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1 CONFIDENTIAL FOR INTERNAL USE ONLY

AAA Independence Day 2011

Travel Forecast

Prepared for:

Prepared for:

American Automobile Association

June 22, 2011

1 IHS Global Insight / AAA Independence Day 2011 Forecast

Table of ContentsHoliday Forecast Methodology: A Brief Overview ............................................................................................................. 2

Actual Travel Forecast ..................................................................................................................................................... 2

Holiday Traveler Profile .................................................................................................................................................... 2

Independence Day Holiday Travel Period......................................................................................................................... 2

Actual Travel Forecast for Independence Day Holiday, 2011 ............................................................................................ 3

Travel by Mode of Transportation..................................................................................................................................... 5

Travel by Region: East North Central ............................................................................................................................... 8

Travel by Region: East South Central............................................................................................................................. 10

Travel by Region: Middle Atlantic ................................................................................................................................... 12

Travel by Region: Mountain............................................................................................................................................ 14

Travel by Region: New England ..................................................................................................................................... 16

Travel by Region: Pacific................................................................................................................................................ 18

Travel by Region: South Atlantic .................................................................................................................................... 20

Travel by Region: West North Central ............................................................................................................................ 22

Travel by Region: West South Central............................................................................................................................ 24

Independence Day 2011 Holiday Traveler Profile Survey Methodology........................................................................... 26

Change in the Average Independence Day Traveler....................................................................................................... 27

Travel Distances ............................................................................................................................................................ 28

Total Spending............................................................................................................................................................... 29

Party Composition.......................................................................................................................................................... 31

Activities ........................................................................................................................................................................ 32

The Impact of Rising Fuel Prices on Travel Plans........................................................................................................... 34

Addendum 1: US Economic Forecast Summary: The Soft Patch Just Got Softer .......................................................... 35

Addendum 2: US Regional Forecast Summary: Gradual Recovery Underway .............................................................. 37

Regional definitions used throughout the report:

East North Central (ENC): IL, IN, MI, OH, WI

East South Central (ESC): AL, KY, MS, TN

Middle Atlantic (MATL): NJ, NY, PA

Mountain (MTN): AZ, CO, ID, MT, NM, NV, UT, WY

New England (NENG): CT, MA, ME, NH, RI, VT

South Atlantic (SATL): DC, DE, FL, GA, MD, NC, SC, VA, WV

West South Central (WSC): AR, LA, OK, TX

West North Central (WNC): IA, KS, MN, MO, ND, NE, SD

Pacific (PAC): AK, CA, HI, OR, WA


Holiday Forecast Methodology: A Brief Overview

The AAA Independence Day 2011 Travel Forecast combines information from several sources to provide a prospective

assessment of likely travel patterns for the upcoming holiday weekend. This report is comprised of two key components –

the actual travel forecast and the holiday traveler profile. The actual travel forecast is based on economic conditions while

the holiday traveler profile is developed employing survey data on travel behaviors. This approach provides the most

comprehensive and detailed understanding of holiday travel both at the national and regional levels. In addition, the

regional travel sections in this report have been enhanced to incorporate information about the state of the local tourism

industries throughout the U.S.

Actual Travel Forecast

In cooperation with AAA, IHS Global Insight developed an approach to forecast actual domestic travel volumes. The

economic variables used to forecast travel for the current holiday are leveraged from IHS Global Insight. These data

include macroeconomic drivers such as employment, output, household net worth, asset prices including stock indices,

interest rates, housing market indicators and variables related to travel and tourism, including prices of gasoline, airline

travel and hotel stays.

The historical travel volume estimates come from the ongoing travel survey database of D.K. Shifflet & Associates, the

premier source of U.S. resident travel volume and behavior. DKSA interviews over 50,000 U.S. households per month

tracking trip incidence, party composition, traveler behavior, and spending…all after the trips have been taken.

Actual travel is forecasted by person-trips, where a person-trip is defined as a trip that involves travel of 50 miles or more

away from home. In particular, AAA and IHS Global Insight forecasts total US holiday travel, travel by mode of

transportation, and travel by US census region. The Actual Travel Forecast presented in this report was prepared the

week of June 13.

Holiday Traveler Profile

The Holiday Traveler Profile is a survey of intended travel behaviors related to party composition, travel distances, trip

expenditures and vacation activities conducted by D.K. Shifflet & Associates. The initial survey includes 1,350

households out of which only the respondents intending to travel during the designated holiday are interviewed in detail

about their anticipated trips. For Independence Day 2011, 337 respondents were interviewed in detail about their intended

trips. The survey was in the field from Thursday, May 26 to Monday, May 30, 2011.

Independence Day Holiday Travel Period

For purposes of this forecast the Independence Day holiday travel period is defined as trips that include travel of 50 miles

or more away from home during the five-day period from Thursday, June 30 to Monday, July 4.


Actual Travel Forecast for Independence Day Holiday, 2011

AAA and IHS Global Insight project 39 million travelers will journey at least 50 miles from home this upcoming

Independence Day holiday weekend. This represents a decrease of 2.5 percent relative to the 40 million trips that

occurred over the holiday period in 2010.

CHART 1

INDEPENDENCE DAY TRAVELERS 2001-2011

TOTAL PERSON-TRIPS*

* 2001-2010 represent actual travel results. 2011 is a forecast.

Travel during the Independence Day holiday has shown significant variability during the past five years, as the overall

economic downturn and recovery have contributed to large swings in holiday travelers. Looking forward to 2011, the

economic picture hasn’t changed dramatically from 2010 and while many economic indicators are slightly more positive

than last year, a significant spike in gas prices will result in small reduction in total travelers during the weekend.

While third quarter projections do not show significant growth for the major economic indicators compared to the third

quarter of 2010, real gross domestic product is forecast to be up 2.7%, household net worth is expected to be up nearly 2

percent, while the unemployment rate should be 8.8 percent for the quarter, down from 9.6 percent a year ago. Despite

those positive factors, real disposable income is forecast to be just 1.2 percent higher than last year, highlighting how

stagnant wages and price increases have cut into consumer spending.

Gas prices remain a significant headwind for not only the overall economy, but also for the travel and tourism industry.

While almost 25 cents less than the nearly $4 a gallon peak of early May, the national average price for regular gasoline is

still more than a dollar higher than at this time last year. The 37 percent year-over-year increase in prices far outweighs

any short-term benefit that the recent five percent decline in prices over the last several weeks might provide.

Without significant momentum from the broader economic outlook, the effect of continued high gas prices will result in a

lower volume of travelers this holiday than last year. This is supported by the expectations of travelers for this holiday,

who were surveyed on the travel intentions for the Independence Day holiday weekend by D.K. Shifflet & Associates. The

results of the survey of those intending to travel is that not only are fewer respondents expected to travel this year

compared to last year, but on the whole they are expected to travel a shorter distance than in 2010. All of which is

37.2

41.4 40.6 40.4 39.934.3

42.3

37.8

29.8

40.0 39.0

-30%

-15%

0%

15%

30%

45%

0

10

20

30

40

50

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011F

(perc

en

tch

an

ge)

(mil

lio

n)

Person Trips (left) % change (right)


consistent with our expectations. However, one notable result from the survey is that the expected spend during the

holiday is higher than that of 2010. Higher gas prices are certainly a contributing factor, as are changing demographics of

the holiday traveler towards those with higher incomes. However, while there may be fewer travelers this Independence

Day, those who are making plans are going to make the most of it.

During the Independence Day holiday weekend, 39 million people are expected to travel. While this number is 2.5

percent lower than in 2010, it will still be the third-highest travel volume in the past six years. The number of travelers in

2011 is similar to the annual volumes from the four-year stretch of 2002 through 2005. Coming off of the 2010 growth in

travelers, which was the highest year-over-year growth seen in the past ten years, this highlights the resiliency of the

summer traveler in the face of significantly higher gas prices and an economy that is struggling to gain momentum.


“Last year was a road trip, so it cost

less but we were worn out by the end

of the trip. This year's spending

towards the flight will be worth it”

New England Respondent

Travel by Mode of Transportation

AAA and IHS Global Insight expect that nearly 33 million Americans are expected to travel by automobile during the

Independence Day holiday weekend, which is down almost three percent in comparison to 2010. With the monthly

average price of self-serve regular gasoline, thus far, at $3.74 in June, travelers are dealing with a 37 percent hike in fuel

costs since last year that are outweighing some of the benefits of convenience and flexibility that automobile travel

provides. While gas prices have eased slightly since their peak in May, the extra dollar per gallon drivers face will be

enough to keep the numbers of travelers on the road from topping last year’s numbers, which were the second-highest

seen in the past five years.

Air travel is expected to make up nearly eight percent of total travel share,

up from the seven percent in 2010. The number of air travelers is expected

to be just over three million, up more than nine percent from 2010. This

continues the rebound in air travel that began in 2010, which was coming

on the heels of two significantly down years in air travel that resulted in

2009 air travelers totaling less than half of the pre-recession volume in

2007. Rising fuel costs are also having an effect on air travel, as the

increasing cost of travel by car is making air travel a more viable option in

some cases despite a rise in air prices that started in the spring.

Other modes of travel (trains, watercraft, multi-modal travel) will comprise the remaining eight percent of the total person-

trips.

Air8%

Automobile

84%

Other8%

Chart 2Distribution of US Independence Day Travelers

by Mode of Transportation


CHART 3

INDEPENDENCE DAY HOLIDAY TRAVELERS 2001-2011

AUTOMOBILE PERSON-TRIPS*

*2001-2010 represent actual travel results. 2011 is a forecast.

