U.S. Hoteliers Are Singing the Blues

Business activity for US hoteliers held steady at previous month reading of 117.2 in July according to the release of the Hotel Industry's Pulse (HIP) indicator. e-forecasting.com's HIP - a predictive analytic which gauges monthly overall business conditions for hotels earlier than any industry indicator - stalled, posting a nil growth rate in July after an increase of 0.1 percent in June. The index is set to equal 100 in 2010.

HIP's six-month growth rate, which has historically confirmed the turning points in US hotel business activity, posted a positive rate of 0.6 percent in July, following a positive rate of 0.6 percent in June. This compares to a long-term annual growth rate of 2 percent, the same as the 40-year average annual growth rate of the industry's gross domestic product.

The probability of the hotel industry being in recession, which is detected in real-time from HIP with the help of sophisticated statistical techniques, registered 40.3 percent in July, up from 40.0 percent reported in June. When this recession-warning gauge is near or passes the threshold probability of 50 percent, the US hotel industry has entered a recession.

"Last month, the Department of Commerce revised national accounts components and aggregates since 2013, which reflect in the construction of HIP. The revised HIP continues to provide the same picture of a stalled industry as before the revisions. In the last 11 months, the growth rates in HIP posted zero or negative numbers in seven months and near zero growth rates of 0.1 percent in four months," said Maria Sogard, CEO of e­forecasting.com. "The probability of the industry in recession in the last six months hovers between 40-43 percent," Maria added.

Two of the three demand and supply indicators of current business activity that make up Hotel Industry's Pulse (HIP) Index had a positive contribution to its change in July: Hotel Jobs and Total Spending on Hotels (includes non-room revenues). The current business activity indicator which had a negative or zero contribution to HIP's change in July was Hotel Capacity.

Reflecting the current revisions, the six-month smoothed annualized growth of HIP has been declining from a high of 3.5 percent in April 2015 to 0.5 percent in the last three months. "Historically more than 4-5 months of negative growth rates confirm a recession," said Evangelos Simos, professor at University of New Hampshire and editor for predictive analytics databases at e-forecasting.com. "With the new information we have so far, it seems we are at the doorsteps of the recession house," Simos added.

The latest HIP reading will be used to update e-forecasting.com’s total US Monthly Hotel Forecast as well as market level forecasts for the top 25 US markets. The firm also covers EMEA markets via a partnership with HotStats with hotel market profitability forecasts.