affected. Expedia had an 11% decline in gross revenue in their latest

quarterly earnings report. To counter the fall in bookings, Expedia dropped their air-booking fees and in April,

they sharply reduced hotel-booking fees. The loss of fee revenue cost Expedia about $6 million a month and

they were scheduled to end this promotion on May 31, but competition forced a permanent extension. Orbitz,

Travelocity and Priceline.com had similar price guarantees and cuts in bookings fees in place through June 1,

and they too have been made permanent.

Conclusion for US Market Projections There is light at the end of the tunnel as more than 90% of economists now predict the recession will end this

year with a few bumps along the way. Most of them (74%) believe the recession, already the longest since

World War II, will be over at some time during the third quarter. This assessment comes from a survey of

leading forecasters by the National Association for Business Economics and conforms closely to the forecast

from Federal Reserve Chairman Bernanke.

These forecasters expect unemployment to continue to climb to an average of 9.1%, the highest level since

1983, keeping consumers cautious. In line with other comments above, 71% believe that a thriftier consumer

will be around for at least five years. Reduced household wealth will contain consumer spending for items that

include travel for some time to come. Caribbean tourism is likely to be less affected than other medium to

long-haul destinations according to our surveys.

CANADA Canada’s economy normally follows in US footsteps and this time of global downturn has been little different

from the past except that Canada has been slower to slip into recession and the recession is less deep, mainly

due to its strong energy resources and the conservatism of Canadian banks which kept them out of the

financial mess that many American financial institutions are still in. Canada is the only Group of Seven

industrialized country that has not had to rescue any of its banks since the current crisis began. Canadian

banks have operated under stricter government regulations than their American counterparts and that has kept

them out of deep trouble, although they are seen as much less competitive than US banks in regard to interest

rates and loans. Nevertheless, Canadian banks have been hurt by the recession which no doubt will reinforce

their conservative approach to lending.

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According to Nielsen’s Global Consumer confidence Survey, conducted this Spring, consumers in Canada are

becoming increasingly wary. Compared to a year ago, Canadians are spending 63% less on out-of-home

entertainment that includes holidays. They are spending less on clothes (55%), groceries (55%), and saving

on gas and electricity (48%). Many Canadians are currently cutting back on this year’s vacations (23%) and

long weekend getaways (30%). However 95% of Canadians expect to resume vacation plans when times get

better. Canadians are very concerned about job prospects that reflect the bleak unemployment picture in the

country where 211,600 jobs were lost in the first two months of 2009. Statistics Canada pegs the

unemployment rate at 7.7%, the highest in six years. National carrier Air Canada’s performance also reflects

the downturn in consumer demand and it posted a first-quarter loss of C$400 million, a 39% decline over the

previous quarter. Passenger revenue declined by 13% on sharply reduced capacity, and further capacity cuts

are expected. Although the carrier still says it hopes to avoid a bankruptcy filing which would be the second

in its history, a number of analysts are dubious that it can be avoided.

Conclusion for Canada Prospects It is our belief that Canada’s economy is fundamentally sound and although it reached technical recession later

than the US, it is less severe and the economy should pull out faster. Consumer spending will stay down for

some time and Caribbean markets dependent on Canada will likely feel the pinch for the rest of the year and

possibly into next winter’s season.

THE BRITISH ECONOMY Back in April, Chancellor of the Exchequer Alistair Darling delivered the worst British budget numbers in post

World War II history and the tumble in national output was the largest since 1945. Similarly, the budget deficit

as a share of GDP was the biggest since the war. The number of jobless actively seeking work rose to 244.000

in the first quarter and the jobless rate is predicted to rise to between 9% and 10% by the end of the year.

British households have managed to accrue the biggest debt, relative to disposable income, of all the G7

countries and British banks were hit as hard as in the US by the credit crisis.

Nevertheless, there are signs that things are looking up, particularly from the consumers’ perspective. The

British are once again proving to be remarkably resilient in the spirit of never-say-die they have shown in the

past. We have referred to the latest GfkNOP Survey above, which shows people’s expectations for the next 12

months improving considerably. Britain’s biggest retail chain, TESCO, reported a 15% rise in sales for its latest

fiscal year and their CEO points to a “fledgling rebound” in consumer spending along with growing sales and

profitability for fiscal 2009.

In travel, Thomas Cook said in mid-May that UK sales were robust in spite of the late booking pattern that we

have reported on in other key markets and some negative impact from the swine-flu scare. Their demand for

destinations outside of the Euro-zone is growing and now represents 39% of all the holidays Cook sells. This

switch, which reflects the falling value of sterling against the euro should benefit the Caribbean. Other

operators including on-line companies have reported the same trend.

CTO’s newly appointed Director of Marketing for the UK and Europe is no stranger to this marketplace, and she

notes, “The latest visitor figures to the Caribbean demonstrate that much of the region is maintaining its

popularity, despite the challenging economic environment.” Carol reports as examples, that visitor figures to

Jamaica rose last year from both the UK and Republic of Ireland and continue to go up this year, while at the

Page 5

other end of the spectrum tiny Dominica managed an 8.9% year-over-year increase from the UK. Carol’s

office and the UK Chapter are fighting hard to maintain this progress with aggressive promotions and have

joined other members of the British travel and tourism industry in an attempt to mitigate the British

Government’s unfair new tax category for travel to the Caribbean for both holiday makers and VFR travelers.

Conclusion For UK Demand In spite of the challenges of the economy and the new tax burden on travel to the region, it appears that the

British market is holding remarkably well. More tough times are ahead and the Bank of England recently threw

cold water on the prospects for an early recovery, but this market can be something of an enigma as it has

responded with good results in earlier bad times. The region seems positioned to do well with new services

announced by BA for the Fall in spite of their horrendous system results. Full support should be given to this

market when allocating regional marketing funds.

THE EURO-ZONE The economy of the 16-member nation Euro-zone collectively shrank by 2.5% in its worst slump since the

inception of the Common Market. Germany, in particular, experienced a near-collapse in the first quarter

reporting a decline of 3.8%, annualized at 14.4%, which was nearly three times worse than Britain and the US.

France, less dependant on exports than Germany, fared somewhat better with a 1.2% drop for the quarter,

while Spain, the other major European nation of interest to the Caribbean saw its economy shrink by 1.8% in

the same period. However, the pace of the recession in the Euro-zone appears to be slowing sharply and

results for the second quarter, including Germany, are expected to be better. Most analysts believe a return to

growth for the Euro-zone is possible by the end of the year although unemployment is expected to continue its

rise into 2010.

In the tourism sector, Meier’s Weltreisen, Germany’s largest long-haul tour operator, reports demand for

holidays is stable with the Caribbean selling well. TUI Travel reported a 16% revenue loss in the first quarter

across its several markets with TUI Germany losing 10% in customer volume.

Conclusion for Demand in the Euro-zone This will be a very tough year for sales to the region although there will be pockets of increased demand

including a potential rise in cruise sales.

