european tourism in 2014: trends & prospects (q4/2014) · 2019. 3. 10. · quarterly report...

European Tourism in 2014: Trends & Prospects (Q4/2014) 1

EUROPEAN TOURISM in 2014: TRENDS & PROSPECTS

Quarterly Report (Q4/2014)

A quarterly insights report produced for the Market Intelligence Group

of the European Travel Commission (ETC)

by Tourism Economics (an Oxford Economics Company)

Brussels, February 2015

ETC Market Intelligence Report

Copyright © 2015 European Travel Commission

European Tourism in 2014: Trends & Prospects (Q4/2014)

All rights reserved. The contents of this report may be quoted, provided the source

is given accurately and clearly. Distribution or reproduction in full is permitted for

own or internal use only. While we encourage distribution via publicly accessible

websites, this should be done via a link to ETC's corporate website, www.etc-

corporate.org, referring visitors to the Research/Trends Watch section.

The designations employed and the presentation of material in this publication do

not imply the expression of any opinions whatsoever on the part of the Executive

Unit of the European Travel Commission.

Data sources: This report includes data from the TourMIS database /

http://www.tourmis.info, STR Global, IATA, AEA and UNWTO.

Economic analysis and forecasts are provided by Tourism Economics and

are for interpretation by users according to their needs.

Published and printed by the European Travel Commission

Rue du Marché aux Herbes, 61, 1000 Brussels, Belgium

Website: www.etc-corporate.org

Email: [email protected]

ISSN No: 2034-9297

This report was compiled and edited by:

Tourism Economics (an Oxford Economics Company)

on behalf of the ETC Market Intelligence Group

Cover: Trakai Castle, Trakai, Lithuania copyright photoff, http://www.shutterstock.com/gallery-401758p1.html

http://www.tourmis.info/index_e.html

http://www.etc-corporate.org/

mailto:[email protected]

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Foreword

European tourism grew strongly and steadily in 2014

2014 sets European tourism on a record growth path. UNWTO

1 , the UN agency for tourism, estimates that

the European tourism sector grew by 4% last year, reaching a total of 588 million visits, a 22 million increase compared to 2013. For the fifth consecutive year, international tourism in the region has grown above the 2.4% average rate forecast for the period 2010-2025

2.

Data reported by ETC members through November-December 2014 exceed the positive trend reported by the UN agency. Two out of three ETC destinations report growth above the regional performance (top chart). As to be expected, most of them are emerging destinations who are investing in their tourism potential, such as Iceland (+24%), Latvia (+15%), Serbia (+12%), Romania and Czech Republic (both at +11%).

Among them, established destinations in Southern and Mediterranean Europe stand out. In the area, growth is led by large destinations such as Greece (+22%), driven by the recovery of business travel and price convenience, and Spain (+9%), whose vibrant sector earned the praise of its Prime Minister for its excellent contribution to the Spanish economy

3. Malta (+7%), Slovenia (6%), Croatia (+5%) and

Turkey (+5%) also contribute positively to the outstanding performance.

A profitable business all across the value chain

Positive trends are mirrored in performance indicators from the hotel sector. Confidence remains high within this sector, where data point to improved occupancy and profits. Average Daily Rates (ADR) rose at most destinations in Europe over the last 12 months, a consequence of significant growth in occupancy across the region.

Air traffic data for Europe also grew at a faster pace than the previous year (middle chart). Despite repeated disruptions caused by strikes in the last quarter of 2014, Passenger Load Capacity was reported at marginally higher rates than in 2013. Air passenger traffic between Europe and the Americas grew substantially thanks to a strengthening dollar and recovering economies in the euro area.

1Source: http://media.unwto.org/press-release/2015-01-27/over-11-billion-tourists-

travelled-abroad-2014.

2Source: https://ec.europa.eu/growth/tools-

databases/vto/documents?name_list=All&field_type_tid=9040&field_year_value=All&items_per_page=10&=Apply

3 Source: http://www.ifema.es/fitur_01/Prensa/NotasdePrensa/INS_048375

Foreign visits to ETC destinations in 2014YTD, % change year ago.

Europe: 4%

Source: TourMIS

-20

-10

0

10

20

30

Icel

and

Gre

ece

Latv

iaS

erbi

aR

om

ani

aC

zech

Rep

.S

pain

Lith

uan

iaIr

elan

d R

epM

alta

Slo

veni

aC

roa

tiaT

urke

yB

elgi

umG

erm

any

Pol

and

Eur

ope

Hu

nga

ryE

ston

iaB

ulga

ria

Aus

tria

Mon

tene

gro

Sw

itze

rland

Cyp

rus

Italy

Slo

vaki

a

Africa Asia/Pacific Europe LatinAmerica

Mid.East N.America World

0

5

10

15

202012 2013 2014 ytd

% year, RPK

Source: IATA

Annual international air passenger growth

Outbound travel from select markets to the world and EuropeAnnual average growth (%), 2014-19.

Source: Tourism Economics

0

2

4

6

8

10

Ru

ssia

US

A

Ca

nad

a

Mex

ico

Arg

entin

a

Bra

zil

Indi

a

Ch

ina

Jap

an

UA

EWorld Europe

http://media.unwto.org/press-release/2015-01-27/over-11-billion-tourists-travelled-abroad-2014

http://media.unwto.org/press-release/2015-01-27/over-11-billion-tourists-travelled-abroad-2014

https://ec.europa.eu/growth/tools-databases/vto/documents?name_list=All&field_type_tid=9040&field_year_value=All&items_per_page=10&=Apply



http://www.ifema.es/fitur_01/Prensa/NotasdePrensa/INS_048375

Long-haul markets lead growth, on top of a strong regional market

Factors that contributed to a successful year include: the recovery of major source markets, marketing efforts in promoting travel outside the main season and themed promotional activities. Many destinations benefitted from increased travel from Europe’s top markets, such as France, Germany, Italy and the UK. Data point to a recovery during short breaks, in addition to the main holidays, as suggested by increases in overnights, shorter lead times and more last-minute bookings. While growth from Germany and the UK is consistent with economic trends, the behaviour of the French and Italian markets clearly reflects the hedonic nature of travel consumption. In 2015, the Eurozone recovery is expected to finally pick up the pace (+1.3%), which bodes well for the regional market remaining a stalwart supporter of growth.

Data paint a bleaker picture for the Russian market, especially as the crisis in Eastern Ukraine shows no sign of abating. Outbound travel from this market is expected to mirror the deep economic recession expected in 2015, largely caused by the devaluation of the Rouble and falling price of oil, and associated with capital flight in emerging markets. A recovery of the market is expected in the medium term (bottom chart on previous page), as illustrated in ETC report “European Tourism amid the Crimea Crisis”, although the twin impact of falling oil prices and a possible renewal of sanctions will further weaken the market throughout 2015.

In the US, accelerated economic growth, the appreciation of the dollar against the euro and decreasing air fares have contributed to strong performance in this market. Consumer spending is expected to become stronger, backed up by an improved labour market and sustained GDP growth, as reflected in an average growth of +5% per year through 2019. A similar optimistic outlook is reported for China, a market sized at 26 million arrivals to long-haul destinations in 2014, and whose growth in Europe is projected at a substantial rate of 6% per year over the next few years. Third-tier long-haul markets, such as Argentina and the UAE, also show positive prospects in the short term, while the picture remains gloomier for Brazil and Japan, as a reflection of a deteriorated economic situation. For the latter, the Japan National Tourism Organization reports a steady decline in outbound travel from Japan, at a level currently below 2011 volumes.

Sailing through rough seas?

A number of factors bode well for another positive year in Europe’s tourism sector. Due to lower energy prices, a weaker euro, continuing reforms, and a likely new round of stimuli from the European Central Bank, it is reasonable to expect continued growth from the regional market. Nevertheless, adverse risks may partly offset favourable risks as the year progresses. Following the January events in Paris, the threat of more terror attacks in Europe may produce ripple effects to other European destinations. Markets in Asia, where safety is a key factor for travel-related decisions, and the USA may prove particularly vulnerable to increasing tensions. Growth prospects for the Eurozone may also fail, under the threat of intensified adverse risks, such as deflation and persisting unemployment.

Dark clouds may be gathering over the waters on which European tourism is sailing and slow down its growth. For 2015, the ETC expects the European tourism sector to continue at a cruising speed around its long-term annual average growth, forecast at a rate between 2% and 3%.

Valeria Croce, ETC Executive Unit

ETC Market Intelligence Group


© European Travel Commission, February 2015

2014 Tourism Performance Summary

Emerging Europe continues to live up to its name with strong arrivals growth across the majority

of its reporting constituents, namely Latvia, Serbia, Romania, and Czech Republic, all of which

have so far this year enjoyed in excess of 10% growth. Latvia and Serbia both reported arrivals

growth from Russia according to YTD figures to September and November respectively. This

contrasts starkly with the fall in Russian arrivals that most other countries have observed due to

a combination of factors, namely a tumbling rouble, falling oil prices, and the response to

sanctions related to the Russia-Ukraine crisis. However, with only data to September, the

marginal growth in Russian arrivals to Latvia (0.6%) is unlikely to be evident in final end-year

data given the fall in oil price and the relative value of the rouble against the euro. Latvia has

shown itself to be a diverse destination, maintaining momentum despite a fall in nights and only

very weak arrivals growth from Russia, its largest source market.

Growth in arrivals from Russia to Serbia have been much more robust; YTD data to November

shows growth and is unlikely to see less than full year double digit growth from Russia. Taken

together with strong double digit arrivals growth from many other large source markets such as

Austria, Switzerland, France, Poland, and Sweden, to name only a few, it is no surprise to see

Serbia as a top performer amongst ETC+3 countries.

Spain continued to demonstrate its appeal as a European destination, with growth in arrivals to

September of 9.2%. Moreover, in terms of visitor nights, Spain saw the largest increase

compared to the same period (January to September) in 2013 of 12%. Italy struggled to find

visitor nights growth early on in the year, but data to October suggests a strong summer which

made up for this shortfall and restored Italy’s visitor nights growth back into positive territory.

Like Spain, Italy’s reputation as a European destination precedes itself, however, its future

success is perhaps a bit more fragile than Spain’s, posting growth figures of 1.2% and 0.5% for

visits and visitor nights respectively.

