PUERTO RICO TOURISM UPDATE:State of the Crises, Outlook and Road Map to Recovery

Puerto Rico Tourism Update: State of the crises, outlook and road map to recovery

September 2, 2020

Boston Consulting Group. Travel Recovery Insights Portal. Dashboard last updated:August 31, 2020; Oxford data refreshed:August 25, 2020Sources: Oxford Coronavirus Government Response Tracker. Hale, Thomas, Sam Webster, Anna Petherick, Toby Phillips, and Beatriz Kira (2020). Oxford COVID-19 Government Response Tracker, Blavatnik School of Government.

Travel Global RestrictionsGlobal tourism continues to be on halt due to travel restrictions and closed borders.

Phased Recovery StrategyPuerto Rico tourism sector gradual business resumption stages and milestones per period.

ContainmentPreparing for

Reopening Reopening Ramp Up Recover

Weathering the Storm

Adjust for the New Normal Gradually Resume

Business Reinstate Business within the new reality

Compete in the Marketplace

March – May* May – July* Late Summer* Fall* Winter Season*

*Moving targets due to the uncertainty of the health crisis.

Safeguard wellness and security of residents and

visitors, while providing aid to tourism workforce and

businesses.

Prepare to Reconvene

As the state begins to relax the Lockdown

order, the sector will prepare to open under best in class health and

safety protocols.

Rollout of the State Opening Phases by Sector pending to be discussed.

Air Capacity Calibration

Domestic Tourism

Demand Generating Efforts:

Domestic TourismAirlines - VFR

Domestic and VFR

Drive long-term and stability while securing strong winter season.

Presentation Outline

• Phased reopening advocacy update.

• Current state of affairs of initiatives rolled out.

• State of the Industry

• State of the Health and Economic Crisis locally, nationally and globally.

• Basic principles for recovery strategy development

• Forecast

• Revamped Recovery

A view from Paseo la PrincesaThe crises are an opportunity to rethink how tourism interacts with our economy, societies, resources, infrastructure and to advance the transition to an even more resilient tourism economy.

• 50th Anniversary• Remembrance at an historic moment when tourism management

becomes an even more important management to foster recovery.

• Focus:• Short-term: manage the crises and mitigate the impact; weather the storm.

Secure immediate relief for financial survival.

• Mid-term: safeguard the good state of the tourism infrastructure and human capital. Capitalize on short-term opportunities in sight.

• Longer-term: turn the crisis into opportunity to revitalize tourism resources, getting sustainable practice in place, be ready for the next wave of recovery in efficient and sustainable ways.

Historic reunion at unprecedented times14 Executive Directors. 13 Administrations. 1 Voice. A unified mission.

Build a roadmap to incite the resurgence of tourism in Puerto Rico and the PRTC given the historical challenges we

face.

State of the Crises• Business Impact• Economic Impact

Today’s Agenda

OutlookStrategy Management

• Approach• Risk and Opportunities• Assessment

Roadmap to Recovery• Strategic Response to

mitigate adverse

The Now Normal

The New Normal

The New Normal“Crises produce not just a plethora of temporary changes, but also some lasting ones”.

• Reconfiguring our business models – Our new business models are being shaped by the demand and supply shifts relevant to tourism.

• “To figure out what business model the new normal requires, you need to ask basic questions about how you create and deliver value, who you’ll partner with, and who your customers will be.”• The 9/11 terrorist attacks caused only a temporary decline in air travel,

but they brought about a lasting shift in societal attitudes about the trade-off between privacy and security, resulting in permanently higher levels of screening and surveillance.

• The 2003 SARS outbreak in China is often credited with accelerating a structural shift to e-commerce, paving the way for the rise of Alibaba and other digital giants.

Source: Harvard Business Review. September/October 2020. Pages 75-81.

The New NormalDelta Airlines taking safety and cleanliness to new heights (literally).

The New NormalJetBlue continues to increase the cleaning standards and the educational efforts to inform customers about the new health and safety measures in place.

• The H&S program was the first adaptation of our experience to the “now” normal. • Program launched: May 4th

• Beginning of Implementation: June 1st

• Auto-Certifications completed: 1,170 businesses

• Inspections conducted to date: 129 properties

• Certified Seals Awarded to date: 111 properties

• First and most comprehensive program of the Americas comprising all lodging options, restaurants, attractions, transportation and tour operators.