WHERE ARE OIL PRICES HEADED - UPDATE We postulated back in January that if OPEC members could stay disciplined, the price of crude could creep up

again to near the $80 a barrel level which was in the target range for the cartel. OPEC, aided by a sharp fall in

inventory in US oil reserves and hints of a global economic recovery seems well on the way to achieving that

goal. Towards the end of May, OPEC met in Vienna and decided not to change quota levels. The Saudi Oil

Minister, Ali Al-Naimi, said the organization should “stay the course” and maintain compliance. Prices are now

up more than 40% this year and the market closed at a 2009 high of more than $65 a barrel on the last

trading day of the month.

Inevitably, this will have an effect on both airline and cruise ship prices for their seats and beds. In fact, the

cruise lines are already talking about a return to energy surcharges.

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POSTSCRIPT “That infernal little Cuban Republic.” No, it’s not a quote from some US right-wing politician, but a note of exasperation from President Theodore

Roosevelt in 1906. We use this quote solely to illustrate how long problems have beset the relationship

between the US and the Cuban Republic in the firm hope that the deadlock is nearly over after more than a

century of misunderstandings. President Obama took the first step in this long road when he lifted the

aforementioned restrictions on travel to Cuba for Cuban-Americans and made it easier again for people

involved in food and medical sales to travel there. He also increased the amount of money that can be sent to

family members in Cuba. Since then, there has been a huge boom in reservations for charter flights between

Miami and the island nation. But this was only the beginning. There is a rising tide of support for the Freedom

to Travel to Cuba Act announced in March by Senate sponsors from both parties. This includes strong support

from such diverse and powerful organizations as the National Tour Association, the American Farm Bureau

Federation, and the US Chamber of Commerce, as well as the OAS and virtually all other governments in the

hemisphere. We believe that passage of the act is likely before the end of the year although the broader trade

embargo would remain in place for now, as a total shift, however desirable, does not seem imminent. If the

travel ban is lifted, as we expect, it will have an immediate impact on the dynamics of Caribbean travel, similar

to the opening up of areas in the Dominican Republic like Punta Cana. Big tour companies are already anxious

to get in on the start and pent-up demand. Curiosity will do the rest. We should all look forward to a new day

for the region when the full scope of its diversity and attractions will be open to all.

BARBADOS One Financial Place Collymore Rock St. Michael, Barbados Tel: 246-427-5242 Fax: 246:429-3065 ctobar@caribsurf.com

NEW YORK 80 Broad Street, 32nd Floor New York, NY 10004 USA Tel: 212-635-9530 Fax: 212-635-9511 ctony@caribtourism.com

LONDON 22 The Quadrant Richmond Surrey, TW9 1BP, England Tel: +44-208-948-0057 Fax +44-208-948-0067 ctolondon@caribtourism.com

CANADA 2 Bloor Street West, Suite 2601 Toronto, Ontario Canada M4W 3E2 Tel: 416-935-0767/1-866-997-0096 Fax: 416-935-0939 ctotoronto@caribtourism.com

Page 7

TOURIST (STOP-OVER) ARRIVALS AND CRUISE PASSENGER VISITS IN 2009

Tourist Arrivals Cruise Passenger Visits

Destination Period Tourists % Change

2009/08 Period Cruise

Passengers % Change

2009/08 Anguilla Jan-Feb 10,447 -21.4 - - -

Antigua & Barbuda * Jan-Apr 92,816 -13.6 Jan-Mar 296,127 16.2

Aruba P Jan-Mar 207,430 -8.0 Jan-Jan 99,309 8.7

Bahamas Jan-Jan 93,631 -15.3 Jan-Jan 311,773 21.9

Barbados P Jan-Mar 145,530 -8.6 - - -

Belize Jan-Feb 45,180 -7.7 Jan-Mar 225,554 -1.9

British Virgin Is. Jan-Feb 52,084 -25.1 Jan-Jan 98,263 -12.1

Cancun (Mexico) ** Jan-Mar 652,717 4.7 - - -

Cayman Islands Jan-Apr 109,053 -12.5 Jan-Apr 604,760 -14.5

Cuba Jan-Mar 809,937 2.0 - - -

Dominican Republic * Jan-Apr 1,518,210 -4.8 Jan-Feb 188,771 9.3

Grenada P Jan-Mar 31,741 -4.6 Jan-Mar 173,660 14.0

Guyana P Jan-Apr 41,915 -1.9 - - -

Jamaica Jan-Mar 485,097 0.2 Jan-Mar 310,720 -25.6

Martinique P Jan-Mar 132,287 -11.1 Jan-Apr 35,141 -32.0

Montserrat Jan-Mar 1,587 -12.6 - - -

Puerto Rico** Jan-Feb 233,434 -8.4 Jan-Jan 133,158 -25.8

Saba Jan-Apr 4,605 1.4 - - -

St. Lucia Jan-Apr 100,577 -8.8 Jan-Apr 359,394 8.0

St. Maarten Jan-Mar 129,046 -16.1 Jan-Mar 541,023 4.4

St. Vincent & the G’dines Jan-Feb 12,493 -12..9 Jan-Feb 61,635 57.7

US Virgin Islands Jan-Feb 122,815 -6.1 Jan-Apr 705,032 -15.7

* Non-Resident Air Arrivals **Non-Resident Hotel registrations only - No Cruise Figures are Reported P Preliminary figures n.a. Figures not

available

N.B: Figures are subject to revision by reporting countries

SOURCE - Data supplied by member countries and available as at June 18, 2009

CARIBBEAN TOURISM ORGANIZATION (www.onecaribbean.org) OVERVIEW

The principal focus of this summer edition will be the dire state of the airline industry both collectively

and individually, with special attention to the current struggles for survival and extensive downsizing

among several of the most important legacy carriers serving the Caribbean region. Given the difficulty

of restoring airline service, once lost, in this environment, it goes without saying that the fate of these

carriers will be a big factor in the region’s eventual recovery. But first we offer an update on the

broader economic conditions that we described in the June edition under the headline of “Green

Shoots and Glimmers of Hope.” The conclusions of that piece suggested that the global recession

had probably hit bottom and a very slow recovery could be expected extending well into next year. Several positive developments in the intervening weeks have reinforced that outlook including a rise in

the US index of leading economic indicators for a third consecutive month, something not seen since

2004. Economists are now predicting a better second half amid a small rise in consumer spending in

June. The stock markets bounced back, following an historic pattern where the markets usually lead

the way out of recession to the highest levels seen since last November with the Dow Jones topping

9300. Adding to the growing optimism came news that private investors had bailed out CIT, one of

America’s largest lenders to small and mid-sized businesses including many in travel and tourism.

