Download San Diego Travel Forecast December 2016

San Diego Travel Forecast
December 2016
Report Prepared For:
San Diego Tourism Authority
San Diego Travel Forecast
December 2016
Contents
1 Executive Summary ......................................................................... 3 2 San Diego Tourism Outlook ............................................................ 6 2.1 Visitor Trends ..............................................................................................6 2.2 Expenditures ...............................................................................................7 2.3 Hotel Performance ......................................................................................8 3 US Tourism & Lodging Outlook .................................................... 10 4 Key Origin Economies ................................................................... 11 4.1 4.2 4.3 4.4 4.5 4.6 4.7 4.8 US Market Summary .................................................................................11 Mexico .......................................................................................................14 Canada......................................................................................................15 Japan ........................................................................................................16 United Kingdom.........................................................................................17 Germany ...................................................................................................18 Switzerland................................................................................................19 Eurozone ...................................................................................................20 5 Trump Economy: Three scenarios highlight uncertainty ........... 21 6 San Diego Forecast Tables ............................................................ 23 7 Forecast Methodology Overview .................................................. 26 8 San Diego Convention Center Attendance Forecast .................. 28 9 San Diego Hotel Project Pipeline .................................................. 29 2
San Diego Travel Forecast
December 2016
1 Executive Summary

San Diego hosted nearly 10.9 million visitors in the third quarter of 2016, a 2.5% increase
over the prior year. This follows a 2.4% decrease in visitation in the second quarter,
mainly a result of a dip in domestic day visitors. Conversely, domestic day visitors
supported overall visits in Q3, adding nearly 3.0% to the total, while overnight visits
contributed just 2.0%, boosted primarily by a 4.3% increase in the hotel/motel sector. Total
visitor expenditures grew by 5.4% in the third quarter of 2016, marking the largest bump
experienced in 2016 thus far. The San Diego hotel market received a much-needed boost
in Q3, as year-over-year growth was even in the first quarter and declined slightly in the
second. Average daily room rates (ADR) in San Diego also posted their best performance
this year, increasing to $173.1, a 3.4% gain from 2015 Q3.

Strong domestic fundamentals – particularly on the consumer side – support steady
growth through the final quarter of 2016, albeit softer than our previous outlook on
increased domestic policy uncertainty and continued global headwinds. While our 2016
US GDP forecast has again been lowered to 1.6% since the start of the year, employment
growth remains solid, consumer spending growth is moderate, and exports are
surprisingly strong. The main spots of domestic weakness are among businesses, as a
restrained business investment outlook is tamping down domestic business travel, and
President-elect Donald Trump has left many businesses wanting as there is yet no clear
path in terms of his policy strategy. Longer-term, we expect the upward creep of interest
rates and rebounding fuel costs from record lows to press on visitor demand and
expenditures as growth rates ease more toward historical averages.

Based on our current forecast, San Diego visitation is expected to grow 1.1% in 2016
before picking up to 1.7% in 2017 and 2018 – a bit weaker than our previous forecast,
mainly due to weakened international travel. Overnight visitation will expand by 1.0% in
2016 and will edge up to 1.9% growth in 2017 as global demand remains muted; some
further rebound is then expected in 2018 as growth reaches 2.0%. Growth in day visits will
reach 1.2% in 2016. As fuel costs remain low and consumers gain confidence, day visits
will improve to 1.5% in 2017 before easing slightly to 1.4% in 2018 as travel costs
gradually climb. Visitor expenditures in San Diego are expected to rise 4.2% in 2016,
ramping up to 5.3% in 2017 and easing back to 4.2% by 2018. Hotel room demand in San
Diego will give up its growth premium over the US in 2016 due, in part, to a weaker than
expected first half, rising 1.3% in for the year. Coupled with 1.2% growth in the supply of
available rooms, this will weigh on hotel occupancy which is expected to register 76.4% in
2016. As such, ADR is expected to advance 2.8% in 2016 to $154. Looking forward over
the forecast horizon, uncertainty in both domestic and international markets will continue
to weigh on the San Diego loding market, as well as the US lodging sector as a whole.
Numerous factors are expected to constrain domestic business activity, including
challenges in the energy sector, the continued strength of the US dollar, and prolonged
weakness in global demand. In addition, the President-elect’s many undefined long term
economic policies and reforms will weigh on corporate demand. Muted international travel,
particularly from European emerging markets, as well as a slowdown in UK travelers
resulting from Brexit, coupled with a slow recovery in domestic business travel, will keep a
lid on overall room demand.

