LESI TRACKS INDUSTRY OPTIMISM

While the Lodging Executives Sentiment Index (LESI) slipped very slightly this period to 85.9 from 87.0 last month, it was up substantially from last year's mark of 75.0 during the same period. As a reflection of conditions in the lodging sector, the LESI continues to point to economic expansion. The Present Situation Index reads at 87.0, reflecting no change from last period; a year ago, the Present Situation Index read 61.4 during the same period.

The Future Expectations Index decreased slightly to 84.4 from 87.0 last period and slightly below the reading of 88.6 during last year's reporting period. An LESI reading greater than 50 indicates that the lodging industry is generally expanding and below 50, the sector is generally declining. The distance from 50 indicates the strength of the expansion or decline.

The University of Michigan's June Surveys of Consumers also showed marked improvement in consumer confidence. The Index of Consumer Sentiment reading 96.0 in June was up from 86.9 in May and just above the 95.6 recorded in June 2004. The Index of Consumer Expectations increased to 85.0, up from 75.3 in May but below the 88.5 recorded last June. The Current Economic Conditions Index was 113.2 in June 2005, up from 104.9 in May and 106.7 in the June 2004 survey.

“After each substantial gain in consumer optimism during the past few years, rising oil prices have led to subsequent reversals,” noted Richard Curtin, director of the University of Michigan's Surveys of Consumers. “If gas prices do not increase any further, the overall impact may be surprisingly small, with most of the burden falling on lower-income households.”

The Lodging Reservations Expectations Index reads at 93.5, up from 86.4 a year ago but identical to last month's reading. Nearly three-fourths of respondents say current business conditions are good, while 26.1 percent believe current conditions are normal. Both of these readings are the same as last period. As with last month, none of the lodging executives surveyed believe business conditions will be worse 12 months from now.

In another indication of optimism among lodging executives, the Reservations Expectations Index climbed to 93.5, indicating a very-slightly faster expansion than last period's reading of 92.5. The Reservations Expectation Index asks lodging executives to project rooms reservations over the next 12 months as compared to the last 12 months. Eighty-seven percent of executives expect rooms reservations to increase in the next 12 months, while 13 percent feel reservations will stay the same. None expect reservations volume to decrease in the next year.

The Lodging Employment Index queries lodging industry executives on whether over the next 12 months they expect to add non-management employees, keep the number about the same or reduce the total. The Lodging Employment Index reads identical to last month at 76.1. Six of ten respondents expect to add non-management employees over the next 12 months, while 30 percent say they'll keep the total number of employees the same. Less than 10 percent plan any layoffs.

The LESI Indices follow the Institute of Supply Management's Index (formerly Purchasing Manager's Index) method of tracking leading indicators. The LESI is a leading economic indicator in the lodging sector and is based on opinions of lodging executives. It satisfies the need for real-time information for executive decision making in the lodging industry. Created more than four years ago, the LESI was developed and is maintained by RevForecast, LLC.

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