While this may turn out to be only a temporary reprieve for CIT, it helped to spark a strong rally in

European markets as well as on Wall Street. The FTSE in Britain, the DAX in Germany and the CAC 40

in France all rose together with the DOW. Most recently, it appears that the economies of France and

Germany may have already emerged from recession although many problems remain. Another piece of good news came from a report on housing released in late July which showed US

home prices in most major cities rising for the first time in nearly four years. Concurrently, sales of

new and existing homes were also up slightly for a fourth consecutive monthly gain. On the

downside, the closely watched Conference Board Consumer Confidence Index retreated again in July

for a third straight monthly drop with the worsening job market taking most of the blame along with

some disillusionment over the Obama administration’s new health plan initiatives and spending

programs, even though July unemployment figures were better than expected and buoyed the stock

market. Nearly 50 percent of respondents to the Conference Board survey say that “jobs are hard to

get” and “business conditions are still bad.” This good news/bad news scenario is hardly surprising as

rehiring and new hires always lag in a stock market recovery. ENERGY PRICES Another area of great concern is the wildly fluctuating price of crude oil that has been largely

manipulated by investors in oil futures. Crude is in plentiful supply in most major markets but lower

inventories for refined products have been experienced even though demand is still weak. Late July

TOURISM EXECUTIVE BRIEFJuly/August - 2009

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and early August prices for crude topped $70 a barrel and seem likely to stay in a band between the

low seventies and $80 a barrel, which was OPEC’s self-proclaimed target at their last meeting.

We see something of a paradox here as higher oil prices have driven up shares in global stock

markets where oil companies are a major component as in the DOW. At the same time, they push up

the operating costs of every oil dependent industry, particularly the airlines, into a higher threat level

for bankruptcy. Airlines are in a catch-22 situation, whether or not to hedge fuel costs and risk

another decline in prices as happened earlier this year when Delta lost $390 million on fuel hedges in

the second quarter. JetBlue dropped $42 million on a similar gamble along with similar big carrier

losses in other parts of the world. The alternative is to stay out of the hedging game which, given the

scarcity of capital at some airlines is more likely, and risk a return to the sky high prices we saw last

summer. Which way will the pendulum swing next? Globally, jet fuel is expected to see rising

demand in 2010 with Asia leading the way. At the moment, decreased demands and capacity cuts

have kept jet fuel reserves in Europe and North America at high levels for this summer period and the

non-hedged carriers can breathe a little easier for now. TRAVEL MARKET IMPACT So what has been the impact so far of these so called green shoots in the general economy on the

travel and tourism industry? What are some of the key players in the wholesale and retail agency

world saying about the state of their business in this twilight moment between deep recession and

slow recovery? We checked a number of our traditional sources that have provided us with reliable

and unvarnished assessment of current conditions for this newsletter over the years. We found

remarkable similarities in their responses which suggest times are still very tough for them but the

worst may be over. Agency managers tell us that clients are starting to call again responding to

increased levels of advertising and promotion. Advance bookings for both land-based and cruise

vacations in the Caribbean are increasing slightly and the month-over-month declines from 2008

figures which have typified most of the year to date have dropped to low single digits. However, this is a market still driven almost entirely by price on both sides of the Atlantic at all

consumer income levels. Bargain prices abound; as examples: some resorts on the Mexican Riviera

are offering free air transportation for stays of more than five nights at already heavily-discounted

room rates. The average yield reported by U.S. carriers operating on trans Atlantic routes in early

summer was down by more than 25 percent. Major resort areas in Southern Europe from Cyprus to

Spain have slashed prices as occupancies have plunged. The World Travel and Tourism Council

estimates that entire region will suffer a loss of 10 million tourists and $21 billion in revenue for the

full year. The cruise industry is no exception with huge discounts readily available at every price point

from mass market to luxury.

There has been one limiting factor to this bargain bonanza in some markets where the huge drop in

seat capacity has caused demand for the lowest promoted prices to exceed supply for many dates

remaining this summer and frequent flyer reward seats have all but disappeared until mid September.

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Compounding the uncertainty for retail agencies in the U.S. market, some senior management people

at bellwether wholesalers have privately expressed growing concern that one or more of their critical

airline partners may not survive into the next winter season and they are hedging their bets by making

fewer advance seat commitments, further hurting the ability of those carriers to forecast future

demand. That leads us into our main theme – a short analysis of current information available on the

state of the airlines, particularly those external trunk carriers serving the Caribbean Basin. INDUSTRY OVERVIEW INCLUDING AN UPDATE ON MERGERS AND ALLIANCES OF INTEREST

Correspondent David Olive of the Toronto Star injected a little humor into a very serious subject by

headlining a recent article on the plight of global airlines with this paraphrase “Mamas, don’t let your

babies grow up to be airline bosses.” We certainly concur in that sentiment as the summer of 2009

may well turn out to be the worst in modern aviation history with prospects for the fall even more

calamitous. Few carriers in North America and Europe have been spared and international route

expansion seen as salvation by some in very recent times has proven to be a double-edged sword at

best. All passenger traffic on U.S. airlines traveling in June fell by 6.5 percent but passenger revenues fell

by a far more alarming 26 percent. Numbers released by IATA tell a similar story as international

scheduled air traffic showed a further 7.2 percent decline after a drop of 9.3 percent in May. Cargo

business, often the difference between profit and loss on many routes, was even weaker with freight

revenues down by 16.5 percent over a year ago. Although most IATA carriers cut capacity sharply,

the fall in demand was even steeper and average fares fell in tandem. As a result, revenues were off

as much as 30 percent well into the heart of the make-or-break summer season when airlines

normally make most of their profits. IATA’s Director-General, Giovanni Bisignani, told airline chiefs in

a June crisis meeting: “Today’s situation is unprecedented, the most difficult ever.” Yet British Airways

CEO, Willie Walsh, immediately painted IATA’s latest forecast of a $9 billion industry loss for the year

as too optimistic. Walsh said that BA is in a situation where its “very survival is at stake” (of which

more specifics later) while Chairman, Martin Broughton, weighed in with a direct quote from Queen

Elizabeth referring to an earlier rash of problems in Britain when he called the last 12 months “Annus

Horribilis” for an industry in desperate need of consolidation. Those prophets of doom were clearly appealing to government anti-trust regulators on both sides of

the Atlantic and the U.S. Department of Transportation to quickly approve removal of trans Atlantic

restrictions on the existing alliance between BA and American.

That bid received a huge shot in the arm when the USDOT gave final anti-trust immunity on July 10 to

all member carriers of the powerful Star Alliance including the recent addition of Continental. The Star

members which include Air Canada, BMI/Lufthansa/Swiss, United and several smaller airlines can now

coordinate schedules, fix fares and pool revenues on all but a couple of trans Atlantic routes between

the U.S. and Germany. Star Alliance members and competing Sky Team airlines collectively control

more than 50 percent of all seats offered on the North Atlantic including Europe and the Middle East.

Sky Team includes Delta and Air France/KLM which already have anti-trust immunity.

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So it would appear that approval for American, BA and Iberia to operate a third collective operation on

trans Atlantic routes with the same anti-trust immunity is almost certain in spite of objections from

Virgin Atlantic’s Richard Branson, law makers and agency groups. If that happens, the three

competing alliance groups will control close to a 100 percent of all the traffic across the Atlantic. The

fact that there will be furious competition between the three should allay some of the concerns

although to some of us old timers from the aviation industry, it seems a little like a return to the fare

and schedule setting practices that typified the old IATA cartel.

