Hotel Industry Pulse Index Stalls, Says STR

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(News Source: Smith Travel Research)

(DURHAM, NH) -- Economic research firm e-forecasting.com in conjunction with Smith Travel Research announced the HIP hit a snag in its recovery. After going up two months in a row, HIP declined 2.1 percent in September. HIP, the Hotel Industry's Pulse index, is a composite indicator that gauges business activity in the U.S. hotel industry in real-time. The latest decline brought the index to a reading of 79.7. 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, worsened to -14.6 percent after registering -13.8 percent in August. To put this in perspective, March was the worst month of the current cycle when the six-month growth rate hit -23.4 percent. 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.

"The hotel industry recovery hit a snag this month, which is common," said Evangelos Simos, chief economist of e-forecasting.com. "At this point, we still see that the major declines ended in June and believe that will be the true turning point. Yet, with this reading, we are hit with the reality that recovery may be a bumpy ride."

The probability of business expansion declined to 17.5 percent in September, after reaching 76.1 percent in August.

"The HIP had shown improvements over the previous two months, but we've tried to approach those gains with cautious optimism," said Chad Church, industry research manager at STR. "Over the past months, we saw leisure demand continue to make strides in recovery while business travel maintained its downward trend. Now that the summer travel season has come to an end, we're waiting to see any signs of life from the business segment."

The Hotel 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 that captures current conditions. The indicator provides 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: revenues from consumers staying at hotels and motels adjusted for inflation, room occupancy rate and hotel employment, and other key economic factors that influence hotel business activity.

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