2014 growth suggested by strong YTD figures in all but one reporting country should help stave

off the winter freeze. With the majority of countries reporting data to November and full-year

data available for three of these, we can surmise that reported trends are indicative of full year

performance. Iceland has been a front-runner since the beginning of the year, maintaining

impressively high levels of arrivals growth throughout. Off-season marketing campaigns,

increased presence in TV and film, and currency movements favouring the foreign visitor have

all contributed. The recovery in Greece continues, as the second strongest performer in terms

of arrivals growth. Hotels data for Athens support the idea that business demand is partly

responsible for this performance, reducing the recent reliance on the Greek islands for growth.

Greece should continue to grow if its economy grows in 2015 as it did in 2014, however,

uncertainty relating to its status within the EU may act as a stumbling block.

-10

-5

0

5

10

15

20

Spain

Latv

iaP

ort

ugal

Neth

erlands

Serb

iaS

weden

Denm

ark

Czech R

ep

Norw

ay

Lithuania

Belg

ium

Malta

Germ

any

Pola

nd

Luxem

bourg

Cro

atia

Hungary

Esto

nia

Slo

venia

Sw

itzerland

Italy

Austr

iaF

inla

nd

Cypru

sS

lovakia

Foreign visitor nights in select destinations2014, year-to-date*, % change year ago

Source: TourMIS *date varies (Jan-Sep) by destination

-11.1-10

-5

0

5

10

15

20

Icela

nd

Gre

ece

Latv

iaS

erb

iaR

om

ania

Czech R

ep

Spain

Irela

nd R

ep

Lithuania

Malta

UK

Slo

venia

Turk

ey

Cro

atia

Germ

any

Belg

ium

Pola

nd

Hungary

Esto

nia

Bulg

aria

Sw

itzerland

Monte

negro

Austr

iaC

ypru

sItaly

Slo

vakia

Foreign visits to select destinations2014, year-to-date*, % change year ago

Source: TourMIS *date varies (Jan-Dec) by destination

24.1

-13.0

22.2

2 European Tourism in 2014: Trends & Prospects (Q4/2014)


Only Austria, Finland, Cyprus, and Slovakia have seen falling visitor nights and, of these, only

Slovakia has a fall in both visits and visitor nights when compared to the same period one year

prior.

Cyprus saw arrivals from Russia, its second largest source market based on 2013 arrivals

figures, increase by 4.6% compared to the same period in 2013. However, this was not enough

to offset a 2.2% fall in visits from the United Kingdom, Cyprus’ largest source market from which

it received twice as many visits in 2013 as from Russia.

Finland’s full year performance is likely to be muted; YTD data to October has shown a large

negative impact on visitor nights from Russia, its largest source market. Visitor nights from

Germany, its third largest source market, have also fallen marginally compared to the same

period last year. While it is possible that data for the final two months of 2014 will reveal visitor

nights growth from Germany, in the case of Russia the opposite is likely to be true due to

depreciation of the rouble relative to the euro which we know continues throughout the months

of November and December.

Slovakia’s performance shows some tentative sign of improvement according to YTD data to

September. Trends in both visits and visitor nights are marginally better than data from earlier in

the year. STR Global hotel data also shows massive improvement in demand and occupancy in

the final months of the year offsetting earlier falls. Final data for 2014 may end higher than the

falls implied in available arrivals and visitor nights data for the year to September.

Country % ytd to month % ytd to month

Austria 1.8 Jan-Oct -1.0 Jan-Oct

Bulgaria 2.2 Jan-Nov

Croatia 5.3 Jan-Dec 2.2 Jan-Dec

Cyprus 1.5 Jan-Dec -2.9 Jan-Sep

Czech Rep 10.7 Jan-Sep 7.5 Jan-Sep

Denmark 8.1 Jan-Nov

Estonia 3.2 Jan-Nov 0.9 Jan-Nov

Finland -1.8 Jan-Oct

Germany 4.3 Jan-Nov 4.6 Jan-Nov

Greece 22.2 Jan-Sep

Hungary 3.9 Jan-Nov 2.0 Jan-Nov

Iceland 24.1 Jan-Dec

Ireland Rep 8.6 Jan-Nov

Italy 1.2 Jan-Oct 0.5 Jan-Oct

Latvia 15.2 Jan-Sep 9.9 Jan-Sep

Lithuania 8.0 Jan-Sep 6.1 Jan-Sep

Luxembourg 2.5 Jan-Oct

Malta 7.0 Jan-Nov 5.0 Jan-Nov

Montenegro 1.8 Jan-Nov

Netherlands 9.4 Jan-Sep

Norway 6.4 Jan-Oct

Poland 4.1 Jan-Nov 3.9 Jan-Nov

Portugal 9.6 Jan-Oct

Romania 11.0 Jan-Nov

Serbia 11.7 Jan-Nov 9.2 Jan-Nov

Slovakia -13.0 Jan-Sep -11.1 Jan-Sep

Slovenia 5.7 Jan-Oct 0.9 Jan-Oct

Spain 9.2 Jan-Sep 12.0 Jan-Sep

Sweden 8.2 Jan-Oct

Switzerland 1.8 Jan-Nov 0.6 Jan-Nov

Turkey 5.3 Jan-Nov

UK 7.0 Jan-Nov

Source: TourMIS, http://www.tourmis.info; available data as of 2.2.15

Measures used for nights and arrivals vary by country

See TourMIS for further data including absolute values.

Tourist Arrivals and Nights

2014 Performance, Year to Date

International Arrivals International Nights


© European Travel Commission February 2015

Global Tourism Forecast Summary

Tourism Economics’ global travel forecasts are shown on an inbound and outbound basis in

the following table. These are the results of the Tourism Decision Metrics (TDM) model,

which is updated in detail three times per year. Forecasts are consistent with Oxford

Economics’ macroeconomic outlook according to estimated relationships between tourism

and the wider economy. Full origin-destination country detail is available online to subscribers.

2012 2013 2014 2015 2016 2012 2013 2014 2015 2016

data/estimate/forecast *** d d e f f d d e f f

World 4.5% 5.1% 5.0% 3.3% 4.7% 4.0% 4.8% 5.2% 3.3% 5.0%

Americas 4.9% 3.3% 7.5% 4.2% 4.7% 5.9% 3.0% 3.6% 4.6% 5.1%

North America 4.7% 3.9% 8.2% 4.2% 4.5% 5.3% 2.2% 2.8% 5.6% 5.4%

Caribbean 3.3% 2.2% 6.1% 3.3% 4.6% -1.5% -1.8% 5.0% 2.4% 5.1%

Central & South America 6.4% 2.4% 6.2% 4.6% 5.6% 9.4% 6.6% 5.8% 1.8% 3.9%

Europe 3.8% 6.0% 3.9% 1.3% 3.6% 3.7% 3.9% 3.7% 0.8% 3.7%

ETC+3 2.7% 5.7% 5.0% 2.5% 3.7% 1.7% 1.8% 4.9% 2.8% 4.1%

EU 2.9% 5.3% 4.5% 2.1% 3.4% 1.3% 1.5% 4.9% 3.0% 4.2%

Non-EU 7.1% 8.7% 2.0% -1.5% 4.0% 11.7% 11.1% 0.4% -5.5% 2.1%

Northern 3.9% 4.2% 6.6% 2.9% 3.9% 2.9% 3.1% 5.9% 2.7% 4.5%

Western 3.2% 5.2% 2.1% 1.6% 2.3% 3.3% 1.2% 4.8% 3.6% 3.9%

Southern/Mediterranean 1.5% 6.5% 8.0% 3.2% 4.4% -2.9% -0.2% 5.8% 1.4% 2.7%

Central/Eastern 7.8% 7.0% -0.7% -3.1% 3.6% 6.9% 9.3% 0.0% -4.1% 3.4%

- Central & Baltic 5.1% 5.8% 2.9% 2.0% 4.6% 3.0% 4.8% 2.7% 2.3% 5.4%

Asia & the Pacific 6.7% 6.1% 5.7% 5.9% 6.7% 7.3% 7.2% 6.3% 5.8% 6.7%

North East 6.0% 3.5% 7.3% 6.9% 6.8% 8.4% 7.5% 6.8% 5.7% 6.6%

South East 8.9% 10.2% 3.0% 4.5% 6.7% 5.5% 7.9% 2.5% 5.5% 6.8%

South 3.6% 6.7% 9.0% 7.9% 6.7% 4.7% 2.7% 15.9% 9.9% 8.1%

Oceania 2.4% 4.1% 6.3% 3.9% 5.3% 5.0% 5.3% 5.0% 2.7% 5.9%

Africa 8.4% -0.9% 4.7% 5.8% 5.1% 7.6% 2.0% 5.2% 5.7% 5.1%

Mid East -3.1% 4.0% 5.4% 6.4% 5.9% -10.3% 5.3% 12.8% 4.7% 5.8%

* Inbound is based on the sum of the country overnight tourist arrivals and includes intra-regional flows

** Outbound is based on the sum of visits to all destinations

Note: world inbound and outbound do not match exactly in historic data or forecast. This is due to visits to multiple destinations.

For example, one outbound trip may be to more than one destination. Some sample error may also be evident in historic data.