The US economy continues to underperform as a result of weak business investment and
sluggish net trade, despite solid employment, and wage and consumer spending growth.
Uncertainty will remain a key concern over the coming months as Trump’s presidency has
caused natural concerns in terms of both the domestic and global economy. Moving
3
San Diego Travel Forecast
December 2016
forward, domestic leisure travel will lead while businesses remain cautious. International
travel is expected to slow, and key risks include a further slowdown in economic growth in
China, sub-par growth in consumer spending in advanced economies, and a further
deceleration in European economic growth as a result of Brexit.
4
San Diego Travel Forecast
December 2016
San Diego Tourism Summary Outlook
(annual % growth, unless stated)
2014
2015
2016
2017
2018
2019
2020
Visits
Day
Overnight
2.1%
1.2%
2.9%
1.4%
1.0%
1.8%
1.1%
1.2%
1.0%
1.7%
1.5%
1.9%
1.7%
1.4%
2.0%
1.4%
1.3%
1.5%
1.5%
1.4%
1.6%
Expenditure
Day
Overnight
9.7%
4.0%
10.4%
7.7%
2.0%
8.4%
4.2%
2.3%
4.4%
5.3%
4.6%
5.3%
4.2%
4.0%
4.2%
3.7%
4.1%
3.7%
3.9%
3.9%
3.9%
Hotel Sector
Room supply
Room Demand
2.1%
6.4%
1.0%
3.4%
1.2%
1.3%
1.7%
2.5%
1.3%
1.7%
1.8%
1.1%
1.1%
1.2%
74.6
$141.38
76.4
$150.03
76.4
$154.21
77.1
$159.30
77.4
$165.00
76.9
$171.47
76.9
$177.82
Occupancy (%)
ADR ($)
5
San Diego Travel Forecast
December 2016
2 San Diego Tourism Outlook
2.1
Visitor Trends
Visitation to San Diego totaled just over 26.7 million in the
first three quarters of 2016 – slightly below our previous
forecast. In Q2 2016, total visits to San Diego fell by 2.4%
bringing growth in visitation for the second half of 2015
and first half of 2016 to 0.5%--this was due, in large part,
to the timing of the Easter holiday which fell in March of
2016 compared to April of 2015. Despite the dip in both
day and overnight visits in the second quarter, -3.9% and
-0.7%, respectively, the third quarter saw an uptick.
Overall visits climbed 2.5% over the same time period in
2015, and both day and overnight visits saw steady
growth--2.9% and 2.0%, respectively. Overnight
household visits fell 1.2% in Q3, the second consecutive
quarter of decline, while hotels and motels bounced back,
increasing 4.3%, the most robust among overnight visitor
segments. Growth in Mexico day visits to San Diego
increased to 2.8% in Q3 2016, up from just 0.3% in Q2
2016, bringing the year-to-date average to 2.9%.
Overnight Visitor Market
% growth
15%
10%
Forecast
ADR
5%
0%
Overnight
visits
-5%
-10%
Average GDP growth
by origin markets
-15%
-20%
2006
2008
2010
2012
2014
2016
2018
2020
Source : Tourism Economics/CIC Research
Overnight & Day Visits
% growth
Forecast
15%
10%
5%
Overnight
visits
0%
Total visitation to San Diego is expected to grow 1.1% in
2016, compared to our August 2016 forecast of 1.4%.
-5%
The downgrade is largely due to a weaker Q2 2016,
Day visits
which is attributable to the timing of the Easter holiday.
-10%
Otherwise, the revised outlook considers a more gradual
2006
2008
2010
2012
2014
2016
2018
2020
slowdown in demand growth from emergers – particularly
Source : Tourism Economics / CIC Research
China – and stronger day visitor growth from Mexico
Day Visits by Origin
% growth
Forecast
which has held up despite the strong US dollar. We
8%
anticipate the downard pressure of a strong dollar on
6%
San Diego day
foreign buying power to persist in the near term. Economic
visits
4%
(excl Mexico)
weakness in Canada and Brazil and more muted prospects
2%
for the United Kingdom following the Brexit referendum also
0%
weigh on the near-term inbound outlook for San Diego, but
-2%
-4%
strong domestic consumer demand and a slower-than-6%
anticipated Fed tightening cycle are providing support.
Day visits
-8%
from Mexico
Overnight visits to San Diego are expected to grow 1.0% in
-10%
2016, compared to our 1.4% prediction in August 2016.
2006
2008
2010
2012
2014
2016
2018
2020
Day visitation will growth by 1.2%, representing a slight
Source : Tourism Economics/SDCVB
downgrade from our earlier forecast of 1.3%.
6
San Diego Travel Forecast
December 2016
While our US GDP forecast has been lowered to 1.6% since the start of the year,
healthy employment growth and firmer wage growth is expected to support
consumer spending and confidence. The main spots of domestic weakness are
among businesses, as a restrained business investment outlook is tamping down
domestic bsuiness travel, and President-elect Donald Trump has left many
businesses wanting as there is yet no clear path in terms of his policy strategy. A
decline in visits from the UK due to the weakened pound and anticipated drag on
demand post-Brexit will be felt more so in 2017. Risks to the foreacst are tilted
toward the downside and include a broader European Union slowdown as Brexit
unfolds, a more marked slowdown in China and emerging markets, and the
realization of secular stagnation among advanced economies. Based on our current
forecast, San Diego visitation growth will edge up to 1.7% in both 2017 and 2018,
before easing longer-term.
2.2
Expenditures
A strong finish for total expenditures in the final quarter of 2015
(9.5%) led to an average growth rate of 7.7% for the year.
While not as strong, 2016 Q1 posted 5.2% growth, followed by
a slow second quarter (1.5%), and a boost of 5.4% in the third
quarter. Weaker spending last quarter was mainly attributable
to a decline in day visitor spending. The bounce-back in the
third quarter is a result of healthy spending across all segments
of visitors, though overnight visitors did lead with a 5.6%
increase. Total visitor expenditures have shown average growth
of 4.0% through the first three quarters, and 2016 is expected
to close with 4.2% growth overall, a slight downgrade from our
August 2016 forecast of 4.6%. For the first three quarters of
2016, spending by hotel/motel visitors was up 4.7%, and
spending by visitors staying in private households rose just
1.0%. Spending by visitors who stayed in neither hotels/motels
or households rose 6.5% for the same period.
The average length of stay of overnight visitors has held steady
at 3.7 days per trip through the first three quarters of 2016.
Average expenditures by overnight visitors on a per-day basis
rose 6.1% over the period ending Q3 2016.
Visitor expenditures are expected to grow by 4.2% in 2016,
reflecting lower fuel costs and reduced per-trip spending by
international visitors on account of a still-strong US dollar. The
gradual creep of tightening interest rates and some expected
rebound in oil prices will weigh on expenditures growth into
2018. Thereafter, we anticipate the strength of the dollar to ease,
Overnight Visits & Expenditures
% growth
20%
15%
10%
Forecast
Overnight
spending
5%
0%
Overnight
visits
-5%
-10%
-15%
-20%
2006
2008
2010
2012
2014
2016
2018
2020
Source : Tourism Economics / CIC Research
Average Visitor Spending
% growth
15%
10%
Forecast
Average income
growth for origin
markets
5%
0%
-5%
-10%
2006
Average spend
(overnight visits)
2008
2010
2012
2014
2016
2018
2020
Source : Tourism Economics
7
San Diego Travel Forecast
December 2016
supporting inbound visitor spending, but more modest rates of total visitor growth
will keep spending gains subdued. Total visitor spending is forecast to grow 5.3%
and 4.2% in 2017 and 2018, respectively.
2.3
Hotel Performance
San Diego room demand grew 3.4% in 2015 and has
Hotel Room Supply & Demand
% growth
averaged 1.0% through the first three quarters of 2016.
10%
Forecast
This represents a marked slowdown from the 6.4%
advance in 2014. Room supply growth also slowed to 1.0%
5%
in 2015 from 2.1% in 2014, and has tracked at 0.8%
0%
