Isle hotels hit record $1.4B revenue

Despite a sharp drop-off in room rate growth in March, Hawaii’s hotel market hit a first-quarter hotel revenue record of $1.44 billion and ended its first three months with the nation’s highest room rates and revenue per available room, and the second best occupancy after Miami/Hialeh, Fla.

During the first quarter, Hawaii hotel guests spent $250.36 a night on the average hotel room, or 6.2 percent more than they did during the same time period in 2013, according to a report due out Thursday by Hospitality Advisors LLC and Smith Travel Research. On average, guests paid about $16 a night less for Miami/Hialeah hotel rooms, and just over $37 a night less in New York.

Joe Toy, president and CEO of Hospitality Advisors, attributes Hawaii’s first-quarter rate ranking to its status as a world-class leisure destination as well as its limited inventory. Indeed, Hawaii’s positioning helped hoteliers set March records for room revenue, which hit $317 million, and revenue per available room, which rose 1.3 percent to $191.06. March’s average daily rate also hit a monthly record of $243.70. However, Toy said the 2.8 percent year-over-year growth rate in March was the lowest in 41 months.

"While high occupancy on Oahu and Maui continue to support strong (average daily rate) gains, there has been a noticeable moderation in price increases over the past six months," Toy said. "Room rates have been increasing, but we’ve been seeing the growth rate decline. Part of it is that we’ve actually been seeing a decline in room demand for the past 11 months and changes in price always lag changes in demand."

Toy said a strong 6.2 percent increase in Hawaii’s average daily rate more than offset a 1.2 percentage point decline in occupancy to 80.8 percent, with room revenue accounting for a record $978 million for the period.

Jerry Gibson, area vice president for Hilton Hawaii, said the chain saw very good hotel occupancies and average daily rates through March.

"Hilton Hawaiian Village and some of our major flags around the system had very good group business so they were able to yield better rates," Gibson said. "Year-over-year our group business was up about 7 percent and that’s a very good percentage for us."

However, come April, Gibson said, Hilton experienced a bit of a decline as increases occurred in Japan’s general excise tax and domestic airfares. Likewise, Kelly Sanders, area managing director of Waikiki for Starwood Hotels and Resorts, said the chain’s first quarter was strong until the last 10 days of March.

"Visitors from Asia, primarily Japan, really helped the first quarter come in much stronger than we had expected," Sanders said. "However, it got worse in April, which was a very tough month across all hotels in Waikiki and then continued into May."

He said Starwood’s Waikiki properties saw business from Asia drop 20 percent in April and 15 percent in May, and are expecting declines of 14 percent in June and 10 percent in July and August. Even so, Sanders said June and July will be stronger for Starwood provided that the Asia drop isn’t worse than anticipated.

Cheryl Williams, regional vice president of sales and marketing for Starwood Hotels and Resorts in Hawaii and French Polynesia, said she thinks the chain will see slight occupancy increases and some average daily rate growth, albeit not as robust as in the past.

"We’re seeing less demand from the U.S. market. Ithink there’s some price resistance due to the overall cost of a package to Hawaii versus, say, somewhere like Mexico," Williams said.

"Hotel rates aren’t the only story. When you look at May and June, airfares from the U.S. mainland to Hawaii are running about 15 to 20 percent more than last year."

John Votsis, director of sales and marketing at Trump International Hotel Waikiki Beach, said it’s hard to predict where hotel prices will go for the summer since rates are elastic and dependent on what the market will bear. But Votsis is confident that second-quarter business, at least at his hotel, will prove better than the first quarter, which saw fluctuating performances.

"May is looking very strong and June has built up perfectly,"Votsis said. "July and August is strong, too. Our level of customer is not easily affected by increases in airfare or currency shifts in the marketplace. They’ll come because Hawaii has the best service in the world — we are blessed with beautiful people who treat guests warmly and that’s the cornerstone of our business."