I believe the hotel sector is a good leading indicator for the economy. The below chart shows that when the US early in recession, more than 50% of the hotel submarkets have a declining RevPAR (Revenue Per Available Room Declines).
I believe as business slows, business and personal bookings for hotels decline and when hotel bookings decline total USA RevPAR. The below chart shows the correlation.
According to the Hotel News Network:
There clearly is a linear relationship: The more submarkets report a drop in RevPAR, the larger the U.S.
RevPAR decline. A regression analysis shows the tipping point when U.S. RevPAR turns negative is reached
when 43.5% of submarkets turn negative. The 95% confidence interval falls between 42.8% and 44.2%.
So what part of the cycle is the hotel sector in?
More from HNN:
In February of this year, 44% of all submarkets showed RevPAR declines and RevPAR in the U.S. still grew 1.2%. March data was obviously more positive because of the Easter shift (only 10% of submarkets showed RevPAR declines). And in April, RevPAR continued to grow slightly (+1.7%), but the number of submarkets with negative RevPAR was 49.3%.
The hotel sector could be pointing to a weaker 2018.
The second warning signal is auto loans frauds. According to Bloomberg:
As many as 1 percent of U.S. car loan applications include some type of material misrepresentation, executives at data analytics firm Point
Predictive estimated based on reports from banks, finance companies and others. Lenders’ losses from deception may double this year to $6 billion from 2015, the firm forecast.
Those fraud rates are coming closer to the over-1-percent level for mortgages in 2009, when the financial crisis was boiling and more lenders started reporting incidents to one another, Frank McKenna, chief fraud strategist at the firm, said in an interview.
Frauds tend to happen near the end of a cycle as everyone who can afford to buy has and only the lower quality borrower is left.
These are two warning signs I am watching. Shortly I will be publishing my 2018-2019 Recession? paper discussing the potential.
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