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Fourth Quarter GDP Goes Negative: Should Hoteliers be Worried?

By Mark Woodworth and Jamie Lane
February 1, 2013

The Commerce Department released a negative estimate of real GDP change for fourth quarter.  Given the correlation between changes in GDP and the demand for hotel rooms, is this an ominous sign for the U.S. lodging industry?  We do not think so, and here’s why:

First and foremost, the Commerce Department statistic represents the quarter-to-quarter change in GDP.  Because of the seasonal nature of lodging demand, the GDP measure that is typically more comparable to hotels is the year-over-year change in GDP, which was up 1.5 percent.  According to Smith Travel Research (‘STR’), rooms sold in the U.S. increased by 3.1 percent for the final three months of 2012, which resulted in an increase in Revenue per Available Room (‘RevPAR’) of 6.5 percent for the period.  It should also be noted that both of these numbers compare favorably to the STR data for Q3 2012, which were +1.8 percent demand growth and a 5.1 percent increase in RevPAR (the year-over-year increase in GDP for Q3 2012 was 2.6 percent).

The contraction of 0.1 percent reported by the Commerce Department was caused mainly by a decrease in military spending and weaker exports.  Over the past few years we have focused our research on understanding the components of GDP and which ones mean the most to the changes in demand for hotel rooms.  Two findings from our research are that changes in personal consumption expenditures and business investment matter the most.  Personal consumption expenditures expanded at a 2.2 percent annualized rate in the fourth quarter which was the second highest quarterly increase experienced since the beginning of 2011.  Business investment also grew steadily, rising 8.4 percent.  Exports and government expenditures, which were the major factors leading to the decrease in GDP, generally have minimal effect on the performance of hotels at the national level.  Exports declined 5.7 percent during the quarter while spending at all levels of government fell by 6.6 percent.

Followers of our work know that we rely on economic forecasts prepared by Mark Zandi and his team at Moody’s Analytics.  The Moody’s forth quarter GDP forecast variance-to-actual was approximately 1.0 percent, which is almost entirely due to the surprising contraction in government spending for the quarter.  Their component forecasts for personal consumption and business investment were spot on.  This also helps to explain why our demand forecast for fourth quarter 2012 of 3.1 percent ended up being 100 percent accurate! 

Overall we still continue to feel optimistic about the prospects for the hospitality industry and do not see any reason for concern from this latest release.


Headquartered in San Francisco, PKF Consulting USA, LLC ( is an advisory and real estate firm specializing in the hospitality industry.  PKF Consulting USA is owned by FirstService Corporation (FSRV) and is a subsidiary of Colliers International.  The firm operates two companies: PKF Consulting USA and PKF Hospitality Research.  The firm has offices in New York, Boston, Portland ME, Indianapolis, Chicago, Philadelphia, Washington DC, Atlanta, Jacksonville, Tampa, Orlando, Houston, Dallas, Los Angeles, Bozeman, and San Francisco.


Mark Woodworth, President,
PKF Hospitality Research, LLC
404 842 1150 ext. 222

Jamie Lane, Economist
PKF Hospitality Research, LLC
404 809 3950

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