CHART 4

INDEPENDENCE DAY HOLIDAY TRAVELERS 2001-2011

AIR PERSON-TRIPS*

+

*2001-2010 represent actual travel results. 2011 is a forecast.

30.9

35.1 34.4 34.0 35.129.8

35.133.4

26.7

33.7 32.8

-30%

-15%

0%

15%

30%

45%

0

10

20

30

40

50

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011F

(perc

en

tch

an

ge)

(mil

lio

n)

Person-Trips (left) % change (right)

3.68

3.142.88

3.58

2.15

2.67 3.08

1.93

1.44

2.753.02

-50%

-20%

10%

40%

70%

100%

0.0

1.0

2.0

3.0

4.0

5.0

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011F

(perc

en

tch

an

ge)

(mil

lio

n)

Person-Trips (left) % change (right)


CHART 5

AVERAGE JUNE* GASOLINE PRICES

NATIONAL AVERAGE PER GALLON REGULAR UNLEADED

2001-2011

Source: AAA Fuel Gauge Report

* June gasoline prices are emphasized because prices observed several weeks prior to the holiday are likely to influence holiday travelplanning, while actual holiday prices are typically less influential.

** 2011 gasoline price is a June average through June 15, 2011.

1.641.39 1.50

1.982.14

2.87 3.06

4.04

2.64 2.73

3.74

$0.00

$1.00

$2.00

$3.00

$4.00

$5.00

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011**


Travel by Region: East North Central

Travel from the East North Central region (ENC) is expected to decline by 2.5 percent this Independence Day holiday

period relative to last year. The 6.73 million person-trips from the ENC region represent 14.4 percent of the population,

which is higher than the national frequency expected to travel (12.4 percent). Payrolls in the ENC region have been

trending upward lately, but high gasoline and commodity prices have softened consumer spending growth and squeezed

consumers’ wallets. This year’s commodity-price-driven jump in inflation coupled with a modest increase in real

disposable income supports a moderate decrease for travel this holiday. Travel by airplane from the ENC region is

expected to increase by 10.2 percent compared to Independence Day 2010, while travel by automobile is expected to fall

by 2.5 percent.

TABLE 1A

2011 INDEPENDENCE DAY TRAVEL FORECAST – EAST NORTH CENTRAL REGION AND UNITED STATES

The ENC economy has been trending upward lately, but key segments of the regional economy remain sluggish. The

housing market showed dim signs of life

in 2010, as total starts increased by

3,000. However, losses in construction

employment and declines in single-

family unit prices counteracted the

positive momentum in housing starts.

Relative to the third quarter of 2010, the

median price of new single family homes

in the East North Central is forecasted to

have decreased by 0.4 percent. This is

the lowest rate of price depreciation

among the nine census regions, mainly

because the housing bubble burst in this

region before it did across the rest of the

country. Faster employment growth

remains the missing component to a

revival in the ENC housing market.

Independence Day Travel

YOY %

Change Level

% of

Population

YOY %

Change Level

% of

Population

Total (millions of person trips) -2.5% 6.73 14.4% -2.5% 39.01 12.4%

Automobile (millions of person trips) -2.5% 5.90 12.7% -2.8% 32.81 10.4%

Air (millions of person trips) 10.2% 0.29 0.6% 9.7% 3.02 1.0%

Economy (2011Q3)

YOY %

Change Level

YOY %

Change Level

Unemployment Rate (YOY Change) -1.2% 8.9% -0.8% 8.8%

Real Gross Product ($, bn)* 2.5% 1,837 2.7% 13,634

Median Price, New Single Family Home ($, thn) -0.4% 193 -3.0% 215

East North Central United States

-1.2%

2.5%

-0.4%

1.6%

-0.8%

2.7%

-3.0%

1.9%

-4%

-3%

-2%

-1%

0%

1%

2%

3%

4%

UenmploymentRate

Real Gross StateProduct

Median PriceNew Single

Family Home

Real DisposablePersonal Income

CHART 1A

YOY GROWTH, 2010Q3 TO 2011Q3EAST NORTH CENTRAL AND UNITED STATES

ENC Total US

Source: IHS Global Insight


The ENC region has the fifth-highest unemployment rate of all census regions at about 8.9 percent. The rate has come

down from last year when it rested above 10.1 percent. Michigan has the fifth-highest unemployment rate in the country

among states, as the state was victim to large contractions in manufacturing jobs. However, the manufacturing industry is

slowly adding jobs in the ENC region and since one year ago the region has seen its unemployment rate drop 1.2 percent

(Chart 1A). The national unemployment rate sits at about 8.8 percent and has declined almost a full percentage point (0.8

percent decline) since the third quarter of 2010.

Output in the ENC region is also increasing and is anticipated to grow 2.5 percent in the third quarter of 2011. This level

of growth slightly trails national GDP growth (2.7 percent). Real disposable personal income growth is also slightly trailing

the nation and is projected to rise 1.6 percent as compared to one year ago.

While the regional economy is now recovering and

realizing positive growth in many economic indicators,

the price of gasoline is near an all-time high. From

2010 to 2011, the price of gasoline in the ENC region

increased by 44.9 percent. The resulting increase in

fuel costs is expected to suppress holiday travel as

consumers are forced to cut back on discretionary

spending.

In general, because the majority of travel occurs by

automobile and remains within regional borders,

regional travel ties closely with the output generated

by that region's leisure and hospitality industry. The

following information provides a look into the state of

the local tourism industry in the East North Central

region

The tourism industry in the ENC region, as measured

by leisure and hospitality industry output (the value of goods and services produced by the leisure and hospitality

industry), has been growing on an annualized basis since the beginning of 2010. Output has been rising as travel

volumes to the ENC region strengthen and the amount of money spent by travelers also increases.

In the third quarter of 2011, total output from the leisure and hospitality industry in the ENC region is expected to see

annual growth of 2.2 percent. Chart 1B demonstrates that the tourism industry recovery in the ENC region has lagged the

recent national tourism recovery, although the gap has

narrowed significantly since the third quarter of 2010.

Of all ENC states, Ohio is expected to see the lead

year-over-year growth in tourism output in the third

quarter of 2011 (3.3 percent), with Illinois trailing

behind with 3.0 percent annual growth. Michigan is

expected to see the smallest growth (0.5 percent) over

this period.

The composition of tourism industry output by state in

the ENC region is fairly balanced (Chart 1C). With

Chicago being one of the top cities for tourism in the

U.S., it is no surprise that Illinois accounts for nearly

one-third of tourism output in the East North Central

region. Wisconsin accounts for the smallest share,

with just 11 percent of the total.

-3%

-2%

-1%

0%

1%

2%

3%

4%

2010Q3 2010Q4 2011Q1 2011Q2 2011Q3

CHART 1BREAL GROSS PRODUCT -- LESIURE &

HOSPITALITYYOY % CHANGE

ENC Total US


IL, 33.3%

IN, 14.3%MI, 18.8%

OH, 22.5%

WI, 11.1%

CHART 1CREAL GROSS PRODUCT -- LESIURE & HOSPITALITY

EAST NORTH CENTRAL REGION MAKEUP BY STATE,2011Q3



Travel by Region: East South CentralTravel from the East South Central (ESC) region this Independence Day holiday is projected to fall by 2.8 percent

compared to Independence Day 2010. The regional travel forecast for the ESC region is consistent with the 2.5 percent

decrease that is forecasted for the national population this upcoming holiday period. Automobile travel is expected to

decrease three percent and airplane travel is anticipated to rise 9.5 percent. Total person-trips in the East South Central

region are projected to account for 10.3 percent of the population, which is about two percent lower than the expected

nationwide frequency (12.4 percent).

TABLE 2A

2011 INDEPENDENCE DAY TRAVEL FORECAST – EAST SOUTH CENTRAL REGION AND UNITED STATES

The ESC economy is not firing on all

cylinders, but it is recovering from

remarkable losses suffered during the

downturn. The East South Central

labor market is finally seeing some

consistent growth with gains in five of

the previous six months, resulting in

59,000 new net jobs. Central to the

turnaround has been stabilization in

the region's large and highly cyclical

trade and manufacturing sectors,

which combine for 33 percent of ESC

employment, the highest

concentration out of the nine census

regions. The good news is that

manufacturing employment posted

annual gains in the first two quarters

of 2011 and is expected to do the same in the third quarter of this year. Overall, job gains in the ESC region last year

were far from robust, but they were a welcome departure from the severe losses experienced over the second half of

2008 and all of 2009. Employment gains, albeit small, in multiple sectors over the past year have helped the

unemployment rate in the ESC region decline by about 0.3 percent.

A key reason the expansion in the ESC region remains so sluggish is there has been, as of yet, no sustained upturn in

housing activity. Regional home prices in the ESC region have continued to contract. Compared to this time last year,


YOY %

Change Level

% of

Population

YOY %

Change Level

% of

Population




Economy (2011Q3)

YOY %

Change Level

YOY %

Change Level


Real Gross Product ($, bn)* 2.6% 628 2.7% 13,634


East South Central United States

-0.3%

2.6% 1.9%

-0.8%

2.7% 1.9%

-20%

-15%

-10%

-5%

0%

5%

UenmploymentRate



Family Home


CHART 2A

YOY GROWTH, 2010Q3 TO 2011Q3EAST SOUTH CENTRAL AND UNITED STATES

ESC Total US

Source: IHSGlobal InsightSource: IHSGlobal Insight

-15.1%

-3.0%


the median price of a new single family home in the ESC region is expected to have decreased 15.1 percent in the third

quarter of 2011. This is the fourth highest rate of price depreciation among the nine census regions. Improved

employment growth has not yet triggered the revival in household formation required to revive demand and work through

the backlog in excess supply.

