20 March 2012
By Stephanie Wharton
- After taking the U.S. out of the equation, either 60% of the world is in recession or rapidly slowing, according to Economist Rajeev Dhawan.
- The emerging economies are providing some help to the established markets, but those economies are showing signs of losing steam.
- “Do not look at the unemployment rate, even remotely, as an indicator of how the economy is doing for the next couple of years,” Dhawan said.
|Dr. Rajeev Dhawan, director of the Economic Forecasting Center and professor at Georgia State University, speaking at the 2012 Hunter Hotel Investment Conference.|
ATLANTA—While the economy continues to show signs of improvement and the hotel industry has so far dodged bullets from high oil prices, hoteliers need to keep a close eye on the headlines, economist Dr. Rajeev Dhawan said at the Hunter Hotel Investment Conference.
“Some people think that we are on the acceleration path. The answer is no. It’s just the headwinds have become less,” Dhawan, director of the Economic Forecasting Center and professor at Georgia State University, said during a session titled “2012 Economy and Beyond: Its Impact on the Lodging Industry.”
The financial meltdown in Europe, particularly Greece, is not going to happen for a while, he said. But hoteliers in the U.S. should still keep an eye on what is happening in the region, Dhawan said. “If there’s a hiccup over there, it’s going to affect our companies over here … What if there was a 5% hiccup? It drops the (gross-domestic-product) growth by about 0.2, 0.3, 0.4 percentage points.”
Hoteliers should look at demand sources, he said. “How much of your revenue is dependent on Europe?”
A hotel in Panama City Beach, Florida, might not feel the effects of the European financial crisis as a hotel with a large base of international guests in Washington, D.C.
Other countries to watch out for are China, Brazil, Russia, India and Turkey. The emerging economies are providing some help to the established markets, but those economies are starting to show signs of slowing.
“Once (the emerging economies) slow down, we’re going to have trouble with financing over there,” he said.
China, India and Turkey all are dependent on Iran for significant percentages of their oil consumption. Cutting off supply in the case of an Iranian crisis will not be an easy transition. “If they don’t get the oil, they’re not going to be able to make it,” he said.
After taking the U.S. out of the equation, either 60% of the world is in recession or rapidly slowing, Dhawan said. “If you’re dependent upon foreign travel and foreign tourists, you need to be a little careful,” he said.
Reports that unemployment is falling and consumer confidence is on the rise should be taken with a grain of salt, Dhawan said.
While the proportion of adults in the 55-plus age group have extended their careers because of concerns about the economy, those in the 16-24 age group continue to put off finding a job until later.
“Do not look at the unemployment rate, even remotely, as an indicator of how the economy is doing for the next couple of years,” Dhawan said.
Company executives are expressing signs of jittery business confidence, he said. While fourth-quarter revenues were mostly positive, there were some slowdowns in growth. When there is slowdown in growth, executives will hold off on company expansion or taking other risks.
Although consumer confidence still has not made its comeback, Dhawan said vehicle sales are at a great level because of the deals on cars. Car sales will remain at strong levels this year, which will serve as an artificial boost to the economy, he said.
Home sales, on the other hand, are abysmal, Dhawan said. “Right now, I’m still worried about why people are not buying,” he said.
There is money sloshing around, though, and eventually it is going to show up in real-estate prices, whether it be in homes or hotels, he said.
As for the remainder of the year, the U.S. will continue to see a decent amount of job growth, Dhawan forecasted. Oil prices also will continue to rise, but will drop again in July after any problems with Iran are over.