DURHAM, New Hampshire–This morning, the economic research firm e-forecasting.com, in conjunction with STR, announced that following a decline of 1.1 percent in April, HIP declined 1.3 percent in May. HIP, the Hotel Industry Pulse index, is composite indicator that gauges business activity in the U.S. hotel industry in real-time. The latest decrease brought the index to a reading of 83.1. The index was set to equal 100 in 2000.
Looking at HIP’s six-month growth rate, which historically has signaled turning points in U.S. hotel business activity, HIP declined by an annual rate of 20.7 percent in May, following a drop of 21.3 percent in April. This compares to 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.
The U.S. hotel industry is still in its recession, having officially entered the 19th month of decline, said Evangelos Simos, chief economist of e-forecasting.com.
“The six-month growth rate, although negative, has been improving for two months in a row, which shows that the deepest point in the recession was likely in March,” Simos said. “Now the industry will slowly begin to recover from that extreme low.”
The chance of business expansion was only 4.7 percent in May, with the risk of recession 95.3 percent.
Any positive news for the industry is welcomed, said Chad Church, industry research manager at STR.
“With March expected to be the turning point in this recession, we hope to see at least some slight improvement through the summer travel season,” Church said.
The Hotel Industry Pulse, or HIP for short, 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 useful information about the timing and degree of the industry’s linking with the U.S. business cycle for the past 40 years. Simply put, it tracks monthly overall business conditions in the industry, like an industry GDP, and points in 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.