The Hotel Times - June 2008 - (Page 13) COVER STORY: DOWN BUT NOT OUT ed recessions or recessionary conditions in six of the last eight economic cycles. Based on Smith Travel Research U.S. data, with demand increasing by 0.2 percent in January and 1 percent in February, but decreasing by 2.4 percent in March, the industry is exhibiting the weakest performance in five years, he pointed out. Still, the forecast of macroeconomic advisors is more favorable for the second half of the year, and in fact challenges other economists for not appropriately reflecting the federal economic stimulus package and other factors, Hanson noted. Mention of a recession can catapult companies into at least considering cutbacks, and compel them to more closely manage their resources, said Dr. Donald Ratajczak, a consulting economist in Atlanta. In fact, the first two budgets affected by even the prospect of a recession are travel and marketing, he said. While noting there' s a feeling of a recession in the air, he said conditions aren' t deteriorating quickly and signs of one could ª vanish very Perception is reality In any event, if not numerically, psychologically many consumers seem to be of the mind that the U.S. indeed is in a recession, observed Peter Yesawich, chairman and c.e.o. of Ypartnership. Consumer confidence, he said, has plummeted. ª If you look at any of the measures that we take in terms of travel intentions, they' re concerning. So the real point is people feel like we' re in this recessionary environment, even if technically we' re not.º The Conference Board Consumer Confidence Index (www.conference-board. org), which had declined sharply in March, fell further in April, according to the Conference Board Web site. The index stands at 62.3 percent, down from 65.9 in March. The Present Situation Index decreased to 80.7 from 90.6. The Expectations Index was virtually unchanged, 50.1 versus 49.4 in March. Clearly, a recession isn' t good for hotel demand, said Robert LaFleur, a lodging industry analyst with Susquehanna Financial Group in Stamford, Conn. He noted that recession indicators, including higher unemployment and reduced consumer spending and confidence, all now are present in the U.S. ª People feel like we' re in this recessionary environment, even if technically we' re not. PETER YESAWICH, CHAIRMAN AND C.E.O., YPARTNERSHIP º soon,º especially if the U.S. begins to experience job growth by July. If that happens, the current slowdown here probably won' t be deep or sustained enough to be declared a recession, which in turn could stir optimism in the international hotel lodging and industry, said Ratajczak, who acknowledged that the current narrow distinction between recessionary and non-recessionary conditions can help stoke confusion among some people. Nevertheless, slightly more than 25 million Americans are expected to travel internationally this summer. That' s an increase of 2.6 percent over the 24.5 million estimated to have traveled overseas in summer 2007, according to a report by Global Insight, which specializes in economic and financial analysis, forecasting and market intelligence. The report includes all travel outside of the U.S., including Canada and Mexico. It states that American travelers will spend more than $30 billion while traveling internationally from June to August. American spending overseas will increase by 5.7 percent, primarily because of inflation and the weakness of the U.S. dollar compared to several major currencies. China and India are expected to see the largest increases in travel from the U.S. this summer, paced by China, with a spike of 13.4 percent, including 573,000 American travelers. India will be up 13.1 percent, with 227,000 American travelers. Travel to Canada and Mexico this summer is forecasted to closely mimic last year. Many of the other destinations that are expected to see large increases this summer are in Europe. Travel from the U.S. to France is expected to be up 6.7 percent, including 1.1 million American travelers; and Ireland up 6.6 percent, which includes 337,000 American travelers. Americans traveling overseas will spend more this summer because of global inflation and the weaker U.S. dollar, states the report, which also estimates that Americans will spend 5.7 percent more than they did last summer, and international spending by U.S. travelers will reach $30.7 billion. However, except perhaps in China and India, Ratajczak said he believes those figures are optimistic. While attributing the outlook in China to the Olympics, he said the spike in India is because of increasing wealth there, which in turn is attracting relatives from the U.S. Furthermore, Ratajczak noted registrations for France and Ireland are down in terms of visitorsÐ though not in dollars because of the high costs of lodging and Continued on page 14 www.TheHotelTimes.com June 2008 The Hotel Times 13 http://www.conference-board.org http://www.conference-board.org http://www.TheHotelTimes.com
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