Metro43%

Porta del Este12%

Porta del Sol31%

Porta Caribe4%

Porta Atlántico8%

Porta Cordillera2%

Awarded Health and Safety Seal by Region

The New NormalHealth and Safety above all.

Updated: September 2, 2020

The New Normal$21.5 M disbursed thus far in support funding to the industry as the product adapts to the “now normal.”

CORONAVIRUS RELIEF FUND (CRF)Assistance Program to the Tourism Industry

Category Funds Disbursed Total # of Entities # Validated in SURI # Sent to SURI # Complete % Validated % Sent to SURI % Complete

Hotel $ 19,550,000.00 306 249 245 179 81.4% 80.1% 58.5%Travel Agency $ 470,000.00 162 128 128 96 79.0% 79.0% 59.3%Tour Guide $ 267,000.00 422 150 141 91 35.5% 33.4% 21.6%Wholesaler $ 276,000.00 37 28 28 24 75.7% 75.7% 64.9%Nautical $ 330,000.00 76 51 50 34 67.1% 65.8% 44.7%Excursion $ 650,000.00 126 93 92 65 73.8% 73.0% 51.6%

Total $ 21,543,000.00 1129 699 684 489 61.9% 60.6% 43.3%

Total Allocation: $ 50,000,000.00 Remaining Funds: $ 28,457,000.00 Program Impact: 489 Businesses

State of the Destination170 days after initial lockdown.

• Travel and Tourism is the sector the COVID-19 crisis has caused the most economic damage to.

• 43 properties and 2,881 rooms temporarily offline.

YTD July 2020

Sum YoY

Inbound Passengers 1,438,286 -49.2%

Total Guest Registrations 606,640 -56.1%

Room Nights Sold 845,399 -53.9%

Occupancy 41.9% (29.00)

ADR $ 161.75 -4.3%

Room Tax Revenue $ 145,760,970 -52.8%

Puerto Rico Tourism Figures Jan-July 2020.

Unemployment continues to riseDepartment of Labor Reports 22,7000 jobs lost in leisure and hospitality with unemployment rate increasing to 27.9% in July.

July 2020 Employment Figures

Unemployment % # of Jobs Lost Total Employment Opportunities

Total Leisure and Hospitality 27.9% 22,700 81,500

Hotels and Restaurants 30.0% 23,200 77,300

Source: PR Department of Labor. Non-Farming Employee Figures July 2020. Published August 21, 2020.

• Leisure and hospitality unemployment rate is x4 higher the national average.• PR National: the unemployment rate for July 2020 was 7.3%. This rate represents a reduction of 1.2

percentage points when compared with that registered in June 2020 (8.5%).

• PR Leisure and Hospitality: the unemployment rate for the tourism sector for July was 27.9%. This rate represents an increase of 2.0 percentage points when compared with that registered in June 2020 (25.9%).

• Within tourism, the hotel and restaurant sector reported a higher unemployment rate of 30.0% or 23,200 jobs lost during July 2020.

http://www.mercadolaboral.pr.gov/lmi/pdf/CES/2020/Empleado%20Asalariado%20No%20Agricola%207.pdf

Unemployment continues to riseDepartment of Labor statistical information reports 27.9% unemployment rate for the tourism sector.

http://www.mercadolaboral.pr.gov/lmi/pdf/CES/2020/Empleado%20Asalariado%20No%20Agricola%207.pdf

Employment Impact Analysis

Total Jobs Unemployment % Lay Offs or Furloughs Wages

Lodging 14,409 72% 10,432 $ 105,994,611 Other Services 12,091 45% 5,441 $ 55,282,300.93

*Wages: Annual Salary based on 2019 Junta de Planificacion Figures is $15,240.62

Unemployment continues to risePuerto Rico Tourism Company Internal Estimated Analysis

• Leisure and hospitality unemployment rate is x4 higher the national average.

• Puerto Rico Tourism Analysis takes into account:

• Estimated higher unemployment rate, due to analysis and qualitative input from the sector.

• Lodging figures considers endorsed and non-endorsed properties. And its operational status for the year. (248)

• The Department of Labor’s latest figures are from a period in which the PPP was still in effect with some players.

State of the Crises

YTD July 2020 – Figures170 days after initial lockdown.

• Travel and Tourism is the sector the COVID-19 crisis has caused the most economic damage to.

