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.