Other pending mergers include the long drawn-out negotiations between BA and Iberia, Lufthansa’s

continuing attempts to take over Austrian, the Air/France/KLM project to buy into Alitalia SpA, and

Spirit’s reported purchase of Air Jamaica. Rumors continue to fly about Continental and United but in

view of the latter’s massive debt and ongoing labor problems, most analysts consider a full merger

unlikely, as do we. However, a much closer relationship will take place as Continental prepares to

leave Sky Team on October 24 and join the Star Alliance a day later. Beyond the obvious international

route benefits, the two carriers are hoping to create a common information technology system which

would provide improved efficiency and significant reductions in fixed operating IT costs. This will be no

simple task as there are currently three separate systems involved: United’s Travelport (owner of

Apollo), Continental’s Shares, and Amadeus as the common platform for the Star partners. Moving on

to some individual carrier performances of particular interest to the region, we start in Canada.

AIR CANADA Falling passenger traffic left Air Canada with a $113 million operating loss for the second quarter

despite capacity cuts which fell short of matching reduced demand and a $276 million savings in

reduced fuel costs. Only a huge foreign exchange gain allowed the carrier to report an increase in net

income of $155 million for the quarter. We note that losses of premium cabin revenues accounted for

nearly 40 percent of the total passenger revenue decrease, a very similar situation as reported by

British Airways, American and other major legacy carriers which have long relied on high yield paying

passengers for profitability. Air Canada CEO, Calin Rovinescu, said on a recent conference call

discussing second quarter results that the airline needs to undertake a “Cultural change” to more

nimbly respond to opportunities and react faster to the daily challenges of an uncertain marketplace.

There is no question that Air Canada needs major restructuring including some probable downsizing

and less emphasis on premium class passengers given the reality of shrinking demand for high-yield

seats. Calgary-based WestJet has become a serious competitor for Air Canada with its much lower operating

costs and fares and a major expansion program into the U.S. and Caribbean markets. If Air Canada is

to survive and stave off the insolvency predicted by some Canadian airline and financial analysts it

must pull off a rigorous cost-cutting program to bring it closer to WestJet which now enjoys an

approximate 30 percent cost advantage. Such a program is in the works and the country’s largest

airline is aiming for $500 million in annualized cost reductions and revenue enhancements over three

years. Although at least one of the naysayers at Research Capital Corp is doubtful that Air Canada can

pull it off, our betting is on the airline’s newly energized management to make it happen.

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AMERICAN AIRLINES American remains the only North American legacy carrier to avoid bankruptcy in spite of the

increasingly hostile environment, and that has to be seen as a significant achievement. Although AA

lost $390 million in the second quarter, the loss was not as severe as Wall Street analysts had

predicted.

Ancillary revenue sources like checked baggage fees and on-board food purchases helped by raising

$565 million in the quarter, and a fuel bill that was considerably less than a year ago.

AA cut capacity by 7.6 percent by cancelling unprofitable flights and using smaller aircraft. It had

earlier reduced the seat pitch in coach sections which made up for some of the lost capacity. In the

third quarter AA expects a further drop of 8.5 percent in seats over last summer with a larger cut on

domestic routes.

Like most other airlines, AA is facing a serious liquidity crisis and it is taking drastic steps to shore up

its cash reserves which ended the second quarter at $3.3 billion. In order to avoid default on debt

covenants coming due in October, the company raised $66 million by selling and leasing back several

aircraft and most recently used other aircraft as collateral in a large private debt sale of senior secured

notes that will not come due until 2016. These are desperate measures for desperate times described

by AA’s Chief Financial Officer as “the most difficult credit market in memory.” Given AA’s huge

contribution in service levels and marketing for Caribbean tourism development in modern history, to

say nothing of their many charitable and disaster relief programs, we can only hope those measures

are successful even as a different and probably smaller airline partner emerges for the region.

DELTA AIRLINES Delta, now the world’ largest airline operator by traffic, narrowed its second quarter loss to $257

million from a year earlier when it wrote off some big one-time items. The carrier would have actually

turned a profit if it hadn’t suffered a $390 million loss in fuel hedge contracts that backfired. Wall

Street expects Delta to be profitable on an adjusted basis for the second half of the year. It has a

strong cash position with $5.4 billion in unrestricted liquidity as of June 30 and a further $500 million

available in an undrawn credit line.

Delta plans to cut international capacity by 15% starting in mid-September and says 2010 system

capacity will be 10 percent lower than in 2008 despite its acquisition of Northwest that year. We do

not expect cuts to affect their Caribbean routes and industry analysts consider Delta among the

healthiest of the major airlines because of its profitable international routes and superior liquidity

position.

US AIRWAYS Even though US Airways recorded a rare profit in the second quarter, it has the weakest cash position

and balance sheet of all major carriers in North America making it dangerously vulnerable to further

economic shocks. Meanwhile, the airline has an $850 million unrestricted cash covenant for a credit

agreement hanging overhead like the Sword of Damocles. Wall Street is concerned and so are

wholesalers who work closely with US Airways. We will be watching and listening closely for any

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further developments. In view of their expanded service to the Caribbean including additional services

to several regional destinations including Barbados this winter, we hope for better news to come as

market conditions improve.

BRITISH AIRWAYS “Could BA go bust?” This was the headline in giant letters that screamed across a full page story in

the business section of a recent London Sunday Times. We don’t think so for a moment and suspect

along with other seasoned airline watchers, that BA’ s two top executives are crying wolf to scare

some of the company’s recalcitrant unions into further concessions to their cost cutting programs.

CEO Walsh issued several dire warnings to employees at all levels asking them to work a month

without pay in a fight for survival. In an intranet message picked up by The Times, the company told

its workers that time was running out. Apparently it worked with some 4000 employees who

volunteered to take a month off without pay; another 1000 agreed to work part time and 400

stalwarts said they will work full time for a month without compensation. The pilots did their bit by

agreeing to a 2.6 percent salary cut but no settlement had been made at the time of writing with

cabin crews and airport workers.

It’s hard to believe that the once proud industry leader that topped traveler satisfaction polls for

outstanding service year after year and as recently as fiscal 2006-2007 earned a record profit of 922

million pounds sterling with an operating margin of 10 percent could have fallen so low, so fast. In

the latest international passenger poll, BA had practically dropped out of sight amid diminishing

service and operational problems and the early disaster of Heathrow’s terminal five.

BA’s problems were further exacerbated this year by their untimely acquisition of French all- business

class airline L’Avion and merging it with their wholly-owned subsidiary Open Skies to operate across

the Atlantic in direct competition with BA’s own premium class traffic. Now it appears that Open Skies

is up for sale itself although still operating for now.

The news from BA is not entirely bad as the struggling airline is still one of the strongest in terms of

cash and it seemed to secure its future in July when it unveiled a $1 billion fund raising program

including $540 million in bank loans that had been set aside for pension funds in the event the airline

went into bankruptcy. The latter action was taken after pension fund trustees agreed that bank

guarantees provided in 2006 could be handed back to the airline.

In other good news for the region, BA is adding flights to the Caribbean this winter even as it is

cutting back on some other long-haul routes. Islands getting additional service are Barbados,

Bermuda, St. Lucia and Trinidad.

