Hotel industry recession reaches 15 months

The Hotel Industry’s Pulse index declined 1.9-percent in January to bring the index to a reading of 90.8, according to a report from economic research firm e-forecasting.com in conjunction with Smith Travel Research.

The index measures the likelihood of a recession for the U.S. hotel industry. It was set to equal 100 in 2000. January’s 1.9-percent decline followed a drop of 1.2 percent in December.

HIP’s six-month growth rate, which historically has signaled turning points in U.S. hotel business activity, decreased by an annual rate of 16.1 percent in January, building on December’s 14.5 percent decline. This compares to a long-term annual growth rate for the hotel industry indicator of 3.2 percent, the same as the 40-year average annual growth rate of the industry's gross domestic product.

“In January, the recession risk for the hotel industry, based on HIP’s reading, was again above the threshold of 35 percent, confirming that the industry is currently in a recession,” said Maria Simos, CEO of e-forecasting.com. “This monthly reading takes into account adjustments due to annual benchmarking of the components and once a year updates of seasonal factors.”

The odds of business expansion in the hotel industry were just 1.3 percent in January, slightly lower than December’s reading of 4.5 percent, Simos added.   

Using the National Bureau of Economic Research methodology in dating U.S. recessions, HIP indicates that the hotel industry reached its peak of business activity in November 2007, a month earlier than the national economy.

“According to HIP, the hotel industry entered its 15th month in the current recession in January,” said Chad Church from Smith Travel Research. The previous two industry recessions, in 1991 and 2001, lasted 17 months each. “If HIP continues to decline for a few more months, the current recession in the hotel industry may outpace the longest hotel recession on record that occurred in 1981 and lasted 20 months,” Simos added.

The Hotel Industry Pulse is a hotel industry indicator created to fill the void of a real-time monthly indicator that captures current conditions. It provides information about the timing and degree of the industry’s performance compared with the U.S. business cycle for the past 40 years. HIP tracks monthly overall business conditions in the industry, like an industry gross domestic product, and points in a timely way to the changes in direction from growth to recession or vice versa. The composite indicator is made with the following components: revenue from consumers staying at hotels and motels adjusted for inflation, room occupancy rate and hotel employment, along with other key economic factors that influence hotel business activity.

Source: HotelNewsNow