YTD July 2020

Sum YoY

Inbound Passengers 1,438,286 -49.2%

Total Guest Registrations 606,640 -56.1%

Room Nights Sold 845,399 -53.9%

Occupancy 41.9% (29.00)

ADR $ 161.75 -4.3%

Room Tax Revenue $ 145,760,970 -52.8%

Puerto Rico Tourism Figures Jan-July 2020.

YTD July 2020 Timeline of Events and YoY Performance

0

50,000

100,000

150,000

200,000

250,000

300,000

350,000

400,000

450,000

January February March April May June July

Room Nights Inbound Passengers

Restrictions Reopenings

+4.00% +11.57%

-50.54%

-95.30%

+6.90%+16.46%

-38.05%

-90.98%

-70.25% -77.06%-94.03%

-89.19%

-74.77%

-62.18%

YoY Air Passenger ArrivalsYoY Room Nights

Source: Puerto Rico Tourism Company Lodging Figures. YTD July 2020. Updated: August 18, 2020. Air Passenger Data: Aerostar/Ports Authority.

LockdownFirst Executive Order

March 16

Executive OrderAdditional Restrictions

March 30

Executive OrderMay 21

Internal Tourism Reopening

June 15

Original External Tourism

ReopeningJuly 15

Executive OrderJune 12

Executive OrderJuly 16

Room Nights

Inbound Passengers

July YTD Lodging ADR and Occupancy

63.76%

73.47%

40.78%

5.34%

9.78%

26.55%

43.09%

$180.33

$176.61 $178.75

$143.69 $153.49 $156.16

$143.19

$-

$50.00

$100.00

$150.00

$200.00

0.00%

10.00%

20.00%

30.00%

40.00%

50.00%

60.00%

70.00%

80.00%

January February March April May June July

January February March April May June July YTD JULY

YoY ADR 1.04% -0.33% -0.82% -18.28% -2.86% -0.07% -8.62% -4.27%

YoY Occ (ppt) -2.03 -0.01 -34.68 -64.39 -54.32 -47.86 -31.72 -29.21

Source: Puerto Rico Tourism Company Lodging Figures. YTD July 2020. Updated: August 18, 2020.

2020 Economic ImpactThe estimated economic impact for the travel and tourism sector in 2020 exceeds the $1.4 B mark.

YoY Economic Impact (2020 vs 2019)

YTD July 2020 Aug-Dec Total 2020

Lodging Room Revenue* $ (163,297,005) $ (107,946,780.19) $ (271,243,784.94)

Lodging Room Tax* $ (26,336,126) $ (902,707.00) $ (27,238,833.21)

Tourist Spending

Food and Beverages $ (153,028,333) $ (382,570,833.33) $ (535,599,166.67)

Shopping $ (91,817,000) $ (191,285,416.67) $ (283,102,416.67)

Arts and Entertainment $ (61,211,333) $ (114,771,250.00) $ (175,982,583.33)

Cruising Industry $ (53,104,412) $ (66,046,805.12) $ (119,151,216.86)

Total $ (548,794,209) $ (863,523,792.31) $ (1,412,318,001.68)

*Traditional lodging figures only. Does not include non-endorsed or short-terrm rentals.

YTD July 2020 Timeline of Events and YoY Performance

0

50,000

100,000

150,000

200,000

250,000

300,000

350,000

400,000

450,000

January February March April May June July

Room Nights Inbound Passengers

Restrictions Reopenings

+4.00% +11.57%

-50.54%

-95.30%

+6.90%+16.46%

-38.05%

-90.98%

-70.25% -77.06%-94.03%

-89.19%

-74.77%

-62.18%

YoY Air Passenger ArrivalsYoY Room Nights

Source: Puerto Rico Tourism Company Lodging Figures. YTD July 2020. Updated: August 18, 2020. Air Passenger Data: Aerostar/Ports Authority.

Room Nights

Inbound Passengers

1,2283,567

27,832

32,465

0

5,000

10,000

15,000

20,000

25,000

30,000

35,000

April May June July

Puerto Rico Residents - Guest RegistrationsMoM

+16.6%MoM

+680.3%

Demand was invigorated via a strong value proposition and the implementation of the health and safety measures. Despite a concerned sentiment, consumer activations stimulated 60,297 residents for a staycation in June and the first half of July (before the restrictions of July 16).

