Hotel Industry's HIP Index Drops in November

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(DURHAM, NH) -- This week, economic research firm e-forecasting.com in conjunction with Smith Travel Research announced HIP hit another bump in November.

After edging down 0.1 percent in October, HIP went down 1.8 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, similar to a GDP measure for the industry.  The latest monthly change brought the index to a reading of 79.9.  The index is 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's growth rate worsened from the previous month, with a reading of negative 9.3 percent compared with negative 8.7 percent in October. As a benchmark, March had been the worst month of the cycle when the six-month growth rate hit negative 23.4. This compares with 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.

"As noted last month, what we are seeing now is that the hotel industry recovery has gone flat. It seems that the industry, although we are not seeing major declines again yet, is leveling out at very low levels," commented Maria Simos, CEO of e-forecasting.com.

Chad Church, industry research manager at STR noted, "Although November demand performance was affected by calendar comparisons to 2008, the revenue input continues to drag the HIP index in negative territory. Discounting and the subsequent revenue losses are primarily to blame for this month's result." There were only eight weekend days in November 2009 compared to nine weekend days in 2008.  The probability of business expansion was lower in November, recorded at 44.7 percent, nearly half the 87.3 percent reading in October.

HIP is a hotel industry indicator which 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 last 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: 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 business activity.

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