How can we predict changes in supply and demand, and therefore the future of the hotel industry?
Predicting new supply is relatively easy. Various consulting firms track detailed information about everything from project planning, entitlements, building permits, construction starts and openings to provide a pretty good indication of the supply “pipeline” of new hotel rooms being built. But predicting changes in demand for hotel room nights can be a bit more challenging. This is frequently done by looking at the statistical correlation between certain measurable events and changes in room demand. The closer a correlation is to 1.0, the better statisticians will tell the events studied are predictors of what a change in one event will have on the other. Interesting correlations have been found between room demand and a number of factors such as airline seat capacity, employment and the price of gasoline. But for many years, Bjorn Hanson, Ph.D., Clinical Associate Professor, New York University, has told us of the amazing correlation between the U.S. GDP and room night demand. In the