Real disposable personal income in the ESC region is projected to have increased 1.9 percent relative to one year ago.

This is the same expected growth in real personal income for the nation as a whole. Real gross state product in the ESC

region is expected to have increased 2.6 percent annually since the third quarter of 2011, slightly lower than GDP growth

for the nation as a whole (2.7 percent).

While increases in real disposable personal income and real gross state product support an increase in regional

consumer spending, the rising price of gasoline is expected to restrain the demand for holiday travel. In 2011, the price of

gasoline in the ESC region increased by 40.8 percent. The effect of this monumental price increase is expected to restrict

the number of total person-trips and to reduce total

spending on leisure and hospitality.

In addition to the originating travel forecast of person-

trips from the East South Central region, the following

information provides a look into the state of the local

tourism industry in the region. In general, because

the majority of travel occurs by automobile and

remains within regional borders, regional travel ties

closely with the output generated by that region's

leisure and hospitality industry.

The ESC region's leisure and hospitality industry

output (the value of goods and services produced by

the leisure and hospitality industry) has been growing

on an annualized basis since the third quarter of

2010 as seen in chart 2B. In the fourth quarter of

2010, the ESC region’s tourism industry growth

surpassed that of the nation as a whole, but has since lost ground as the price of gasoline has continued to rise. Still, in

the third quarter of 2011, total output from the leisure and hospitality industry in the ESC region is projected to rise 2.4

percent annually, higher than tourism industry

growth for the nation as a whole (2.2 percent).

The share of tourism industry output in the

ESC region is comparatively even. Tennessee

is the largest contributing state, making up

42.4 percent of ESC's tourism output, while

Alabama, Kentucky and Mississippi make up

the remaining three-fifths of the total.

-3%

-2%

-1%

0%

1%

2%

3%

4%

2010Q3 2010Q4 2011Q1 2011Q2 2011Q3



ESC Total US


AL, 19.0%

KY, 20.9%

MS, 17.7%

TN, 42.4%


EAST SOUTH CENTRAL REGION MAKEUP BY STATE,2011Q3



Travel by Region: Middle Atlantic

Independence Day holiday travel originating from the Middle Atlantic (MATL) region is forecasted to decline relative to the

holiday period in 2010. The recovery in the Middle Atlantic region is underway, but the combination of higher gasoline

and food prices has contributed to the recent softening in real consumer spending that supports a decrease in travel

demand over the upcoming holiday. The forecast for travel by automobile from the Middle Atlantic region is expected to

decrease by 3.1 percent, with air travel forecasted to increase by 9.5 percent. About 13 percent of the regional population

is expected to journey at least 50 miles from home this holiday, a slightly higher frequency than is expected nationwide

(12.4 percent).

TABLE 3A

2011 INDEPENDENCE DAY TRAVEL FORECAST – MIDDLE ATLANTIC REGION AND UNITED STATES

The recovery in the Middle Atlantic region

continues at a slow but steady pace. In

the first quarter of 2011, the MATL region

averaged 0.7 percent job growth,

compared to the first quarter of 2010. The

stabilization in the manufacturing and

finance sectors has been a big factor in

improving the regional economy, while the

retail and services industries have driven

the recovery. The unemployment rate in

the region has fallen 0.7 percentage

points from last year, and sits below the

national unemployment rate of 8.8

percent. Real gross state product for the

region is anticipated to slightly trail the

growth in national output over the past

year with the Middle Atlantic region and

the U.S. expected to realize 2.4 percent and 2.7 percent annual growth in output since the third quarter of 2010,

respectively.


YOY %

Change Level

% of

Population

YOY %

Change Level

% of

Population




Economy (2011Q3)

YOY %

Change Level

YOY %

Change Level




Middle Atlantic United States

-0.7%

2.4%

-2.7%

1.5%

-0.8%

2.7%

-3.0%

1.9%

-4%

-1%

2%

5%

8%

11%

UenmploymentRate



Family Home


CHART 3A

YOY GROWTH, 2010Q3 TO 2011Q3MIDDLE ATLANTIC AND UNITED STATES

MATL Total US



The Middle Atlantic regional housing market remains a noticeable weakness on the heels of a recovery. New housing

construction is stuck near historical lows in almost every state, and the declining trend in prices is expected to have

worsened in the Middle Atlantic region. With prices falling, buyers have a strong incentive to wait despite the low level of

interest rates. As a result, the median price of new single-family homes in the Middle Atlantic is forecasted to have

decreased by 2.7 percent relative to the third quarter of 2010.

Although the economic picture in the Middle Atlantic region is expected to have improved, the combination of this year’s

commodity-price-driven jump in inflation and surging gasoline prices (39.8 percent increase in 2011) has softened real

consumer spending growth in the MATL region. The impact of this consumer slowdown will be to reduce the demand for

regional holiday travel.

In addition to the originating travel forecast of

person-trips from the Middle Atlantic region, the

following information provides a look into the state

of the local tourism industry in the region. In

general, because the majority of travel occurs by

automobile and remains within regional borders,

regional travel ties closely with the output

generated by that region's leisure and hospitality

industry.

The national tourism industry has witnessed

leisure and hospitality output (the value of goods

and services produced by the leisure and

hospitality industry) expand on an annualized basis

since the first quarter of 2010. Chart 3B shows

that the Middle Atlantic region's tourism output has

been increasing since the third quarter of 2010 and

has been recovering faster than the nation over the

last year.

The Middle Atlantic region's output increased 1.9 percent in the third quarter of 2010, the steepest increase among the

nine census regions. In the third quarter of 2011, the leisure and hospitality industry in the Middle Atlantic is anticipated to

generate 2.4 percent higher output than in the

third quarter of 2010. The relative nationwide

figure for comparison is 2.2 percent annual

growth in tourism output.

New York State contributes 56.8 percent of the

Middle Atlantic region's tourism output, which

is no surprise with New York City as one of the

top tourist destinations in the country. New

York State is also growing faster than

Pennsylvania and New Jersey in terms of

tourism output and is expected to increase its

tourism output by 2.9 percent since one year

ago. However, Pennsylvania and New Jersey

do contribute large amounts to the Middle

Atlantic regional tourism output, accounting for

23.5 and 19.7 percent, respectively.

-3%

-2%

-1%

0%

1%

2%

3%

4%

5%

2010Q3 2010Q4 2011Q1 2011Q2 2011Q3

CHART 3BREAL GROSS PRODUCT -- LESIURE & HOSPITALITY

YOY % CHANGE

MATL Total US


NJ, 19.7%

NY, 56.8%

PA, 23.5%


MIDDLE ATLANTIC REGION MAKEUP BY STATE, 2011Q3



Travel by Region: Mountain

The holiday forecast for the Mountain region calls for a 2.4 percent decrease in travel this Independence Day holiday

versus 2010. The Mountain region's economic recovery is coming to life slowly but gasoline and commodity price hikes

have taken their toll on consumer spending. The regional cost of gasoline is more than 38 percent higher than it was this

time last year, which will produce a net decrease in holiday travel demand. Automobile travel is anticipated to fall by 2.7

percent, relative to Independence Day 2010, while air travel is forecasted to increase 9.9 percent. The reduction in total

person-trips in this region is slightly lower than the nation as a whole (2.5 percent) while the percentage of travelers from

the Mountain region expected to travel (13.2 percent) is higher than the projected national frequency (12.4 percent).

TABLE 4A

2011 INDEPENDENCE DAY TRAVEL FORECAST – MOUNTAIN REGION AND UNITED STATES

Economic change in the Mountain region is moving in the right direction, albeit slowly. Total employment in the Mountain

region is expected to increase by 1.1% in 2011, after declining by 5.9% and 1.5% in 2009 and 2010, respectively. Idaho

and Utah are forecasted to lead the region in rate of job growth in 2011, with New Mexico and Nevada showing the

slowest job growth. All states in the

region should show positive job growth

in 2011 after none showed a positive

annual gain in 2010.

Unemployment in the Mountain region

is higher than the national figure of 8.8

percent, but it has seen a decrease of

0.5 percent over the past year. The

regional labor market should benefit

from the current high prices for virtually

all commodities with its large

concentration of natural resource and

mining jobs. This improved

employment picture is expected to

produce growth in real disposable

personal income of 2.1 percent

compared to one year ago


YOY %

Change Level

% of

Population

YOY %

Change Level

% of

Population




Economy (2011Q3)

YOY %

Change Level

YOY %

Change Level




Mountain United States

-0.5%

3.0%2.1%

-0.8%

2.7%

-3.0%

1.9%

-5%

-3%

-1%

1%

3%

5%

7%

UenmploymentRate



Family Home


CHART 4A

YOY GROWTH, 2010Q3 TO 2011Q3MOUNTAIN AND UNITED STATES

MTN Total US


-14.0%


When taken together with the recent surge in commodity prices, however, the 2.1 percent increase in real disposable

income in the Mountain region is rather modest. Relative to this time last year, regional gasoline prices in the Mountain

states have increased by more than 38 percent. IHS Global Insight expects the hike in fuel prices to soften real consumer

spending and counteract the increase in regional holiday travel demand spurred by increases in real personal income,

state output and the reduction in regional unemployment.

In addition to the originating travel forecast of person-trips from the Mountain region, the following information provides a

look into the state of the local tourism industry in the region. In general, because the majority of travel occurs by

automobile and remains within regional borders, regional travel ties closely with the output generated by that region's


The tourism industry in the Mountain region, as

measured by leisure and hospitality industry real

gross product (the value of goods and services

produced by the leisure and hospitality industry), has

been growing since the third quarter of 2010.

Moreover, the Mountain region's tourism industry has

been outperforming the nation's tourism recovery for

over that same time span.