*** d - data reported by national statistical agencies are available for all years to 2012

e - 2013 estimated using all available year-to-date data, and forecasts for the rest of the year

f - forecasts according to Tourism Economics' global economic and tourism forecast models

ETC+3 = ETC members plus France, Netherlands, and UK

EU = Austria, Belgium, Bulgaria, Cyprus, Czech Republic, Denmark, Estonia, Finland, France, Greece, Germany, Hungary,

Ireland, Italy, Latvia, Lithuania, Luxembourg, Malta, Netherlands, Poland, Portugal, Romania, Slovakia,

Slovenia, Spain, Sw eden, UK

Non-EU Europe is all European countries (listed below ) outside EU

Northern Europe = Denmark, Finland, Iceland, Ireland, Norw ay, Sw eden, UK

Western Europe = Austria, Belgium, France, Germany, Luxembourg, Netherlands, Sw itzerland

Southern/Mediterranean Europe = Albania, Bosnia-Herzegovina, Croatia, Cyprus, FYR Macedonia, Greece, Italy, Malta,

Central/Eastern Europe = Armenia, Azerbaijan, Bulgaria, Czech Republic, Estonia, Hungary, Kazakhstan, Kyrgyzstan, Lativia,

Lithuania, Poland, Romania, Russian Federation, Slovakia, Ukraine

of w hich

Central Europe & Baltic countries = Bulgaria, Czech Republic, Estonia, Hungary, Latvia, Lithuania, Poland, Romania, Slovakia

TDM Visitor Growth Forecasts, % change

Outbound**Inbound*



Recent Industry Performance

Growth continues, overcoming some hurdles along the way…

European international air transport growth is strong in 2014

More industry strikes have had some negative impact on an otherwise strong

year for air travel growth

Travel growth between Europe and long haul markets continues to outpace total

European air passenger traffic growth

European hotel occupancy and room rates have grown in 2014 to date with the

best overall performance of any World region, despite falls in eastern Europe

Air Transport

Air passenger data to November shows growth in all

regions, with the exception of Africa. Annual international

revenue passenger kilometers (RPK) growth for African

carriers has slipped into negative territory. This weakness

appears to reflect adverse economic developments in parts

of the continent, particularly those which are reliant on oil

revenues, while localised ebola related fears have also

depressed demand. Middle Eastern carriers enjoyed

particularly impressive growth, notably in September which

saw RPK grow by 15.8% compared with the same month in

2013. Growth in November was 11.7% - the region’s fourth

consecutive double-digit reading. While Middle Eastern

economies are feeling the pinch of plunging oil revenues, for

most of these the cost of oil extraction remains well below

the current market price.

With only one more month of data required to complete the

picture for 2014, it looks likely that almost all regions will see

full year RPK growth higher than in 2013, with Africa and

Latin America the only exceptions. European airlines posted

RPK growth of 5.6% in November compared to the same

month in 2013.

-5

0

5

10

15

20



Aug-14 Sep-14 Oct-14 Nov-14

% year

Source: IATA

Monthly international air passenger growth

-12

-9

-6

-3

0

3

6

9

12

15

18

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

RPK = revenue passenger kms

Source: IATA

3 month moving average

Icelandic Ash Cloud Impact

International air passenger traffic growth% year, RPK



0

5

10

15

202012 2013 2014 ytd

% year, RPK

Source: IATA

Annual international air passenger growth



Data from the Association of European Airlines (AEA) shows lower European airline capacity in Q4.

Strikes by Lufthansa pilots for two days in December as well as a 24 hour strike at Brussels airport

(BRU) caused disruptions to European airline capacity in the quarter. However, these were minor

in comparison to the steep fall in capacity growth coinciding with strike action taken by employees

of Air France and Lufthansa – Europe’s two biggest carriers – in September. During the two weeks

of these strikes air capacity shrank by over 5% compared to the same weeks in 2013, with some

50-60% of these airlines’ services grounded in the first few days of the 14 day strike.

Passenger load factor (PLF) appeared to follow a broadly similar pattern as in 2012 and 2013, with

the exception of the higher utilisation rates coinciding with the reduction in supply due to the airline

strikes in September. PLF fell for much of the fourth quarter relative to earlier in the year, following

the typical seasonal pattern, but at marginally higher rates than in 2013.

On the whole, air passenger traffic between Europe and the Americas continues to grow at a faster

rate than total travel to and from Europe in 2014 data to date, in some part due to recovering

European economies. However, United States outbound travel to Europe has also been particularly

strong this year, helped by the strengthening dollar, a driving force of this growth.

Travel between Europe and Asia has also increased at a faster rate than total European airline

passenger growth throughout most of 2014, largely driven by emerging Asia economies and their

growing ability to travel long haul in line with economic trends in the region. Growth has slowed

notably in early data for the start of 2015. This is a concern given the slowing trend in Chinese

consumer spending, but we expect faster growth to resume.

-5

0

5

10

Q1 Q2 Q3 Q4

2012 2013 2014

ASK, 4 week moving average, % change year ago

Source: AEA

European airlines capacity

60

65

70

75

80

85

90

Q1 Q2 Q3 Q4

2012 2013 2014

Weekly load factor, %

Source: AEA

European airlines passenger load factor

-4

-2

0

2

4

6

8

10

12

14

201

2Q

1

2012Q

2

2012Q

3

201

2Q

4

2013Q

1

2013Q

2

2013Q

3

2013Q

4

2014Q

1

2014Q

2

2014Q

3

2014Q

4

2015Q

1

Americas Total

RPK, 4 week moving average, % change year ago

RPK = revenue passenger kmsSource: AEA

European airline passenger traffic: Americas

-4

-2

0

2

4

6

8

10

12

14

201

2Q

1

201

2Q

2

201

2Q

3

201

2Q

4

201

3Q

1

201

3Q

2

201

3Q

3

201

3Q

4

201

4Q

1

201

4Q

2

201

4Q

3

201

4Q

4

201

5Q

1

Asia Total

RPK, 4 week moving average, % change year ago

RPK = revenue passenger kmsSource: AEA

European airline passenger traffic: Asia



The European hotel sector performed well, growing across all hotel performance measures for

2014 as a whole. This is despite eastern Europe performance acting as a drag on what would

otherwise have been growth across the board. Occupancy in the region fell by 4%, while ADR and

RevPAR fell by 9.1% and 12.8% respectively in dollar terms. Northern Europe and southern Europe

both grew impressively in 2014, the latter enjoying 3.1%, 8.3%, and 11.6% increases in occupancy,

ADR, and RevPAR respectively, and the former seeing occupancy, ADR, and RevPAR grow by

3.5%, 2%, 5.6% respectively.

Within eastern Europe, Russia was by far the biggest brake on performance owing to its size within

the region; Russian occupancy, ADR, and RevPAR all fell by 12.9%, 2.2%, and 14.8% respectively,

compared to the same period last year, denominated in its local currency. Denominated in euro

terms the fall is much more extreme given the rate at which the rouble has depreciated over the last

number of months, with ADR down 18% and RevPAR 28.6%. Hoteliers have been largely holding

prices stable for the domestic market, with no attempts made to cut ADR as a means of spurring

much needed foreign demand in the midst of tensions and potential conflict, even before the more

recent oil price and rouble movements.

While the fall in the rouble in itself would make Russia a more attractive destination in terms of the

lower ADR when taken in euro terms (down 18% on the same period in 2013) or pound terms

(down 22.5%), the Russia-Ukraine crisis continues to deter visitors, and dampens this price effect.

The same currency movement raises cost for travel from Russia to the rest of Europe and can help

explain weak performance in key destinations, notably elsewhere in eastern Europe.

Elsewhere, in northern Europe, Ireland and the UK are forging ahead, particularly in terms of ADR,

both countries enjoying respective growth of 9.4% and 11.2% in euro terms. Occupancy rates grew

by 3.7% and 3% respectively compared to the same period in 2013.

Accommodation In 2014, all regions saw growth across all measures of hotel performance for the year as a whole,

denominated in dollar terms. The exception is Asia/Pacific which only saw occupancy rates

increase compared to the same period last year. Within the region, only south-east Asia was a drag

on occupancy, it being the only sub-region within Asia/Pacific to post a fall in occupancy rates

based on full year data. This can be traced back to the civil unrest in Thailand in the summer. In

terms of average daily rate (ADR) and revenue per available room (RevPAR), each constituent of

the region played its part in contributing to the fall, suggesting that appreciation of the dollar may be

to blame.

Middle East/Africa has seen the largest growth in occupancy rates, and was able to achieve this

while simultaneously pushing up its ADR. Despite the twin threat of terrorism and the ebola virus,

their confinement to distinct and small areas within the region has seemingly offered enough peace

of mind for those wishing to make the trip. southern Africa saw occupancy and ADR fall, with a

corresponding fall in RevPAR of 2.8%. north Africa, on the other hand, was a strong performer with

a rebound in Egypt helping to push regional occupancy rate growth into double-digit territory

(11.5%). ADR grew by 4.2% and RevPAR by 16.2%.



Southern Europe also enjoyed strong growth across all three measures with Greece, Portugal, and

Spain driving this growth. Each enjoyed 22.2%, 9.6%, and 10.4% growth in RevPAR respectively,

in euro terms. The future of southern Europe is somewhat more uncertain than for the other

European sub-regions, with elections in 2015 in Greece, Portugal and Spain. Recent strong hotel

performance in Greece has been driven by demand in Athens, indicating a recovering business

environment; occupancy rates in Athens grew by 19.6% and RevPAR by 29.3% according to data

to December. However, political changes in Greece following January’s election may ultimately

result in exit from the Eurozone, an idea which has been publicly discussed by the new Greek

leadership. This would present some clear short-run barriers to business. But with a new weaker

national currency, demand in the economy could be stimulated more effectively over the medium to

long run.

-10

-5

0

5

10

15

20

Esto

nia

Turk

ey

Denm

ark

Malta

Port

ugal

Lithuania

Cze

ch R

ep

ub

lic

Ru

ssia

Irela

nd

Hu

ng

ary

United

Kin

gd

om

Spa

in

Gre

ece

Neth

erl

and

s

Belg

ium

Sw

itzerla

nd

Italy

Pola

nd

Germ

any

Austr

ia

Rom

an

ia

Fin

lan

d

Fra

nce

Slo

vakia

Hotel average daily rate (ADR)Jan-May year to date, local currency, % change year ago

Source : STR Global

Asia/Pacific Americas Europe MiddleEast/Africa

-4

-2

0

2

4

6

8

10 Occ ADR* RevPAR*

Global Hotel Performance, Jan-Dec 2014

% change year ago

Source: STR Global * ADR and RevPAR denominated in US$ except for Europe



Key Source Market Performance

The sun shines on European travel all year round…

European travel demand maintains momentum to finish 2014 strongly

Falling oil prices have a varied effect across the continent

Travel to and from Russia impacted by the conflict with Ukraine, as well as

by the tumbling rouble

Robust travel growth from long-haul markets, notably the US, maintains

pace

Key intra-European markets

Latvia has seen huge growth in visits and visitor nights from Germany so far this year, enjoying

36.9% and 38.9% growth respectively, based on data to September. And as Latvia’s second

largest source market after Russia, this growth translates to large numbers in absolute terms.

