9

•

•

•

Tourism Economics

Facing the elements

Hurricanes

The economy

Politics

Tourism Economics

Caribbean facing significant disruption

14

Tourism Economics

Facing the elements

Hurricanes

The economy

Tourism Economics

Accelerating globally

The economy is…

Tourism Economics

World trade picking up

-30

-20

-10

0

10

20

30

40

1999 2001 2003 2005 2007 2009 2011 2013 2015 2017

IATA air freight

Cass freight index

RWI container index

World: Alternative trade indicators% year, 3m average

Source : Oxford Economics/Haver Analytics/IATA

Tourism Economics

…with emergers leading acceleration

5.0%

4.3%

3.7%3.6%

4.2%

4.5%

1.1%1.3%

1.9%2.1%

1.7%

2.0% 2.1%

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

20

12

20

13

20

14

20

15

20

16

20

17

20

18

Emerging Markets

Advanced Economies

World GDP

% change

Source: Oxford Economics

Tourism Economics

Steady, broad-based growth

0.4%

1.4%

1.6%

1.7%

2.0%

2.2%

2.4%

2.5%

2.5%

2.6%

2.7%

6.6%

6.9%

0.0% 2.0% 4.0% 6.0% 8.0%

Brazil

Japan

France

United Kingdom

Germany

United States

Mexico

Australia

Canada

South Korea

World

China

India

GDP growth in major markets, 2017

% change Source: Oxford Economics

Tourism Economics20

Eurozone economy experiencing a mini-boom

We predict three more

years of above trend

growth for the Eurozone

and have recently raised

our forecast.

Healthy job markets are

encouraging increased

labor force participation.

Solid real wage gains are

expected.

Tourism Economics

Accelerating globally

On solid footing in the US

The economy is…

Tourism Economics

ISM Indexes at Decade Highs

22

Highest since 2004 Highest since 2005

Tourism Economics

Business investment is starting to firm, after two years of sluggish growth

23

Tourism Economics

Consumer spending is solid with confidence leading

Tourism Economics25

Risk: Consumers’ “savings dip”

Consumer spending

growth has recently

outpaced modest

growth in after-tax

income.

Causing a dip in

savings.

Tourism Economics

Household net worth is well ahead of its prior peak…

26

Gains in housing

markets and equity

values have boosted

household net wealth.

This is anticipated to

moderately boost

discretionary spending

over time.

Tourism Economics

Equities continue to set new highs

27

High equity values indicate

elevated risk appetite among

investors.

Tourism Economics

…while household debt service payments are well below

28

Tourism Economics

Dollar appreciation has eased, returning to near its historical average

29

Value of the dollar in

2017Q3:

• 12% stronger than in

2014

• 2.5% stronger than

historical average

Tourism Economics

Accelerating globally

On solid footing in the US

Supportive of travel growth

The economy is…

Tourism Economics31

Consumers have dedicated an increased share of spending to lodging

60

70

80

90

100

110

120

130

140

150

2011 2012 2013 2014 2015 2016 2017

Index (Dec. 2011=100)

Consumer spending, US

Note: Data is nominal, three-month moving average, seasonally adjusted and extends through June 2017.Source: Bureau of Economic Analysis; Tourism Economics

Air (34.2%) F&B (31.4%)

Lodging (41.8%)

Consumer spending (22.9%)

Recreation services (26.0%)

Motor vehicle fuel (-32.4%)

Growth 2011 to June 2017

Tourism Economics32

Older households show the strongest increases in spending on lodging

16%

1%

20%

12%

8% 8%

23% 24%

Allhouseholds

Under 25 25 to 34 35 to 44 45 to 54 55 to 64 65 to 74 75+

Household age brackets

Recent spending per household on lodging by agePercentage difference relative to long-term average for each age group

For example, households aged 65 to 74 are spending 23% more than similar households in the past

Note: Recent constant dollar spending (2013 to 2015) relative to long-term average for the same age brackets (1984 to 2015).

