Sentiment Declines Among Execs

The current Lodging Executives Sentiment Index (LESI) reads 45.8, down from 51.7 last period and from 72.1 during the same period last year. The LESI indicates slower economic expansion than last period — its first suggestion the lodging sector is in decline. An index reading greater than 50 indicates lodging is expanding and below 50, declining. The distance from 50 indicates the strength of the decline. The Future Expectations Index reading of 39.6 drops LESI into a declining trend with the Present Situation Index barely above the transition line of 50, only 12.5 index points above the Future Expectations Index.

The Present Situation Index reads 52.1 this period, suggesting a slightly faster increase in business activity compared to last period's reading of 46.6 and 80.8 during the same period a year ago. The Future Expectations Index at 39.6 versus 56.9 last period indicates lodging executive respondents feel the short-term business outlook is bleak. Last year's reading of the Future Expectations Index was 63.5. This is the first registered decline in the LESI since April, 2003. With the exception of the dip to 45.0 in January 2008, the Future Expectations Index has never been on the negative side of 50. Since February 2004, the Present Situation Index has always been in expansion mode, never registering an index reading below 50.

Just 16.7 percent of respondents indicated current business is good, versus 17.2 percent last period; 71 percent indicated current conditions were normal, up from 58.6 percent last period. One-eighth of those responding called business conditions bad, down from 24.1 percent last period. As for future business conditions, only 4.2 percent registered optimism about the next 12 months, far fewer than last period's 27.5 percent, while 71 percent feel business conditions will stay steady, versus 58.5 percent last period. One-fourth of the executives indicated business conditions would be worse 12 months from now, up from 14 percent last period.

The Reservations Expectation Index asks lodging executives to project rooms reservations over the next 12 months as compared to the last 12 months. Lodging executives expect a decrease, as this index reads 41.3 against last period's flatline of 50 and a year ago at 73.1. Thirteen percent of the executives indicated they expected rooms reservations to increase compared to 21.4 percent last period.

56.5 percent felt rooms reservations would stay the same compared to 57.2 percent last period, and 30.4 percent indicated room reservations would decrease in the next 12 months, up from 21.4 percent last period.

The Lodging Employment Index moved up slightly to 58.7 versus last period's reading of 55.4 and 70 last year at this time. 34.8 percent of the executives, versus 25.0 percent last period, indicated they expect to add line-level employees, 47.8 percent expect to hold steady (down from 60.7 percent last period). 17.4 percent reported they will lay off non-management employees versus 21.4 percent last period.

The LESI is a leading economic indicator in lodging and is based on opinions of lodging executives. It satisfies the need for real-time information for executive decisionmaking in the lodging industry. The LESI utilizes the same methodology as is used for the Purchasing Managers' Index (now called the Institute for Supply Management). The University of New Hampshire's Hospitality Management Department created the LESI and manages it now.

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