In the third quarter of 2011, the Mountain region's

total output from the leisure and hospitality industry is

anticipated to rise by 2.5 percent relative to one year

ago (the national tourism output growth rate for

comparison is 2.2 percent).

Nevada is the Mountain state expected to see the

largest increase in tourism output growth (4.0

percent) since the third quarter of 2010. New Mexico

is at the other end of the spectrum with a slight

0.3 percent increase in tourism output since last

year; New Mexico has the second lowest growth

rate in terms of tourism output over the past year

among all fifty states.

The Mountain region is comprised of states such

as Nevada, Colorado and Arizona, which

contribute large amounts of tourism output to the

regional total. Nevada, which includes the major

tourist city of Las Vegas, contributes 39 percent

of the Mountain region's tourism output. The

remainder of the states account for much smaller

shares of the Mountain region's tourism output.

-3%

-2%

-1%

0%

1%

2%

3%

4%

2010Q3 2010Q4 2011Q1 2011Q2 2011Q3



MTN Total US


AZ, 19.8%

CO, 19.9%

ID, 3.4%

MT, 3.2%NM, 5.2%

NV, 39.0%

UT, 7.0% WY, 2.5%


MOUNTAIN REGION MAKEUP BY STATE, 2011Q3



Travel by Region: New England

Travel originating from the New England region is expected to fall by 2.7 percent over the Independence Day holiday

relative to 2010. Automobile travel from the New England region is projected to decline by 3.2 percent compared to the

holiday last year, while the forecast is for air travel to increase by 9.3 percent. The forecast indicates that 13.4 percent of

the New England population will travel this upcoming Independence Day holiday period, which is higher than the national

frequency (12.4 percent).

TABLE 5A

2011 INDEPENDENCE DAY TRAVEL FORECAST – NEW ENGLAND REGION AND UNITED STATES

The New England regional economy has

continued to make process along the road to

recovery. The unemployment rate sits at 7.9

percent, which is significantly lower than the

national unemployment rate (8.8 percent).

Gross state product is expanding slowly on a

quarter-over-quarter basis throughout 2011

and on an annual basis (2.5 percent) in the

third quarter of 2011. Real disposable

personal income is forecasted to increase by

1.1 percent in the third quarter of 2011

compared to last year which is lower than the

increase expected nationwide but is still

noticeable progress.

Despite marked progress in the region’s labor

market, the residential real estate market in

New England continues to struggle, although the region is seeing less of a decline than the national market. Housing

starts are down nearly 17 percent as of the first quarter in 2011 compared to 2009. A number of factors may explain why

housing has still suffered despite the upturn in the labor markets, but falling home prices is a primary culprit. The median

price of new single family homes is projected to decrease on an annual basis in the third quarter of 2011 by 0.6 percent.

With the third lowest unemployment rate among the nine census regions and a forecasted increase of 1.1 percent in real

disposable income, the economic drivers suggest that an increase in 2011 holiday travel is to be expected in the New


YOY %

Change Level

% of

Population

YOY %

Change Level

% of

Population




Economy (2011Q3)

YOY %

Change Level

YOY %

Change Level




New England United States

-0.5%

2.5%

-0.6%

1.1%

-0.8%

2.7%

-3.0%

1.9%

-4%

-3%

-2%

-1%

0%

1%

2%

3%

UenmploymentRate



Family Home


CHART 5A

YOY GROWTH, 2010Q3 TO 2011Q3NEW ENGLAND AND UNITED STATES

NENG Total US



England region. However, the price of gasoline in New England increased by 31.7 percent in 2011 compared to this time

last year. The rising price of gasoline is expected to soften real consumer spending in the New England region and lead

to a reduction in the number of total person-trips relative to last year’s holiday period.

In addition to the originating travel forecast of person-trips from the New England region, the following information

provides a look into the state of the local tourism industry in the region. In general, because the majority of travel occurs

by automobile and remains within regional borders, regional travel ties closely with the output generated by that region's


New England's tourism industry has seen growth

recovery over the past year that is on par with the

national tourism industry. In the third quarter of

2010, the New England region’s tourism industry

growth was equal to that of the nation as a whole

(1.4 percent). However, as the price of gasoline has

continued to rise, IHS Global Insight expects growth

in leisure and hospitality industry output (the value of

goods and services produced by the leisure and

hospitality industry) in New England (1.6 percent) to

again trail that of the nation as a whole (2.2 percent).

Massachusetts is the largest contributor of tourism

output to the New England economy, comprising

48.3 percent of tourism output in New England.

Vermont and New Hampshire, although smaller than

Massachusetts in terms of tourism output, are

expected to also see the largest growth in tourism

output since the third quarter of 2010 with 2.7

percent and 2.6 percent growth, respectively.

Connecticut is second to Massachusetts in terms of

tourism output in New England, but the state is

forecasted to grow just 1.2 percent annually in the

third quarter of 2011. This represents the smallest

year-over-year growth of the New England states.

-3%

-2%

-1%

0%

1%

2%

3%

4%

2010Q3 2010Q4 2011Q1 2011Q2 2011Q3



NENG Total US


CT, 22.2%

MA, 48.3%

ME, 8.2%

NH, 9.1%

RI, 6.9%VT, 5.3%


NEWENGLAND REGION MAKEUP BY STATE, 2011Q3



Travel by Region: Pacific

The Pacific region is projected to see Independence Day holiday travel fall by 2.3 percent since last year. The regional

economy is realizing positive growth in some economic indicators, but a more than 31 percent annual increase in the

regional price of gasoline is expected to reduce the demand for regional holiday travel. The forecast calls for air travel to

increase 9.5 percent and automobile travel to decrease 3.1 percent compared to last year as consumers respond to the

commodity-price-driven jump in inflation. The forecast projects 12.2 percent of Pacific region residents to travel this

holiday, which is just below the percentage of the national population expected to travel (12.4 percent). The Pacific region

typically sees a higher than average share of its population expected to travel by air, and this is indeed the case for

Independence Day (1.5 percent compared to the national figure of 1.0 percent).

TABLE 6A

2011 INDEPENDENCE DAY TRAVEL FORECAST – PACIFIC REGION AND UNITED STATES

The economic recovery in the Pacific region is continuing to show progress in 2011. Total employment increased by 2.9

percent in the first quarter, far exceeding the national average (1.3 percent). While the unemployment rate in the Pacific

region is still the highest of any census

region at 10.9 percent, this represents an

anticipated drop of 0.8 percent since the

third quarter of 2010.

Many economic indicators in the Pacific

region are realizing positive growth. Real

gross state product for the Pacific region

has increased over the past year as the

regional economy recuperates. Growth in

regional output is expected to rise 3.2

percent in the third quarter of 2011 as

compared to the previous year. This growth

is expected to be somewhat higher than the

national forecasted gross domestic product

growth of 2.7 percent. Regional real

disposable personal income is also

expected to have grown relative to last year.


YOY %

Change Level

% of

Population

YOY %

Change Level

% of

Population




Economy (2011Q3)

YOY %

Change Level

YOY %

Change Level




Pacific United States

-0.8%

3.2%

2.1%

-0.8%

2.7%

-3.0%

1.9%

-8%

-6%

-4%

-2%

0%

2%

4%

UenmploymentRate



Family Home


CHART 6A

YOY GROWTH, 2010Q3 TO 2011Q3PACIFIC AND UNITED STATESPAC Total US


-16.1%


Real disposable personal income in the Pacific region is projected to be 2.1 percent higher than the third quarter of 2010,

which is slightly higher than the national growth figure of 1.9 percent.

After suffering through one of the most significant housing market declines of all of the census regions, sliding house

prices continue to undermine the Pacific region’s recovery. In the third quarter of 2011, the median price of new single

family homes is expected to have decreased by an annual rate of 16.1 percent.

With employment trending upward and both real disposable income and real gross state output showing marked

improvement in 2011, the economic drivers suggest that holiday travel will increase in the Pacific region relative to last

year. However, a more than 31 percent annual increase in the regional price of gasoline is expected to reduce the

demand for regional holiday travel as consumer budgets are squeezed by rising commodity prices.


person-trips from the Pacific region, the following


tourism industry in the region. In general, because

the majority of travel occurs by automobile and

remains within regional borders, regional travel ties

closely with the output generated by that region's


In terms of growth in total leisure and hospitality

output (the value of goods and services produced by

the leisure and hospitality industry), the Pacific

region had been trailing the national recovery until

the fourth quarter of 2010. In the fourth quarter of

2010 the Pacific region began to grow faster than the

nation and that is expected to continue through the

third quarter of 2011.

The Pacific region's leisure and hospitality output is

projected to rise 2.8 percent since the third quarter

of 2010, and the comparable national figure is 2.2

percent. Washington lags the rest of the Pacific

states in growth recovery, expected to grow 2.1

percent since last year. The remaining four states

are all expected to grow more than two and a half

percent during this period.

The composition of tourism industry output by state

in the Pacific region is dominated by California,

which accounts for 75.8 percent of tourism output in

the region. Washington is the second largest state,

contributing 11.7 percent of tourism output to the

Pacific region.

-3%

-2%

-1%

0%

1%

2%

3%

4%

5%

2010Q3 2010Q4 2011Q1 2011Q2 2011Q3



PAC Total US


AK, 1.4%

CA, 75.8%

HI, 5.8%

OR, 5.2% WA,11.7%


PACIFIC REGION MAKEUP BY STATE, 2011Q3



Travel by Region: South Atlantic

Independence Day holiday travel from the South Atlantic (SATL) region is forecasted to decline by 2.6 percent this holiday

period as compared to 2010. The South Atlantic regional economy is rebounding slowly, and travel demand is expected

to be stimulated by economic improvement, but the rising price of fuel will lead to a reduction in regional travel when

compared to last year. Air travel is projected to rise by 9.7 percent, while automobile travel is expected to fall by 2.9

percent. The forecast calls for 11.4 percent of the regional population to travel this Independence Day holiday period.

