Hotel Industry’s Pulse index shows small gain

HIP shows small gain Economic research firm e-forecasting.com, in conjunction with Smith Travel Research, has announced the Hotel Industry’s Pulse index edged back up in October after hitting a snag the previous month.

Economic research firm e-forecasting.com, in conjunction with Smith Travel Research, has announced the Hotel Industry’s Pulse index edged back up in October after hitting a snag the previous month.

After stalling in September with a decline of 0.7 percent, the Hotel Industry’s Pulse index, or HIP, went up 0.2 percent in October. HIP is a composite indicator that gauges business activity in the U.S. hotel industry in real-time, similar to a gross domestic product measure for the industry. The latest monthly change brought the index to a reading of 81.0. The index was set to equal 100 in 2000.

Looking at how HIP, which has historically signaled turning points in U.S. hotel business activity, has performed during the past six months, the growth rate improved from the previous month, with a reading of negative 9.4 percent compared with negative 12.2 percent reached in September. 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.

“Along with my commentary from last month, it appears that the hotel industry recovery we saw during the summer hit a snag and is now hovering near flat levels,” said Evangelos Simos, chief economist of e-forecasting.com. “Will this turn into a W (-shaped) recession for the industry? That remains to be seen.

“It will be important to keep up with the monthly indicators of HIP and HIL (the Hotel Industry Leading indicator) to determine if that does indeed become the case. Although this was only a positive improvement over the previous month, there is in it a reason to pause and see it as overly positive.”

HIP 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 information about the timing and degree of the industry’s linking with the U.S. business cycle during the past 40 years. Simply put, it tracks monthly overall business conditions in the industry, like an industry GDP, and points 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 that influence hotel business activity.

“It’s always good to see a positive growth percentage in the HIP, even if it is small,” noted Chad Church, industry research manager at STR. “As we said last month, leisure demand was driving the growth we saw in the summer and convention and business travel in the fall was a guessing game. HIP should continue to maintain flat-to-slow growth throughout the end of 2009 barring an unforeseen event.”