Submit your questions in the Q&A box below All presentation materials will be available on OutlookForum.com Webinar will begin shortly Wednesday, April 14 Around the Globe Series: Spotlight on Mexico Alex Pace CEO, Global Marketing & Sales MEXICO- RESILIANT MARKET PLANING AND PAYING FOR FUTURE TRAVEL Heather Huckeba Teresa Solis Director of Research Director for Tourism and Visit California Regional Development Deloitte S - Latam Mexico Research Heather Huckeba Public To what degree are cases increasing, stable or falling in the International Market? To what degree Health have vaccinations been distributed? Are there travel restrictions due to public health imposed Crisis either by the International Market, or by the USA towards that Market? Do the overall macro-economic conditions within the International Market favor resumption of Economic travel? Forecasts will rely heavily on these inputs (expected GDP, currency exchange rates, etc.) to Crisis predict growth in International travel. Consumer What are the consumer attitudes and behaviors relative to traveling in general, and to the USA Sentiment and to California in particular? Local consumer sentiment could influence a country to either out- perform or under-perform forecast expectations. CALIFORNIA TOURISM Is California ready to welcome back visitors? PRODUCT READINESS Do consumers feel that California is ready to welcome visitors back? International Spend Forecast and Economic Rate of Recovery 2019 2020 2021 2022 2023 2024 2025 2020 2021 2022 2023 2024 2025 Total $28,137 $5,293 $9,022 $15,687 $21,704 $26,657 $30,046 19 32 56 77 95 107 Mexico $4,256 $1,028 $1,922 $2,914 $3,673 $4,231 $4,468 24 45 68 86 99 105 Land $3,389 $684 $1,469 $2,245 $2,838 $3,276 $3,465 20 43 66 84 97 102 Air $866 $344 $453 $669 $835 $955 $1,003 40 52 77 96 110 116 China $4,015 $431 $934 $1,939 $3,054 $3,958 $4,456 11 23 48 76 99 111 Canada $3,163 $694 $1,370 $2,365 $2,957 $3,334 $3,520 22 43 75 93 105 111 United Kingdom $1,423 $216 $433 $802 $1,148 $1,384 $1,528 15 30 56 81 97 107 Japan $1,369 $281 $520 $892 $1,142 $1,247 $1,326 21 38 65 83 91 97 Australia $1,288 $211 $456 $844 $1,108 $1,275 $1,412 16 35 65 86 99 110 France $1,276 $177 $414 $764 $1,053 $1,200 $1,294 14 32 60 83 94 101 South Korea $1,233 $327 $529 $829 $1,081 $1,255 $1,419 26 43 67 88 102 115 India $1,167 $258 $423 $685 $894 $1,020 $1,154 22 36 59 77 87 99 Germany $934 $116 $215 $442 $686 $881 $985 12 23 47 73 94 105 Middle East $770 $226 $287 $510 $639 $684 $707 29 37 66 83 89 92 Scandinavia $661 $118 $225 $380 $488 $576 $682 18 34 58 74 87 103 Italy $471 $43 $95 $205 $308 $384 $466 9 20 43 65 82 99 Brazil $445 $79 $146 $230 $310 $373 $416 18 33 52 70 84 93 Heat map color-coding is applied vertically for each year to Heat map color-coding is applied across all countries and all show highest value/lower value share of spend each year. years to indicate expectations for faster vs. slower recovery rate. Source: Visit California Research / Tourism Economics – April 2021 Forecast COVID-19 Cases & Deaths Public Health Tests Per 1,000 1,163 627 -- 757 -- -- 615 184 862 77 45 156 1,912 Tests 14.3 5250.4 -- 16.5 -- 13.7 9.0 10.4 16.8 18.9 4.1 62.8 258.7 Per Case Public Vaccination Share and Rate Health Time to Reach 75% 3 mos 2.1 yrs 11 mos 6 mos 16 mos 8 mos 7 mos 15 mos 9 mos 5.1 yrs 18 mos 6.4 yrs 5 mos Consumer Intent to Travel Internationally Sentiment (Next 12 Months) 76% 57% 57% 52% 47% 43% 41% 37% 35% 33% 10% India China Mexico UK Brazil Germany France Canada Australia South Korea Japan Source: Brand USA / Engine / ORC (March 2021) International Airlift to California by Market • The chart shows international non-stop seats to California by market for the current month and year-over-year comparison. Non-Resident Arrivals at CA Ports of Entries • The chart shows non-resident arrivals at California Ports of Entry by market for the current month and year-over-year comparison. What do Mexico and India have in common? Airlift from Mexico to CA New testing requirement 4.6% Non-resident arrivals from Mexico to CA New testing requirement Visit California April 2021 Mexican Economy Mexico´s GDP annual performance in 2020 (%) Mexico´s GDP annual performance, 2020 Sciences Health Telecom Food & Beverages Energy Financial services Mining Services Retail Manufacturing Construction Tourism © 2021 Deloitte Asesoría Financiera, S.C. Brand USA 25 Mexico´s economy in 2020 and 2021 Our forecast is that the Mexican economy will expand 4.1% this year. The sectors linked to exports will grow significantly, but those associated with the domestic market will remain weak. Gross Domestic Product (GDP % Annual variation) Approval of new Economic Stimulus Package in the