TABLE 7A

2011 INDEPENDENCE DAY TRAVEL FORECAST – SOUTH ATLANTIC REGION AND UNITED STATES

After three years of declines, the economy is

moving in a positive direction for the South

Atlantic region. In the third quarter of 2011,

the unemployment rate is expected to have

fallen by 0.6 percent after remaining

relatively stable over the past year at about

10 percent. Output in the SATL region is

also increasing and is anticipated to grow 2.8

percent in the third quarter of 2011. This

level of growth is in line with national GDP

(2.7 percent).

The badly damaged housing market in the

SATL region has been the lone sore spot in

an otherwise promising recovery. The

median price of new single family homes is

projected to decrease on an annual basis in

the third quarter of 2011 by 19.3 percent.

Real disposable personal income tends to play a more direct role in travelers' decisions, and it is expected to grow by 2.0

percent in the third quarter of 2011 relative to one year ago. This is on par with national real disposable personal income

growth (1.9 percent).


YOY %

Change Level

% of

Population

YOY %

Change Level

% of

Population




Economy (2011Q3)

YOY %

Change Level

YOY %

Change Level




South Atlantic United States

-0.6%

2.8%2.0%

-0.8%

2.7%

-3.0%

1.9%

-8%

-6%

-4%

-2%

0%

2%

4%

UenmploymentRate



Family Home


CHART 7A

YOY GROWTH, 2010Q3 TO 2011Q3SOUTH ATLANTIC AND UNITED STATESSATL Total US


-19.3%


When taken together with the recent surge in commodity prices, however, the two percent increase in real disposable

income in the SATL region is potentially overstated. Compared to this time last year, gasoline prices in the surrounding

South Atlantic states have increased by more than 38 percent. The recent spike in fuel prices is expected to soften real

consumer spending and counteract the increase in regional holiday travel spurred by growth in real personal income and

state output and the reduction in regional unemployment.


person-trips from the South Atlantic region, the

following information provides a look into the state of

the local tourism industry in the region. In general,

because the majority of travel occurs by automobile

and remains within regional borders, regional travel

ties closely with the output generated by that

region's leisure and hospitality industry.

The tourism industry in the SATL region, as

measured by leisure and hospitality industry output

(the value of goods and services produced by the

leisure and hospitality industry), has been growing

since the third quarter of 2010, but has been lagging

the national tourism recovery. In the third quarter of

2011, total output from the leisure and hospitality

industry in the SATL region is expected to grow by

1.8 percent from the year prior (compared to 2.2

nationwide).

Florida contributes over 40 percent of tourism

output to the South Atlantic tourism industry with

its draw of high profile beaches and amusement

parks. Georgia contributes the second-largest

share of tourism output with Atlanta being one of

the top cities for tourism in the U.S. Other states

such as Maryland and Virginia contribute just

about 10 percent each to the region's tourism

industry, but Washington, D.C. is seeing the

largest year-over-year tourism output growth in

the SATL region (2.7 percent).

-3%

-2%

-1%

0%

1%

2%

3%

4%

2010Q3 2010Q4 2011Q1 2011Q2 2011Q3



SATL Total US


DC, 3.8%

DE, 1.4%

FL, 40.5%

GA,13.2%

MD, 9.3%

NC, 11.9%

SC, 6.6%VA,

11.2%

WV, 2.2%


SOUTH ATLANTIC REGION MAKEUP BY STATE, 2011Q3



Travel by Region: West North Central

The West North Central (WNC) region is projected to see a 2.6 percent decrease in Independence Day holiday travel this

year compared to 2010. The regional economy is recovering gradually, mirroring the national trend, but historically-high

fuel prices are tightening travel budgets in the WNC region. Air travel in the region is expected to grow 10.8 percent,

while automobile travel is expected to decline two percent versus Independence Day last year. A much higher-than-

average share of the West North Central population is expected to travel this holiday (15.3 percent), which is typical of the

WNC region based on its widespread geographic region.

TABLE 8A

2011 INDEPENDENCE DAY TRAVEL FORECAST – WEST NORTH CENTRAL REGION AND UNITED STATES

The West North Central region is poised for a turnaround this year. After gaining only 0.1 percent in total employment in

the first three months of 2011, 1.6 percent growth in employment is expected in the second quarter. With an

unemployment rate of roughly 6.8 percent,

the WNC region boasts the lowest

unemployment rate of any region. The

regional economy is waiting for the labor

market to catch up, but keeping in

perspective that job losses were mounting

one year ago, the WNC region is in a better

position this year.

In general, the regional economy is moving

in step with the nation. Real gross state

product in the WNC region is expected to

have increased 2.6 percent annually in the

third quarter of 2011, which is comparable

to the projected growth of 2.7 percent in

real gross domestic product. Real

disposable personal income is also

anticipated to rise; growth of 1.8 percent on

an annual basis is expected in this category in the third quarter of this year, which is slightly lower than the increase

expected nationally (1.9 percent).


YOY %

Change Level

% of

Population

YOY %

Change Level

% of

Population




Economy (2011Q3)

YOY %

Change Level

YOY %

Change Level




West North Central United States

-0.4%

2.6%

-1.9%

1.8%

-0.8%

2.7%

-3.0%

1.9%

-4%

-3%

-2%

-1%

0%

1%

2%

3%

4%

UenmploymentRate


Median PriceNew Single Family

Home


CHART 8A

YOY GROWTH, 2010Q3 TO 2011Q3WEST NORTH CENTRAL AND UNITED STATES

WNC Total US



The housing market in the WNC remains extremely depressed like that of the rest of the nation. The median price of new

single family homes is forecasted to decrease 1.9 percent on a year-over-year basis in the third quarter of 2011. This rate

of price depreciation is far less than in the broader U.S (3.0 percent).

Although the economic picture in the WNC region is

forecasted to have improved in the third quarter of 2011,

the effect of rising gasoline prices (44.9 percent annual

growth) will counteract the impact of these economic

drivers. The increase in the regional fuel price is

expected to reduce the number of total person-trips in

the West North Central region, compared to last year. In

addition to the originating travel forecast of person-trips

from the West North Central region, the following


tourism industry in the region. In general, because the

majority of travel occurs by automobile and remains

within regional borders, regional travel ties closely with

the output generated by that region's leisure and

hospitality industry.

The WNC's tourism industry has been recovering since

the first quarter of 2010, as measured by leisure and

hospitality industry output (the value of goods and services produced by the leisure and hospitality industry). Regional

output growth has been underperforming the national recovery since the third quarter of 2010.

In the third quarter of 2011, total output from the leisure and hospitality industry in the WNC region is expected to see

annual growth of 1.7 percent, which is lower than growth predicted nationally over this period (2.2 percent).

North Dakota is expected to see the largest annual growth (3.5 percent) in tourism output since the third quarter of 2010

as compared to the rest of the WNC states.

Missouri and Minnesota are the largest contributors

to tourism output in the West North Central region,

followed by Iowa, Kansas, Nebraska, South Dakota

and North Dakota.

-3%

-2%

-1%

0%

1%

2%

3%

4%

2010Q3 2010Q4 2011Q1 2011Q2 2011Q3



WNC Total US


IA, 13.2%

KS, 11.5%

MN, 27.7%

MO, 32.6%

ND, 3.2%

NE, 7.3%SD, 4.5%


WEST NORTH CENTRAL REGION MAKEUP BY STATE,2011Q3



Travel by Region: West South Central

The Independence Day holiday travel forecast calls for a decline of 2.1 percent in West South Central (WSC) regional

holiday travel relative to last year. Travel is expected to decline with high gas and commodity prices holding back

demand on the heels of regional economic recovery. Air travel is expected to rise by 10 percent while automobile travel is

expected to decrease by 2.6 percent relative to Independence Day 2010. About 10.1 percent of the WSC population is

predicted to travel this holiday period, which is less than the estimated national frequency of 12.4 percent.

TABLE 9A

2011 INDEPENDENCE DAY TRAVEL FORECAST – WEST SOUTH CENTRAL REGION AND UNITED STATES

The West South Central region has led the

country in recovery, expanding faster and

adding more jobs than any other region. In

the third quarter of 2011, employment in the

WSC region is anticipated to increase at an

annual rate of 2.1%. The unemployment

rate in the region has remained around 7.8

percent for the past year. The WSC

maintains the second-lowest unemployment

rate of all nine census regions. All four

WSC states ended the year 2010 with job

gains, and all except Louisiana have

continued to grow in early 2011,

Real gross state product growth over the

past four quarters in the WSC region is

expected to exceed national output growth

(3.6 percent versus 2.7 percent). Moreover,

real disposable personal income is forecasted to increase by 3.0 percent in the third quarter compared to 2010 (the

relative nationwide figure for comparison is 1.9 percent annual growth in real disposable personal income.


YOY %

Change Level

% of

Population

YOY %

Change Level

% of

Population




Economy (2011Q3)

YOY %

Change Level

YOY %

Change Level




West South Central United States

-0.2%

3.6%3.0%

-0.8%

2.7%

-3.0%

1.9%

-8%

-6%

-4%

-2%

0%

2%

4%

UenmploymentRate


Median PriceNew Single Family

Home


CHART 9A

YOY GROWTH, 2010Q3 TO 2011Q3WEST SOUTH CENTRAL AND UNITED STATES

WSC Total US


-16.4%


The housing market has been up and down, but expectations for the median price of new single-family homes in the third

quarter of the year are negative in following with the rest of the nation. The region's median price of new single-family

homes is projected to decrease by 16.4 percent in the third quarter of 2011 relative to the previous year.

