PUERTO RICO TOURISM UPDATE: State of the Crises, Outlook And

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

Boston Consulting Group. Travel Recovery Insights Portal. Dashboard last updated:August 31, 2020; Oxford data refreshed:August 25, 2020 Sources: 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. Phased Recovery Strategy Puerto Rico tourism sector gradual business resumption stages and milestones per period.

Preparing for Containment Reopening Reopening Ramp Up Recover March – May* May – July* Late Summer* Fall* Winter Season*

Gradually Resume Adjust for the New Normal Business Reinstate Business within Prepare to Reconvene Rollout of the State the new reality Opening Phases by Sector Compete in the Marketplace Weathering the Storm As the state begins to pending to be discussed. Demand Generating Efforts: Drive long-term and relax the Lockdown Domestic Tourism Safeguard wellness and stability while securing order, the sector will Air Capacity Calibration Airlines - VFR security of residents and strong winter season. prepare to open under Domestic and VFR visitors, while providing aid best in class health and Domestic Tourism to tourism workforce and safety protocols. businesses.

*Moving targets due to the uncertainty of the health crisis. 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 Princesa The 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 times 14 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. Today’s Agenda

The Now Normal Roadmap to Recovery • Strategic Response to mitigate adverse State of the Crises Outlook • Business Impact Strategy Management • Economic Impact • Approach • Risk and Opportunities • Assessment 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 Normal Delta Airlines taking safety and cleanliness to new heights (literally). The New Normal JetBlue continues to increase the cleaning standards and the educational efforts to inform customers about the new health and safety measures in place. The New Normal Health and Safety above all.

• The H&S program was the first adaptation of our experience to the “now” normal. th • Program launched: May 4 Awarded Health and Safety Seal by Region st Porta Cordillera • Beginning of Implementation: June 1 2% Porta Atlántico • Auto-Certifications completed: 1,170 businesses 8%

• Inspections conducted to date: 129 properties Porta Caribe 4% • Certified Seals Awarded to date: 111 properties Metro 43% • First and most comprehensive program of the Americas

comprising all lodging options, restaurants, attractions, Porta del Sol transportation and tour operators. 31%

Porta del Este 12% 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

Updated: September 2, 2020 State of the Destination 170 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 rise Department of Labor Reports 22,7000 jobs lost in leisure and hospitality with unemployment rate increasing to 27.9% in July.

• 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.

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.

http://www.mercadolaboral.pr.gov/lmi/pdf/CES/2020/Empleado%20Asalariado%20No%20Agricola%207.pdf Unemployment continues to rise Department 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

Unemployment continues to rise Puerto Rico Tourism Company Internal Estimated Analysis

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

• 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 – Figures 170 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

450,000 +6.90% Inbound Passengers +16.46% 400,000 Room Nights Inbound Passengers

350,000

300,000 +4.00% +11.57% -38.05% Room250,000 Nights -62.18%

200,000 150,000 -74.77% 100,000 -50.54% -89.19% -94.03% 50,000 -70.25% -77.06% 0 -90.98% January February March -95.30%April May June July

Executive Lockdown Executive Order Internal Tourism Order First Executive Order May 21 Reopening July 16 March 16 June 15 Executive Order Executive Order Original External June 12 Additional Restrictions Tourism March 30 Reopening Restrictions Reopenings July 15 YoY Air Passenger Arrivals YoY Room Nights

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

80.00% $200.00 $180.33 73.47% $178.75 70.00% $176.61 63.76% $153.49 $156.16 60.00% $143.69 $150.00 $143.19 50.00% 43.09% 40.78% 40.00% $100.00

30.00% 26.55%

20.00% $50.00

9.78% 10.00% 5.34%

0.00% $- 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 Impact The 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

450,000 +6.90% Inbound Passengers +16.46% 400,000 Room Nights Inbound Passengers

350,000

300,000 +4.00% +11.57% -38.05% Room250,000 Nights -62.18%

200,000 150,000 -74.77% 100,000 -50.54% -89.19% -94.03% 50,000 -70.25% -77.06% 0 -90.98% January February March -95.30%April May June July

Restrictions Reopenings YoY Air Passenger Arrivals YoY Room Nights

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

Puerto Rico Residents - Guest Registrations MoM 35,000 +16.6% MoM 30,000 +680.3% 32,465

25,000 27,832

20,000

15,000

10,000

5,000

1,228 3,567 0 April May June July

Source: Puerto Rico Tourism Company. YTD July 2020 Lodging Registration Figures. Summer uptick in US demand A discounted value proposition and geo-targeted marketing efforts attracted 53,214 guest from the US in June and July.

• 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.

California 3% Texas 3% New Hampshire 4% Delaware 16% Arkansas 4% Maine 4%

Maryland 4% New Mexico 15%

Tennessee 5%

Massachusetts 5%

Oregon 5% Florida 11%

Pennsylvania 5%

Idaho 7% New York 9% Summer uptick in US demand A 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.