Iceland has also enjoyed strong arrivals growth from Germany; 13.3% based on full year data.

As with Latvia, given Germany is Iceland’s largest source market, this growth is significant in

absolute terms. As relatively small tourism destinations these are not indicative of the growth in

German travel demand. Despite their large share of arrivals from Germany, these two

destinations combined account for less than 0.5% of German travel within Europe.

In more well-established European destinations, such as Spain and the UK, visitor growth in the

region of 10% is substantial as it translates to relatively large numbers in absolute terms. In

addition, Spain saw visitor nights from Germany grow at an even greater rate.

Some countries have seen visits from Germany fall; Cyrus and Slovakia have suffered the

greatest drop, both in excess of 10%. Switzerland has also experienced a decline, and the

recent decision to unpeg the Swiss franc from the euro will likely exacerbate this trend. Upon

this announcement markets reacted by buying up francs in anticipation of the unpegging giving

a stronger currency. With further appreciates against the euro, visits from European source

markets within the currency union would, in all likelihood, fall further.

Trends discussed in this section relate to the first nine months of the year, although actual coverage

varies by destination; for the majority of countries October or November will be the latest available

data point.

Further detailed monthly data for origin and destination, including absolute values, can be obtained

from TourMIS, http://tourmis.info.

-20

-15

-10

-5

0

5

10

15

20

Latv

iaL

ith

ua

nia

Cze

ch R

ep

Icela

nd

Esto

nia

Se

rbia

Bu

lgaria

Spain

Po

land

UK

Slo

ve

nia

Be

lgiu

mC

roatia

Ro

ma

nia

Tu

rke

yH

un

ga

ryM

onte

ne

gro

Au

str

iaG

ree

ce

Sw

itzerland

Ma

lta

Italy

Slo

va

kia

Cyp

rus

Visits from Germany to select destinations2014, year-to-date*, % change year ago

Source: TourMIS *date varies (Jan-Sep) by destination

43.6

-20

-15

-10

-5

0

5

10

15

20

Latv

iaS

pa

inE

sto

nia

Ne

the

rla

nds

De

nm

ark

Sw

ed

en

Cze

ch R

ep

Se

rbia

No

rwa

yP

ort

ug

al

Lith

ua

nia

Be

lgiu

mP

ola

nd

Luxe

mb

ourg

Cro

atia

Italy

Slo

ve

nia

Fin

lan

dH

ungary

Austr

iaS

witzerland

Ma

lta

Slo

va

kia

German visitor nights in select destinations2014, year-to-date*, % change year ago


38.9

-20

-15

-10

-5

0

5

10

15

20

Latv

iaIc

ela

nd

Cze

ch R

ep

Lith

ua

nia

Sp

ain

Esto

nia

Bu

lgaria

UK

Se

rbia

Gre

ece

Po

land

Be

lgiu

mT

urk

ey

Ro

ma

nia

Cro

atia

Slo

ve

nia

Hu

ng

ary

Au

str

iaIt

aly

Sw

itzerland

Ma

lta

Mo

nte

ne

gro

Slo

va

kia

Cyp

rus

Visits from Germany to select destinations2014, year-to-date*, % change year ago


36.9



As a source market, Netherlands has been somewhat of a mixed bag in 2014. In many

ways the preferences of the Dutch align with those of the Germans with the top three

destinations in terms of visits, and the top two in terms of visitor nights the same.

Switzerland has seen visits and visitor nights from Netherlands fall according to data to

November compared to the same period in 2013. Its decision to unpeg the franc is

unlikely to reverse this trend, particularly in the case of Netherlands which has not

recovered as well as some of the other, larger Eurozone economies following the 2008-

09 recession. As such, it is not surprising to note that very few destinations enjoy visitor

nights growth in excess of visits growth, suggesting that the average length of stay by

Dutch tourists is falling.

Once again, Latvia and Iceland feature as top destination markets for France based on

YTD growth, however, both are trumped by Greece which saw visits from France grow by

26.9% based on data to September. This growth may be further supplemented if Greece

was to leave the Eurozone as per speculation. In such a situation, with greater control

over its own currency, Greece could opt to make its exports more attractive by driving

down their relative price via exchange rate mechanisms; tourism would be one such

export.

Portugal and Spain benefit as southerly neighbours of France, with the former seeing

French visitor nights grow by 17.1% based on data to November. Spain enjoyed strong

growth in both visits and nights by 10.9% and 7.3% respectively according to data to

September.



Central and eastern European destinations dominate the top spots for growth from many

of Europe’s larger source markets, including Italy. Improving air links between these

countries and western Europe are helping to support this longer run trend, in particular

those links delivered by low-cost carriers, while such destinations remain relatively less

expensive than other European destinations and many European travellers remain cost

conscious.

Spain, Greece, and the United Kingdom still maintain their appeal, with Spain enjoying

13% growth in visits from Italy, and Greece and the UK both enjoying 11% growth. Last

quarter’s report saw the UK lead both Spain and Greece in terms of growth, however,

with the inclusion of data for the winter months, it is clear that the UK loses some of its

appeal in the colder weather.

Latvia and Iceland once again reign supreme as destinations for UK travel, as for other

source markets, each enjoying 43% and 31.7% visits growth respectively. But notably strong

growth was also recorded in many of Britain’s more traditional destination markets such as

Greece, Italy, Ireland, Spain, and Portugal (these markets collectively received more than

40% of all UK outbound to Europe and more than 30% of total UK outbound in 2013).

Moreover, British visitor nights also grew; Spain saw growth of 15.6%, Italy 13.8%, and

Portugal 10.2%. In these three countries, the fact that overnights growth is outpacing

arrivals growth suggests a growing appetite and affordability amongst the British tourist to

holiday for longer. And given that Spain alone accounts for 27% of all UK outbound travel to

Europe, such growth from Britain is particularly noteworthy. This strong performance is

consistent with the current pickup in the British economy as well as with movements in the

value of pound. Looking ahead, extremely low levels of inflation in the UK due to falling oil

prices may have the same impact on disposable income as a tax cut, gifting British citizens

with additional disposable income which they would not have had otherwise and which can

be spent on holidays abroad.



Unsurprisingly, the majority of reporting destinations have recorded falling arrivals and

overnights from Russia. These declines reflect falling oil prices and the impact this has

had on Russian aggregate income. This uncertainty has caused the rouble to depreciate

markedly in recent months, making foreign travel relatively more expensive for the

Russian traveller,

The UK continues to see strong growth from Russia, despite its weaker currency.

However, growth has slowed compared to earlier YTD estimates, now 17% based on

data to November. But much of this growth is apparently education related according to

detailed data for the year to September published by Visit Britain. With education-related

travel growth stripped out of this figure, growth from Russia is much more modest.

As the powerhouse of the EU, it is not unexpected to see Germany posting falling arrivals

and overnight visits from Russia. Given this status, the bulk of bad sentiment surrounding

the EU’s sanctions was likely to fall heavily on Germany. It seems also that Romania has

suffered at the hands of the Russia-Ukraine crisis with overnight visits from Russia falling

by 11.8% based on data to August, Russia’s likely favouring Ukraine/Crimea’s Black Sea

coast to Romania’s, perhaps as an act of nationalism.

Serbia has seen close to 20% growth in visits from Russia, and close to 30% growth in

visitor nights, likely benefitting from its pro-Russia stance whilst much of the EU were

imposing sanctions related to its actions in Ukraine. Italy has also seen some strong

growth in visits and visitor nights, of 8.5% and 6.9% respectively. Italy was also

somewhat more pro-Russia than many other EU states.



Non-European markets Latest data indicate that travel to Europe from the US was positive in most reporting

destinations. Economic growth in the US is strengthening according to the latest data and

we estimate acceleration in GDP in 2014 as a whole. This will include an upswing in

consumer spending on the back of jobs and wage growth. There remains scope for

further growth in outbound travel over the remainder of the year and particularly in terms

of long haul travel, helped by further appreciation in the dollar against key currencies

such as the euro. US outbound travel volume is expected to regain, and even exceed,

previous peak levels achieved in 2007. This is also true for long-haul travel demand.

Norway and Lithuania have enjoyed particularly strong growth from the US in terms of

nights, each growing by 34% and 23.8%, based on data to October and September,

respectively. Greece and Iceland enjoyed strong growth in US visits. It is unusual to see

falling arrivals to Spain. However, since the US is not a particularly large source market

for Spain, this will have only a minimal impact on Spain’s overall performance.

Visits and overnights from Japan suggest that the export-led policies of the Bank of Japan

have not affected travel behaviour as much as initially feared, despite lower spending power

in international markets from the weaker yen. Many European countries continue to report

growth in arrivals, although a majority report lower arrivals and a large minority report lower

overnights.

Strong growth in Greece, Montenegro, and Estonia would however suggest that those

relatively cheaper destinations within Europe have stood to gain from the weaker yen, while

growth in the more traditional European destinations such as Spain and Italy is also evident.



Outbound travel from China has been strong so far in 2014 both in terms of visitor arrivals

and nights, the vast majority in double digit territory. We should expect to see a

continuation of growth in outbound travel, and ahead of general GDP growth. This comes

despite ongoing signs of slowdown in the economy and industrial activity, although

consumer surveys and retail sales data remain robust. Travel to Europe as a whole is

estimated to have grown by over 15% in 2014 as a whole for the fifth consecutive year;

arrivals will be more than 2.5 time larger than in 2009. The Chinese economy remains

stable and with an increasing number of middle-class households, now more consumers

are able to afford travel. However, given the relatively small volumes, travel from China to

Europe should not be overvalued, accounting for just 1.3% of European arrivals in 2013.

Arrivals growth from India is positive with the majority of European destinations reporting

double digit figures. In particular, Bulgaria saw arrivals grow by 59.5%, while Croatia saw

arrivals rise by 47.7% YTD to December with similar 42.7% growth in overnights.

Indian arrivals still represent a relatively small proportion of total European arrivals and

some volatility should be expected, but with limited impact on overall destination

performance. In the longer-term, growth prospects remain strong with potential economic

reform. Given the positive economic trends, there is potential for India to catch-up with

China as an emerging source market.

