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HomeStatistics & TrendsPricewaterhouseCoopers: 83% of downturn in lodging demand related to the economy rather than concerns about travel

PricewaterhouseCoopers: 83% of downturn in lodging demand related to the economy rather than concerns about travel

Actual lodging demand decreased by 6.5 percent in the fourth quarter of 2001, according to an analysis…

Actual lodging demand decreased by 6.5 percent in the fourth quarter of 2001, according to an analysis prepared by PricewaterhouseCoopers<.>. Of that decrease in demand, 5.4 percentage points are directly attributable to the economy, and only 1.1 percentage points are attributable to non-economic concerns, such as concerns about travel safety and fear of flying related to terrorism. Therefore, the economy explains 83 percent of the decline in lodging demand.



This contrasts to the third quarter of 2001, when actual lodging demand decreased by 6.0 percent. Of this decrease, 2.2 percentage points of the total decline were due to the economy. The residual 3.8 percentage points were due to the aforementioned non-economic factors.



The analysis is based on PricewaterhouseCoopers' proprietary econometric model; the change in demand elasticity to economic indicators explains the change in demand related to the economy.

"The economic effects of September were incorporated into an overall slowdown in economic activity, and it is the economy that explains most of the decrease in demand, not fear or even the increased inconvenience of travel," said Bjorn Hanson, Ph.D., global industry leader, PricewaterhouseCoopers Hospitality & Leisure Practice.



"This is not to suggest that the influence of concerns about travel safety is certain to diminish in the immediate future," said Dr. Hanson. "In the past three months, lodging demand has been very sensitive to federal alerts, air-travel-related accidents and other threats."



The group PricewaterhouseCoopers predicted every industry turning point in the last ten years, usually two years in advance of each market move.



In July 1991, PricewaterhouseCoopers predicted a return to profitability for the industry in 1993, and average daily room rates surpassing inflation. In April 1996, PricewaterhouseCoopers issued an early alert that there would be an occupancy decline in 1997. In October 1996, the firm predicted occupancies would decline in 1997. And in September 1997, PricewaterhouseCoopers said room starts would decline in 1998.



In January 2000, PricewaterhouseCoopers forecasted a U.S. lodging industry slowdown in late 2000 and early 2001.

Theodore Koumelis
Co-Founder & Managing Director - Travel Media Applications | Website

Theodore is the Co-Founder and Managing Editor of TravelDailyNews Media Network; his responsibilities include business development and planning for TravelDailyNews long-term opportunities.

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