Hotel industry risk of recession at 99.9%:
|December 9th, 2008
|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 1.9 percent in October, HIP fell by 3.2 percent in
November. HIP, the Hotel Industry's Pulse Index, is a composite
indicator that gauges business activity in the U.S. hotel industry
in real-time. This decline brought the index to a reading of 92.4.
The index was set to equal 100 in 2000.
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 13.5 percent in November, further worsening its
decline of 9.2 percent in October. This compares to a long-term
annual growth rate of 3.2 percent, the same as the 38-year average
annual growth rate of the industry's gross domestic product.
Looking at the results, Chief Economist Evangelos Simos of
e-forecasting.com said, “Using the NBER methodology to identify the
peaks and troughs of the business cycle, the peak was in November
of 2007 for the industry. Since then, the index has been declining
and so far the recession is 13 months old. Looking further at the
six month growth rate, at this time, the recession appears to be
similar to what the industry felt in late 1979 through early 1980,
but not yet quite as bad as 2001.”
The probability of a
recession in the hotel industry, which is detected in real-time
from HIP with the help of sophisticated statistical techniques,
registered 99.9 percent in November, up from 95.7 percent reported
in October. 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. As a result, the odds of
business expansion in the hotel industry were at the 0.1 percent
mark in November, becoming even more dismal than October’s reading
of 4.3 percent.
The Hotel Industry Pulse, or HIP for
short, 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 US business
cycle, or simply put it tracks monthly overall business conditions
in the industry, like an industry GDP, and points in a timely way
the changes in direction from growth to recession or vice versa.
The composite indicator is made with the following components:
revenues from consumer’s staying at hotels and motels adjusted for
inflation, room occupancy rate and hotel employment, along with
other key economic factors which influence hotel business activity.