-30

-20

-10

0

10

20

30

40

50

Bulg

aria

Cro

atia

Latv

ia

Hungary

Pola

nd

Czech R

ep

Belg

ium

Turk

ey

Spain

UK

Italy

Sw

itzerland

Germ

any

Austr

ia

Slo

vakia

Visits from India to select destinations2014, year-to-date*, % change year ago


59.5

-30

-20

-10

0

10

20

30

40

50

Cro

atia

Po

land

Be

lgiu

m

Hu

ng

ary

Sw

ed

en

Latv

ia

Fin

lan

d

Cze

ch R

ep

Italy

Ne

the

rla

nds

Germ

an

y

Sw

itze

rla

nd

Au

str

ia

De

nm

ark

Slo

va

kia

Sp

ain

Indian visitor nights in select destinations2014, year-to-date*, % change year ago




Some strong growth remains from Canada following on from high growth figures reported

earlier in the year. Lithuania features as the strongest performer yet again with 67.2% growth

in visitor nights but the volumes from Canada are likely to be very small. Iceland has also

held up well, managing to sustain strong growth in visits since the beginning of the year,

61.8% based on data to December.



Origin Market Share Analysis

United States

Based on the Tourism Decision Metrics (TDM) model, the following charts and analysis show

Europe’s evolving market position – in absolute and percentage terms – for selected source

markets. 2014 values are year-to-date estimates based on the latest available data and are not

final reported numbers.

Methodology note:

Data in these charts and tables relate to reported arrivals

in all destinations as a comparable measure of outbound

travel for calculation of market share.

Hence, US outbound shown here is larger than reported

departures in national statistics as long-haul trips often

involve travel to multiple destinations. For example, in

2013 US data reporting shows 11.4m departures to

Europe while the sum of European arrivals from the US

was 22m; each US trip to Europe involved a visit to two

destinations on average.

Note: this analysis is based on the Tourism Decision Metrics

(TDM) model. The geographies of Europe are defined as:

Northern Europe: Denmark, Finland, Iceland, Ireland,

Norway, Sweden, UK

Western Europe: Austria, Belgium, France, Germany,

Luxembourg, Netherlands, Switzerland

Southern/Mediterranean Europe: Albania, Bosnia-

Herzegovina, Croatia, Cyprus, FYR Macedonia, Greece, Italy,

Malta, Montenegro, Portugal, Serbia, Slovenia, Spain, Turkey

Central/Eastern Europe: Armenia, Azerbaijan, Bulgaria,

Czech Republic, Estonia, Hungary, Kazakhstan, Kyrgyzstan,

Latvia, Lithuania, Poland, Romania, Russian Federation,

Slovakia, Ukraine

0

10

20

30

40

50

60

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

US long haul* outbound travel Rest of Long Haul

Central/Eastern Europe

Southern Europe

Western Europe

Northern Europe

Million

*Long haul defined as tourist arrivals to destinations outside North America


0%

2%

4%

6%

8%

10%

12%

14%

16%

18%

20%

20

04

20

05

20

06

20

07

20

08

20

09

20

10

2011

20

12

20

13

20

14

20

15

20

16

20

17

20

18

20

19

Europe's share of US marketNorthern Europe

Western Europe

Southern Europe


% of long haul* market



Level* ShareAnnual

average

Cumulative

growth**

Share

2019

Cumulative

growth**

Share

2009

Total outbound travel (000s) 89,539 - 5.6% 31.5% - 21.0% -

of which:

Long haul (000s) 55,011 61.4% 6.3% 36.0% 63.6% 24.9% 59.5%

Short haul (000s) 34,529 38.6% 4.4% 24.2% 36.4% 15.4% 40.5%

Travel to Europe***

Europe (000s) 23,447 26.2% 5.3% 29.6% 25.8% 24.3% 25.5%

Northern Europe (000s) 5,375 6.0% 6.9% 39.7% 6.4% 15.9% 6.3%

Western Europe (000s) 8,956 10.0% 4.0% 21.6% 9.3% 26.1% 9.6%

Southern Europe (000s) 5,997 6.7% 5.0% 27.8% 6.5% 24.7% 6.5%

Central/Eastern Europe (000s) 3,119 3.5% 6.7% 38.6% 3.7% 35.3% 3.1%

US Market Share Summary

2014 Growth (2014-19) Growth (2009-14)

* Levels are in 000s unless otherwise specified

*** Shares are expressed as a % of total outbound travel

** Shows cumulative change over the relevant time period indicated



Canada




Norway, Sweden, UK









Slovakia, Ukraine

0

2

4

6

8

10

12

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

Canada long haul* outbound travel Rest of Long Haul


Southern Europe

Western Europe

Northern Europe

Million



0%

2%

4%

6%

8%

10%

12%

14%

16%

18%

20%

200

4

2005

200

6

200

7

200

8

200

9

201

0

201

1

201

2

201

3

2014

201

5

201

6

201

7

201

8

201

9

Europe's share of Canadian market Northern Europe

Western Europe

Southern Europe





Level* ShareAnnual

average

Cumulative

growth**

Share

2019

Cumulative

growth**

Share

2009


of which:

Long haul (000s) 11,340 30.8% 5.3% 29.2% 32.2% 17.0% 34.3%

Short haul (000s) 25,487 69.2% 3.9% 21.2% 67.8% 37.1% 65.7%

Travel to Europe***

Europe (000s) 4,267 11.6% 3.0% 15.8% 10.9% 14.8% 13.1%

Northern Europe (000s) 874 2.4% 7.3% 42.6% 2.7% -2.0% 3.2%

Western Europe (000s) 1,629 4.4% 0.9% 4.7% 3.7% 14.3% 5.0%


Central/Eastern Europe (000s) 201 0.5% 5.8% 32.7% 0.6% -10.1% 0.8%



Canada Market Share Summary

2014 Growth (2014-19) Growth (2009-14)




Mexico




Norway, Sweden, UK









Slovakia, Ukraine

0.0

0.5

1.0

1.5

2.0

2.5

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

Mexico long haul* outbound travel Rest of Long Haul


Southern Europe

Western Europe

Northern Europe

Million



0%

5%

10%

15%

20%

25%

30%

35%

200

4

200

5

200

6

200

7

200

8

200

9

201

0

2011

201

2

2013

201

4

201

5

201

6

201

7

201

8

201

9

Europe's share of Mexican marketNorthern Europe

Western Europe

Southern Europe





Level* ShareAnnual

average

Cumulative

growth**

Share

2019

Cumulative

growth**

Share

2009


of which:

Long haul (000s) 2,355 13.2% 5.4% 29.8% 13.3% 42.8% 11.0%

Short haul (000s) 15,491 86.8% 5.2% 28.6% 86.7% 15.6% 89.0%

Travel to Europe***

Europe (000s) 1,248 7.0% 3.0% 15.9% 6.3% 38.6% 6.0%

Northern Europe (000s) 120 0.7% 5.7% 32.0% 0.7% 43.5% 0.6%

Western Europe (000s) 578 3.2% 3.1% 16.7% 2.9% 33.5% 2.9%

Southern Europe (000s) 437 2.4% 1.4% 7.1% 2.0% 35.2% 2.1%

Central/Eastern Europe (000s) 113 0.6% 5.1% 28.0% 0.6% 86.6% 0.4%


Mexico Market Share Summary

2014 Growth (2014-19) Growth (2009-14)





Argentina




Norway, Sweden, UK









Slovakia, Ukraine

0.0

0.5

1.0

1.5

2.0

2.5

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

Argentina long haul* outbound travel Rest of Long Haul


Southern Europe

Western Europe

Northern Europe

Million

*Long haul defined as tourist arrivals to destinations outside South America


0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

200

4

200

5

200

6

200

7

200

8

200

9

201

0

2011

201

2

2013

201

4

201

5

201

6

201

7

201

8

201

9

Europe's share of Argentinean market

Northern Europe

Western Europe

Southern Europe





Level* ShareAnnual

average

Cumulative

growth**

Share

2019

Cumulative

growth**

Share

2009


of which:

Long haul (000s) 2,288 29.4% 3.0% 15.9% 29.3% 59.9% 27.0%

Short haul (000s) 5,496 70.6% 3.0% 16.2% 70.7% 42.1% 73.0%

Travel to Europe***

Europe (000s) 837 10.8% 2.6% 13.6% 10.5% 44.8% 10.9%


Western Europe (000s) 47 0.6% 3.6% 19.1% 0.6% 73.7% 0.5%




Argentina Market Share Summary


2014 Growth (2014-19) Growth (2009-14)




Brazil




Norway, Sweden, UK









Slovakia, Ukraine

0

1

2

3

4

5

6

7

8

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

Brazil long haul* outbound travel Rest of Long Haul


Southern Europe

Western Europe

Northern Europe

Million



0%

5%

10%

15%

20%

25%

30%

35%

200

4

200

5

200

6

200

7

200

8

200

9

201

0

2011

201

2

2013

201

4

201

5

201

6

201

7

201

8

201

9

Europe's share of Brazilian marketNorthern Europe

Western Europe

Southern Europe





Level* ShareAnnual

average

Cumulative

growth**

Share

2019

Cumulative

growth**

Share

2009


of which:

Long haul (000s) 7,374 72.9% 3.8% 20.6% 70.9% 114.1% 68.4%

Short haul (000s) 2,746 27.1% 5.8% 32.8% 29.1% 72.5% 31.6%

Travel to Europe***

Europe (000s) 3,746 37.0% 0.2% 1.0% 30.2% 97.6% 37.6%


Western Europe (000s) 1,822 18.0% -0.9% -4.6% 13.9% 114.8% 16.8%

Southern Europe (000s) 1,390 13.7% -1.6% -8.0% 10.2% 87.9% 14.7%



Brazil Market Share Summary



2014 Growth (2014-19) Growth (2009-14)



India




Norway, Sweden, UK









Slovakia, Ukraine

0

2

4

6

8

10

12

14

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

India long haul* outbound travel Rest of Long Haul


Southern Europe

Western Europe

Northern Europe

Million

*Long haul defined as tourist arrivals to destinations outside South Asia


0%

1%

2%

3%

4%

5%

6%

7%

8%

9%

10%

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

Europe's share of Indian marketNorthern Europe

Western Europe

Southern Europe



*Long haul defined as tourist arrivals to destinations outside South Asia


Level* ShareAnnual

average

Cumulative

growth**

Share

2019

Cumulative

growth**

Share

2009


of which:

Long haul (000s) 12,809 94.7% 8.2% 48.4% 93.7% 68.8% 96.4%

Short haul (000s) 716 5.3% 12.2% 78.0% 6.3% 151.9% 3.6%

Travel to Europe***

Europe (000s) 1,921 14.2% 7.3% 42.3% 13.5% 49.9% 16.3%


Western Europe (000s) 705 5.2% 7.1% 40.9% 4.9% 61.7% 5.5%




India Market Share Summary

2014 Growth (2014-19) Growth (2009-14)





China




Norway, Sweden, UK









Slovakia, Ukraine

0

5

10

15

20

25

30

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

China long haul* outbound travel Rest of Long Haul


Southern Europe

Western Europe

Northern Europe

Million

*Long haul defined as tourist arrivals to destinations outside Northeast Asia


0%

5%

10%

15%

20%

25%

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

Europe's share of Chinese marketNorthern Europe

Western Europe

Southern Europe





Level* ShareAnnual

average

Cumulative

growth**

Share

2019

Cumulative

growth**

Share

2009


of which:

Long haul (000s) 26,737 39.6% 6.6% 37.4% 40.7% 190.3% 33.0%

Short haul (000s) 40,863 60.4% 5.5% 30.9% 59.3% 118.9% 67.0%

Travel to Europe***

Europe (000s) 8,773 13.0% 6.0% 34.0% 13.0% 161.1% 12.1%


Western Europe (000s) 4,851 7.2% 6.0% 33.5% 7.2% 214.6% 5.5%



China Market Share Summary

2014 Growth (2014-19) Growth (2009-14)






Japan




Norway, Sweden, UK









Slovakia, Ukraine

0

2

4

6

8

10

12

14

16

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

Japan long haul* outbound travel Rest of Long Haul


Southern Europe

Western Europe

Northern Europe

Million



0%

2%

4%

6%

8%

10%

12%

14%

16%

18%

20%

2004

2005

200

6

2007

2008

2009

201

0

2011

2012

2013

201

4

2015

2016

2017

2018

2019

Europe's share of Japanese marketNorthern Europe

Western Europe

Southern Europe





Level* ShareAnnual

average

Cumulative

growth**

Share

2019

Cumulative

growth**

Share

2009


of which:

Long haul (000s) 13,984 62.8% 2.3% 11.9% 60.0% 22.4% 57.0%

Short haul (000s) 8,300 37.2% 4.7% 25.5% 40.0% -3.7% 43.0%

Travel to Europe***

Europe (000s) 4,474 20.1% 0.5% 2.7% 17.6% 15.0% 19.4%

Northern Europe (000s) 454 2.0% -0.5% -2.5% 1.7% 0.0% 2.3%

Western Europe (000s) 2,203 9.9% -0.3% -1.6% 8.3% 15.4% 9.5%



2014 Growth (2014-19) Growth (2009-14)


Japan Market Share Summary





United Arab Emirates




Norway, Sweden, UK









Slovakia, Ukraine

0.0

0.5

1.0

1.5

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

UAE long haul* outbound travel Rest of Long Haul


Southern Europe

Western Europe

Northern Europe

Million

*Long haul defined as tourist arrivals to destinations outside the Middle East


0%

5%

10%

15%

20%

25%

30%

200

4

200

5

200

6

200

7

200

8

200

9

201

0

2011

201

2

2013

201

4

201

5

201

6

201

7

201

8

201

9

Europe's share of Emirati marketNorthern Europe

Western Europe

Southern Europe



*Long haul defined as tourist arrivals to destinations outside the Middle East


Level* ShareAnnual

average

Cumulative

growth**

Share

2019

Cumulative

growth**

Share

2009

Total outbound travel (000s) 2,602 - 5.5% 30.5% - -24.7% -

of which:

Long haul (000s) 1,113 42.8% 5.2% 28.6% 42.2% 1.6% 31.7%

Short haul (000s) 1,489 57.2% 5.7% 31.9% 57.8% -36.9% 68.3%

Travel to Europe***

Europe (000s) 591 22.7% 4.0% 21.9% 21.2% -11.1% 19.2%

Northern Europe (000s) 160 6.2% 1.1% 5.9% 5.0% -35.2% 7.2%

Western Europe (000s) 278 10.7% 3.9% 21.2% 9.9% 20.3% 6.7%


Central/Eastern Europe (000s) 16 0.6% 6.8% 38.9% 0.7% -77.3% 2.0%

United Arab Emirates Market Share Summary



2014 Growth (2014-19) Growth (2009-14)




Russia

The rouble continues to fall against the dollar (and

indeed many other currencies, including the euro) as

oil prices continue to hover just below $50/barrel.

The central bank of Russia now estimates that

capital flight from Russia totalled $150 billion in

2014, double 2013’s level. This underlines the

pressure on both parts of the Russian balance of

payments (current and financial account) from low oil

prices, sanctions and financial instability.




Norway, Sweden, UK









Slovakia, Ukraine

0

5

10

15

20

25

30

35

40

45

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

Russia outbound travel Rest of World


Southern Europe

Western Europe

Northern Europe

Million

*Outbound travel defined as tourist arrivals to all destinations


0%

10%

20%

30%

40%

50%

60%

70%

200

4

200

5

2006

200

7

200

8

200

9

2010

201

1

201

2

201

3

2014

201

5

201

6

201

7

201

8

201

9

Europe's share of Russian marketNorthern Europe

Western Europe

Southern Europe


% of outbound* market

*Outbound market defined as tourist arrivals to all destinations


Level* ShareAnnual

average

Cumulative

growth**

Share

2019

Cumulative

growth**

Share

2009


of which:

Long haul (000s) 9,055 22.5% 6.4% 36.1% 27.5% 101.7% 21.5%

Short haul (000s) 31,179 77.5% 0.9% 4.5% 72.5% 89.9% 78.5%

Travel to Europe***

Europe (000s) 31,179 77.5% 0.9% 4.5% 72.5% 89.9% 78.5%

Northern Europe (000s) 1,673 4.2% 1.3% 6.5% 4.0% 68.6% 4.7%

Western Europe (000s) 2,424 6.0% 0.2% 1.1% 5.5% 129.1% 5.1%




Russia Market Share Summary


2014 Growth (2014-19) Growth (2009-14)




Economic outlook summary: key source markets

Eurozone GDP growth is forecast to grow in 2015 across all key markets with the exception of

Russia.

Performance by some key Eurozone economies will remain sluggish, particularly Italy where

deflation is dragging on consumer expenditure.

The UK’s recovery is in full flow with strong growth across all key macro indicators expected to

continue in 2015, particularly GDP and consumer expenditure, up 3.0% and 3.2% on 2014,

respectively. Strength of the latter is based largely on falling oil prices.

Russian growth has slowed substantially in 2015 and Oxford Economics’ latest outlook is for a

deep recession with GDP expected to fall more than 6%. This is partly linked to the large

devaluation of the rouble which began last year (down 28.6% against the euro for 2014 as a

whole) and risks related to capital flight in emerging markets, while a falling oil price will also affect

government revenue and spending. Political tensions, including sanctions will further affect

investment attractiveness.

Chinese growth is also expected to slow marginally in 2014, although it remains the strongest

growing source market in terms of GDP and consumer expenditure, the latter arguably being the

more pertinent to outbound travel and tourism growth. China remains a small source market for

Europe, however strong travel growth from China nonetheless provides a modest contribution to

overall growth.

Strong GDP and consumer expenditure growth in India will pave the way for outbound travel

growth.

Assessing recent tourism data and industry performance is a useful way of directly monitoring the

key trends for travel demand across Europe. This can be complemented by looking at key trends

and relationships in macroeconomic performance in Europe’s key source markets which can

provide further useful insight into likely tourism developments throughout the year.

The linkages between macro and tourism performance can be very informative. For example,

strong GDP or consumer spending growth is an indication of rising prosperity with people more

likely to avail of international travel. It is also an indication of rising business activity and therefore

stronger business travel. Movements in exchange rates against the euro can be equally important

as it can influence choice of destination.

GDP

Consumer

expenditure

Unemploy-

ment **

Exchange

rate*** Inflation GDP

Consumer

expenditure

Unemploy-

ment **

Exchange

rate*** Inflation

UK 2.6% 2.3% -1.1% 5.4% 1.5% UK 3.0% 3.2% -0.6% 2.8% 0.1%

France 0.4% 0.6% -0.1% 0.0% 0.5% France 1.2% 1.5% 0.1% 0.0% 0.3%

Germany 1.5% 1.1% -0.2% 0.0% 0.9% Germany 2.0% 2.3% 0.0% 0.0% 0.4%

Netherlands 0.7% -0.1% 0.2% 0.0% 1.0% Netherlands 1.4% 0.7% -0.4% 0.0% 0.6%

Italy -0.4% 0.3% 0.6% 0.0% 0.2% Italy 0.2% 0.4% 0.1% 0.0% -0.1%

Russia 0.6% 0.5% -0.3% -16.7% 7.8% Russia -6.3% -7.7% 1.2% -28.6% 12.9%

US 2.4% 2.5% -1.2% -0.1% 1.7% US 3.3% 3.2% -0.7% 13.1% 1.1%

Canada 2.5% 2.8% -0.2% -6.8% 1.9% Canada 2.4% 2.6% -0.3% 6.8% 1.2%

Brazil 0.0% 0.8% -0.5% -8.2% 6.3% Brazil 0.1% 0.5% 0.7% -6.5% 6.6%

China 7.4% 7.8% 0.0% -0.3% 2.0% China 6.8% 7.2% 0.0% 11.4% 1.3%

Japan 0.1% -1.1% -0.4% -7.7% 2.8% Japan 0.9% 1.1% -0.1% -3.1% 1.5%

India 5.3% 6.2% 0.0% -4.0% 7.1% India 6.1% 4.9% 0.0% 11.1% 5.5%

* unless otherwise specified

** percentage point change

Note: Colour coding relates to each individual column and highlights the strongest performing countries shaded as dark green (e.g. China fastest growing GDP), and

weakest performaing countries as dark red (e.g. rising unemployment and falling GDP, consumer expenditure, and exchange rate in Russia).