Source: Puerto Rico Tourism Company. YTD July 2020 Lodging Registration Figures.

Summer uptick in US demandA discounted value proposition and geo-targeted marketing efforts attracted 53,214 guest from the US in June and July.

Delaware 16%

New Mexico 15%

Florida 11%

New York 9%Idaho 7%

Pennsylvania 5%

Oregon 5%

Massachusetts5%

Tennessee 5%

Maryland 4%

Maine 4%

Arkansas 4%New Hampshire 4%

Texas 3%California 3%

• Programs designed in May and attracted consumers willing to travel in the summer despite the health concerns.

• Discount and bargain-oriented consumers.

• Consumers who are open to trying new things and take risks.

Delaware 16%

New Mexico 15%

Florida 11%

New York 9%Idaho 7%

Pennsylvania 5%

Oregon 5%

Massachusetts5%

Tennessee 5%

Maryland 4%

Maine 4%

Arkansas 4%New Hampshire 4%

Texas 3%California 3%

Summer uptick in US demandA discounted value proposition and geo-targeted marketing efforts attracted 53,214 guest from the US in June and July.

• Based on June and July’s hotel registrations:• The DMOs geo-targeted strategy deployed prior to the July 16th closing

attracted guests from Florida, Delaware, Pennsylvania, Massachusetts and Texas.

• The airlines marketing program complimented the targeting from other regions including New Mexico, New York, Idaho, Oregon, Tennessee, Maine and Arkansas.

State of the CrisesGlobal, US and local COVID-19 impact.

• Grim milestone: Global cases surpassed 25 million, while U.S. cases topped 6 million cases and +183,000 deaths.• Puerto Rico: 33,421 cases and +435 deaths.

• August 18th was the peak day of confirmed cases.

• CDC: A new forecast projects over 200,000 Covid-19 deaths in the U.S. by September.

Puerto Rico Confirmed Cases March 15 – August 30

By The New York Times | Sources: Johns Hopkins University and World Bank

• The United States is also joined by Spain in the leaderboard of countries that are still suffering through a major coronavirus outbreak.

• Spain’s number of cases has surged in the last month. • “Over the last week, its per capita rate of new

cases has been five times larger than France’s, six times larger than Portugal’s and 15 times larger than Japan’s.” (New York Times)

• Adjusted for population, Spain’s outbreak has even surpassed the U.S. outbreak over the last few days.

• Reported root causes for the on-going outbreaks:• Lack of a clear national message• Premature reopening• Shortage on testing and contact tracing.

State of the CrisesThe United States and Spain remain the most COVID-19 pandemic impacted economies.

State of the CrisesThe breadth of the difficulties faced go beyond the COVID-19.

• The Trio of crises: A) Health crisis due to COVID-19 pandemic.

B) Economic impact directly causing supply chain disruptions, declines in consumer demand, jobs instability and low consumer/investor confidence.

C) In mainland, a social crisis that led to national civic unrest movement denouncing racial inequality.

• Original roadmap to recovery interrupted. • Second wave uncertainty looms over Q3 and Q4 plans.

• Puerto Rico placed again under rigorous measures due to the surge experienced in July

• Tropical Storm Isaias

• Tropical Storm Laura

• Uncertainty remains high. But what is clear is that economies will not emerge unscathed and the daily routines and lifestyles of consumers will shift to accommodate continued social distancing and health measures.

• The economic impact is yet to be measured.

“Travel Bubbles” and regional restrictions lifted.Europe and EMEA relaxed travel restrictions among nearby countries that have effectively contained the virus.

Boston Consulting Group. Travel Recovery Insights Portal. Dashboard last updated:August 26, 2020; Oxford data refreshed:August 18, 2020Sources: Oxford Coronavirus Government Response Tracker. Hale, Thomas, Sam Webster, Anna Petherick, Toby Phillips, and Beatriz Kira (2020). Oxford COVID-19 Government Response Tracker, Blavatnik School of Government.

• United: will cut 36,000 jobs in October.

• American Airlines: planning to eliminate over 40,000 jobs this year.

• 19,000 of those 40,000 jobs will be furloughs and layoffs in October.

• Southwest: not expecting furloughs this year. However, is encouraging employees to take buyouts or early retirement.

• Delta: unveiled plans to furlough 1,941 of its pilots in October.