through Q3 2016. The premium in demand growth over that
of supply in 2015 brought occupancy up to 76.4% from
-5%
74.6% in 2014, and is expected to remain at 76.4% through
2016. Growth in average daily room rates (ADR) registered
-10%
6.1% in 2015, driven by the strong advance in room
Room Supply
Room Demand
demand and has since averaged 2.7% as room nights
Occupancy rate, 12mma (rhs)
-15%
2006
2008 2010 2012 2014 2016 2018
growth has waned in the first half of 2016. Revenue per
Source
:
Tourism
Economics / STR
available room (RevPAR) posted a robust 8.6% gain in
2015 following a 9.2% gain the prior year but has been more subdued at an average
2.9% rate through Q3 of 2016.
80%
78%
76%
74%
72%
70%
68%
66%
64%
62%
60%
2020
The San Diego hotel sector outperformed the US in 2015. Room demand growth in
2015 registered 3.4% in San Diego and 2.7% across the US. In 2016, the US is
expected to outperform San Diego (1.6% vs. 1.3%). Supply growth will also
underperform the nation in 2016, as the US will see 1.6% in growth, while San
Diego will experience about a 1.2% increase in available rooms in 2016.
Furthermore, ADR growth in San Diego will lag the national average in 2016, 2.8%
to 3.1%. Furthermore, ADR growth in San Diego will lag the national average in
2016, 2.8% to 3.1%. San Diego has continued to lead the nation in terms of
occupancy, averaging 79.0% in the first three quarters of 2016 compared to 67.0%
for the US. Current hotel pipeline projections suggest that room supply growth in
San Diego will increase, on average, to 1.2% in 2016 and 1.7% in 2017, before
easing to 1.3% in 2018. Supply for the US market will contribute at least 2% growth
each year through 2019.
Room demand for San Diego is expected to increase by 1.3% in 2016 before ticking
up to 2.5% in 2017 and easing to 1.7% in 2018 as overnight visitation growth
tempers. Overall, room demand over the forecast horizon has remained consistent
with our previous forecast in August 2016 (1.7% in 2018, 1.1% in 2019, and 1.2% in
2020 in our current forecast, compared to 1.8% in 2018, 1.1% in 2019, and 1.3% in
2020 in our previous forecast from August 2016). The resulting differences in hotel
demand between our previous and current forecasts are -0.1% for 2018, 0.0% for
2019,and -0.1% for 2020. These downward demand revisions for the San Diego
8
San Diego Travel Forecast
December 2016
hotel sector are consistent with other Top 25 markets. For example, the downward
revisions in demand between STR & Tourism Economics’ Top 25 hotel forecasts in
August 2016 and November 2016 were -0.4% for 2017, 0.1% for 2018, 0.0% for
2019, and -0.1% for 2020. We expect demand in the US hotel sector to remain
below 2.0% through 2020 for a number of reasons. Oxford Economics forecasts
GDP growth of 2.3% in 2017, rising to 2.5% in 2018, then dropping to 1.7% in 2019.
Private consumption is expected to grow 2.7%, followed by three years of decline,
registering 2.5% growth in 2017m 2.4% in 2018, and 2.0% in 2019.
Uncertainty in both domestic and international markets continues to weigh on US
hotel sector performance, and we expect this trend to continue. Numerous factors
are expected to constrain domestic business activity, including challenges in the
energy sector, the continued strength of the US dollar, and prolonged weakness in
global demand. The President-elect’s undefined long term economic policies and
reforms, including international trade agreements, monetary and fiscal policies, and
proposed infrastructure spending, weighs on corporate demand. Muted
international travel, mainly a result of a slowdown in travel from European emerging
markets, as well as the UK stemming from Brexit, coupled with a further slowdown
in economic growth in China, sub-par growth in consumer spending in advanced
economies, and a slow recovery in business travel on the domestic front, will keep a
lid on overall room demand. Looking forward, we expect that continued supply
growth, along with slowed growth in demand, will result in declined occupancy levels
for the US lodging sector. We expect a similar trend for the San Diego lodging
sector, with occupancy levels registering 77.4% in 2017, then dropping to 76.9% in
2019 and remaining steady at 76.9% in 2020.
As room demand growth eases, moderate growth in room supply will stem ADR
gains to 3.3% and 3.6% in 2017 and 2018, respectively. Here, the San Diego
outperforms the nation as room rates are expected to be higher than the national
average—the US will average just below 3% growth in ADR each year through
2019.US Tourism & Lodging Outlook
9
San Diego Travel Forecast
December 2016
3 US Tourism & Lodging Outlook
Domestic Person Trips in the US
(Millions)
Total
% change
By purpose
Business
% change
Leisure
% change
Hotel room demand
Roomnights
% change
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
1900.1
1963.7
1997.5
2030.3
2059.6
2109.3
2178.7
2205.1
2234.6
2266.9
2303.4
2342.5
-3.3
3.3
1.7
1.6
1.4
2.4
3.3
1.2
1.3
1.4
1.6
1.7
434.3
446.6
440.7
439.4
445.7
450.8
459.8
457.2
459.4
463.0
466.5
471.1
-5.8
2.8
-1.3
-0.3
1.4
1.2
2.0
-0.6
0.5
0.8
0.8
1.0
1465.9
1517.1
1556.8
1590.9
1614.0
1658.4
1718.9
1747.9
1775.2
1804.0
1836.9
1871.4
-2.5
3.5
2.6
2.2
1.5
2.8
3.6
1.7
1.6
1.6
1.8
1.9
940.7
1008.1
1058.0
1086.8
1108.5
1154.6
1186.1
1205.1
1224.7
1246.3
1270.4
1295.5
-6.2
7.2
4.9
2.7
2.0
4.2
2.7
1.6
1.6
1.8
1.9
2.0
Forecast prepared October 2016
Summary US Lodging Forecast
2016
Rooms (mn roomnights)
Room Supply
Room Demand
Occupancy (% balance)
ADR ($)
RevPAR ($)
2018
2017
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
447.9
271.6
460.5
320.4
469.3
336.8
467.0
283.8
456.7
279.6
469.2
325.5
478.8
342.6
475.9
288.3
465.7
284.8
478.2
332.2
488.0
349.3
485.0
293.8
60.7%
69.6%
71.8%
60.8%
61.2%
69.4%
71.6%
60.6%
61.2%
69.5%
71.6%
60.6%
$120.92
$73.34
$125.62
$87.40
$127.83
$91.73
$124.24
$75.49
$126.52
$77.46
$130.08
$90.25
$132.48
$94.80
$128.89
$78.08
$131.12
$80.18
$134.98
$93.76
$137.40
$98.37
$133.91
$81.13
(year-to-year % growth)
2016
2017
2018
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Room Supply
Room Demand
1.5%
1.0%
1.7%
2.4%
1.8%
2.5%
1.9%
2.3%
2.0%
2.9%
1.9%
1.6%
2.0%
1.7%
1.9%
1.6%
2.0%
1.8%
1.9%
2.1%
1.9%
2.0%
1.9%
1.9%
Occupancy (% balance)
-0.5%
0.7%
0.7%
0.4%
0.9%
-0.3%
-0.3%
-0.3%
-0.1%
0.1%
0.0%
0.0%
ADR
RevPAR
3.2%
2.7%
4.1%
4.8%
4.2%
4.9%
4.5%
4.9%
4.6%
5.6%
3.6%
3.3%
3.6%
3.4%
3.7%
3.4%
3.6%
3.5%
3.8%
3.9%
3.7%
3.8%
3.9%
3.9%
Forecast prepared December 2016
10
San Diego Travel Forecast
December 2016
4 Key Origin Economies
4.1
US Market Summary
Modest growth this year…
Real GDP advanced 3.2% in Q3 as moderate
consumer spending was assisted by a rebound in
inventories and a surprisingly strong boost from
exports. We believe that economic growth in the
fourth quarter will moderate to 2.3%.
We estimate average growth of 1.6% in 2016. In light
of recent indications that President-elect Trump and
his administration will focus on pro-growth fiscal
reform, we have nudged up our 2017 GDP growth
forecast from 2.0% to 2.3%. We now expect the peak
growth effect from increased government
infrastructure outlays and tax cuts will occur in early
2018, with average growth that year expected around
2.5% (from 1.9% previously).
…but pick-up expected in 2017 and 2018
Headwinds from elevated policy uncertainty, a strong
dollar, sluggish global growth and reduced oil and gas
investment will continue to dampen the economy, but
business activity is slowly firming and corporate tax cuts
should revive ‘animal spirits’. Strong income growth,
supported by income tax cuts, should underpin
spending and housing activity while the Fed tightens
policy only very gradually.
Key forecast drivers include:

Solid labor market – healthy
employment growth and firmer wage
growth remain supportive of
household income, confidence and
outlays.

Solid consumer spending –
boosted by buoyant private sector
confidence, steady increases in
employment, faster wage growth and
lower taxes, consumer spending
growth should average 2.5% pa in
11
San Diego Travel Forecast
December 2016
2017-18.

A revival in business investment –
business investment remains
constrained by a strong dollar, weak
global growth, depressed energy
sector activity and elevated policy
uncertainty. However, tax cuts and
business deregulation could unleash
investors’ ‘animal spirits’ and stimulate
activity.

Moderate housing activity –
stronger wage growth is supportive of
housing activity but tight inventories
and elevated home price inflation are
important headwinds. We see
residential investment contributing
0.2pp to annual GDP growth in 201718.

Inflation rebounding – the Fed’s
favored inflation gauge – personal
consumption expenditures deflator –
remains below the 2% target, but
strengthening activity, a fiscal stimulus
and energy price base effects should
push it above 2% in 2017.

Sluggish global trade – we see US
exports constrained by global
headwinds while imports grow at a
moderate pace pulled in by solid
consumer spending but limited by wellprovisioned inventories. Net trade will
be a drag on growth during 2017-18.

Policy uncertainty – the uncertainty
surrounding the likelihood, timing and
magnitude of Trump’s policy proposals
explain why the President-elect is seen
as the greatest upside and downside
risk to growth.
12
San Diego Travel Forecast
December 2016
The Fed to tighten cautiously
Following a 25bp increase in the federal funds rate in December 2016, we expect
the Fed will act cautiously, raising interest rates twice in 2017 while allowing inflation
to temporarily settle above its 2.0% inflation target. Conscious of the downside risks
to growth, the Fed will likely maintain its cautious stance amid modest economic
momentum.
We expect long-term government bond yields to also rise in the near term, affected
by expectations of a large fiscal stimulus and a widening federal budget deficit. Real
GDP and policy interest rate differentials vis-à-vis the rest of the world should
support the dollar and maintain steady capital flows into the US (thus curbing some
of the above-mentioned rise in yields).
Long-term factors
The US economy is forecast to grow 2.2% pa in 20172019, slowing towards 1.6% in the long run. In part, this
reflects a reduction in the output gap, currently estimated
to be 1.5% of GDP. Other fundamentals include

Flexible labor force – the US will
maintain the flexibility of its labor force,
giving it an advantage over its peers.

Strengthening financial sector – debt
levels for US financial corporations are
the lowest since 2001 and bank lending
to corporates is now expanding.

