The hotel industry cycle: developing an economic indicator system for the hotel industry

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Date
1996
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Publisher
Virginia Polytechnic Institute and State University
Abstract

The principal objective of this study was to develop an economic indicator system for the hotel industry in order to project the industry's growth and turning points. This study developed for the U.S. hotel industry a business cycle that would cover hotel activity as broadly as possible and one that would represent the magnitude of growth of the industry. This study also identified and selected seventy economic indicators for the hotel industry by reviewing literature and testing the characteristics of each time series which are available in public. By classifying the indicators into leading, coincident, and lagging indicators, this study formed composite indices for the groups of indicators and defined the relationships in terms of time lags between the hotel industry growth cycle and the series of composite indices.

For a twenty-eight year period ( 1966-1993 ), the hotel industry experienced three cycles (peak to peak or trough to trough). The hotel industry peaked in 1967, 1973, 1980, and 1989. The industry troughed in 1969, 1974, 1982, and 1991. The mean duration of the hotel industry cycles is 7.3 years, calculated either by peak to peak or trough to trough. An interesting finding is that the hotel industry declines sharply once it reached the peaks. In general, the mean duration for the contraction is about two years.

The hotel industry growth cycle representing the rate of growth changes was also identified by standardizing the changes, and by measuring and dating the cycles. The results showed that the hotel industry experienced high growth (a boom) every four or five years. The average expansion (L-H) period is about three years and the average contraction (H-L) period is about two years.

The performances of the composite indices for the leading, coincident, and lagging indicators were measured based on their timing differences of turning points compared with those of the industry cycles. The usefulness and effectiveness of the indicator system composed of composite indices of leading, coincident, and lagging indicators were empirically supported in this study. The results of this study imply the indicator system can be used as a forecasting tool for the hotel industry.

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Keywords
hotel industry, indicator system, forecasting cycle
Citation