27 July 2009
Hospitality Lawyer with some insights on the “amazing relationship” between GDP and hotel room demand. What does it mean for the lodging industry when the “recovery” finally comes?
Going back to the 1920s, there has been approximately a 1 to 1 relationship between the demand for hotel rooms and the U.S. gross domestic product (and its predecessor, gross national product). The long-term trend line for the GDP and lodging industry demand have been parallel, even during the Great Depression and World War II. For some brief periods, this relationship was off a bit, but never as badly as with the current economic crisis. During the Great Recession of 2008-2009, the demand for hotel rooms has fallen FOUR times as fast as the GDP has declined.
This creates some very interesting speculation. For example, when the recovery finally does come, will the old 1 to 1 relationship be restored? Will the lodging industry start improvement from its then-current level on that 1 to 1 basis? Or will the lodging demand “snap back” to the GDP curve, making up for that historic 4 to 1 distortion we have just experienced on the downside?