Competitive economy – despite a strong dollar, the US economy
remains globally competitive thanks to high productivity, moderate
wage growth and the benefits of a stable regulatory environment,
low energy costs and access to a large final market.
What to watch
Presidency – Donald Trump’s victory means that a
high degree of uncertainty is likely to linger over the
near-term US economic outlook.
Pro-growth fiscal reform – a large fiscal stimulus
package, combining infrastructure outlays with
income and corporate tax cuts, has the potential to
boost economic activity over the next two years.
Protectionism – calls for unilateral tariffs on China
and Mexico would severely curtail growth and
employment in US, and lead to much higher
domestic inflation.
13
San Diego Travel Forecast
December 2016
Tighter financial conditions – Trump’s reflationary policies have led to a surge in
government bond yields and a stronger dollar. So far, these conditions have been
offset by lower volatility, higher stock prices and lower spreads, but the risk that
tighter financial conditions choke off growth is real.
US dollar appreciation – growth and monetary policy divergence around the world
will likely lead to further US dollar appreciation, weighing on US exports and growth.
Slower global growth – much slower emerging markets growth (led by China)
could lead to substantially weaker growth in developed economies.
Geopolitical developments – proposals to revisit long-standing security
commitments to European and Asian allies could embolden other regional actors
and undermine efforts to salvage the Bretton Woods institutions. A large-scale
terrorist attack on US soil would prompt steep stock market losses, undermine
private-sector confidence, and set back the economy
4.2
Mexico
Following Mr. Trump’s victory in the US
presidential elections, we have lowered our GDP
growth forecast to 2.1% next year and 2.2% in
2018, down from 2.5% and 2.4% previously. Even
assuming no trade tariffs, we think that a mix of
heightened uncertainty, a weaker peso – leading
to higher inflation – and significantly tighter
monetary policy will weigh on the Mexican
economy.
It is too early to know what kind of Trump
presidency we will have, but two things are clear:
greatly increased uncertainty and a weaker peso.
First, uncertainty regarding Trump’s policies will
weigh on investment and harm Mexico’s economy.
We now expect that investment will stagnate for a second year in a row in 2017
(previously we expected a 1% rise).
Second, uncertainty will keep the peso weak throughout 2017 ‒ below MXN19/US$
– which will lead to higher inflation and lower growth in real disposable incomes. We
now see inflation averaging 3.5% in 2017, up from 3.3% previously. Moreover, the
higher inflationary pressure will force the central bank to maintain a tighter monetary
policy stance, meaning higher borrowing costs that feed back into lower investment
and consumption.
14
San Diego Travel Forecast
December 2016
Consumer prices rose by 0.6% m/m for a second consecutive month in October,
taking headline inflation to 3.1% ‒ above the central bank’s target for the first time
since April 2015. Given the weaker forecast profile for the peso throughout next
year we now see inflation peaking at 3.7% in Q2 2017.
We expect Banxico to raise interest rates by 50bp at its 17 November policy
meeting and by a further 75bp in 2017 to counter the additional inflationary
pressures stemming from the peso’s depreciation and the capital outflows
triggered by the increase in uncertainty.
INEGI’s flash estimate showed that Mexico’s GDP expanded by 1.0% on the
quarter in Q3, driven by the primary and tertiary sectors (up 1.2% and 1.5%
respectively), while secondary activities remained a drag on growth (-0.1% q/q).
These figures were in line with our expectations, so we continue to see GDP
growing by 2.0% in 2016.
4.3
Canada
We think Canada’s economic outlook is slightly
dimmer in the wake of Mr. Trump’s US presidential
election victory. The US economy will benefit from
lower taxes, increased infrastructure outlays and
de-regulation, but offsetting government spending
cuts, trade protectionism and uncertainty will
constrain growth. Given the heavy reliance of
Canadian exports on US domestic demand as a
source of growth, it is vital that Canadian policy
makers clarify the incoming US administration’s
views on NAFTA. On energy, we think Mr. Trump
will work to approve the Keystone XL oil pipeline
that his predecessor rejected. However, we believe
that the potential positive impact on Canada’s
economy will be more than outweighed by weaker exports and domestic demand.
Real GDP grew 0.2% m/m in August, the third consecutive month of expansion. The
rise was driven largely by increased activity in the resources sector as it continued
to rebound after the Alberta wildfires. Services were flat on the month while
manufacturing output edged higher (albeit up only 0.4% year-on-year). Overall, the
annual trend in real GDP growth remained subdued in August at just 1.3%.
Given the July and August data, real GDP is likely to have grown at a3-3.5%
annualized rate in Q3, and we expect that GDP will grow at a sluggish 1.2% on
average in 2016. Looking ahead, we forecast gradually strengthening non-energy
activity, a reduced drag from the energy sector, low interest rates and expansionary
fiscal policy to underpin a modest acceleration in real GDP growth to 1.7% next
year. However, the overall pace of growth is likely to remain lackluster.
15
San Diego Travel Forecast
December 2016
We also believe that the Bank of Canada is likely to stay on the sidelines through
2017, preferring to rely on fiscal policy to stimulate activity and lingering concerns
about an overheated housing sector and questions regarding the marginal efficacy
of further interest rate cuts.
The most exciting part of the 2016 Fall Fiscal Update was the formal announcement
of a plan to create a ‘Canada Infrastructure Bank.’ It remains to be seen whether
this new institution, not to mention plans for greater infrastructure spending, will
boost Canada’s long-term growth prospects.
4.4
Japan
The final estimate for quarterly GDP growth in Q3
was revised lower to 0.3% from the advance
estimate of 0.5%. The downward revision was
primarily driven by a smaller contribution from net
exports.
Looking beyond the headline figure, the underlying
composition of GDP growth was a mixed bag.
Although the increase in exports was weaker than
first estimated it was still a 1.6% rise on the quarter,
while household spending was revised higher. On
the other hand, private non-residential investment
was revised down to show a fall in Q3 (albeit from a
higher level as the inclusion of R&D spending
contributed to much stronger growth in investment
than previously estimated in H1).
Notwithstanding the downward revision to GDP in Q3, we have raised our GDP
growth forecast for 2016 and the next two years. This is partly due to historical
revisions to the data which mean that growth in the first half of 2016 and, indeed,
the last two years was stronger than previously estimated. We are also now
projecting a much weaker yen profile than before, which has led to a stronger
outlook for both exports and business investment. Coupled with ongoing support
from the latest fiscal package, we now expect GDP to grow by 1% this year and
next, after 1.2% in 2015.
The yen has depreciated by around 10% against the USD since Mr. Trump’s victory
in the US elections, largely driven by a widening in the US-Japan 10-year yield
spread to around a three-year high. We now expect that this differential will widen
further during the course of 2017-18 reflecting the changing nature of US economic
policy and the expectation that the Bank of Japan will defend the 10-year
government bond yield target of “around” 0%. Consequently we look for the JPY to
16
San Diego Travel Forecast
December 2016
depreciate to 117.5 versus the USD by end-2017 and remain at these weaker levels
through 2018.
With import costs also set to rise due to the weaker JPY, consumer prices are
forecast to be slightly higher in2017 and 2018. However, at 0.2% and 0.6%, inflation
will still fall well short of the 2% target.
4.5
United Kingdom
High-frequency data continue to suggest that
activity has been largely unaffected by June’s
referendum result. In particular, consumer demand
has remained very strong, with annual retail sales
growth at its strongest in 14 years in October.
However, this probably represents the high-water
mark for the consumer, with the impact of the
sharp depreciation of sterling likely to steadily pass
along the supply chain and push up inflation in
2017.
When it loosened policy in August, the MPC had
indicated that it expected to cut Bank Rate again
before the end of the year. However, the combination of stronger than expected
activity data and renewed depreciation of sterling in October saw the MPC