California 3% Texas 3% New Hampshire 4% Delaware 16% Arkansas 4% Maine 4%

Maryland 4% New Mexico 15%

Tennessee 5%

Massachusetts 5%

Oregon 5% Florida 11%

Pennsylvania 5%

Idaho 7% New York 9% State of the Crises Global, 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 State of the Crises The United States and Spain remain the most COVID-19 pandemic impacted economies.

• 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.

By The New York Times | Sources: Johns Hopkins University and World Bank State of the Crises The 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, 2020 Sources: 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.

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.

• 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. Airlines Update YTD July 2020 share of air travel based on passenger traffic.

YTD July 2020 Share by Airlines

American Airlines 15%

JetBlue Airways 27% Spirit Airlines 13%

Others 5%

Cape Air 2% Southwest Airlines 12%

Seaborne 2%

United Airlines Delta Airlines 7% 9% Frontier Airlines 8% 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.

• 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. Airlines Update Despite 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: SJU Inbound Load Factors -49.20% YTD July 2020 • Decline driven by inbound traffic decline April- July with Jan 76.7% figures -80.0% versus YA. Feb 81.4% Mar 54.7% • YTD July 2020 load factor: 57.9% Apr 20.7% • The vast majority of the 24 US airports with nonstop service May 53.0% before the pandemic have recovered SJU service; except the Jun 66.8% following: Jul 52.2% • 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 Airlines Update Short-term seat capacity outlook

Inbound Seat Capacity Inbound Seat Capacity – Scenarios Based on Expected Changes

580,500 565,937 549,460 529,295 458,667 468,703 384,220 352,279 350,757

243,580

Sep Oct Nov Dec Jan Sep Oct Nov Dec Jan

2019 Seat Capacity 2020 Current Published 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 Industry Itineraries 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 Industry Itineraries and cancellations dominate headlines. Closer look at the Mediterranean Region As 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 State of the Health Crisis • Gating criteria established by the Federal Government and local Factors Medical Workforce. • New cases, the “curve” and infection rate. Macroeconomics • GDP Impact (US and PR) • Unemployment (US and PR)

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

450,000

400,000 Room Nights Inbound Passengers 350,000

300,000

250,000

200,000

150,000

100,000

50,000

0 January February March April May June July Uncertainty & Complexity

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

• Complexity Health • Interconnectivity of the parts and variables of the crisis. • The three crises and its impact. Financial Social Complexity

• The evolving consumer sentiment. • Constantly evaluating the desire, and actual intent for a behavior. • Travel Intent • Health Concerns Complexity Tracking 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 Model Scenario 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 Impact Travel and Tourism faces unprecedented impact due to COVID-19.

2020 Forecast WTTC – Latin America and Caribbean Forecast Job Losses -36% to -62% GDP Impact -36% to -62% WTTC. August 25, 2020. Oxford Economics – US Forecast Room Nights -36% Room Revenue -50%

Euromonitor – US Forecast Tourism Economics (Oxford Economics). July 2020. US Departures -47.50% US Arrivals -49.90%

Euromonitor. Aug 18, 2020. https://www.ustravel.org/system/files/media_root/document/Research_Travel-Forecast_Summary-Table.pdf Puerto Rico Preliminary Outlook Estimated growth trajectory for key performance indicators of the industry.

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% *Preliminary outlook based on 2019 figures, 2020 existing market trends, global forecasts, risks in scope and effectively leveraging opportunities in scope. Puerto Rico Preliminary Outlook Estimated growth trajectory for key performance indicators of the industry. • Annual growth projections in comparison to 2019 figures.

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% *Preliminary outlook based on 2019 figures, 2020 existing market trends, global forecasts, risks in scope and effectively leveraging opportunities in scope. Outlook Variables 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 • Low risk with the 2020-21 Flu season. and International airlines. • Investor’s sentiment to continue to feel “bullish” • Investment in air access negotiations about investment conditions in the island. • Financial stability and operational readiness of the • Continuity of the trajectory past January 2021. cruise line industry to bounce back by Q1 2020. • Ability to capitalize on the highlighted opportunities • Local investment in cruising negotiations and position Puerto Rico competitively in the US • Stability of the Financial Services sector and ability to Domestic marketplace. 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. Shape of the economic recovery Traditional ways to visually display the economy rebound.

Images: NatWest www.nwm.com. Nike logo. Registered mark. Outlook An estimated growth trajectory for key performance indicators of the industry.