• Spirit: pilots and management have entered an agreement to avoid furloughs. The agreement has led to the cancellation of 600 planned furloughs with immediate effect. • Approximately 50% of Spirit’s pilots have also agreed to work fewer hours each

month on a temporary basis, which will prevent 800 pilots from being furloughed.

CARES Act Sept 30 Deadline Effect. As the end of the CARES Act term comes to an end, airlines are beginning to announce organizational changes.

Airlines UpdateYTD July 2020 share of air travel based on passenger traffic.

JetBlue Airways27%

American Airlines15%

Spirit Airlines13%

Southwest Airlines12%

Delta Airlines9%

Frontier Airlines8%

United Airlines7%

Seaborne2%

Cape Air2%

Others5%

YTD July 2020 Share by Airlines

• Avianca: Colombian government approved to take an $370 M loan for restructuring of the airline under the bankruptcy laws.

• Although the pandemic will change the global airline landscape, not all foreseen changes will be negative. • JetBlue and American Airlines strategic alliance

to expand routes bandwidth, enhance customer experience and cross-honor loyalty benefits.

Debt financing, operational restructuring and alliances marks the global airline sector. The current global crisis for airlines will produce fewer and smaller airlines with less appetite for risk.

Airlines UpdateDespite the impact, airlines showcased a slight recovery throughout the summer.

• National TSA airport screenings are currently -67% (versus -91% in May and -96% in April).

• Puerto Rico YTD July 2020 YoY inbound passengers: -49.20% • Decline driven by inbound traffic decline April- July with

figures -80.0% versus YA. • YTD July 2020 load factor: 57.9%

• The vast majority of the 24 US airports with nonstop service before the pandemic have recovered SJU service; except the following:

• Detroit - Delta service cancelled for Winter 2020

• Chicago Midway - Southwest service suspended until Nov. 2020 (O'Hare service available)

• Houston Hobby - Southwest service suspended until Mar. 2021 (Houston Intercontinental service available)

• Orlando Sanford - Allegiant service cancelled.

• Nashville - Southwest service start was postponed for March 2021

SJU Inbound Load FactorsYTD July 2020

Jan 76.7%

Feb 81.4%

Mar 54.7%

Apr 20.7%

May 53.0%

Jun 66.8%

Jul 52.2%

Airlines UpdateShort-term seat capacity outlook

352,279384,220

458,667

529,295549,460

243,580

350,757

468,703

580,500 565,937

Sep Oct Nov Dec Jan

Inbound Seat Capacity

2019 Seat Capacity 2020 Current Published

Sep Oct Nov Dec Jan

Inbound Seat Capacity – Scenarios Based on Expected Changes

2019 Seat Capacity 2020 Current Published S1 Optimistic S2 Conservative

SJU Inbound Seats Analysis

2019 Seat Capacity 2020 Current Published S1 Optimistic S2 Conservative

Sep 352,279 243,580 240,000 220,000

Oct 384,220 350,757 290,000 250,000

Nov 458,667 468,703 420,000 360,000

Dec 529,295 580,500 540,000 425,000

Jan 549,460 565,937 525,000 400,000

State of the Cruising IndustryItineraries and cancellations dominate headlines.

• Resumption plan continues to be on hold.• Existing voyages suspension through Oct. 31.

• However, CDC clearance still pending.

• Consumer sentiment continues to be discouraging as new protocol and health standards are not released yet.

• Uncertainty over world port access and the potential for ongoing travel restrictions.

• Italy, France, French Polynesia, Germany, and Taiwan are the first countries that have granted permission for ocean cruises to resume.

State of the Cruising IndustryItineraries and cancellations dominate headlines.

Closer look at the Mediterranean RegionAs cruising slowly attempts to resume, Italy and the Mediterranean ports are offering lessons learned for global resumption.

• Costa and MSC Italian Voyages:• Domestic cruises:

• Italian residents only

• Italian ports-of-call

• Rapid test requirement before embarkation, with follow-up PCR test for suspicious cases.

• Working with a 50% capacity restriction

• GPS Bracelets for contact tracing

• Shore disembarkation restricted to only booked tours with approved vendors who comply with local safety measures.

Strategy and Forecasting Management

Calibrating Factors

Macroeconomics• GDP Impact (US and PR)• Unemployment (US and PR)

State of the Health Crisis• Gating criteria established by the

Federal Government and local Medical Workforce.

• New cases, the “curve” and infection rate.

