WORLD PROPERTY CHANNEL ®

(DURHAM, NH) -- Signs of recovery for the battered hotel industry are on two economists' charts today. They show two straight months of improved bookings. 

They are showing up on a mystical index which the two economists call the Hospitality Industry Pulse, or HIP for short. They say the HIP gauges business activity in the U.S. hotel industry.

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A Durham, NH-based economic research firm called e-forecasting.com and STR are jointly announcing the HIP continued to break its downward path in September.

Following 19 months of decline, HIP went up for the second month in a row, gaining 1.5 percent in August. The latest increase brought the index to a reading of 82.0. The index is set to equal 100 in 2000. 

(Please see related postings, STR Reports U.S. Hotel Performance,  Sept. 11, 2009; STR's 2009 Hotel Projections Hold Steady , Sept. 11, 2009; STR Reports on German Hotel Performance, Sept. 10, 2009)
    
HIP's six-month growth rate, which historically has signaled turning points in U.S. hotel business activity, improved from July's negative reading of 17.9 percent to a negative 12.8-percent rate in August.

In comparison, March was 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.

Evangelos Simos

"The hotel industry seems to be pointed to a recovery path for a second month in a row," notes Evangelos Simos, Chief Economist of e-forecasting.com.

"The bottom of the recession can be confirmed by an upward trend that lasts for five months after a contraction. However, given the second consecutive monthly increase in HIP, our statistical signal of expansion probabilities and the recent behavior of the hotel leading indicator, it seems the current recession has hit a turning point.

"The question now we have to answer is about the strength and speed of the future upswing."


"We are seeing a softening of demand losses over the previous two months, which does indicate a potential recovery pattern," adds Chad Church, Industry Research Manager at STR.
 

Chad Church

"It is important to note that our model does adjust for the date change in Labor Day in 2009, reducing the noise we will see in the monthly performance comparison resulting from last year leading up to the holiday travel week." 

Employment figures for the industry have shown a stabilization trend over the past three months as well.
 
When comparing levels of employment so far in 2009 with 2008, it appears the absolute levels of employment in the industry have hit a trough at a value 8-8.5 percent lower than levels in 2008.

Because the industry began to shed jobs in the second half of 2009, we expect the percent change of employment year-over-year to show improvement in the fourth quarter of 2009.
 

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About the Hotel Industry Pulse index
 
HIP was created to fill the void of a real-time monthly indicator that captures current conditions in the U.S. hotel industry. Economists maintain the HIP indicator provides useful information about the timing and degree of the industry's link with the U.S. business cycle for the last 40 years.

Hospital industry economists claim HIP 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; hotel employment; and five other key economic factors that influence hotel business activity. 

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