Summary of economic outlook: 2014% growth y-y*

Macroeconomic indicators

Summary of economic outlook: 2015% growth y-y*

Macroeconomic indicators

*** exchange rates measured against the euro. A positive change indicates stronger local currency against the euro and therefore a positive impact on outbound

tourism demand. A negative change indicates weaker local currency against the euro and therefore a negative impact on outbound tourism demand.



Overview: Oil price slump boosts growth forecasts

Oil prices have fallen further over the past month,

with Brent dropping below $50 per barrel. Prices are

now down over 50% from their June 2014 peak

levels. We do not expect any significant supply

response (either from Saudi Arabia or US shale

producers) to come through until late this year so low

prices will persist for some time.

This is a positive development for world growth,

though the impact will be uneven across countries.

Based on our new oil price forecast of $55/barrel for

2015, we estimate that the oil bill for ten leading

industrial economies, (accounting for over 60% of

world GDP) will be $440 billion lower than it would

have been based on our June 2014 oil forecasts.

This is around 1% of their combined GDP, money

potentially free to be spent on other goods and

services, including those of their main trading

partners.

US consumer sentiment already shows signs of

reacting positively and with other US consumer

fundamentals also improving we have upgraded our

2015 GDP growth forecast to 3.3% from 3% last

month.

We have also upgraded our forecasts for other

advanced economies such as the Eurozone and

Japan, where lower prices should be a respite to

hard-pressed consumers in particular.

For the emerging markets, the slide in oil has starkly

different consequences for different countries. Oil

producers will be losers, most strikingly Russia

where we now see GDP down over 6% this year –

with financial instability exacerbating the oil effect.

But China and India should both gain.

Lower oil prices will also ease the external pressures

some emergers have felt in recent months –

reducing the risk of further hikes in domestic interest

rates resulting from inflation and currency pressures.

We now see world growth at 2.9% in 2015, up a

tenth from last month and an increase from 2.6%

growth last year. This is our first upgrade to the

global growth forecast since August 2014.



-0.5

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

1997 2000 2003 2006 2009 2012 2015

% year

Source: Oxford Economics

F'cast

Eurozone: Consumer price inflation

0.8

0.9

1.0

1.1

1.2

1.3

1.4

1.5

1.6

2000 2002 2004 2006 2008 2010 2012 2014 2016

Source: Oxford Economics/ Haver Analytics

Eurozone: $/€ exchange rate

F'cast

$/€

7

8

9

10

11

12

13

1994 1997 2000 2003 2006 2009 2012 2015 2018Source: Oxford Economics

%

F'cast

Eurozone: Unemployment

Eurozone Economy

In light of the tumbling price of oil and (to a lesser

extent) renewed euro weakness we have made

notable revisions to our forecast for the Eurozone

economy in the coming couple of years. Based on

the new outlook for oil prices it seems likely that

annual inflation will be negative for much of 2015,

and giving households a further boost to spending

power. As a result we have increased our forecast for

consumer spending growth in 2015 from 1.4% to

1.6%.

In response to inflation tipping below zero we expect

the ECB to accelerate its asset purchases in 2015,

starting with the meeting later this month. This should

add a little further downward pressure to the euro,

and support exporters in 2015-16. We have therefore

revised up modestly our expectation for the

Eurozone’s current account surplus. Overall we have

increased our forecasts for GDP growth to 1.5% for

2015 (from 1.3%) and 1.8% for 2016 (from 1.7%).

Nevertheless, given the need for fiscal restraint and

private sector deleveraging, and with wage growth

being constrained by the degree of labour market

slack, medium term growth will remain unimpressive

by historical standards. Furthermore with oil prices

likely to rebound in the later years of the decade this

will act as a drag on household income growth. We

expect GDP growth to remain around 1.6-1.7%

during 2017-18.

In addition, a number of major risks persist. Most

worryingly, although core inflation seems to be

holding up in recent data, there remains the

possibility that second round effects from the lower

cost of energy start to erode core price growth in the

coming months, and ultimately detach price

expectations for the longer term. 2015 also has the

potential to reignite Eurozone financial instability, with

a coalition of radical parties newly in power in

Greece, and an equally radical party similarly well

placed ahead of elections in Spain.



-1.5

-1.0

-0.5

0.0

0.5

1.0

1.5

2.0

2.5

Jan-14

Mar-14

May-14

Jul-14

Sep-14

Nov-14

Jan-15

Mar-15

May-15

Jul-15

Sep-15

Nov-15

Other

Energy

Petrol

Food

CPI

UK: Contributions to CPI inflation% year

Source : Oxford Economics

Forecast

-2

-1

0

1

2

3

4

5

6

2002 2004 2006 2008 2010 2012 2014 2016 2018

% year

CPI inflation


Average earningsForecast

UK: Earnings & inflation

-20

-15

-10

-5

0

5

10

15

2000 2002 2004 2006 2008 2010 2012 2014 2016 2018

% year

UK: Business investment and GDP

GDP

Businessinvestment


Forecast

UK Economy

2014 ended on a slightly downbeat note, with the

ONS revising down its estimates of quarterly GDP

growth for each quarter between Q2 2013 and Q2

2014. This reduced the annual growth rate in Q3

2014 from 3.0% to 2.6%. But while these revisions

were disappointing, they do not alter the fact that

2014 was the UK’s best year since the financial

crisis and past experience suggests that the ONS

will probably revise up its estimate of 2014 growth

to 3% – or perhaps even higher – over the next

few years, once the data has been through the

Blue Book balancing process.

High frequency data suggest that the economy lost

some of its momentum in the latter part of last

year, so the recent plunge in the oil price comes at

a particularly opportune time. Weekly data from

DECC suggests that retail petrol prices have

already fallen by more than 8% over the past

month and prices should fall further as the impact

of the latest declines in the price of crude oil

continue to feed through. Our forecast assumes

that Brent crude oil will average $55 per barrel in

2015 and our modelling suggests that this will

result in the price of unleaded petrol falling to

£1.03 per litre in early 2015, down from £1.31 in

July.

With a lower oil price also set to reduce production

costs across a range of sectors, we expect CPI

inflation to briefly turn negative in early 2015 and to

average just 0.1% across 2015 as a whole. This

will provide a substantial boost to household

purchasing power, giving renewed momentum to

GDP growth.

Lower inflation will also provide the MPC with a

dilemma. Stronger wage growth and further

declines in unemployment would appear to fulfil

the criteria it had set for interest rates to start

rising, while the fall in the oil price is also likely to

cause it to revise up its forecasts for GDP growth.

However, we think it unlikely that the Committee

will want to put up interest rates at a time when

inflation rates are so low. Therefore, with CPI

inflation expected below 1% for almost all of this

year, we now expect the first rate hike to come in

Q1 2016, rather than Q3 2015.



US Economy

Real GDP growth was revised up to 5% annualised in

Q3, with final sales also rising 5% and inventories

having little impact as the composition of growth also

improved with households and businesses playing a

greater role than in H1.

We estimate that real GDP growth cooled modestly in

Q4, but even so it probably ran at a fairly solid 3%

annualised pace. Importantly, we see stronger

consumer spending growth (at just under 4%)

supported by robust payroll growth, firming wages

and lower gasoline prices.

The labor market remains very strong with

employment gains averaging 246,000 jobs per month

in 2014. In 2015, we see continued strength in

payrolls, though probably at a more subdued monthly

pace of just under 200,000.

Wage growth is slowly picking up though we have yet

to see a marked and broad-based acceleration. This

year, we see ongoing gains in employment and

firmer growth in labor compensation as the key

underpinnings to stronger consumer spending and

housing activity. Real personal consumption should

rise 3.2% in 2015, up from a 2.5% increase in 2014.

Although housing struggled to accelerate in 2014, we

see low interest rates, modest home price increases,

strong employment gains and firmer wage growth

supporting 1.23 million housing starts in 2015.

Most leading investment indicators suggest a solid

outlook. Businesses should continue to thrive on

robust domestic fundamentals though lower oil prices

are likely to curb oil drilling activity.

The US economy will benefit from lower oil prices as

exports respond to firming global growth – albeit its

positive impact will be partly dampened by the

stronger dollar weighing on export competitiveness.

Lower crude oil and gasoline prices will push inflation

as measured by the consumer spending deflator

down to 1% in 2015, but the effects will be transitory.

Moreover, core price pressures are expected to rise

gradually as the economy picks up and we believe

this will prompt the Fed to raise interest rates in June.

We have revised up our forecast for real GDP growth

in 2014 to 2.4% (from 2.3%), and raised our 2015

growth outlook to 3.3% (from 3%), on a stronger

finish to 2014 and the net boost from lower oil prices.



-5.0

-4.0

-3.0

-2.0

-1.0

0.0

1.0

2.0

3.0

Q1 Q2 Q3 Q4 (Est)

Private consumption Fixed investment Net exports Government consumption StockbuildingGDP

Japan: Quarterly GDP contributions, 2014% quarterly contribution

Source : Cabinet Office of Japan / Haver Analytics

-3

-2

-1

0

1

2

3

2006 2007 2008 2009 2010 2011 2012 2013 2014

Source: Ministry of Internal Affairs and Communications / Haver Analytics

Japan: Core inflation (ex-sales tax)

% year

2% target

-3

-2

-1

0

1

2

3

Jan-12 Jul-12 Jan-13 Jul-13 Jan-14 Jul-14

Total gross cash earnings

Source: Ministry of Health, Labour and Welfare / Haver Analytics

Japan: Earnings

% year

Japanese Economy

Incoming data points to modest growth at the end of

last year. PMI readings are consistently registering

above 50 – in December the manufacturing index

stood at 52.0 and the services index at 51.7. In

addition, although industrial production and retail

sales both fell in November, activity is nevertheless

generally on an upward trend – in the three months

to November industrial production was up 1.9% on

the preceding period, while retail sales were up

2.8%. We estimate that Q4 saw GDP growth of

0.6%.