BMI/LUFTHANSA In June, Lufthansa reached agreement to buy BMI, the second largest operator at London’s Heathrow

airport, after a long-simmering duel between the German carrier and veteran airline entrepreneur Sir

Michael Bishop who finally withdrew a law suit against them. Lufthansa initially owns a 35 percent

stake in the UK based LHBD holding company while the remaining 65 percent will continue to be held

by British nationals until new bilateral agreements are renegotiated. After their conclusion, Lufthansa

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will acquire 100 percent of the holding company and become a very serious player at LHR indeed. It

remains to be seen how the German carrier, which is still in the acquisition mode, will use its new

strength at Heathrow on what routes, but we are optimistic that their plans will continue to use and

expand BMI’s mid-Atlantic services to the Caribbean.

VIRGIN ATLANTIC After more wild rumors flooding the British media, the flamboyant founder of Virgin Atlantic, Sir

Richard Branson, appears to have totally ruled out a takeover or financial bailout of struggling British

Airways. Meanwhile Virgin’s profits soared earlier in the year even as BA’s plunged and Virgin has

successfully increased market share on a number of competitive routes.

Virgin has just placed an order for ten new long range Airbus 330-300 aircraft valued at more than $2

billion. Deliveries of the 270-seat aircraft will take place in 2011 and 2012 and the carrier says it plans

to use the new fuel-efficient aircraft on both business-oriented and vacation routes worldwide.

Virgin Atlantic is 51 percent owned by Branson’s Virgin Group and 49 percent by Singapore Airlines, it

currently has 38 aircraft in its fleet. CEO Steve Ridgeway says “despite the worst economic situation

in decades, we are focusing on sustainable growth in the years ahead using the most fuel-efficient

aircraft possible.”

It seems to us that the future of new market development for the Caribbean region is likely to lie in

the expansion of carriers like Virgin and BMI/Lufthansa which could open up new direct services to

more of Europe and Asia in the years ahead.

POSTSCRIPT

This special edition closes with a look at safety in today’s commuter airline industry which mostly

affects communities dependent on regional commuter airlines. Travelers have long complained about

unacceptable delays and uncomfortable conditions in this carrier group but shocking revelations by

investigators following the crash of a Colgate Air commuter plane in February operating for

Continental have raised new and more serious issues about the way some of these companies are run

and the level of FAA control over them in the past. The new head of the FAA, Randy Babbitt,

considers commuter pilot fatigue and insufficient training to be at the top of the federal agency’s

safety concerns and he has promised to draft much tougher rules to alleviate an increasingly bad

situation in the next few months.

How critical this can be is measured by the fact that commuter aircraft currently operate more than 50

percent of all commercial flights in the United States. Most of them are flying under contract for trunk

carriers ferrying passengers between small communities and large city hubs many of whom are

making connections to the Caribbean and elsewhere. In fact most of the North American trunk line

airlines serving the region use them extensively including American, Continental, Delta and US

Airways.

Investigators of the Colgate crash found that the captain had failed several flight proficiency tests

earlier in his career that had either gone undetected or been ignored and that he and his co-pilot had

Page 8

been engaged in casual conversation moments before impact. Questions were raised about industry

practices on commuter services and widespread abuses were found including improper crew rest, with

some pilots illegally sleeping in airports’ crew rest rooms because they could not afford a hotel. Many

commuter pilots turn out to be paid less than a junior clerical position in a good firm.

We believe that apart from the obvious need to improve safety the widespread publicity given the

Colgate accident and subsequent problems with other commuter companies including Continental

Express could well have contributed in some small measure to the downturn in the numbers of

passengers willing to fly with them this Spring and Summer. Similar actions to those of the FAA in the

U.S. undoubtedly need to be taken within the Caribbean both by the FAA, where involved, and local

aviation authorities to reassure the traveling public about safety on intra-regional commuter

operations.

BARBADOS One Financial Place Collymore Rock St. Michael, Barbados Tel: 246-427-5242 Fax: 246:429-3065 ctobar@caribsurf.com

NEW YORK 80 Broad Street, 32nd Floor New York, NY 10004 USA Tel: 212-635-9530 Fax: 212-635-9511 ctony@caribtourism.com

LONDON22 The Quadrant Richmond Surrey, TW9 1BP, England Tel: +44-208-948-0057 Fax +44-208-948-0067 ctolondon@caribtourism.com

CANADA 2 Bloor Street West, Suite 2601Toronto, Ontario Canada M4W 3E2 Tel: 416-935-0767/1-866-997-0096Fax: 416-935-0939 ctotoronto@caribtourism.com

Page 9

TOURIST (STOP-OVER) ARRIVALS AND CRUISE PASSENGER VISITS IN 2009

Tourist Arrivals Cruise Passenger Visits

Destination Period Tourists % Change

2009/08 Period Cruise

Passengers % Change

2009/08 Anguilla Jan-Feb 10,447 -21.4 - - - Antigua & Barbuda * Jan-Jul 148,767 -12.9 Jan-May 415,863 20.6 Aruba P Jan-Apr 280,269 -5.1 Jan-Apr 343,942 5.0 Bahamas Jan-May 602,445 -14.1 Jan-May 1,436,165 9.8 Barbados P Jan-May 229,472 -8.5 Jan-May 347,789 -2.7 Belize Jan-Jun 131,650 -8.3 Jan-Jun 365,557 8.4 Bermuda Jan-Jun 107,214 -17.0 Jan-Jun 124,553 -5.7 British Virgin Is. Jan-Mar 85,964 -25.0 Jan-Mar 265,370 -10.3 Cancun (Mexico) ** Jan-Jun 1,035,155 -14.6 - - - Cayman Islands Jan-Jun 154,640 -13.3 Jan-Jun 846,952 -6.0 Cozumel (Mexico) - - - Jan-May 978,385 -21.4 Cuba Jan-May 1,211,238 2.1 - - - Curacao Jan-Mar 94,235 -4.1 Jan-Feb 133,592 26.6 Dominica Jan-Jun 33,355 -2.9 Jan-Jun 293,149 37.9 Dominican Republic * Jan-Jun 2,145,957 -3.2 Jan-Apr 343,779 15.5 Grenada P Jan-Mar 31,741 -4.6 Jan-Jun 218,533 20.6 Guyana P Jan-Jun 61,868 2.7 - - - Jamaica Jan-Jun 971,191 3.4 Jan-Jun 550,924 -14.7 Martinique P Jan-May 209,636 -9.8 Jan-Apr 35,141 -32.0 Montserrat Jan-Jun 2,834 -15.3 - - - Puerto Rico** Jan-May 588,626 -6.4 Jan-May 618,857 -18.1 Saba Jan-Jun 6,554 0.1 - - - St. Lucia Jan-Jul 172,369 -9.4 Jan-Jul 430,682 8.5 St. Maarten Jan-Jun 235,677 -12.5 Jan-Jun 781,063 1.1 St. Vincent & the G’dines Jan-Apr 26,262 -8.1 Jan-Apr 99,607 49.4 US Virgin Islands Jan-Jul 428,052 -7.6 Jan-Jul 974,222 -14.5