announce in the minutes of the November meeting that its earlier guidance had
“expired”. The MPC now expects a lengthy period of above-target inflation, but
made clear that it will only tighten policy if it sees evidence of second-round effects
on wages and inflation expectations. We expect Bank Rate to remain at 0.25% for a
prolonged period.
Chancellor Phillip Hammond had promised to “reset” fiscal policy in November’s
Autumn Statement. But while less stretching fiscal rules reduce the chances of
further policy tightening being required in the short-term Hammond’s stimulus
package was modest and is unlikely to have a material impact on growth.
Central to the Chancellor’s plans was the creation of the National Productivity
Investment Fund, which will spend £23bn over the next five years on housing,
research & development and economic infrastructure projects, with the aim of
boosting productivity growth. However, the extra funding merely means that, as a
percentage of GDP, investment levels will be the same over the next six years as
they have been over the past six. Furthermore, the additional funding is
‘backloaded’ and will do nothing to support demand in 2017, when activity is likely to
be under the greatest pressure. Indeed, the OBR’s forecasts still imply a significant
tightening of fiscal policy over the period to 2019-20, with the average drag on GDP
growth being 0.8% a year.
17
San Diego Travel Forecast
December 2016
4.6
Germany
The Q3 flash GDP release revealed that the German
economy grew by just 0.2%, the weakest quarterly
result since Q1 2015. While household and
government spending rose, net trade and investment
are reported to have been a drag on GDP.
But there are some signs of improvement in the
industrial sector, offering hope that it can pick up the
growth baton from households as higher inflation
starts to erode real incomes and hence spending.
And initial evidence suggests the pace of growth
might pick up a little in Q4. The October EC ESI
reading was the best outturn since 2011 and the
composite PMI picked up sharply too.
A key feature of the improvement has bene strong industrial sentiment, partly
reflecting large pick-ups in the survey-based measures of firms’ export orders. With
global GDP growth expected to pick up next year, export growth may regain a little
momentum after a summer lull. But the big picture remains that weak global trade
growth will not be strong enough to deliver a major trade-driven recovery.
Encouragingly, domestic demand prospects remain solid. While inflation, which we
expect to rise from 0.5% this year to 1.8% in 2017, will eat into real income growth,
the labour market recovery continues. Employment growth will slow due to capacity
constraints, but we expect supply bottlenecks in conjunction with higher inflation to
push up wage growth. With scope for households to save less too, we expect
consumer spending growth to ease only slightly, from 1.4% to 1.2%.
In response to the weaker than expected Q3 outturn we have cut out 2016 GDP
growth forecast from 1.8% to 1.7%, and we continue to expect a modest slowdown
to a still above-trend rate of 1.4% in 2017. Thereafter, growth is likely to slow further,
reflecting the economy’s weak potential prospects.
18
San Diego Travel Forecast
December 2016
4.7
Switzerland
In our latest baseline forecast, Donald Trump’s
victory in the US elections will have only small
effects on the Swiss economy. Heightened
uncertainty will likely result in business investment
expanding at a slightly slower pace in 2017.
Moreover, the Swiss franc will probably depreciate
less in 2017 and 2018 than previously expected
because of its role as a safe haven for global
investors, and this will dampen export prospects
slightly. However, on the other hand, Swiss
exporters of pharmaceuticals are likely to benefit
from Trump’s win as the probability of increased
price regulation in the important US market has
decreased.
Apart from the US elections, other news on the Swiss economy has been relatively
upbeat. Both the KOF economic barometer and the industrial PMI improved further
in October and point towards solid growth in the coming months. The PMI subindices showed robust manufacturing production and a high backlog of orders. In
addition, unemployment fell slightly in October and foreign trade experienced robust
growth in Q3 2016.
But there are still areas of weakness. For instance, retail sales volumes remained
very sluggish in Q3, while consumer sentiment (as measured by SECO) continues
to run at quite downbeat levels (although consumers were more optimistic in their
answers about expected economic developments over the coming 12 months.)
Overall, the positive impact of the most recent economic indicators and the negative
effect of the increased uncertainty resulting from Mr. Trump’s election win should
roughly cancel each other out. Therefore, we have left our GDP growth forecast for
2017 unchanged at 1.6%. For 2018, we have edged down our forecast slightly to
1.7% (from 1.8% last month) as the stronger profile projected for the Swiss franc will
have a dampening effect on exports and business investment. In addition, the
downside risks for Switzerland have increased after the US elections. If the US were
to implement major protectionist measures, then the subsequent decline in global
trade would clearly hurt Swiss growth prospects.
19
San Diego Travel Forecast
December 2016
4.8
Eurozone
Economic data published over the past month
continue to show that, for now, the spillover effects
of Brexit on the Eurozone economy remain limited,
while the initial signs are that Trump’s US election
victory will not have any major adverse impact on
Eurozone growth.
The Q3 GDP release for the Eurozone showed that
the economy expanded by 0.3% for a second
quarter in a row.
While it is still early days for Q4, October’s
business surveys made encouraging reading from
an activity perspective. Both the closely-watched
composite PMI and EC Economic Sentiment
Indicators rose to their highest levels of the year, reinforcing the view that for now
the Eurozone remains resilient to Brexit.
One concern is that CPI inflation, which to 0.5% in October and will climb
substantially higher in the coming months, will derail the consumer recovery.
Encouragingly, consumer sentiment is yet to be dented and we remain confident
that the labor market will provide at least some offset to higher inflation. Indeed, the
EC measure of employment intentions is back to pre-global financial crisis levels.
Meanwhile, although bank lending to firms has weakened recently, this reflects a fall
in short-term loans. Longer-maturity loans continue to grow at a healthy pace, which
is a positive sign for investment.
The upshot is that we have made no major changes to our GDP growth forecasts—
we see growth of 1.4% in 2017 (down from 1.5%), only a touch weaker than this
year’s expected 1.6% outturn. Given this and the likely upside inflation surprise to
the ECB’s forecasts, we still expect the ECB to announce a tapering of QE after
March 2017.
20
San Diego Travel Forecast
December 2016
5 Trump Economy: Three scenarios highlight
uncertainty
Markets appear to have adopted a glass half-full view of the
recent election outcome. We caution, however, that while
lower taxes, more infrastructure spending, and reduced
regulation may be positives for businesses, increased policy
uncertainty, more trade protectionism, congressional fiscal
orthodoxy and stricter immigration are important constraints.
One of the main characteristics of a Trump presidency will
be the unusually elevated degree of policy and political
uncertainty. While we know the name of the president and
the composition of Congress, we have little inforation about
the likely administration, which policies will be passed and
when these may be implemented.
Our baseline view assumes a compromise between
President Trump and Congress, and contains a modestly
expansionary fiscal package and targeted trade protectionist
measures. While private sector activity benefits from lower
taxes and increased infrastructure investment in the near
term, trade protectionism and elevated policy uncertainty
constrain growth to just 2% in 2017 and 1.8% in 2018. The
Fed still raises rates in December, but only proceeds with
one rate hike in 2017.
Our upside scenario assumes tax reductions are twice as
large as in the baseline (worth $1tn over the next decade)
and much more inclusive for low-income families, and the
government implements a larger infrastructure investment
program. Trump negotiates a relaxation of fiscal orthodoxy
in exchange for a less protectionist trade stance than he
campaigned on. Growth accelerates to 3% in 2018, and the
economy is 2% larger than in the baseline by the end of
2020, creating 2 million more jobs.
Our downside scenario assumes that, after a brief
honeymoon period, President Trump reverts to his highly
protectionist and isolationist stance. His refusal to negotiate