While the WSC region is experiencing aneconomic recovery, the rising price of gasoline is expected to reduce the

demand for holiday travel. In 2011, the price of gasoline in the WSC region increased by 36.6 percent. The effect of this

price increase is expected to reduce the number of total person-trips relative to Independence Day 2010.

In addition to the originating travel forecast of person-trips from the West South Central region, the following information

provides a look into the state of the local tourism industry in the region. In general, because the majority of travel occurs

by automobile and remains within regional borders, regional travel ties closely with the output generated by that region's


The WSC recovery in real gross state product from

the leisure and hospitality industry (the value of

goods and services produced by the leisure and

hospitality industry) commenced in the third quarter

of 2010. After trailing the nation in terms of annual

tourism output growth over the past year, the WSC

region is expected to witness annual tourism output

growth that is equal to that of the nation as a whole

in the third quarter of 2011 (2.2 percent).

Texas accounts for nearly three quarters of tourism

output in the West South Central region. Arkansas

accounts for the smallest share with just 5.5 percent

of tourism industry output in the WSC region.-3%

-2%

-1%

0%

1%

2%

3%

4%

5%

2010Q3 2010Q4 2011Q1 2011Q2 2011Q3



WSC Total US


AR, 5.5%

LA, 14.9%

OK, 8.6%

TX, 71.0%


WEST SOUTH CENTRAL REGION MAKEUP BY STATE,2011Q3



Independence Day 2011 Holiday Traveler Profile Survey Methodology

The Holiday Traveler Profile study, conducted by D.K. Shifflet and Associates, surveys holiday travelers regarding their

planned holiday travel including planned party composition, travel distances, trip expenditures and activity participation.

For the Independence Day 2011 holiday, the survey was in the field from May 26-30, 2011, and 337 respondents were

interviewed in detail about their holiday plans. This panel was designed to yield survey responses that are statistically

significant at the national level.1 Although we report detail for individual census regions, the reader should be aware that

the census region-level results are not generally statistically significant and margins of error are generally large.

Those census region-level responses that do differ significantly from national responses are flagged with asterisks, as in

the example below from our Memorial Day 2010 report:

Party Composition Memorial Day 2010 (example)

* Indicates estimate differs from estimate for Total US with 99 percent confidence or greater.

Source: D.K. Shifflet & Associates, Ltd.

Numbers may not add due to rounding.

Note that the percent of New England respondents planning to travel as a party of "Two Adults" is listed as "10 percent*".

As the footnote below the table states, the asterisk indicates that the New England estimate differs from the Total US

estimate with 99 percent confidence or greater. In other words, if the actual proportion of New England residents traveling

in a party of two adults were the same as the actual proportion of US residents traveling in a party of two adults, there

would be a one percent or lower chance of seeing a difference as large as the difference observed in this survey (10

percent for New England versus 33 percent for Total US). Therefore, it is unlikely—though not impossible—that this

difference is reflective of random sampling error.

Although we will focus primarily on national responses, our commentary on the Holiday Traveler Profile tables may call

out certain regional responses of interest. When we discuss a regional response, we will generally avoid highlighting

responses with large margins of error. For example, the margin of error for the share of New England residents travelling

in parties with two adults is +/-14 percent, meaning that the share could be as high as 24 percent. As such, we would

either avoid highlighting that result or provide the margin of error to the reader for appropriate statistical context.2

1Specifically, the margin of error for each binary response question is, at most, about 6 percentage points, with 99%

confidence.

2 This +/-14% margin of error reflects a 99% confidence interval based on a t-distribution.

One Adult Two Adults

Three or

more Adults FamiliesTotal US 21% 33% 19% 27%New England 11% 10%* 26% 53%Middle Atlantic 7% 19% 15% 60%*South Atlantic 30% 33% 23% 14%East North Central 39% 17% 23% 21%East South Central 27% 23% 15% 35%West North Central 6%* 17% 28% 49%West South Central 16% 39% 20% 24%Mountain 26% 52% 10% 13%Pacific 13% 67%* 14% 6%*


Change in the Average Independence Day Traveler

The economic outlook, as described previously in the report, shows some signs of growth but only minor improvements in

the critical travel-related areas of consumer spending and disposable income. As was the case when looking at

expectations for Memorial Day 2011 holiday travel, the significant rise in gasoline prices in comparison to last year is

putting pressure on consumer spending. The amount spent each month on gasoline is unlikely to vary dramatically across

household income groups, but the share of total spending on fuel is obviously going to be much higher for those with

lower household incomes and, as a result, those families will have less money available for travel. The chart below

highlights this by showing the change in income distribution of those intending to travel this holiday taken from the Holiday

Traveler Profile survey. Those households making less than $50k are expected to make up 33 percent of all travelers this

year, down from 41 percent in 2010. Conversely, households making over $100k will make up 35 percent of holiday

travelers this year versus 26 percent in 2010.

CHART 10

HOUSEHOLD INCOME DISTRIBUTION OF INTENDING TRAVELERS

INDEPENDENCE DAY 2010 AND 2011 HOLIDAYS

TOTAL US

41%

33%

26%

33% 32%35%

0%

10%

20%

30%

40%

50%

Under $50k $50k - $100k Over $100k

2010 2011


“'We went camping last year,

and this year we will travel to

the East Coast."

Pacific Respondent

Travel Distances

Holiday Traveler Profile respondents plan to travel an average of 573 miles round-trip this upcoming Independence Day

holiday weekend. This is down slightly from last year when the expected travel distance was 617 miles. This decrease

comes despite an expected rise in travelers by air compared to last year. However, we see a drop in the share of long

haul trips of more than 700 miles (26 percent vs. 30 a year ago) and an increase in shorter trips between 251 and 700

miles (39 percent vs. 31 percent last year). It appears that while the share of air travel is going up this holiday, the

distance travelled by air is dropping. These shorter flights may seem more affordable in comparison to the rising fuel

costs associated with long road trips. While the share of trips less than 150 miles is not expected to change much from

2010, the trips from 151-250 miles round trip, which are likely to be via automobile, are expected to make up 15 percent of

all trips, down from 18 percent. The drop in these longer drives is very likely due to significantly higher gas prices

compared to a year ago.

At the regional level, there is significant variance for expected trip length, with travelers

based in the Middle Atlantic expected to take the shortest average trips at just 303

miles, as over 50 percent of travelers from the region expect their trips to be less than

250 miles. Those in the West South Central region are expected to take trips nearly

three times as long, averaging 871 miles. Not surprisingly, just 23 percent of travelers

from this region expect their trips to be less than 250 miles.

TABLE 11

EXPECTED ROUND-TRIP DISTANCE TRAVELED

INDEPENDENCE DAY 2011 HOLIDAY

TOTAL US AND BY REGION OF RESIDENCE

Measures of statistical confidence are not available for differences between regional and Total US average miles traveled.


Numbers may not sum due to rounding

50-150

miles

151-250

miles

251-400

miles

401-700

miles

701-1500

miles

Over 1500

miles

Average

Miles

Total US 20% 15% 18% 21% 16% 10% 573

New England 22% 37% 16% 11% 8% 5% 388

Middle Atlantic 36% 16% 18% 24% 2% 3% 303

South Atlantic 15% 15% 9% 36% 18% 7% 613

East North Central 36% 15% 20% 10% 16% 4% 414

East South Central 21% 8% 16% 22% 15% 18% 727

West North Central 11% 10% 26% 30% 10% 12% 586

West South Central 5% 18% 25% 17% 17% 17% 871

Mountain 16% 10% 10% 23% 16% 25% 751

Pacific 15% 11% 22% 17% 26% 9% 602

(Percentage of Travelers)


“'I have been planning for a long

holiday with my family for some

time and 4th of July seems to be

the perfect weekend…”

Middle Atlantic Respondent

Total Spending

Intending travelers expect to spend $807 this upcoming holiday period, a 25

percent increase compared to the expected median spending of intending travelers

in 2010. The increase comes without any significant changes in the expected

share of spending within the major categories, so travelers are expecting to spend

more money across the board this year in comparison to last year. A shift towards

travelers with higher median income, as described previously, is likely part of the

reason for the increase in expected spending.

Total spending can be roughly grouped into the following categories – transportation spending and spending occurring at

the travel destination including lodging, food and beverages, shopping, and entertainment. Share of spending on fuel is

expected to be 13 percent, only slightly above the 12 percent expected last year. However, when combined with the

overall increase in expected total budget, actual dollars spent on fuel is expected to be 39 percent higher than last year,

which tracks right in line with the rise in gas prices compared to last year. On-site spending categories are expected to

make up 75 cents of the holiday dollar, up from 71 cents in 2010.

TABLE 12

MEDIAN EXPECTED TOTAL TRIP SPENDING AND AVERAGE EXPECTED SHARES OF BUDGET BY CATEGORY





Total US

New

England

Middle

Atlantic

East

North

Central

West

North

Central

South

Atlantic

East

South

Central

West

South

Central Mountain Pacific

Median Total $807 $420 $701 $545 $569 $1,036 $679 $1,102 $1,041 $782

Fuel Transportation 13% 13% 14% 13% 15% 9% 19% 21% 14% 10%

Other Transportation 12% 7% 3% 13% 15% 10% 6% 10% 8% 19%

Accommodations 21% 27% 22% 22% 22% 28% 18% 18% 25% 13%

Food & Beverages 22% 24% 28% 22% 25% 23% 20% 16% 24% 21%

Shopping 15% 14% 13% 13% 10% 14% 19% 17% 12% 17%

Entertainment/Recreation 13% 13% 16% 12% 10% 12% 12% 11% 13% 15%Other 5% 2% 4% 5% 2% 6% 5% 7% 4% 5%


Chart 12 illustrates the average expected shares of budget by category for 2011. Chart 13 shows the change in expected

budget distribution from Independence Day 2010 to Independence Day 2011.