Source: BLS; Tourism Economics

Tourism Economics

0%

10%

20%

30%

40%

50%

60%

84 86 88 90 92 94 96 98 00 02 04 06 08 10 12 14

55 and over

35 to 54

Under 35

Year

2015: 42%

2000: 33%

2015: 36%

2000: 42%

2000: 25%2015: 22%

0%

10%

20%

30%

40%

50%

60%

84 86 88 90 92 94 96 98 00 02 04 06 08 10 12 14

55 and over

35 to 54

Under 35

Year

2015: 45%

2000: 35%2015: 41%

2015: 13%2000: 15%

2000: 50%

Seniors represent greater share of households and spending

Share of households by age Share of lodging spending by age

Note: Lodging spending is based on recent three-year average (2013 to 2015). Consumer spending represents leisure trips.

Source: BLS; Tourism Economics

Tourism Economics34

Bermuda’s major markets are traveling more

50

100

150

200

1995 2000 2005 2010 2015 2020 2025

UK

Canada

USA

International departures per capita1995=100

Source: Tourism Economics

Tourism Economics

Facing the elements

Hurricanes

The economy

Politics

Tourism Economics

Can both of these things be true?

Tourism Economics

The source of uncertainty

Tourism Economics

Trump Administration’s first 250 days: A positive or negative policy mix?

38

!?!

Tourism Economics39

Policy upside & downside

Oxford baseline forecast

Modest $500 billion fiscal

stimulus package over the next

10 years, boosting GDP growth

about 50 bps.

Risks

Government shutdown

• GDP growth drag of 0.1 pp

for each week of shutdown

Debt ceiling crisis

• Spending cut by 3-4% of

GDP (size of federal budget

deficit)

Tourism Economics

Curbing immigration big risk: Demand & Supply impact

40

Tourism Economics

Restrictions on “Dreamers” would reduce employment & growth

Tourism Economics

A protectionist stance would hurt the US economy

• Assume US slaps 45% tariff on China, 35% on Mexico and 20% on Korea

• Assume all three retaliate with equal tariffs on US exports

Tourism Economics

Travel to the US has fallen

Overseas Mideast Africa Latin America Europe Oceania Asia

-35%

-30%

-25%

-20%

-15%

-10%

-5%

0%

International visits to the US by region

Source: NTTO

January-May 2017, YTD % change

Loss of $3.5 billion in

first five months

alone

Tourism Economics44

Tourism Economics

How is Bermuda faring?

Tourism Economics

The Bermuda comeback is on

46

60

70

80

90

100

110

120

2005 2007 2009 2011 2013 2015 2017

Caribbean comps* Bermuda

Overnight Arrivals1995=100

Source: Tourism Economics

Tourism Economics

Cruise market outpaces the region

0

50

100

150

200

250

300

1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 2015 2017

Caribbean Bermuda

Cruise Arrivals1995=100

Source: Tourism Economics

Tourism Economics

Visitor spending has surged since 2014

0

20

40

60

80

100

120

140

160

2014 2015 2016 2017

Caribbean comps* Bermuda

Visitor Spending2014=100

Source: Tourism Economics

14% cumulative

44% cumulative

Tourism Economics

And tourism is driving economic growth

13.813.4

14.515.0

8.47.8

8.58.8

4

6

8

10

12

14

16

2014 2015 2016 2017

Total impact T&Tshare of GDP

Direct T&T shareof employment

% of total economy

Source: Tourism Economics

Travel & Tourism Share of Bermuda Economy

Source: WTTC, Oxford Economics

Tourism Economics50

Summary

Outlook summary

GlobalWorld trade is driving acceleration in the world economy,

especially in emerging markets

US Consumers are confident and businesses are investing again

Travel marketsTravel propensity is rising on the back of sold fundamentals and

supportive demographics

PoliciesUS policy remains a wild card with both positive and negative

implications