Economists: A Ray of Hope Ahead for the Hotel Market

Addressing New York University’s Hotel Investment Conference on Monday afternoon, Standard & Poor’s chief economist delivered a relatively cheerful forecast for the U.S. economy.

Both air travel and recreational spending are on the rise, said economist David Wyss, and those are positive developments for the hotel sector.

"But a lot can go wrong, and assuming that nothing will go wrong is a very optimistic assumption," said Wyss, who emphasized that the threat of repeat terrorist attacks are a crucial concern.

Wyss was joined by panelists Sara Johnson, managing director of Global Insight, and PricewaterhouseCoopers’ Bjorn Hanson, who acted as moderator. The two-day event was held at the Waldorf Astoria Hotel.

Both Wyss and Johnson project that the Gross Domestic Product will hit 5% by the end of the year. Johnson predicted that the Consumer Price Index would hit 2.7% by year-end.

On the interest rate side, Johnson predicted that the Fed will raise rates four times this year, which would cause rates to double their current standing.

Johnson also said that the Fed is now concerned about inflation. On that score, both economists agreed that the Federal Reserve would likely raise short-term rates by one-quarter percentage points at their June 30 meeting. "These are the lowest interest rates since 1958. They just can’t stay down there, and the goal of the Fed isn’t to halt the economy," said Wyss.

Johnson added that the travel demand typically lags the business cycle by roughly six months, so the industry is just now starting to feel the effects of the rebound.

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