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Hotel industry recession reaches 17 months:
EDITOR'S NOTE
| April 7th, 2010 |
| e-forecasting.com eNews for the Hotel Industry |
DURHAM, New Hampshire —
This morning, economic research firm e-forecasting.com in
conjunction with Smith Travel Research announced that following a
decline of 1.6 percent in February, HIP went down 3.2 percent in
March. HIP, the Hotel Industry's Pulse index, is composite
indicator that gauges business activity in the U.S. hotel industry
in real-time. The latest decrease brought the index to a reading of
85.3. The index was set to equal 100 in 2000.
Looking
at HIP's six-month growth rate, which historically has signaled
turning points in U.S. hotel business activity, HIP went down by an
annual rate of 21.7 percent in March, falling even deeper than
February’s 18.6 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.
“According to the new
data, the hotel industry in March entered the 17th month of
recession, which matches in length the recessions of 1990 and 2000.
As it stands now, it is second only in length to the longest
recession in the industry, which was in 1981-82 and lasted 20
months,” said Evangelos Simos, chief economist of
e-forecasting.com. The odds of business expansion were just 0.2
percent in March, with the risk of recession being 99.8 percent.
Historically, when this recession-warning gauge passes the
threshold probability of 35 percent for a few months, the U.S.
hotel industry has entered a recession.
The Hotel
Industry’s Pulse, or HIP for short, is a hotel industry indicator
that was created to fill the void of a real-time monthly indicator
for the hotel industry that captures current conditions. What the
indicator does is provide useful information about the timing and
degree of the industry’s linking with the U.S. business cycle for
the past 40 years. Simply put, it tracks monthly overall business
conditions in the industry, like an industry GDP, 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. 
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