Before September 2008 the U.S. lodging industry was able to weather the slowing economic environment that was beginning to envelope the economy. However, beginning that month the stampede of bad news coupled with the unfortunate comments made by several politicians created a tidal wave of economic pressure that the industry could no longer hold back.
Beginning in that month the two fundamental components that ensure lodging industry health—room demand growth and accelerating average room rates—began to disappear. Specifically, room demand, when compared to the same month of the previous year, began falling and has done so every month since then. The same phenomenon was seen for average room rates one month later in October, and again has continued throughout this year.
Since the end of last year, lodging demand, while still declining, has not been as bad, while the slide in average daily rate accelerated and has only now stabilized at about 9 percent below year-earlier levels. The charts here present monthly demand and average room rate change, by month, to help illustrate the magnitude of the declines in these measures.
So as we head into the fall of 2009 we often hear that industry results might start to look better because we are entering a period of time where we begin to have what’s often referred to as “easy comps.” Generally, this term implies that the most frequently used measure of industry performance, comparing the current month’s results to the same month last year, now will have depressed results for the comparison. Typically, those comparisons result in performance numbers that appear considerably better.
Because of this, as we get into the fourth quarter of 2009, the period of the so-called comparisons to “easy comps,” we will be looking very closely at the results to help us gauge whether the lodging industry’s performance continues to decline, has stabilized or is beginning to show any improvement. If monthly results continue to show any significant declines, then the conclusion will be that the lodging environment is continuing to deteriorate. If the results are about flat with last year, then we may conclude that the industry continues to be bouncing along at reduced performance levels, and if we see any kind of continuous positive improvement in those measures, then we may be entering into a period of recovery.