Probability of US hotel industry recession jumps:
|October 25th, 2011
|e-forecasting.com eNews for the Hotel Industry
DURHAM, New Hampshire —
Business activity in U.S. hotels declined in September, according
to the latest reading of e-forecasting.com’s Hotel Industry Pulse
index, or HIP.
HIP, a composite indicator that gauges
monthly overall business conditions in the U.S. hotel industry,
fell by 0.6 % in September to 103.7, following a decline of 0.5 %
in August. The index was set to equal 100 in 2005.
The probability of the hotel industry entering into recession,
which is detected in real-time from HIP with the help of
sophisticated statistical techniques, registered 20 % in September,
up from 15.8% reported in August. When this recession-warning gauge
passes the threshold probability of 50%, the U.S. hotel industry
enters a recession.
“Our September reading on the
U.S. hotel industry shows the third monthly decline in the Hotel
Industry Pulse index,” said Evangelos Simos, chief economist of
e-forecasting.com. “Also worrisome, we see the hotel recession
probability jumping to 20%. The last time it jumped this high from
low levels was in June of 2008, just months prior to the last
recession. It will be important to watch this recession probability
carefully over the next few months to see if this jump continues
and goes past the threshold of 50% or retreats.”
index’s six-month growth rate, which has historically confirmed the
turning points in U.S. hotel business activity, had a positive rate
of 1.9% in September, following a positive rate of 3.5% in August.
This compares to a long-term annual growth rate of 3%, which is the
same as the 30-year average annual growth rate of the industry's
gross domestic product.
Only one of the three demand and
supply indicators of current business activity that constitute HIP
had a positive contribution to its change in September: Hotel
Capacity; The two of the three indicators of current business
activity which had a negative or zero contribution to HIP's change
in September were Hotel Jobs and Spending on Hotels.
last 12—September 2010 to September 2011—overall economic activity,
measured by e-forecasting.com's monthly U.S. GDP, rose by 1.6%.
Over the same period, economic activity in U.S. Hotels, measured by
HIP, increased by 3.5%,” Simos said.
Industry Pulse index, 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.
The indicator provides useful information about the timing and
degree of the industry’s link with the US business cycle for the
last four decades. 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: revenues from consumers staying at hotels and motels
adjusted for inflation, room occupancy rate and hotel employment,
along with other key economic factors which influence hotel