Inbound Travelers and Room Nights Estimated Room Revenue $478,874,028 SJU Inbound Travelers 4,780,391 4,923,803 $457,350,491 4,717,446 4,509,803 $415,773,173

$371,226,048 3,390,829 3,061,594 Room Nights 2,988,853 $309,355,040 2,915,804 2,422,021 2,429,837 Inbound 1,869,105 Travelers $213,348,303 1,335,075 Room Nights 2019 2020 2021 2022 2023 2024 2019 2020 2021 2022 2023 2024

ADR $160.22 $160.58

$157.43

$149.93

$144.17 $142.74 *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. 2019 2020 2021 2022 2023 2024 Outlook An estimated growth trajectory for key performance indicators of the industry.

Inbound Travelers and Room Nights Estimated Room Revenue $478,874,028 SJU Inbound Travelers 4,780,391 4,923,803 $457,350,491 4,717,446 4,509,803 $415,773,173

ADR $160.22 $160.58

$157.43

$149.93

$144.17 $142.74 *Preliminary outlook based on 2019 figures, 2020 existing market trends, global forecasts, risks in scope and effectively leveraging opportunities in scope. 2019 2020 2021 2022 2023 2024 Recovery by Segments Segment behavior and predicted pace for recovery.

Segment Pace VFR (Visiting Friends & Relatives) Quicker (Due to Holidays)

Quicker Leisure Travelers

Cruise Travelers Slow and Gradual

Business Travelers Gradual

Meetings & Conventions Slower Roadmap to Recovery Crises scope Implications and risks identified in the assessment.

Adaptability to the new normal Financial health of the airlines sector Political Distraction • High costs involved with the adaptation of a • Post-September 30th reality once CARES Act aid • The politization of health measures (masks and healthier and safer environment. conditions and service obligations terminate. social distancing). • Major carriers anticipating substantial furloughs. • National and local November election

A second wave: local and national “twindemic” Cruising industry vulnerability • Originally expected in Q4, as colder weather kicks off • Uncertainty and financial stability Natural (Atmospheric) Circumstances in the US and is Flu season. • Heavily active hurricane season approaching to the Adaptability to the new normal September historic activity peak. • 13 systems thus far; 9 named storms and 4 Supply and demand imbalance Innovation halt hurricanes • Expenses surpassing revenues. • Constraints in capital (CAPEX) to develop innovation • Continuous seismic activity. • High cost of maintaining property and retaining in products and services. personnel. Locals perception about tourism Consumer sentiment State of the tourism infrastructure • Apathy toward visitors due to the “stigma” on • The spike in COVID-19 cases in the US has caused • Foreclosures and businesses shutdown tourists as virus spreaders. many consumers to lose their willingness to resume regular activities, indicating a delay in economic State of the crises in the U.S. recovery. • Puerto Rico’s recovery is largely dependent on the • How quickly the industry will recover is largely health crisis containment and economic recovery of dependent on the consumer’s willingness to fly. mainland U.S.

The wellbeing of the Human capital State of the tourism infrastructure • Unemployment levels spiking • Foreclosures and businesses shutdown • 32-42% of COVID-induced layoffs will be permanent1 • Skills and Acumen preservation

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

• 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.

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 Strategy Puerto Rico tourism sector gradual business resumption stages and milestones per period.

Preparing for Containment Reopening Reopening Ramp Up Recover March – May* May – July* Late Summer* Fall* Winter Season*

*Moving targets due to the uncertainty of the health crisis. Phased Recovery Strategy

Containment Reactivation Recovery March - October October - December December – Spring 2022

Internal Tourism Soft - External Reopening Lockdown Soft Internal Cruising Resumes Reopening November 1 First Executive Order Tourism Q1 2021 March 16 Reopening October 1 Full External Tourism Meetings and Conventions September’s New Reopening Resumes Executive Order December 1 Q2 2021 Phased Recovery Strategy

Containment March - October • 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.

End of Existing Soft Internal • Continue to execute the available economic stimulus packages to: Executive Order Tourism September 11 Reopening a) Offer immediate direct income support to workforce

September’s New b) b) Provide emergency liquidity for businesses to stay open Executive Order • Soft-Internal Tourism Reopening Phased Recovery Strategy Reactivation • Resume demand generating efforts and boost competitiveness • Internal Tourism Resumption: September 25th October - December • 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. Internal Tourism Soft - External Reopening Reopening November 1 October 1 Full External Tourism Reopening December 1 Phased Recovery Strategy

Reactivation • Develop and execute an educational campaign to revert perception about tourists October - December 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.

Internal Tourism Soft - External Reopening Reopening November 1 October 1 Full External Tourism Reopening • Milestone event to mark the beginning of the reopening phase for the destination. December 1 Phased Recovery Strategy Recovery December – Spring 2022 • Secure the resumption of the cruise industry. • Prepare the destination to the meetings and conventions activity resumption.

Cruising Resumes Q1 2021 Meetings and Conventions Resumes Q2 2021 Puerto Rico Tourism Update: State of the crises, outlook and road map to recovery

Thank You