Hotel Industry Indicators Show Improvement, Says STR

Vacation News » Vacation & Leisure Real Estate Edition | By Michael Gerrity | September 29, 2009 10:07 AM ET

(News Source: Smith Travel Research)

(DURHAM, NEW HAMPSHIRE) -- This morning economic research firm in conjunction with Smith Travel Research announced that their US hotel industry leading indicator - HIL - went up in August for the fourth consecutive month.  HIL went up 1.7 percent in August, after going up 2 percent in July.  HIL, a monthly leading indicator for the U.S. hotel industry, is a composite leading indicator that, on average, leads the industry's business activity four to five months in advance.  This means when the HIL increases for four to five consecutive months, the hotel industry should begin to show signs of improvement.  The latest increase brought the index to a reading of 105.6.  The index is set to equal 100 in 2000.

Looking at its six-month growth rate, a signal of turning points, the Hotel Industry's Leading Indicator went up by an annual rate of 4.9 percent in August, after an increase of 0.7 percent in July. This compares to a long-term annual growth rate of 3.6 percent, the same as the annual growth rate of the industry's overall economic activity.  At the deepest depths of the recession, this growth rate was down to negative 15.7 percent, which happened in January of this year.

Six of the nine components that make up Hotel Industry's Leading Indicator had a positive contribution in August: Weekly Hours in Hotels; Hotel Profitability; International Visitors Future Demand; Interest Rate Spread; New Orders for Manufactured Goods and National Vacation Barometer.  Three of the nine components had a negative or zero contribution to Hotel Industry's Leading Indicator in August: Labor Market Tightness; Oil Prices and Housing Activity.

"The leading indicator continues to improve, with the August reading continuing the trend," noted CEO of Maria Simos.  "This is the first time in nearly three and a half years that the six month growth rate of the indicator has been above the long term trend of 3.6 percent.  This is positive news for the industry that expansion lies ahead."

The US hotel industry leading indicator, or HIL for short, is a monthly leading indicator for the industry.  Building off the tracking success of HIP, the real-time indicator for the US hotel industry, HIL was built as a composite indicator that uses nine different components that, on average, when put together have led the industry four to five months in advance of a change in direction in the industry business cycle.  What the indicator does is provide useful information about the timing of future shifts in the direction of the US hotel industry.

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