Recent global developments have prompted us to

lower our oil price forecast again – we now see

Brent crude averaging $55/pb this year and staging

a gradual recovery thereafter. The most immediate

impacts on Japan will be on inflation and the current

account. Indeed the impact of lower oil on inflation is

already being felt – core inflation (excluding the

impact of April’s sales tax hike) fell to 0.7% in

November, with lower energy the main drag. The

merchandise trade balance has also rebounded in

recent months on the lower energy import bill.

Our weaker oil forecast will also feed through to

slightly higher GDP growth this year due to the real

income boost for consumers. We now forecast 0.9%

growth in 2015 (up from 0.8% in December). We

expect consumer spending to grow 1.1% this year,

improving to 1.8% growth in 2016.

The government has proposed ¥3.5 trillion of

stimulus spending (0.7% of GDP) in this year’s

supplementary budget, in line with expectations.

This is the smallest supplementary budget for many

years; the overall fiscal stance this year will still be

contractionary given the lasting drag on real

incomes from the sales tax.

Government bond yields have tumbled in the wake

of the Bank of Japan’s latest easing and Q3’s

contraction. Yields are now negative at the short

end of the curve; 10-years have dropped below

0.3%; and at the very long end yields have fallen

almost 60 basis points. Through 2015 this should

start to feed through to more rapid money and credit

growth and thus to stronger aggregate spending.



-10

-8

-6

-4

-2

0

2

4

6

8

10

-60

-40

-20

0

20

40

60

2008 2009 2010 2011 2012 2013 2014

OE China commodity index and producer prices% year

Source: Oxford Economics/Haver Analytics

% year

Commodity index (lhs)

Producer prices (rhs)

0

2

4

6

8

10

12

14

16

18

1999 2001 2003 2005 2007 2009 2011 2013 2015 2017

% year

Consumer prices


Forecast

Brazil: Inflation targeting

Inflation target

Emerging Market Economies

Lower oil improves outlook for China…

Like other oil importers, the Chinese economy stands to

gain substantially from lower oil prices. Real incomes

are boosted, encouraging consumption, and industry

benefits from lower input prices.

Chinese producer prices have been falling for several

years already, however, reflecting overcapacity in some

sectors, so this is not all good news for the economy. In

fact, slowing demand from China is one of the factors

underlying lower oil prices – last year China overtook

the US as the largest net importer of crude oil and other

petroleum products (there are also supply-side factors

influencing the price, including Saudi Arabia’s refusal to

cut output).

We forecast CPI inflation to average just 1.3% this year

and we revised our GDP growth forecast for 2015 and

2016 up to 6.8% and 6.1% (from 6.5% and 5.9%,

respectively, in December).

…India, and most other oil importers

India should be one of the main beneficiaries of lower oil

prices as it is one of the world’s largest oil importers.

CPI Inflation is now expected to average 5.5% this year

(down from 6% last month). Consumer spending will

benefit; indeed strong consumer goods orders in the

December PMI indicate this is already coming through.

Investment should pick up and may get a further boost if

the Reserve Bank brings forward its expected interest

rate easing (we currently forecast a 25bp rate cut in Q1

and a further reduction later in the year). We have

upgraded our GDP forecast for 2015 to 6.1%, from

5.7% last month.

Most other Asian emerging economies will also see

lower inflation, higher real household incomes and

improved corporate profitability supporting growth this

year. With this in mind we have raised our forecasts for

2015 and 2016 in South Korea, Philippines, Thailand

and Taiwan as well as Turkey and several eastern

European economies.

Brazil is a major exception

Brazil will not benefit from the fall in oil prices, as

Petrobras – the state-owned giant that sets fuel prices –

will use the opportunity to improve its profitability rather

than cutting prices at the pump. We forecast that

inflation will rise slightly to 6.6% this year from 6.3% in

-100

-80

-60

-40

-20

0

20

40

60In

do

ne

sia

Russia

Sth

Afr

ica

Ma

laysia

Bra

zil

Chin

a

India

Phili

pp

ines

Net energy imports as % of EM energy use

% of energy use, 2011

Source : World Bank Development Indicators



2015. GDP will grow just 0.1% (down from 0.7% in

December) as fiscal consolidation and tighter monetary

policy take hold.

Saudi revenues plummet, hitting budget

The impact of lower oil prices on Saudi government

revenues will be substantial as oil revenues typically

account for some 90% of the total. Oil production and

exports are not expanding, despite substantial spare

capacity and the fact that the authorities have eschewed

their traditional role as OPEC’s swing producer, preferring

to maintain their oil market share.

We expect the government to maintain spending at

elevated levels to support the economy, a strategy it can

afford given the negligible debt burden and substantial net

foreign assets. But GDP will still slip to just 2% this year, a

marked cut in our forecast from the 2.9% expected in

December.

Russia’s economy deteriorates further

Russia is entering a severe recession. Oil prices have

continued to slide in the past month. Our $55/barrel price

forecast this year will be a major terms-of-trade shock for

Russia as exports of fuel account for more than 60% of

total exports. The oil price drop will also weaken the fiscal

position and force the government to tap its reserve fund.

Although the central bank hiked its policy interest rate

sharply to 17% in December, the rouble is still

depreciating. It is currently around 47% lower than in June

last year, and there is a risk that formal capital controls

will be introduced if the exchange rate remains under

pressure. Tight monetary policy will be a major drag on

domestic demand this year.

Ongoing sanctions complete the gloomy outlook for

Russia. In December we forecast that the economy would

shrink by 3.6% in 2015, with the risk that the contraction

could be much more pronounced. Bur given the most

recent developments, we now think the contraction will

exceed 6%.

Venezuela faces growing instability

As one of the higher cost producers of oil, Venezuela

faces high and rising sovereign default risks. We expect

GDP will fall by 4.5% this year, after a likely 3.5%

contraction in 2014. The government has no choice but to

reduce demand and cut imports further. Inflation is

expected to peak at around 75% in Q1 2015. The deep

recession and very high inflation could trigger political and

social instability.

0

500

1000

1500

2000

2500

3000

3500

Jan 11 Jan 12 Jan 13 Jan 14 Jan 15

Spread, bps over US Treasuries

Source: JP Morgan / Haver Analytics

Venezuela and Argentina: Risk spread

Argentina

Venezuela

-15

-10

-5

0

5

10

15

2006 2008 2010 2012 2014 2016 2018

GDP Industrial production

Russia: GDP and industrial production% year


Forecast

-40

-30

-20

-10

0

10

20

30

40

50

60

70

-100

-75

-50

-25

0

25

50

75

100

125

150

175

1992 1995 1998 2001 2004 2007 2010 2013 2016

US$ bn(LHS)

F'cast

% of GDP


% of GDP(RHS)

Saudi Arabia: Government budget balance

US$ bn



Glossary of commonly used terms and abbreviations

Airline industry indicators

ASK Available Seat Kilometers. Indicator of airline supply, available seats x kilometers flown

PLF Passenger Load Factor. Indicator of airline capacity. Equal to revenue passenger kilometers

(RPK) / available seat kilometers (ASK)

RPK Revenue Passenger Kilometers. Indicator of airline demand, paying passenger x kilometers

flown

Hotel industry indicators

ADR Average Daily Rate. Indicator of hotel room pricing. Equal to hotel room revenue / rooms sold in a

given period.

Occ Occupancy Rate. Indicator of hotel performance. Equal to the number of hotel rooms sold /

room supply.

RevPAR Revenue per Available Room. Indicator of hotel performance. Equal to hotel room revenue /

rooms available in a given period

Central Banks

BoE Bank of England; MPC Monetary Policy Committee of BoE

BoJ Bank of Japan

ECB European Central Bank

Fed Federal Reserve (US)

RBI Reserve Bank of India

Economic indicators and terms

Broad money: key indicator of money supply and liquidity including currency holdings as well as bank

deposits that can easily be converted to cash

CPI Consumer Price Index. Measure of price inflation for consumer goods

GDP Gross Domestic Product. The value of goods and services produced in a given economy

LCU Local Currency Unit. The national unit of currency of a given country, e.g. pound, euro, etc.

PMI Purchasing Managers’ Index. Indicator of producers’ sentiment and the direction of the economy

PPI Purchase Price Index. Measure of inflation of input prices to producers of goods and services

PPP Purchasing Power Parity. An implicit exchange rate which equalises the price of identical goods

and services in different countries so they can be expressed with a common price.

QE Quantitive Easing. Expansionary monetary policy pursued by Central Banks involving asset

purchases to reduce bond yields and increase liquidity in capital markets.

G7 Group of seven industrialised countries comprising US, UK, France, Germany, Italy, Canada, Japan



ETC Member Organizations

Austria Austrian National Tourist Office (ANTO)

Belgium Flanders: Visit Flanders

Wallonia: Tourist Office for Wallonia-Brussels

Bulgaria Ministry of Economy and Energy

Croatia Croatian National Tourist Board (CNTB)

Cyprus Cyprus Tourism Organisation (CTO)

Czech Republic CzechTourism

Denmark VisitDenmark

Estonia Estonian Tourist Board - Enterprise Estonia (ETB)

Finland Visit Finland – Finpro ry

Germany German National Tourist Board (GNTB)

Greece Greek National Tourism Organisation (GNTO)

Hungary Hungarian Tourism Ltd.

Iceland Icelandic Tourist Board

Ireland Fáilte Ireland and Tourism Ireland Ltd.

Italy ENIT – Agenzia Nazionale del Turismo

Latvia Latvian Tourism Development Agency (TAVA)

Lithuania Lithuanian State Department of Tourism

Luxembourg Luxembourg National Tourist Office (ONT)

Malta Malta Tourism Authority (MTA)

Monaco Monaco Government Tourist and Convention Office (DTC)

Montenegro National Tourism Organisation of Montenegro

Norway Innovation Norway

Poland Polish National Tourist Office (PNTO)

Portugal Turismo de Portugal, I.P.

Romania Romanian National Authority for Tourism

San Marino State Office for Tourism

Serbia National Tourism Organisation of Serbia (TOS)

Slovakia Slovak Tourist Board

Slovenia SPIRIT Slovenia

Spain Turespaña - Instituto de Turismo de España

Sweden VisitSweden

Switzerland Switzerland Tourism (ST)

Turkey Ministry of Culture and Tourism

european tourism in 2014: trends & prospects (q4/2014) · 2019. 3. 10. · quarterly report...

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