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Soaring Into the Stratosphere

The hotel industry is breaking records and the U.S. economy is recovering – don’t believe the news! Here’s the truth behind why everyone in the lodging business should feel great.

Wednesday, September 18, 2013
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Call it rational exuberance.

For the first time ever there is a near universal sense of confidence to the current and future state of the hotel industry. And it showed at this week's Lodging Conference. Attendees were virtually atwitter with excitement that translated into an unbridled sense of positivity.

And it is the exact opposite of what was felt in 2009. This year is a new hallmark for the hotel industry and it’s making this week’s industry gathering a true celebration rivaling the sense of excitement felt in 2007 before the Great Recession spoiled everyone’s good time.

Though the industry is continuing to set new records every single and taking the business to new peak levels, there isn’t too much a sense the bottom is about to fall out as it did in 2008. And though the average economic recovery lasts about 4.8 years – a mark we are approaching— it appears as if the good times are going to last for several more years.

That is, if you have the right attitude and strategy to back it up. What continues to amaze me is there are a contingent of people out there still carping things aren’t that great and the economy is just limping along. I’m surely no economist but it seems as if the Great Recession is a distant memory for most Americans and the future outlook is bright. Just look at the recent jump in housing prices for example.

Industry numbers are proof positive this is a halcyon time. Naysayers will point to the fact that when adjusted for inflation is not at peak levels. I say forget about that. Hotels are bringing in more actual dollars than at any time in history and the fact we’re not at peak inflation adjusted levels actually proves the point the industry is continuing a steep ascent and should not be read a barometer for a downturn or a lagging economy. Fact is, some people are always going to be pessimists and they do keep the optimists in check.

This morning Lodging Conference co-founder Harry Javer asked the nearly 1,500 attendees to raise a hand if they thought 2013 was better than 2012. Virtually everyone raised their hand (I didn’t actually see one hand down, but there had to be a few right?) The same happened when asked if 2014 would be better than 2013. So how can a small contingent of people still feel things are going bad? I suspect they’re the ones that got burned badly when the world tanked in 2008, never regained their confidence and may be having an internal struggle where they are doubting their skill set. We say be positive and make opportunity, everyone else is.

Here at Hotel Interactive® we don’t want to be Pollyanna, so we are not saying everything is perfect. There are people that can make valid claims things aren’t going so well. However, that is not what is reflective of what is happening for hotels in aggregate. They could be in a bum market, have a hotel that is not at the same quality of their newer, fresher neighbors, or they could be focusing on declining lines of business such as the deterioration in group business. However, industry wide that drop has been made up by an increase in transient business. But it’s not hard to imagine hotels out there that are not part of the current market driver mix.

Back to the good news, hotel stocks are up 12% on average this year alone, the travel business is driving the reduction in unemployment and soaring demand and higher rooms rates are driving profits. In the 12 months trailing in July, STR says the industry brought in $120 billion in revenue, a record high. Wow! Additionally 108.5 million room nights were sold in July, a new record. In August those new records will also be broken when final numbers are tallied.

And it looks like the U.S. economy is roaring back in exciting and unexpected ways, according to Bernie Baumohl, Chief Global Economist with the Economic Outlook Group.

“We are confident we will see strong growth at three to four percent next year. Many companies are saying they are ready to ramp up hiring and we have seen the highest numbers since January 2007. Households have been deleveraging for several years and household debt service levels … are the lowest in 30 years.

“In just four years household wealth has increased by an amount greater than the entire GDP of USA, which will encourage more spending. Car sales are up the most since 2007, retail sales are at record high levels now and we will see a significant contribution from the consumer side,” said Baumohl who added loan delinquencies are at their lowest in two decades.

Finally, he said the USA is going to have an economic Renaissance because of an energy revolution due to new technologies which will make the country much less dependent on the Middle East. In fact he said we will produce more oil in this country than Saudi Arabia by end of decade.

Overall the Hotel industry is doing amazing thing and we’ll be reporting on the different facets of the business throughout the week. Are you seeing record highs? Are you still stuck in the mud? Send us your comments and let us know.

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