* Non-Resident Air Arrivals **Non-Resident Hotel registrations only - No Cruise Figures are Reported P Preliminary figures n.a. Figures not available N.B: Figures are subject to revision by reporting countries SOURCE - Data supplied by member countries and available as at August 20, 2009

CARIBBEAN TOURISM ORGANIZATION (www.onecaribbean.org)

OVERVIEW Now that the summer of 2009 is fast receding in our memories, particularly for denizens of the Northeast US where winter appears to have come early to the likely benefit of Caribbean tourism from one of its largest markets, we take a look back at our last double-issue in late August to audit and update its conclusions. To say the least, it covered still another period of great uncertainty and mixed signals from governments and the marketplace, both good and bad. Financial markets, led by Wall Street, seem to be running well ahead of consumer sentiment which is still lagging in the US and that makes the apparent end to the global recession and its immediate impact on the travel and tourism industry even harder to analyze and predict. However, we can safely say two months later that the ultimate conclusions of that report remain valid based on our latest surveys for a very slow recovery in our major markets stretching well into 2010 while our concerns expressed about the critical state of the airline industry are still focused on survival. Proceeding here, we choose to compartmentalize various key issues into good news and bad news segments for comparison and easy evaluation. 1. THE US ECONOMY THE GOOD NEWS The DOW, up by 15% for the year at the end of September, had its best quarterly gain since 1998 and re -crossed the psychologically important threshold of 10,000 for the first time in mid-October since the same time last year. The strong rally comes as other indicators show the economy to be stabilizing on better corporate earnings including a return to healthy earnings among national leaders in the banking industry although many regional and local banks remain in trouble. The US Index of Leading Economic Indicators has now risen for five consecutive months starting in April – its best performance in more than five years. Retail sales, while still very weak compared to a year ago, rose in August and again in September after removing losses in the auto industry following the end of the government-funded cash for clunkers program. Housing sales of existing properties rose by 9.4% in September and total home purchases hit a two-year high. THE BAD NEWS The worst recession since the Great Depression has left a “scorched landscape” that will weigh heavily on the labor market for years to come. Since the start of the recession in December 2007, the number of unemployed has increased by 7.6 million to 15.1 million and the unemployment rate has doubled to 9.8%

TOURISM EXECUTIVE BRIEFOctober - 2009

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which continued to trend up in September although at a slightly slower pace. Job losses and consequential large debts are recreating more pessimism among many Americans in spite of a soaring stock market. According to the Reuters/University of Michigan Survey of Consumers, consumer confidence fell unexpectedly from 73.5 in September to 69.4 in October. This followed a larger than predicted drop in the much bigger Conference Board Consumer Confidence Index as reported at the end of September. As a further indication of a more frugal consumer determined to live within his means, The Federal Reserve reported consumer borrowing contracted for a seventh straight month in August. If September figures show a further decrease in consumer credit applications, it would be the longest period of contraction since the Fed began tracking credit in 1943. These reports caused the National Retail Federation to forecast that holiday sales for the coming season will fall by another one percent over last year’s dismal performance. Nearly half of the nation’s 25 retail chains expect to hire fewer holiday workers this season further adding to the woes of the unemployed and students looking for part-time jobs. OUR GOOD NEWS/BAD NEWS SCORE The bumps on the road to recovery and our “how’s business” survey of leading agency chains and wholesalers (see below) cause us to rate this as a tied game with good news expected to prevail in overtime during 2010. 2. CANADA’S ECONOMY THE GOOD NEWS Strong gains in employment and a spurt in manufacturing sales in August and September anticipate that a modest increase in GDP will be forthcoming for the third quarter. Canada’s economy created 30,600 jobs in September after a 27,100 increase in August. Housing starts were stronger than expected in September at an annualized 150,100 and a continued upward trend in starts for single detached homes, particularly in key market Ontario, and rising sales activity indicate that this sector is recovering faster than the overall economy (source RBC.) The unexpectedly strong job gains and the fall in the unemployment rate in September all confirm that Canada is emerging from recession. Unlike the US, Canadians are more confident about their financial wellbeing as the Consumer Confidence Index reached 90.9 in September, up from 88.4 in August. The Index has now gained more than 23 points since the seven-year low reported by the Conference Board of Canada in December 2008. In currency matters, the Canadian loonie has risen nearly 25% versus the US dollar since the beginning of March when it traded at 77 US cents compared to the current rate of 96 cents – close to parity. Lastly, the core inflation rate dipped in August to its lowest rate in nearly a year. Modest increases in

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energy-related prices were offset by lower costs for mortgages, passenger vehicles and some foods (fruit and vegetables.) THE BAD NEWS GDP output stalled this summer below forecasts due to a sharp drop in mining and oil and gas extraction. Downward pressure on exports due to the strong Canadian dollar caused a record trade deficit in August of C$2 billion. The decline in the US dollar has been especially steep against the loonie and since Canada sells about three-quarters of its exports to the US, it has made life difficult for many Canadian producers who get paid in US currency. In spite of the improvements in the labor market, the unemployment rate continues to rise well above levels recorded before the economic downturn and further job creation is expected to be very slow. OUR GOOD NEWS/BAD NEWS SCORE No ambivalence here. Good news is the winner in Canada. 3. THE UK ECONOMY THE GOOD NEWS The UK economy should grow twice as fast as previously forecast in 2010 according to Ernst & Young’s LLP Item Club. The chief economist at Item, Paul Spenser, is a former UK Treasury official and the firm uses the same model as his old employer for its predictions. Spenser says “The outlook for the next 12 months is certainly looking more positive but it is going to be a bumpy ride and there could still be substantial pain.” Mid-October figures released by the Department of Works and Pensions show that both unemployment figures and the general employment picture improved slightly during the summer months as many workers and unions displayed flexibility in accepting temporary pay freezes and reduced working hours. At the same time, UK consumers are becoming increasingly optimistic about the future although the majority is still downbeat about their present circumstances. Consumer confidence as measured by the Nationwide Confidence Barometer rose by six points in September to 71 after increases in both July and August. While this level is still described as gloomy, the Expectations and Spending indices both topped 100 and overall confidence is now at its highest level since April 2008. The positive sentiment has been boosted by good news about the housing market and the strong rally in equity markets in recent months. The weak pound which has taken a beating this year against the Euro and a basket of other currencies with the exception of the US dollar is actually reviving its export industry. According to UK economists at