CHART 12

US INDEPENDENCE DAY 2011 HOLIDAY SPENDING

DISTRIBUTION BY CATEGORY


CHART 13

TOTAL US INDEPENDENCE DAY HOLIDAY SPENDING

CHANGE IN BUDGET SHARE FROM 2010 TO 2011


Fuel13%

OtherTransp.

12%

Lodging21%Food &

Bev.22%

Shopping14%

Ent/Rec13%

Other5%

1.3%

-5.3%

2.1%

0.7%1.2%

-0.5%

0.5%

-6%

-4%

-2%

0%

2%

4%

Fuel OtherTransp.

Lodging Food &Bev.

Shopping Ent/Rec Other


Party Composition

The compositions of expected travel parties for the Independence Day holiday weekend is expected to be predominantly

two adults or families, with travel shares of those groupings at 35 percent and 33 percent, respectively. The share of two

adults is consistent with 2010, but family share is up from 28 percent last year. More significantly, those traveling by

themselves are expected to make up 13 percent of all travelers this holiday, a major decline from the 32 percent of

intending travelers last year. Making up the remainder of this difference outside of families, is traveling parties of three or

more adults, which is expected to make up 19 percent of all travel parties, compared to just four percent in 2010.

.

TABLE 13

PARTY COMPOSITION



* Indicates estimate differs from estimate for Total US with 99 percent confidence or greater.



One Adult Two Adults

Three or

more Adults Families

Total US 13% 35% 19% 33%

New England 17% 34% 15% 34%

Middle Atlantic 4%* 36% 34% 25%

South Atlantic 14% 23% 24% 39%

East North Central 7% 42% 25% 26%

East South Central 14% 19% 11% 56%*

West North Central 13% 41% 9% 37%

West South Central 15% 39% 6% 40%

Mountain 28% 34% 17% 20%

Pacific 14% 40% 17% 30%


“'I stayed in town last year. I've

never been to Charleston so it will

be a new trip with new things to

buy and participate in”

ENC Respondent

Activities

The Independence Day holiday involves spending time with friends and family

as well as enjoying the outdoors. Independence Day, similar to Memorial Day,

is marked by a show of patriotism that is highlighted by fireworks and parades

and other celebrations. As such, visiting with friends and family, going to the

beach and sightseeing are all among the top five activities travelers intend to

pursue during the holiday. Other top activities include dining (62%), shopping

(50%) and nightlife (26%).

TABLE 14

MAIN PURPOSE OF TRIP





Total

US

New

England

Middle

Atlantic

East

North

Central

West

North

Central

South

Atlantic

East

South

Central

West

South

Central Mountain PacificDining 62% 48% 51% 66% 51% 68% 60% 42%* 60% 82%*Visit with friends/relatives 57% 65% 59% 46% 67% 48% 63% 62% 60% 63%Shopping 50% 42% 34% 45% 41% 66% 47% 50% 40% 60%Go to beach/waterfront 46% 49% 56% 40% 37% 52% 38% 35% 24% 61%Touring/sightseeing 36% 28% 26% 34% 26% 41% 32% 28% 35% 50%Night Life 26% 21% 34% 22% 19% 30% 15% 13% 21% 40%Attend festivals, craft fairs, etc. 26% 25% 18% 27% 23% 39% 23% 13% 29% 27%Hike, bike, etc. 25% 19% 17% 21% 24% 27% 14% 22% 26% 38%Visit historic sites 23% 17% 22% 29% 9%* 24% 25% 33% 13% 24%Visit national or state parks 22% 21% 18% 21% 15% 17% 21% 21% 25% 30%Visit museums, art exhibits, etc. 18% 30% 12% 19% 12% 6% 23% 20% 22% 25%Boat/sail 18% 20% 21% 25% 22% 15% 23% 17% 6%* 12%Visit theme/amusement parks 16% 13% 14% 23% 12% 23% 0% 23% 3% 13%Watch sporting events 15% 15% 12% 13% 9% 27% 12% 6% 16% 13%Attend concerts, plays, dance, etc. 14% 20% 9% 20% 13% 4% 12% 15% 15% 20%Gambling 13% 8% 8% 12% 8% 20% 8% 16% 15% 12%Observe & conserve nature/culture -

Eco-Travel10% 18% 7% 4% 7% 12% 3% 10% 3% 16%

Hunt, fish, etc. 9% 2% 9% 6% 17% 5% 13% 9% 14% 9%Play golf 7% 6% 8% 14% 4% 6% 5% 2% 11% 6%Look at real estate 6% 8% 7% 2% 4% 4% 7% 2% 9% 11%Attend show: boat, car, home, etc. 6% 6% 6% 7% 1% 3% 15% 17% 1% 2%Spa 6% 4% 4% 0% 1% 8% 5% 6% 2% 12%Compete in sporting events 4% 0% 5% 0% 0% 0% 2% 14% 0% 8%Snow ski, snow board, other

snow/ice sports0% 0% 0% 0% 0% 0% 0% 0% 0% 0%

Other 7% 5% 10% 4% 3% 13% 9% 8% 2% 4%


As described previously, travelers are expecting to spend more this year than they did in 2010. As the table below

illustrates, there are clear differences in expected activities between now and 2010, most significantly might be that

travelers just plan on doing more this year, with increases in the vast majority of activities. Beyond the busier schedule,

some of the largest increases can be seen in activities where travelers will be expected to spend some money, such as

dining, shopping and watching sporting events. These changes are consistent with the demographic shift in travelers

towards those with higher incomes that was discussed previously.

Expected Primary Activities 2011 2010 VarianceDining 62% 57% 5%Visit with friends/relatives 57% 58% -1%Shopping 50% 45% 5%Go to beach/waterfront 46% 33% 13%Touring/sightseeing 36% 34% 2%Night Life 26% 27% -1%Attend festivals, craft fairs, etc. 26% 22% 4%Hike, bike, etc. 25% 19% 6%Visit historic sites 23% 19% 4%Visit national or state parks 22% 19% 3%Visit museums, art exhibits, etc. 18% 16% 2%Boat/sail 18% 11% 7%Visit theme/amusement parks 16% 14% 2%Watch sporting events 15% 7% 8%Attend concerts, plays, dance, etc. 14% 12% 2%Gambling 13% 12% 1%Observe & conserve nature/culture - Eco-Travel 10% 7% 3%Hunt, fish, etc. 9% 10% -1%Play golf 7% 9% -2%Look at real estate 6% 5% 1%Attend show: boat, car, home, etc. 6% 3% 3%Spa 6% 7% -1%Compete in sporting events 4% 2% 2%Snow ski, snow board, other snow/ice sports 0% 0% 0%Other 7% 7% 0%


The Impact of Rising Fuel Prices on Travel Plans

During the Memorial Day 2011 Holiday Forecast Report, intending travelers were asked about the impact of rising gas

prices on their holiday travel plans. With gas prices still near historic highs and more than a dollar per gallon greater than

last year, the question was repeated for those intending to travel during the Independence Day 2011 holiday.

As described previously, total travel is expected to

decline by 2.5 percent this holiday, compared to last

year, while travel by automobile is expected to decline

by less than three percent. Additionally, travelers are

expecting to take shorter trips compared to last year

while spending more money.

Despite those intentions, 56 percent of respondents

stated that the rising gas prices will have no impact on

their travel plans. Within the remaining 44 percent, 31 percent say they will economize in other areas of their trip, while

nine percent are expecting to take a shorter trip and four percent are planning to use a new travel mode.

CHART 14

TOTAL US INDEPENDENCE DAY HOLIDAY

IMPACT OF RISING FUEL PRICES

The impact on expected length of travel is consistent with responses to the specific length of travel question within the

survey. For those who feel it won’t impact their choices, those choices that have already been made clearly include an

increased travel budget in comparison to last year. Even those who do plan to economize in other areas are likely

working off of an already expanded budget plan in comparison to 2010.

Yes,newtravelmode

4%

Yes,economizeother areas

31%

Yes,shorter trip

9%

No impact56%

WILL THE RECENT INCREASE IN GASOLINE PRICES IMPACT YOUR

TRAVEL PLANS THIS INDEPENDENCE DAY HOLIDAY?:

YES, TRAVELING BY ANOTHER MODE OF TRANSPORTATION

YES, I WILL ECONOMIZE ON OTHER AREAS OF MY TRIP

YES, TAKING A SHORTER TRIP

NO IMPACT, TRAVELING AS I ORIGINALLY PLANNED



Addendum 1: US Economic Forecast Summary: The Soft Patch Just Got Softer

PUBLISHED 6/6/2011

Key economic indicators are flashing warning signs. The ISM survey indexes still show growth, though slower than

before, while May's employment report showed a sharp slowdown in private employment growth to just 83,000, after three

months close 200,000. With government payrolls steadily declining, total employment growth was just 54,000.

The evidence has been so soft that it now seems likely that second-quarter GDP growth (we expect 2.0%) will be

little different from the first (1.8%). We still believe that the current soft patch represents a bump in the road on a

prolonged and subdued recovery, rather than the precursor of a double dip. Pressures from rising commodity costs, plus

supply-chain disruptions from Japan's natural disaster and extreme weather domestically, have combined to slow the

economy's momentum. But downside risks have become more troubling, and our calendar-year forecasts for GDP

growth have been reduced to 2.5% for 2011 (from 2.7%) and 2.7% for 2012 (from 2.9%).