USA Better than expected performance in first two months of 2021 RISKS: Deeper affectation| in industrial production Continued deterioration of investment climate A third wave of Covid-19 with higher fatality than previous ones Increase in gloBal risks © 2021 Deloitte Asesoría Financiera, S.C. Brand USA 27 The way back to travel Mexicans as International Travelers Mexican tourists abroad International travel by Mexican nationals residents in the country, which had decreased in expenditure -15% in 2019 compared to the previous year, hit a record low in 2020 with a decrease in travelers in -61.63%. Mexican tourists abroad 2020 vs 2019 2019 2020 % Var Total Visitors 75 million 33 million -55.29 International Tourists 17 million 6 million -61.63 Inbound Tourists 10 million 3 million -67.70 Border Tourists 6 million 3 million -51.90 Excursionists 57 million 26 million -53.33 Total expenditure 8 , 931 million USD 3, 235 billion USD -63.78 Average spending 118.59 96.07 -18.98 Source: Banco de México 2020. © 2021 Deloitte Asesoría Financiera, S.C. Brand USA 33 Anxiety Index Despite the high level of health and financial concerns by the Mexican population, Deloitte´s Global Consumer Anxiety showed Mexico in the seventh lowest record in our measurement for March 31st, 2021. Methodology The global anxiety index is calculated by aggregating responses by respondents by country to the question “I am more anxious tan last week?” and taking the difference between the percentage users responding “agree” or “strongly agree” and the percentage of users responding with “disagree” or “strongly disagree”. A positive percentage indicates that in aggregate, respondents are more anxious than last week, and a negative, less anxious. *Net Anxiety = (% Agree) - (% Disagree) Source: Deloitte State of the Consumer Tracker, 2021. © 2021 Deloitte Asesoría Financiera, S.C. Brand USA 36 Consumer Travel Sentiment According to the survey on March 31st Mexicans concerns refer more to health than economic issues, though these are considerably higher if compared with US. Mexico USA Source: Deloitte State of the Consumer Tracker, 2021. © 2021 Deloitte Asesoría Financiera, S.C. Brand USA 37 Consumer Travel Sentiment Maybe surprisingly, Mexican younger travelers and seniors have a higher degree of confidence in air travel and staying at hotels. 55+ 35 - 54 18 - 34 © 2021 Deloitte Asesoría Financiera, S.C. Brand USA 38 Travel Plans While all segments are increasing their travel planning, it calls the attention to observe the interest of younger generation in international travel, rail and cruise experiences, of which there is almost no offer in Mexico. 55+ 35 - 54 18 - 34 © 2021 Deloitte Asesoría Financiera, S.C. Brand USA 39 Qualitative findings • Mexicans long for travel, particularly the international kind, which maintains an aspirational status. • Mexican international travelers in middle-high and high income households have started to plan for holidays as a result of the gradual recovery of confidence, due to the availability of vaccination programs, gradually in Mexico and rapidly in the USA. • There may be a transitional period for Mexican travelers to regain confidence in participating in high density venues: shopping, cruises and sporting events. • Corporations may restrict Business travel due to risk concerns in the short term, as well as cost-cutting and carbon emission targets in the mid-term. • Home Office, Online Learning, Telemedicine and Digital commerce advanced sharply as result of Covid- 19. These changes open opportunities to develop new high value travel experiences. • Projected expectations regarding the exchange rate of the Mexican peso during 2021 will encourage the continuation of shopping activities during international travel. © 2021 Deloitte Asesoría Financiera, S.C. Brand USA 40 Conclusions Social distancing and mobility restrictions have actually increased the psychological allure of international travel. Nevertheless, travel decision factors include the perception of risk to be infected by Covid-19 during 01 travel, the potential of plan disruptions and unexpected additional costs. The interdependence of Mexican and US economies have caused goods and persons mobility to continue flowing despite Covid-19. Despite the huge fall in tourism flows, the Mexican market was closer to the 02 behavior of local markets in the US than to long-haul source markets. Leisure travel, outdoor activities and e-shopping will be particularly attractive to Mexican travelers in 2021. Business travel, Entertainment venues, busy retail malls, casinos, cruises and youth camps are likely to 03 gradually start to recover only in the second half of the year or, most likely, 2022.