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Goldman Sachs, the 20% slide in sterling could push the UK’s currency account into a comfortable trade surplus. At the same time, its continued if puzzling strength against the dollar is good news for holidaymakers traveling to dollar zones like most of the Caribbean. THE BAD NEWS UK gross domestic product unexpectedly dropped in the third quarter by 0.4% defying market forecasts that the nation would emerge from recession for the first time since the first quarter of 2008. The real unemployment rate in Britain’s industrial heartland is not improving. Joblessness in parts of Scotland, Wales, West Midlands and the North Country still exceeds 15% and factory output has dropped by more that 13% since the recession began in regions that had never recovered from job cuts in the 1980s when most of the mining industry and many factories shut down. Many analysts have expressed disappointment in the results of the Central Bank’s program to kick-start economic recovery in the UK this year. The oddly named Quantitative Easing QE program has helped a revival in capital markets but the QE cash and low interest payments are seen by some as an opportunity to pay down debt rather than a stimulus to spend. With the mandatory election due in June 2010 and the government trailing in opinion polls, PM Gordon Brown says it’s too early to withdraw economic stimulus programs that are set to expire next year. The likelihood of a conservative party victory in early 2010 clouds the economic and political future of Britain’s ongoing role in the European community as Tory leader, David Cameron, has pledged a referendum on the Lisbon Treaty if elected. He can legally do so without a constitutional change if all 27 member countries fail to ratify the treaty prior to the British election. So far, the Czech Republic’s feisty President Klaus is the lone holdout and he is under enormous pressure from Brussels to cave in. However, in recent days, he has received some support from neighboring Slovakia which is seeking similar amendments. It is an interesting scenario since there is a strong current of euro skepticism in the UK continuously supported by some key media outlets on the right. The collapse of the Lisbon Treaty, though unlikely, would certainly throw the EU into chaos. OUR GOOD NEWS/BAD NEWS SCORE We tend towards optimism when evaluating this market, particularly for its resilience in bad times and the public’s conviction that vacations abroad are a British birthright. We think 2010 will be a good year for outbound travel and so we give the UK a cautious vote of confidence. 4. THE EURO ZONE ECONOMY THE GOOD NEWS The collective economy of the 16-nation euro zone stopped contracting in the third quarter as all but three of its member countries – Ireland, Italy and Spain – appear to have emerged from recession. European stock markets rose in September to new highs for 2009 on modestly upbeat forecasts from the

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European Commission and better-than-expected corporate earnings particularly in Germany. HSBC global strategists have their biggest overweight positions firmly placed in the euro zone with their largest single position in Germany recommended over a global basket of stocks. Consumer confidence in the euro zone grew to its highest level in a year in September supporting the belief that the economy would show growth for the quarter. A monthly survey by the European Commission showed that overall economic sentiment, business and consumer, for the euro zone in September climbed to 82.8, a two point increase over August which also exceeded forecast. THE BAD NEWS The fragile recovery in the euro zone is endangered by the continued slide in the value of the US dollar against the common currency. The euro has risen nearly 19% in the past seven months and the dollar is now at a 14-month low. Euro zone exports slid 23% in August from a year ago mainly due to the weakness of the dollar and sterling which has also declined against the euro by a similar 21% this year. Given that the US and the European Union remain each others’ main trading partners with the UK in number one or two position in importance for some members like Ireland, the scope of the problem is obvious. Finance ministers from the 16 nations were meeting in Luxembourg on October 19 to discuss the crisis but remedial action in the short term appears difficult. The impact on Europe’s inbound travel industry, including the UK, is equally obvious with Americans already on tighter budgets and out of their free-spending mode of the past decade. Those that are still traveling are spending less on hotels, restaurants, shopping and services, many others are just staying home for now and buying local products. In our view, the bad news wins for now in evaluating outbound tourism prospects in the euro zone in the short to mid-term. A close watch needs to be maintained for any further swings in currency trading. 5. ASIA AND BRIC It used to be said as a virtual truism that when America sneezes, the rest of the world catches cold. No longer! Amid growing signs of a new world order and an irreversible global power shift, it was instructive that Ben Bernanke, Chairman of the Federal Reserve, told a conference in California this month that Asian nations are leading the world out of crisis. The region as a whole was already expanding at an annual rate of nine percent by the end of the second quarter with China and India in front with double digit increases. On the other side of the world, Brazil is quickly becoming an economic powerhouse to be reckoned with. In another sign of its new-found political and economic power, the BRIC countries issued a strongly-worded scolding to the developed countries in the G2O group at a September meeting of finance ministers in London. The BRIC representatives told their colleagues that they must fix their “Lax financial regulation and deficient oversight.” The BRIC communiqué went on to say “we cannot miss the

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opportunity to change international practices, rules and governance structures to make the global economy more resilient to future crises.” We are not entirely sure that this shift is good news or bad, but it seems certain that without the rapid recovery in Asia and Brazil, the global economic downturn would have plunged further into recession. There are lessons here for the travel and tourism industry in the Caribbean and elsewhere – not only in the growing significance of these countries as markets for our products and services, but in the need to get more accountability and transparency in fixing internal causes that have magnified the financial crisis. 6. TRAVEL INDUSTRY SPECIFIC INDICATORS THE GOOD NEWS Tour operators in the US are cautiously optimistic that the worst may be over as most firms reported a strong uptick in bookings starting in July and strengthening in August. In some cases advance bookings for the past summer were double over the same period in 2008 and early bookings for 2010 are positive. A cooler than average summer in the Northeast and Midwest coupled with an early taste of winter in October with snow and freezing temperatures are causing the biggest increases to warm weather destinations. Demand for the coming winter season is strong among three of our bellwether wholesalers for the Caribbean that we have contacted in recent weeks. Bookings from Canada to the region are sharply up with the big three destinations in the Northern tier, Cuba, the Dominican Republic and Jamaica, again expected to benefit the most out of this market. In the UK, leading operators, including Europe’s biggest holiday firm TUI, are predicting a tough winter season but strong advance bookings for next summer look more positive as the British are already planning to take their postponed holidays from 2009. THE BAD NEWS Consumers are spending less on vacations including taking shorter trips. Price is still the principal driver of business in all markets including the luxury segment for both land-based and cruise packages where extraordinary bargains abound. Although advance bookings are up percentage-wise, there is little margin for profit and the bottom line harder to achieve according to Steve Gorga, head of Travel Impressions an important player for the Caribbean. With the arrival of new ships for sailings out of the US and the UK, advance bookings for 2010 are solidly up but the same problem prevails where most first-time and long-term cruisers are increasingly driven by price. Business reported by German operators was weaker in August than in the UK and North America. All in all, the travel and tourism industry in our major markets sees some small reason for optimism but anticipates several years of slow going before consumer spending returns to normal.