The first-quarter GDP report had several mitigating factors. There were a number of temporary forces restraining

growth, including unusually bad weather (which hurt construction) and a plunge in defense spending that will likely prove

temporary.

The second-quarter weakness is more troubling because of the loss in underlying momentum. That loss is being

compounded by the supply constraints caused by Japan's natural disaster that caused unit vehicle production to drop

12.6% month-on-month in April. The hit to domestic production is enough to shave 0.5–1.0 percentage point off second-

quarter growth. The saving grace is that growth will return once production ramps up again, a key reason why we expect

third-quarter GDP growth to bounce up to 3.8%.

The second half of the year remains the big question mark. Our growth forecast for the year is still heavily back-

loaded, with 3.5% growth (on average) expected for the second half of the year, after 1.9% growth in the first half. That

improvement rests on several factors, including the return to normal levels of production in the vehicles sector, a

flattening-out in nonresidential construction, and a temporary acceleration of business equipment spending to lock in full

expensing before depreciation allowances become less generous next year. The second-half improvement is also

conditional on the recent retreat in oil prices remaining in place, allowing gasoline prices to move below $3.50/gallon by

the fourth quarter.

Real consumer spending growth softened to 2.2% in the first quarter, from 4.0% in the fourth, and we expect an even

more anemic 1.3% increase in the second. Overall, we expect consumer spending growth of 2.5% in 2011, up from 1.7%

in 2010, but not a powerful driver of recovery.

The second-quarter consumer slowdown is almost entirely concentrated in the supply-constrained vehicles sector.

Excluding new vehicles, we expect second-quarter consumer spending growth to be 1.9%, still soft but little different from

2.0% in the first quarter. Consumers have been squeezed by this year's commodity-price-driven jump in inflation, which is

more than wiping out the benefit of the temporary payroll tax cut.

Faster employment growth has provided an offset, although the weak May payrolls report has cast doubt on how strong

that support will be in coming months. Our baseline forecast anticipates a revival in employment growth during the second

half of the year (at a pace averaging around 175,000 per month) and a gradual decline in the unemployment rate to 8.6%

at year-end.


A key reason the expansion remains so sluggish is that there has been, as yet, no sustained upturn in housing activity.

Improved employment growth has not yet triggered the revival in household formation required to revive demand and

work through the backlog of excess supply. The best that can be said is that home sales and housing starts are "bumping

along the bottom". And with prices falling, buyers have a strong incentive to wait, despite the low level of interest rates. As

a result, we have further delayed the housing upturn in our forecast. We expect housing starts of just 589,000 this year

(previously 630,000) and 838,000 in 2012 (previously 1.02 million). We expect prices to fall 8.0% over the course of 2011,

as measured by the FHFA purchase-only index.

Inflation has become more of a concern, but more for emerging markets than for the United States. A combination of

higher gasoline prices and food prices is pointing to CPI inflation of 3.0% this year, compared with 1.6% in 2010, although

with less pressure from oil and food we see CPI inflation falling back to 1.7% in 2012. We also have evidence of higher

core inflation, with some sellers feeling confident enough to pass on higher commodity costs. Crucially, though, we do not

see higher wage inflation, with the unemployment rate still at 9.1% and plenty of other potential workers not counted in the

labor force. Unless wage inflation accelerates, we see any pickup in core inflation as limited—but it has passed its low

point.

Crude Oil Prices: Don’t Expect Much More Relief. The earlier-than-expected retreat in oil prices during May was part of

the broader commodity price correction. Crude oil prices fell $9–10 per barrel from April levels, leaving Dated Brent at

$114 and West Texas Intermediate at $101 in May. Signs of weakening gasoline demand in the United States and easing

concerns about oil supply disruptions in the Middle East and North Africa region contributed to the price declines.

Further big price drops are unlikely. Global oil demand is projected to increase 1.5 million barrels per day (b/d) this year to

a new high of 89.2 million b/d, after a 2.7-million-b/d increase in 2010 as demand surged in the second-half of the year. As

a result, IHS's annual price forecasts are essentially unchanged, although the monthly pattern is a little different. Dated

Brent is expected to average $112 per barrel in 2011 and 2012 before rising to $115 in 2013. The price of West Texas

Intermediate crude oil is projected to average $101 per barrel this year, $104 in 2012, and $108 in 2013.


Addendum 2: US Regional Forecast Summary: Gradual Recovery Underway

PUBLISHED 4/1/2011

The U.S. recovery continues, and although now slowed by high energy costs, we expect that all states will still enjoy some

level of expansion and job growth in 2011. Payroll gains were widespread through the first quarter of this year. Private-

sector employment levels advanced in 43 states, including 24 at annual rates exceeding 3% and notably in formerly

lagging Michigan and Ohio. Gains in 2011 will be led by North Dakota, Vermont, and Texas and lag in Kansas, New

Jersey, and Georgia. In 2012, Colorado and Utah will join Texas at the top.

Northeast: Recent economic performance has been robust in Massachusetts but lagging badly in Connecticut and New

Jersey. Despite New York's role as epicenter of the financial crisis, that state is recovering well. The Northeast is currently

the best performing of the regions, with job levels in the first quarter of 2011 just 3.5% below their 2008 peak. We project

that peak to be reached again in the first quarter of 2013.

Midwest: Manufacturing's sharp rebound boosted the recent performance of Michigan, Ohio, and Indiana, but payrolls in

the region overall are still 5.5% below their 2007 peak. That peak will be regained in the second quarter of 2014.

South: Georgia and Maryland were slow out of the gate in 2011, but when they rebound, the region will be the fastest

growing from 2012 through 2015. The South's payrolls are still 4.9% below their 2008 employment peak, which we project

will be reached in the second quarter of 2013.

West: The West has suffered the steepest fall since 2007, and payrolls remain 7.3% shy of that peak now, with Arizona

and Nevada especially weak in the hangover from the housing bubble. It will be year-end 2014 before the region's

recovery is in that sense complete.


Over the first four months of the year, payrolls have expanded in every state except one: South Dakota. This is in stark

contrast to its neighbor, North Dakota, which continues to occupy the top spot, capitalizing on its oil deposits. Among large

states, Texas remains a juggernaut in job creation. Year-to-date, Texas has increased its payrolls by 254,400 jobs, led by

the professional and business services sectors, the sector to which Texas owes its success; the other positive factors

include the state's affordable housing market, relatively low costs of doing business, and a favorable tax environment.

April's job report is a good indication that the recovery is picking up steam, and that 2011 is the year for momentum-

building job growth, although some downside risks remain. Since the beginning of the year, only 37 states have added

jobs on average, indicating that a sizable number of states are still struggling. Construction remains in the doldrums, as

the housing market shows no signs of a pickup. The service and manufacturing sectors will continue to be the engine of

growth this year, but as we wait for construction to recover, growth will still be modest. We expect the United States to

expand payrolls this year at an annual pace of 1.2%—only slightly higher than population and labor force growth.

Therefore, we do not expect unemployment to recede to near pre-recession levels in the near term. Employment growth

will ramp up in the coming years, with the annual five-year growth rate averaging 1.8%.

Personal IncomeThe latest data show that after expanding in all four quarters, state personal income grew an average 3.0% in 2010, with

all states reporting gains during the year. This was a significant improvement from 2009, when personal income fell 1.7%

and only five states saw gains. This latest report confirms that the national economy continues to slowly recover. Personal

income has now exceeded its pre-recession levels in all but two states—Wyoming and Nevada. During 2011, we expect

personal income growth will accelerate as the labor market gains some momentum.

Regional Housing Update - Winter 2011


Existing Home Sales Bounce Around. After a rise of 2.7% in January 2011, existing home sales fell 9.6% in February,

to a seasonally adjusted annual rate of 4.88-million units. Weather likely played a role in the sudden drop in purchases, as

did an expected reversion toward the mean after January’s unusually positive data. Regionally, existing-home sales in the

Northeast fell 7.2% in February, and the median price was $230,200, down 9.5% from a year earlier. Existing-home sales

in the Midwest dropped 12.2% and the median price was $122,000, which was 5.4% below February 2010. In the South,

existing-home sales fell 10.2%; the median price in the South was $134,600, down 3.9% from a year earlier. Existing-

home sales in the West declined 8.0%, and the median home price was $190,000, which is 5.2% lower than a year

earlier. Distressed homes still make up a sizable portion of the total sales—37% in January and 39% in February—and

the large number of discounted properties continues to have a negative effect on new home sales.

Most States and Metros See Overall Price Gains. The most recent National Association of Realtors” home price report,

for the fourth quarter of 2010, showed that home sales rebounded in 49 states, with 78 metro markets—just over half of

the available metropolitan areas—experiencing price gains from a year earlier. This is up a tiny bit from 77 metro markets

seeing price gains in the third quarter.

Although buyers are still taking advantage of deals to be had on foreclosures, sales activity remains depressed. The key

for housing going forward is still employment growth. New jobs will require that new homes be built nearby. More

importantly, the household formation rate will pick up once job growth takes off. Increases in the household formation rate

will then reduce the housing glut, which will stimulate new construction. Overall, we expect the economy to add about 2.3-

million jobs in 2011 and 2.6-million more in 2012. With more jobs, housing starts will bounce back from 586,000 units in

2010 to 680,000 units in 2011 and 1.097 million in 2012. Our view is that the housing market will start to get back on its

feet this year. The forecast, however, hinges on builders being able to access credit. If builders cannot get financing to

build new homes, housing will remain in the dumps.

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