LODGING EXECUTIVES SENTIMENT DROPS

The Lodging Executives Sentiment Index dropped precipitously, with a current reading of 69.8 down from 78.6 last period and 85.9 12 months ago. In addition, the Present Situation Index dropped to 79.2 from 89.7 as against 93.8 a year ago. While the LESI indicates continued economic expansion in the lodging sector, the decline of each indicator suggests future softening. The Future Expectations Index decreased 11 index points to 60.4 from 71.4 last period and from 78.1 last year. An index reading greater than 50 suggests the lodging industry is expanding and below 50, declining; proximity to 50 indicates the strength of expansion or decline. There is a rather significant moderating effect as we look at last year's indices: 15 index points lower each for LESI and Present Situation and 18 points lower for the Future Expectations Index.

Nearly two-thirds, or 62.5 percent, of respondents call current business conditions good, down from 74.3 percent last period, while 33 percent say they're normal, compared to 22.9 percent last period; 4.2 percent of the executives responding to the survey indicated current business conditions are bad, versus three percent last period. With regard to future business conditions, 37.5 percent of the lodging executives believe they will be better in the next 12 months, as against 48.6 percent last period, with 45.8 percent feeling conditions will be the same compared to 45.7 percent last period. The negative grew, however: 16.7 percent of executives reporting say business conditions will be worse 12 months from now versus 5.7 percent last period who felt the same way.

Lodging executives expect a drop in rooms reservations compared to last period. The Reservations Expectations Index reads 66.7 as against last period's index reading of 74.3, but 90.6 a year ago. More than 40 percent expect rooms reservations to increase in the next 12 months, and 50 percent believe they will stay the same; 8.3 percent of the lodging executives thinks reservations volume will decrease in the next 12 months.

The Lodging Employment Index also dropped, to 67.4 versus last period's index reading of 72.1 and 73.3 a year ago. Forty-four percent of the executives expect to add non-management employees over the next 12 months compared to 45.7 percent last period. Nearly half — 48 percent — expect to keep the total number of non-management employees the same, and this is compared to 48.6 percent last period; 8.7 percent plan to lay off non-management employees, compared to 2.9 percent last period.

The Lodging Employment Index asks lodging industry executives whether, over the next 12 months, they expect to increase the number of non-management employees, keep it at about the same level or reduce it.

The LESI indices follow the Institute of Supply Management's Index (ISM) method of tracking leading indicators. The LESI, a leading economic indicator in lodging, is based on opinions of lodging executives and aims to provide real-time information for executive decision-making in that field. It was developed and is maintained by the University of New Hampshire's Hospitality Management Department.

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