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7. THE AIRLINE INDUSTRY THE GOOD NEWS It has been hard to find much good news in the all-important airline industry of late where more predictions of gloom and doom have issued forth from IATA’s Director General Bisagni and some airline chiefs like BA’s Willie Walsh. However, in spite of huge shrinkage in the number of flights and available seats in most domestic and international markets to levels not seen since the post 9/11 period in 2001, the Caribbean as a region seems to be holding its own and may actually enjoy increased capacity for the coming winter season – unless, of course, the latest spike in fuel costs takes its toll again. Expanded services starting this December from legacy and low cost carriers alike have been confirmed from traditional and new gateways in the US to the Caribbean. American, still the leader after a period of declining interest suddenly seems ready and willing to take on new challenges from upstart carriers (in their view) like JetBlue and is investing in new flights and improved ground facilities at regional airports. Delta continues to shift emphasis and capacity to international routes including the Caribbean and their in-house wholesale operator MLT Vacations has geared up to become a major player for the region along with Apple, Libgo and Travel Impressions. The LCCs, including AirTran, Spirit and JetBlue, have generally fared better than the legacy carriers in the recession and are increasing service and becoming price-point leaders on a number of routes. JetBlue, in particular, has cut its US transcontinental routes in favor of expansion to the Caribbean. We are seeing a similar situation in the UK where British Airways and Virgin Atlantic are offering expanded midAtlantic services on some routes. Lufthansa’s 100% takeover of BMI is now complete and provides for interesting speculation about the German carrier’s plans for BMI’s Caribbean routes. Lufthansa’s renewed interest in the Caribbean was heightened by last month’s announcement of a new code share agreement with JetBlue which offers seamless connections from Europe via JetBlue US gateways to Puerto Rico and several American interior cities under the LH flight designator. JetBlue has the largest number of spots at JFK of any domestic carrier and offers extensive service to other Caribbean points. We confidently expect Lufthansa to expand this program further into the region. Seats go on sale by Lufthansa in mid-November. LH has an equity stake in JetBlue. In an another pending alliance agreement of interest to the Caribbean, British Airways CEO, Willie Walsh, told investors this month that he fully expects US regulators to soon remove restrictions on North Atlantic flights between the US and The UK for the existing BA/American Airline alliance without surrendering slots to rival carriers at London’s Heathrow. In 2002, the US DOT demanded the two carriers give up 224 weekly slots at LHR which killed the deal. However, the number of carriers serving LHR-US routes has risen since then from four to nine and the competitive landscape has completely changed. We are also encouraged by the rapid expansion of new low-cost Brazilian airlines like Azul, which is headed up by former CEO and founder of JetBlue, David Neeleman. Azul and others are mainly

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interested in vacation travel and are seeking new markets while forcing the dominant carriers TAM and GOL to expand internationally including routes to the Caribbean. In spite of the recession, Brazil’s total air travel grew by 7% in 2008 and is continuing to expand. We see tremendous potential in Brazil with its growing population of 190 million and an expanding middle class with new horizons. THE BAD NEWS We gave most of the bad news in detail by carrier in the summer edition of the Brief and we do not need to repeat it here. However, international traffic fell again in August and while fares stabilized, it was at generally unprofitable levels while premium seat demand dropped by another 22% in that month alone. Recent surveys showed that recent attempts to push up fares around holidays and add even more ancillary charges may have backfired as bookings have declined in direct proportion to the fare increases in some key markets. The principal culprit now in stalling the airlines’ recovery is the rising cost of oil again in spite of plentiful supplies and greatly reduced demand. OPEC nations are still producing above their collective five-year average and have large reserves on hand according to their Secretary General, El-Badri, who blames current price levels above $80 per barrel on international speculators outside of OPEC’s control. There were also some serious labor problems of concern to the Caribbean unresolved at time of writing. The potentially most drastic had British Airways cabin crews’ union Unite failing to settle a potential walkout at a meeting with management on October 19. Such an action could ground BA’s fleet and cause massive disruption in advance of the holiday season. We are keeping our fingers crossed for a speedy settlement.

BARBADOS One Financial Place Collymore Rock St. Michael, Barbados Tel: 246-427-5242 Fax: 246:429-3065 ctobar@caribsurf.com

NEW YORK 80 Broad Street, 32nd Floor New York, NY 10004 USA Tel: 212-635-9530 Fax: 212-635-9511 ctony@caribtourism.com

LONDON 22 The Quadrant Richmond Surrey, TW9 1BP, England Tel: +44-208-948-0057 Fax +44-208-948-0067 ctolondon@caribtourism.com

CANADA 2 Bloor Street West, Suite 2601Toronto, Ontario Canada M4W 3E2 Tel: 416-935-0767/1-866-997-0096Fax: 416-935-0939 ctotoronto@caribtourism.com

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TOURIST (STOP-OVER) ARRIVALS AND CRUISE PASSENGER VISITS IN 2009

Tourist Arrivals Cruise Passenger Visits

Destination Period Tourists % Change

2009/08 Period Cruise

Passengers % Change

2009/08 Anguilla Jan-Feb 10,447 -21.4 - - -

Antigua & Barbuda * Jan-Sep 177,318 -13.1 Jan-Aug 482,887 18.7

Aruba P Jan-Jul 475,236 -3.2 Jan-Jul 378,682 5.3

Bahamas Jan-Jul 875,108 -13.7 Jan-Jul 1,913,250 15.1

Barbados P Jan-Sep 379,821 -11.4 Jan-Sep 443,257 2.9

Belize Jan-Jul 152,958 -7.7 Jan-Aug 445,734 10.5

Bermuda Jan-Jun 107,214 -17.0 Jan-Jun 124,553 -5.7

Bonaire Jan-May 28,829 -15.2 Jan-May 148,058 54.8

British Virgin Is. Jan-Mar 85,964 -25.0 Jan-Mar 265,370 -10.3

Cancun (Mexico) ** Jan-Jul 1,177,943 -17.0 - - -

Cayman Islands Jan-Sep 208,761 -13.1 Jan-Sep 1,144,948 -1.9

Cozumel (Mexico) - - - Jan-Jul 1,269,121 -21.0

Cuba Jan-Sep 1,856,774 3.3 - - -

Curacao P Jan-Sep 267,542 0.5 Jan-Sep 280,123 23.5

Dominica Jan-Jul 41,891 -3.5 Jan-Jul 317,117 38.8

Dominican Republic * Jan-Sep 3,069,794 -1.8 Jan-Aug 374,284 7.3

Grenada P Jan-Sep 87,580 -14.4 Jan-Sep 229,415 26.6

Guyana P Jan-Sep 104,907 5.7 - - -

Jamaica Jan-Aug 1,319,704 4.1 Jan-Aug 658,485 -14.5

Martinique P Jan-Aug 336,059 -5.2 Jan-Aug 35,141 -32.1

Montserrat Jan-Aug 3,786 -17.5 - - -

Puerto Rico** Jan-Jul 805,145 -5.4 Jan-May 618,857 -18.1

Saba Jan-Aug 8,707 -3.4 - - -

St. Eustatius Jan-Apr 4,025 -2.6 - - -

St. Lucia Jan-Sep 210,348 -8.9 Jan-Sep 478,346 12.3

St. Maarten Jan-Jun 235,677 -12.5 Jan-Jun 781,063 1.1

St. Vincent & the G’dines Jan-Aug 52,199 -13.2 Jan-Aug 101,615 50.7

Trinidad & Tobago Jan-Apr 143,351 -10.5 - - -

US Virgin Islands Jan-Sep 507,296 -6.3 Jan-Sep 1,118,701 -14.1

* Non-Resident Air Arrivals **Non-Resident Hotel registrations only - No Cruise Figures are Reported P Preliminary figures n.a. Figures not available

N.B: Figures are subject to revision by reporting countries

SOURCE - Data supplied by member countries and available as at November 9, 2009