Microeconomics • Consumer Confidence• State of the Wallet

Operational Readiness• Tourism infrastructure• State of the airline sector• State of cruising

Management in stressed conditions

Volatility

• Instability of the Situation. Factors changing quickly, frequently and significantly. • The speed of the virus spread

• The steep decline observed in March

0

50,000

100,000

150,000

200,000

250,000

300,000

350,000

400,000

450,000

January February March April May June July

Room Nights Inbound Passengers

Uncertainty & Complexity

• Unpredictability factors. • The state of the airlines and cruise lines.

• Complexity • Interconnectivity of the parts and variables of the

crisis.

• The three crises and its impact.

Health

SocialFinancial

Complexity

• The evolving consumer sentiment.

• Constantly evaluating the desire, and actual intent for a behavior. • Travel Intent

• Health Concerns

ComplexityTracking the consumer sentiment.

• 2 Tools readily available:• Boston Consulting Group – The Travel Recovery Insights Portal

• WTTC and McKinsey & Co. – Travel Demand Recovery Dashbord

Management in stressed conditions

Ambiguity

• Unclearness due to unknown conditions.• Example: historic performance indicators from previous downturns.

Resources for the VUCA Analysis

• STR COVID-19 impact on Mexico and Caribbean hotel performance of August 27. Click HERE.

• McKinsey and WTTC Travel Demand Recovery Dashboard. Click HERE.

• Boston Consulting Group Travel Recovery Insights Portal. Click HERE.

VUCA ModelScenario Planning to futureproof the tourism

1. Identify risks and opportunities

2. Assess and prioritize the risks

3. Examine financial impact

4. Identify key actions to mitigate risks and impact

Outlook

2020 Global Economic ImpactTravel and Tourism faces unprecedented impact due to COVID-19.

2020 ForecastWTTC – Latin America and Caribbean Forecast

Job Losses -36% to -62%

GDP Impact -36% to -62%

Oxford Economics – US Forecast

Room Nights -36%

Room Revenue -50%

Euromonitor – US Forecast

US Departures -47.50%

US Arrivals -49.90%

WTTC. August 25, 2020.

Tourism Economics (Oxford Economics). July 2020.

Euromonitor. Aug 18, 2020.

https://www.ustravel.org/system/files/media_root/document/Research_Travel-Forecast_Summary-Table.pdf

Travel and Tourism Outlook - Annual YoY Forecast (Growth)

2020 2021 2022 2023 2024

Total Travel and Tourism GDP Contribution -55.0% 38.0% 30.0% 18.0% 10.0%

Inbound Travelers -48.7% 40.0% 33.0% 6.0% 3.0%

Room Nights -55.3% 40.0% 30.0% 20.0% 5.0%

Room Revenue -55.4% 45.0% 20.0% 12.0% 10.0%

ADR -10.9% 1.0% 4.0% 5.0% 2.0%

Puerto Rico Preliminary OutlookEstimated growth trajectory for key performance indicators of the industry.

*Preliminary outlook based on 2019 figures, 2020 existing market trends, global forecasts, risks in scope and effectively leveraging opportunities in scope.

Puerto Rico Preliminary OutlookEstimated growth trajectory for key performance indicators of the industry.

Growth % vs 2019 Figures (Baseline)2020 2021 2022 2023 2024

Inbound Travelers -48.7% -28.1% -4.4% 1.3% 4.4%Room Nights -55.3% -37.5% -18.7% -2.4% 2.4%

Room Revenue -55.4% -35.4% -22.5% -13.2% -4.5%ADR -10.9% -10.0% -6.4% -1.7% 0.2%

• Annual growth projections in comparison to 2019 figures.

*Preliminary outlook based on 2019 figures, 2020 existing market trends, global forecasts, risks in scope and effectively leveraging opportunities in scope.

OutlookVariables and assumptions for the estimated trajectory.

• Components considered in the forecasting process that can or may shift as the evolving crises progress.

• Financial health and operational capabilities of the US and International airlines.

• Investment in air access negotiations• Financial stability and operational readiness of the

cruise line industry to bounce back by Q1 2020.• Local investment in cruising negotiations• Stability of the Financial Services sector and ability to

lend.• Plus, lending at competitive rates.

• Liquidity and financial resilience of the local tourism businesses.

• Investment in marketing efforts for domestic and external tourism.

• Effective containment of the existing health crisis and control of virus’s spread.

