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HIP: US hotel recovery outpacing economy
January 5 2012

The Hotel Industry Pulse index rose to a reading of 106.4 in November, following an increase of 0.4 % in October. The index was set to equal 100 in 2005.

DURHAM, New Hampshire—Business activity in the U.S. hotel sector increased during November, according to the latest reading of e-forecasting.com’s Hotel Industry Pulse index.

The Hotel Industry Pulse index, or HIP, is a composite index that gauges monthly overall business conditions in the U.S. hotel industry. It rose to a reading of 106.4 in November, following an increase of 0.4 % in October. The index was set to equal 100 in 2005. 

HIP's six-month growth rate, which has historically confirmed the turning points in U.S. hotel business activity, had a positive rate of 5.2% in November, following a positive rate of 5.4% in October. This compares to a long-term annual growth rate of 3%, the same as the 30-year average annual growth rate of the industry's gross domestic product.

The probability of the hotel industry entering into recession, which is detected in real-time from HIP with the help of sophisticated statistical techniques, registered 7.7 % in November, up from 7.1% reported in October. When this recession-warning gauge passes the threshold probability of 50%, the U.S. hotel industry enters a recession.

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“While business activity has slowed for hotels in the U.S., it appears the year will close out with little risk of an upcoming recession,” said Evangelos Simos, chief economist of e-forecasting.com.     
       
Two of the three demand and supply indicators of current business activity that constitute HIP had a positive contribution to its change in November: Spending on Hotels and Hotel Capacity. The current business activity indicator, which had a negative or zero contribution to HIP's change in November, was Hotel Jobs.  
       
Continues Dr. Simos, “In the last 12 months (November 2010 to November 2011) overall economic activity, measured by e-forecasting.com's monthly U.S. GDP, rose by 1.7%.  Over the same period, economic activity in U.S. Hotels, measured by HIP, increased by 6.4%."

The Hotel Industry Pulse index, or HIP for short, is a hotel industry index that was created to fill the void of a real-time monthly index for the hotel industry that captures current conditions. The index provides useful information about the timing and degree of the industry’s link with the US business cycle for the last four decades. 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 index 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 which influence hotel business activity.

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