with Congress means Republicans refuse any increase in the
deficit. Global aversion to the US combines with heightened
domestic policy uncertainty. Real GDP growth slows and the
economy enters a recession by late 2018. By the end of his
term, the economy is 5% smaller than in the baseline and
21
San Diego Travel Forecast
December 2016
counts 4 million fewer jobs.
President-elect Trump has the executive power to do a number of things, such as
pulling out of trade agreements, imposing tariffs on our trading partners, or reversing
some business regulations. But for many of his major economic proposals (fiscal,
immigration, healthcare) he would need to compromise with Congress. And while
Republicans hold a majority in Congress, there is no guarantee that Mr. Trump
would find common ground in negotiations with members of his own party.
We see essentially three positive and four negative economic factors in a Trump
presidency. The three positives, on which markets have thrived in recent days, are
lower taxes, increased infrastructure investment, and reduced regulation. The four
negatives are heightened political and policy uncertainty, increased trade
protectionism, stricter immigration rules, and fiscal orthodoxy in Congress (requiring
offsetting spending cuts to fund any tax cuts and infrastructure spending).
Traditionally, elections have reduced political and policy uncertainty, but in this case
the uncertainty remains unusually elevated. President-elect Trump’s promises and
recent comments by his transition team lean towards a more moderate protectionist
stance and a focus on pro-growth reform. This points towards our upside scenario,
and while a severe downside scenario is unlikely, the downside risks are important
and should not be overlooked.
22
San Diego Travel Forecast
December 2016
6 San Diego Forecast Tables
San Diego Visitor Forecast
(millions)
Visits
2014
2015
2016
2017
2018
2019
2020
33.8
34.3
34.6
35.2
35.8
36.3
36.9
Total Overnight
Hotel / Motel
Household
Other
16.9
9.4
6.7
0.9
17.2
9.6
6.7
0.9
17.4
9.8
6.6
1.0
17.7
10.0
6.7
1.0
18.1
10.2
6.9
1.0
18.3
10.3
7.0
1.1
18.6
10.4
7.1
1.1
Day Visitors
Day (excl Mexican)
Mexican Day Visitors
16.9
12.6
4.2
17.1
12.7
4.4
17.3
12.7
4.5
17.5
13.0
4.6
17.8
13.1
4.7
18.0
13.3
4.7
18.3
13.4
4.8
(year-to-year % growth)
Visits
2014
2015
2016
2017
2018
2019
2020
2.1%
1.4%
1.1%
1.7%
1.7%
1.4%
1.5%
Total Overnight
Hotel / Motel
Household
Other
2.9%
4.9%
0.2%
2.6%
1.8%
2.5%
0.3%
6.3%
1.0%
1.9%
-0.5%
2.8%
1.9%
2.3%
1.1%
2.5%
2.0%
1.7%
2.1%
3.1%
1.5%
1.2%
1.6%
3.2%
1.6%
1.3%
1.9%
3.2%
Day Visitors
Day (excl Mexican)
Mexican Day Visitors
1.2%
0.2%
4.5%
1.0%
0.2%
3.6%
1.2%
0.7%
2.7%
1.5%
1.6%
1.2%
1.4%
1.2%
2.0%
1.3%
1.2%
1.6%
1.4%
1.3%
1.7%
San Diego Visitor Forecast
(millions)
2016
2018
2017
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
7.27
8.63
10.85
7.90
7.38
8.78
11.02
8.05
7.53
8.90
11.22
8.17
Total Overnight
Hotel / Motel
Household
Other
3.82
2.23
1.39
0.21
4.32
2.65
1.43
0.24
5.05
2.76
2.01
0.28
4.19
2.14
1.82
0.23
3.88
2.28
1.39
0.21
4.40
2.71
1.44
0.25
5.14
2.82
2.03
0.29
4.29
2.20
1.85
0.24
3.97
2.33
1.43
0.22
4.48
2.75
1.47
0.26
5.24
2.86
2.07
0.30
4.36
2.23
1.88
0.25
Day Visitors
Day (excl Mexican)
Mexican Day Visitors
3.64
2.47
1.17
3.44
2.35
1.09
4.31
3.21
1.10
5.79
4.67
1.12
3.71
2.51
1.20
3.50
2.39
1.11
4.38
3.27
1.11
5.88
4.74
1.14
3.76
2.55
1.21
3.55
2.42
1.13
4.42
3.29
1.13
5.98
4.81
1.17
Visits
(year-to-year % growth)
2016
2018
2017
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
3.0%
-2.4%
2.5%
1.4%
1.6%
1.8%
1.6%
1.9%
2.0%
1.4%
1.8%
1.5%
Total Overnight
Hotel / Motel
Household
Other
1.9%
1.2%
2.4%
6.2%
-0.7%
0.7%
-3.6%
1.3%
2.0%
4.3%
-1.2%
3.6%
0.9%
1.3%
0.5%
0.6%
1.6%
2.4%
0.3%
1.7%
1.9%
2.2%
1.3%
2.7%
1.6%
2.0%
1.0%
2.8%
2.4%
2.8%
1.9%
2.6%
2.3%
2.2%
2.4%
3.5%
1.9%
1.7%
2.0%
2.8%
2.0%
1.5%
2.4%
3.2%
1.7%
1.6%
1.7%
3.0%
Day Visitors
Day (excl Mexican)
Mexican Day Visitors
4.3%
3.8%
5.5%
-3.9%
-5.3%
0.3%
2.9%
2.9%
2.8%
2.1%
1.9%
2.4%
1.6%
1.7%
1.6%
1.6%
1.8%
1.0%
1.5%
1.6%
1.3%
1.3%
1.4%
1.1%
1.6%
1.3%
2.2%
1.0%
0.8%
1.5%
1.7%
1.5%
2.7%
1.2%
0.9%
1.8%
Visits
23
San Diego Travel Forecast
December 2016
San Diego Visitor Expenditure Forecast
($ million)
Expenditure
Total Overnight
Hotel / Motel
Household
Other
Day Visitors
Day (excl Mexican)
Mexican Day Visitors
2014
2015
2016
2017
2018
2019
2020
9,209
9,921
10,336
10,878
11,337
11,756
12,219
8,259
6,159
1,320
780
8,952
6,723
1,370
859
9,344
7,050
1,386
907
9,841
7,481
1,415
945
10,258
7,784
1,483
991
10,633
8,053
1,540
1,041
11,051
8,359
1,600
1,092
950
696
254
969
712
257
992
731
261
1,037
768
269
1,078
802
276
1,123
839
284
1,167
875
292
(year-to-year % growth)
2014
2015
2016
2017
2018
2019
2020
9.7%
7.7%
4.2%
5.3%
4.2%
3.7%
3.9%
Total Overnight
Hotel / Motel
Household
Other
10.4%
12.1%
5.7%
6.0%
8.4%
9.2%
3.8%
10.1%
4.4%
4.9%
1.2%
5.6%
5.3%
6.1%
2.0%
4.2%
4.2%
4.1%
4.8%
4.8%
3.7%
3.5%
3.8%
5.0%
3.9%
3.8%
3.9%
5.0%
Day Visitors
Day (excl Mexican)
Mexican Day Visitors
4.0%
2.7%
7.6%
2.0%
2.4%
1.1%
2.3%
2.6%
1.5%
4.6%
5.1%
3.0%
4.0%
4.4%
2.8%
4.1%
4.6%
2.9%
3.9%
4.3%
2.8%
Expenditure
San Diego Visitor Expenditure Forecast
($ million)
2016
Expenditure
Total Overnight
Hotel / Motel
Household
Other
Day Visitors
Day (excl Mexican)
Mexican Day Visitors
2017
2018
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
2,279
2,680
3,060
2,317
2,381
2,830
3,234
2,433
2,502
2,944
3,369
2,521
2,097
1,611
272
214
2,428
1,866
313
249
2,721
2,017
443
260
2,098
1,556
359
184
2,181
1,682
276
222
2,568
1,990
322
256
2,885
2,172
447
267
2,208
1,637
370
200
2,289
1,762
292
235
2,674
2,070
338
266
3,008
2,254
472
282
2,288
1,698
381
208
181
122
59
252
192
60
339
275
64
219
141
78
200
140
60
262
199
63
349
283
66
226
146
79
213
150
63
270
206
64
361
293
68
234
153
81
(year-to-year % growth)
2016
2017
2018
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
5.2%
1.5%
5.4%
4.7%
4.5%
5.6%
5.7%
5.0%
5.1%
4.0%
4.2%
3.6%
Total Overnight
Hotel / Motel
Household
Other
5.3%
5.5%
3.2%
6.2%
2.1%
2.5%
-2.2%
5.0%
5.6%
6.0%
2.1%
8.1%
4.6%
5.6%
1.8%
2.3%
4.0%
4.4%
1.6%
3.8%
5.8%
6.7%
2.8%
2.9%
6.0%
7.7%
0.8%
2.5%
5.2%
5.2%
3.3%
8.8%
5.0%
4.7%
5.9%
5.4%
4.1%
4.0%
5.0%
4.1%
4.3%
3.8%
5.6%
5.7%
3.6%
3.8%
2.9%
3.9%
Day Visitors
Day (excl Mexican)
Mexican Day Visitors
3.9%
5.6%
0.3%
-3.7%
-4.3%
-1.8%
4.4%
4.8%
2.6%
5.4%
6.0%
4.3%
10.3%
14.0%
2.7%
3.9%
3.7%
4.5%
3.0%
2.9%
3.7%
3.0%
3.8%
1.4%
6.5%
7.5%
4.2%
3.1%
3.4%
1.9%
3.4%
3.5%
3.1%
3.6%
4.3%
2.3%
Expenditure
24
San Diego Travel Forecast
December 2016
San Diego Hotel Sector Forecasts
2014
2015
2016
2017
2018
2019
2020
Rooms (mn roomnights)
Room Supply
Room Demand
21.8
16.3
22.1
16.8
22.3
17.1
22.7
17.5
23.0
17.8
23.4
18.0
23.6
18.2
Occupancy (% balance)
74.6%
76.4%
76.4%
77.1%
77.4%
76.9%
76.9%
$141.38
$105.48
$150.03
$114.58
$154.21
$117.89
$159.30
$122.81
$165.00
$127.71
$171.47
$131.86
$177.82
$136.80
ADR
RevPAR
(year-to-year % growth)
2014
2015
2016
2017
2018
2019
2020
Room Supply
Room Demand
2.1%
6.4%
1.0%
3.4%
1.2%
1.3%
1.7%
2.5%
1.3%
1.7%
1.8%
1.1%
1.1%
1.2%
Occupancy
4.2%
2.4%
0.1%
0.8%
0.4%
-0.7%
0.0%
ADR
RevPAR
4.8%
9.2%
6.1%
8.6%
2.8%
2.9%
3.3%
4.2%
3.6%
4.0%
3.9%
3.2%
3.7%
3.8%
San Diego Hotel Sector Forecasts
2016
2017
2017
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Rooms (mn roomnights)
Room Supply
Room Demand
5.4
4.1
5.5
4.4
5.6
4.7
5.7
3.9
5.6
4.1
5.7
4.5
5.7
4.8
5.8
4.0
5.6
4.2
5.7
4.5
5.8
4.9
5.9
4.1
Occupancy (% balance)
74.5%
79.1%
83.3%
69.0%
74.3%
79.1%
84.7%
70.3%
75.2%
79.5%
84.8%
70.2%
$ 144.0
$ 107.2
$ 155.6
$ 123.0
$ 173.1
$ 144.3
$ 140.9
$ 97.2
$ 148.1
$ 110.0
$ 160.6
$ 127.0
$ 178.4
$ 151.1
$ 146.5
$ 103.0
$ 154.1
$ 115.8
$ 167.2
$ 133.0
$ 184.6
$ 156.5
$ 150.4
$ 105.5
ADR ($)
RevPAR ($)
(year-to-year % growth)
2016
2017
2018
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Room Supply
Room Demand
0.7%
0.0%
0.7%
-0.2%
0.9%
3.3%
2.6%
2.1%
2.5%
2.2%
2.1%
2.0%
1.7%
3.4%
0.5%
2.5%
0.8%
2.0%
1.0%
1.6%
1.4%
1.5%
1.9%
1.6%
Occupancy (% balance)
-0.7%
-0.8%
2.3%
-0.4%
-0.3%
0.0%
1.7%
1.9%
1.3%
0.5%
0.1%
-0.2%
ADR
RevPAR
2.2%
1.5%
2.3%
1.5%
3.4%
5.8%
2.8%
2.3%
2.9%
2.6%
3.3%
3.2%
3.0%
4.8%
4.0%
6.0%
4.0%
5.3%
4.1%
4.7%
3.5%
3.6%
2.6%
2.4%
25
San Diego Travel Forecast
December 2016
7 Forecast Methodology Overview
Forecasts reported in this document represent the baseline outlook with a business
as usual marketing effort. This does not take any specific marketing programs
directed at key markets into account.
The forecasts are primarily based upon expected economic developments in key
origin markets as well as anticipated costs. Previous tourism trends relative to
economic demand and travel conditions have been tracked and relationships have
been quantified. Estimated relationships are applied to the economic and broader
tourism forecasts.
Forecasts do account for the impact of important events which would influence visits
and/or spend, such as air service restrictions and special events in San Diego such
as hosting the Superbowl or US Open.
Summary of Main Model Relationships


