INDUSTRY SENTIMENT DIPS AMONG EXECUTIVES

Results from the Lodging Executives Sentiment Index (LESI) reflects continued expansion in general lodging business conditions, even though the most recent reading of 84.1 is lower than last month's 86.1. At 75.0, the Future Expectations Index is quite a bit lower than the LESI, although it is higher than last month's reading of 74.1 and was 85.0 a year ago. The Present Situation Index reading of 93.2 compares to 98.1 last period and 82.5 a year ago.

As mentioned in previous articles, it's unusual that sentiment about present conditions differs so greatly from future expectations. As a possible explanation, one lodging executive expressed serious concerns about the effects on the hotel industry of the rising price of gasoline and the threat of a bird flu pandemic.

Eighty-six percent of lodging executives say current business conditions are good, versus 14 percent who say conditions are just normal. More than half feel business conditions will improve in the next 12 months, while 41 percent believe conditions will be the same a year from now.

Lodging executives feel slightly less optimistic about the upcoming pace of room reservations. The Reservations Expectations Index reading of 83.3 is down from 85.2 last month and 92.5 during this same period a year ago. Seventy-one percent of executives expect reservations to increase, versus 23.8 percent who believe reservations volume will stay the same. The Future Expectations and Reservations Expectations numbers usually corroborate one another, but this period's readings reveal a mixed response, with reservations running 8.3 index points higher than future expectations. Perhaps the bird-flu pandemic, which continues to populate news headlines, has a significant negative impact on lodging executives' sentiment about future business conditions, although reservation expectations seem to counter the fear.

Developed six years ago, the LESI is a leading indicator based on opinions of lodging executives. A LESI index reading greater than 50 indicates that the industry is generally expanding; below 50, the lodging sector is generally declining. The distance from 50 indicates the strength of the expansion.

The LESI Employment Expectations Index registered 73.8 this month versus 77.8 last period. A year ago to date, the Index stood at 80.0. A little more than half of the executives in the survey group expect to add non-management employees over the next 12 months, while 42.9 percent expect to keep the total number of employees the same. Less than five percent of executives expect to lay off employees in the next 12 months. The Lodging Employment Index asks lodging industry executives whether, over the next 12 months, they expect to add the total number of non-management employees, keep the number about the same or reduce the number of employees.

The LESI Index follows the Institute of Supply Management's Index method of tracking leading indicators. The LESI was developed and is maintained by RevForecast at the University of New Hampshire's Hospitality Management Program. It satisfies the need for real-time information for executive decision-making in the lodging industry. If you are a lodging executive and would like to be a monthly respondent, please send an e-mail to Raygoodman@aol.com.

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