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Is Worst of the Downturn Past?

NEW YORK — The economy and gas prices are affecting hotel demand. For every 10% increase in gas prices, there is a correlating 0.5% decline in hotel demand, says Bjorn Hanson, a hospitality and leisure researcher for PricewaterhouseCoopers.

Moreover, 60% of hotel demand is tied to gross domestic product, Hanson noted while moderating an economic update panel at the 30th annual New York University International Hospitality Industry Investment Conference.

Two panelists offered different perspectives on the state of the economy. David Wyss, chief economist for Standard & Poor’s, believes the U.S. economy is in recession — albeit not a bad one, considering that it has continued to grow. Construction in non-residential real estate is “very robust” said Wyss, and trade has emerged as another positive as the weak dollar boosts exports.

Wyss doesn’t forecast a recovery in the economy until the second half of 2009. And if oil prices continue to rise ora further freeze occurs in financial markets, the economy could get worse.

The question of whether the economy is technically in a recession or not is actually irrelevant at this point, said Bernard Baumohl, managing director of The Economic Outlook Group, considering that people behave the same way whether the economy grows 1% or declines 1%.

Clearly, housing is in recession, credit availability is scarce, and consumers and businesses have cut back on spending, he said.

Baumohl expects that “most of the hemorrhaging is over” and that the economy is in the final stage of “correcting itself of excesses.” He also projects that the housing sector will bottom out in early 2009.

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