• Low risk with the 2020-21 Flu season.• Investor’s sentiment to continue to feel “bullish”

about investment conditions in the island. • Continuity of the trajectory past January 2021.• Ability to capitalize on the highlighted opportunities

and position Puerto Rico competitively in the US Domestic marketplace.

Shape of the economic recoveryTraditional ways to visually display the economy rebound.

Images: NatWest www.nwm.com. Nike logo. Registered mark.

4,717,446

2,422,021

3,390,829

4,509,803 4,780,391 4,923,803

2,988,853

1,335,075

1,869,105

2,429,837

2,915,804

3,061,594

2019 2020 2021 2022 2023 2024

InboundTravelers

Room Nights

$478,874,028

$213,348,303

$309,355,040

$371,226,048

$415,773,173

$457,350,491

2019 2020 2021 2022 2023 2024

$160.22

$142.74

$144.17

$149.93

$157.43

$160.58

2019 2020 2021 2022 2023 2024

SJU Inbound Travelers

Room Nights

Estimated Room Revenue

ADR

Inbound Travelers and Room Nights

OutlookAn estimated growth trajectory for key performance indicators of the industry.

*Preliminary outlook based on 2019 figures, YTD July 2020 data, 2020 existing market trends, global forecasts, risks in scope and effectively leveraging opportunities in scope.

4,717,446

2,422,021

3,390,829

4,509,803 4,780,391 4,923,803

2,988,853

1,335,075

1,869,105

2,429,837

2,915,804

3,061,594

2019 2020 2021 2022 2023 2024

InboundTravelers

Room Nights

$478,874,028

$213,348,303

$309,355,040

$371,226,048

$415,773,173

$457,350,491

2019 2020 2021 2022 2023 2024

$160.22

$142.74

$144.17

$149.93

$157.43

$160.58

2019 2020 2021 2022 2023 2024

SJU Inbound Travelers

Room Nights

Estimated Room Revenue

ADR

Inbound Travelers and Room Nights

OutlookAn estimated growth trajectory for key performance indicators of the industry.

*Preliminary outlook based on 2019 figures, 2020 existing market trends, global forecasts, risks in scope and effectively leveraging opportunities in scope.

Recovery by SegmentsSegment behavior and predicted pace for recovery.

VFR (Visiting Friends & Relatives)

Leisure Travelers

Cruise Travelers

Business Travelers

Meetings & Conventions

Quicker(Due to Holidays)

Quicker

Slow and Gradual

Gradual

Slower

PaceSegment

Roadmap to Recovery

Crises scopeImplications and risks identified in the assessment.

Adaptability to the new normal• High costs involved with the adaptation of a

healthier and safer environment.

Adaptability to the new normal

A second wave: local and national “twindemic”• Originally expected in Q4, as colder weather kicks off

in the US and is Flu season.

Supply and demand imbalance• Expenses surpassing revenues.• High cost of maintaining property and retaining

personnel.

Consumer sentiment• The spike in COVID-19 cases in the US has caused

many consumers to lose their willingness to resume regular activities, indicating a delay in economic recovery.

• How quickly the industry will recover is largely dependent on the consumer’s willingness to fly.

The wellbeing of the Human capital• Unemployment levels spiking

• 32-42% of COVID-induced layoffs will be permanent1

• Skills and Acumen preservation

1University of Chicago, Becker Friedman Institute of Economics. June 25, 2020.

Financial health of the airlines sector• Post-September 30th reality once CARES Act aid

conditions and service obligations terminate.• Major carriers anticipating substantial furloughs.

Cruising industry vulnerability• Uncertainty and financial stability

Locals perception about tourism• Apathy toward visitors due to the “stigma” on

tourists as virus spreaders.

Innovation halt• Constraints in capital (CAPEX) to develop innovation

in products and services.

State of the crises in the U.S. • Puerto Rico’s recovery is largely dependent on the

health crisis containment and economic recovery of mainland U.S.

State of the tourism infrastructure• Foreclosures and businesses shutdown

State of the tourism infrastructure• Foreclosures and businesses shutdown

Political Distraction• The politization of health measures (masks and

social distancing).• National and local November election

Natural (Atmospheric) Circumstances• Heavily active hurricane season approaching to the

September historic activity peak. • 13 systems thus far; 9 named storms and 4

hurricanes• Continuous seismic activity.

