STR - HIL, a Hotel Industry Leading Indicator Shows Promise

Economic research firm e-forecasting.com in conjunction with Smith Travel Research announced that their U.S. hotel industry leading indicator - HIL - increased during December, the ninth consecutive monthly increase for the indicator.

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. February 01, 2010

The indicator went up 1.8 percent during the month, following a 1.3-percent increase in November.

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. The latest increase brought the index to a reading of 109.4. 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 14.7 percent in December after rising 12 percent in November. This compares to a long-term annual growth rate of 3.5 percent, the same as the annual growth rate of the U.S. overall economic activity. When the industry was in the deepest part of the recession, this growth rate was down to negative 15.7 percent, which happened in January of this year.

Seven of the nine components that comprise HIL had a positive contribution in December: Labor Market Tightness; Weekly Hours in Hotels; Hotel Profitability; International Visitors Future Demand; Interest Rate Spread; New Orders for Manufactured Goods; and Oil Prices. Two of the nine components had a negative or zero contribution to HIL in December: Housing Activity and National Vacation Barometer.

'The strong increase in the hotel industry leading indicator was led by gains in the industry's profitability component," said Evangelos Simos, Chief Economist of e-forecasting.com. "Also promising is that we are seeing the six-month growth rate, a great indicator of turning points and a measure of strength or weakness in the industry, continue to grow."

Chad Church, Industry Research Manager at STR, noted, 'The continued growth in the leading indicator is good news for hoteliers. We've seen turning points in demand across a number of chain scales, and this should provide an opportunity to stabilize pricing and revenues.'

The U.S. 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 U.S. 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 future direction of the U.S. hotel industry.

About STR & STR Global
For more than 20 years, Smith Travel Research has been the recognized leader for lodging industry benchmarking and research. Smith Travel Research and STR Global offer monthly, weekly, and daily STAR benchmarking reports to more than 36,000 hotel clients, representing nearly 5 million rooms worldwide. STR is headquartered in Hendersonville, Tenn., and STR Global is based in London. For more information, visit www.smithtravelresearch.com or www.strglobal.com.