Oxford Economics
&
Tourism Economics
Existing models
Economic trends by market
(income, output, spend
employment etc)
Outbound trends by market
Visitor Spending
Visits
•Day visits
•Overnight visits
Combine forecasts of average
spending by market with visits
Hotel ADR



Supply-side factors
New attractions
Events, conventions etc
Travel Constraints
Hotel room demand
Hotel Occupancy
Hotel room supply

Overnight Visitors. Trends in overnight visits have been identified
and are forecast separately for stays in hotels and in private
households. Forecasts account for different trends according to
purpose of visit (business and leisure) as well as by origin market.
Economic developments in key origin markets at the city, state,
national and international level are included.

Day Visitors. Travel patterns from nearby drive markets tend to
differ from those from longer-haul markets. For day visitors the
impact of economic developments in key origin markets and tourism
costs (such as hotel room rates) differs from the impact on
overnight visits. Mexican visitors represent a significant proportion
of day visitors to San Diego and trends have been separately
identified. For non-Mexican day visitors, business and leisure trends
26
San Diego Travel Forecast
December 2016
have again been separately identified taking developments in origin
markets into account.

Visitor Days. Visitor days spent in San Diego are calculated from
the number of overnight visits multiplied by average length of stay,
plus day visits. Differences in the average length of visit according
to origin markets are taken into consideration as well as any impact
of economic developments.

Visitor Spending. Average spending per day is calculated for
different market segments and applied to visitor days. This takes
tourism-related price inflation in both San Diego into account (such
as hotel room rates), as well as spending patterns according to
origin market and the impact of more general tourism costs (such as
airfares and fuel costs).

Hotel Rooms sold. Hotel room demand largely follows the trend in
overnight visitor days. The impact of local demand on rooms is also
accounted for as locals tend to use more rooms in economic
downturns as a replacement for longer-haul travel.

Hotel Rooms supply. Supply is calculated as the current stock of
hotel rooms plus planned and current hotel construction.
Probabilities are applied to the current timetable of projects
underway to determine when new capacity will be available. It is
assumed that almost all hotels under construction are completed,
while a smaller proportion of those in the planning stage are
completed according to plan.

Hotel Occupancy. Occupancy is simply determined as the ratio of
room demand to supply in terms of room nights.

Hotel Average Daily Rate (ADR). The cycle in daily rates follows
occupancy closely, with a slight lag. Over time, more general price
inflation also needs to be taken into consideration and price
developments in San Diego as well as in origin markets are
important factors.
27
San Diego Travel Forecast
December 2016
8 San Diego Convention Center Attendance Forecast
28
San Diego Travel Forecast
December 2016
9 San Diego Hotel Project Pipeline
29
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