• Strategy must be kept intact. But, be flexible and agile.

• “Be adaptable. The world is changing every single day, and we need to keep asking: How can we help our customers? How can we help our communities? We need to clear away bureaucracy, address things very quickly, and be operationally agile.”

• Prioritize resilience over efficiency. • Strengthening our focus on resiliency is key as we have seen

through previous crises has been catastrophic.

• Today: People want authentic dialogue and transparency.

Strategy in The New Normal“How to adjust to uncertain times? What customers, employees and society expect from us? And how business will change as the crisis ebbs.”

Source: Harvard Business Review. July/August 2020. Pages 48-51.

The Phased Recovery Strategy Objective

• Turn the crises into an opportunity to build a long-term advantage for Puerto Rico as a premier destination through a coordinated public-private approach • Ensure a safer and stronger recovery.• Uphold jobs and wages.• Preserve the financial health (liquidity) and stability (equity) of the travel and tourism

business infrastructure.

Phased Recovery StrategyPuerto Rico tourism sector gradual business resumption stages and milestones per period.

ContainmentPreparing for

Reopening Reopening Ramp Up Recover

Weathering the Storm

Adjust for the New Normal Gradually Resume

Business Reinstate Business within the new reality

Compete in the Marketplace

March – May* May – July* Late Summer* Fall* Winter Season*

*Moving targets due to the uncertainty of the health crisis.

Safeguard wellness and security of residents and

visitors, while providing aid to tourism workforce and

businesses.

Prepare to Reconvene

As the state begins to relax the Lockdown

order, the sector will prepare to open under best in class health and

safety protocols.

Rollout of the State Opening Phases by Sector pending to be discussed.

Air Capacity Calibration

Domestic Tourism

Demand Generating Efforts:

Domestic TourismAirlines - VFR

Domestic and VFR

Drive long-term and stability while securing strong winter season.

Phased Recovery Strategy

ContainmentMarch - October October - December December – Spring 2022

Reactivation Recovery

LockdownFirst Executive Order

March 16

Cruising ResumesQ1 2021

Internal Tourism ReopeningOctober 1

Soft - External ReopeningNovember 1

Full External Tourism Reopening

December 1

Meetings and Conventions ResumesQ2 2021

Soft Internal Tourism

Reopening

September’s New Executive Order

Phased Recovery Strategy

ContainmentMarch - October

End of Existing Executive Order

September 11

• Secure tourism as a public policy priority.

• Develop public policy and economic stimulus measures.• Protect jobs and income.• Protect businesses

• Postponement of dues• Subsidies Plan and Utilities concessions

• Secure the implementation of the Health and Safety standards.

• Continue to execute the available economic stimulus packages to:a) Offer immediate direct income support to workforce

b) b) Provide emergency liquidity for businesses to stay open

• Soft-Internal Tourism Reopening

Soft Internal Tourism Reopening

September’s New Executive Order

Phased Recovery Strategy

October - December

Reactivation

Internal Tourism ReopeningOctober 1

Soft - External ReopeningNovember 1

Full External Tourism Reopening

December 1

• Resume demand generating efforts and boost competitiveness• Internal Tourism Resumption: September 25th

• External Tourism Resumption: October 15

• Reach competitive air seat capacity and frequencies.

• Engage with cruise industries to plan the resumption and growth strategy for homeport and transit calls.

• Develop a tourism transition plan and secure its implementation following the elections.

• Update the Health and Safety program and lock the UNWTO and WTTC seals to secure Puerto Rico’s competitive position.

Phased Recovery Strategy

October - December

Reactivation

Internal Tourism ReopeningOctober 1

Soft - External ReopeningNovember 1

Full External Tourism Reopening

December 1

• Develop and execute an educational campaign to revert perception about tourists and strengthen the impact of tourism as a mean of economic resurgence.

• Build a competitive advantage by securing Puerto Rico’s positioning as a healthy, safe and nearby destination in the US Domestic Travel Bubble.

• Milestone event to mark the beginning of the reopening phase for the destination.

Phased Recovery Strategy

December – Spring 2022

Recovery

Cruising ResumesQ1 2021

Meetings and Conventions ResumesQ2 2021

• Secure the resumption of the cruise industry.

• Prepare the destination to the meetings and conventions activity resumption.

Puerto Rico Tourism Update: State of the crises, outlook and road map to recovery

Thank You