Higher rates helped boost isle hoteliers in February

February was a month to love for Hawaii’s hotel industry, which set records for revenue, average daily rate and revenue per available room for the second month in a row.

The industry earned a record $471 million in total statewide revenue during February, according to a report scheduled for release today by Hospitality Advisors LLC. While statewide occupancy was a healthy 83.6 percent, it was just a smidge better than the prior year.

A higher statewide average daily room rate, or ADR, helped balance weakening demand for hotel stays. Statewide ADR climbed 2.9 percent to a February high of $261.16. The modest ADR gain, coupled with the flat occupancy, was still enough to push statewide revenue per available room, or RevPAR, up 3.6 percent to $218.33, a February record.

Hoteliers consider RevPAR, which is the rate that each hotelier gets for every room regardless of whether it is occupied, the best measure of industry performance.

“We’re doing marginally better than last year,” said Barry Wallace, executive vice president of hospitality services for Outrigger Enterprises Group. “If this continues, at the end of the year, we’ll probably be up about 2 to 3 percent over last year. That’s good enough, but if we really want to do better, we’ll have to improve significantly over inflation.”

Kelly Sanders, area managing director for Starwood Hotels Honolulu, is only slightly more bullish. Sanders thinks year-end RevPar might be up 3 to 4 percent based on first-quarter results, a strong second-quarter booking pace and anticipated boosts from Rim of the Pacific military exercises in the summer and the World Conservation Congress in the fall.

Wallace said one of the challenges to watch was the unfavorable exchange rate for Canadian visitors. The currency downturn hurt first-quarter performance because it resulted in less overall spending and a reduced length of stay for the snowbird market. Sanders said Japanese business also was down, but the good news is that the yen is stabilizing and the exchange rate has improved from 125 to the U.S. dollar at the start of the year to around 107 or 108.

Still, February, generally the best month of the year for Hawaii hoteliers, didn’t disappoint.

“We had some gains in February,” Wallace said. “We never expect to see huge year-over-year positive variances because February is such a great month, there’s not that much room to go up.”

February occupancy on Oahu crept up to 86.8 percent but was flat against February 2015. Occupancy in Waikiki was a staggering 88.1 percent for the month. Oahu room rates ticked up 3.5 percent to a record $223.20, and RevPAR grew 4 percent to a record $193.74. Waikiki hotel rooms went for $223.42, 3.6 percent more than in February 2015. Waikiki hoteliers achieved a record RevPAR of $196.83, nearly 5.7 percent above February 2015.

“Oahu benefited from Waikiki’s compression,” Sanders said. “An 88.1 percent occupation in Waikiki is astounding, especially when you think about the number of hotels that we have in the entire island. Oahu overall has been maxed out in terms of total visitors, and the hotels have been sold out a majority of the time.”

Kauai was a winner for performance across the isles. Occupancy at Kauai hotels grew 1.3 percentage points to 82.3 percent. Room demand helped Kauai hoteliers push up their average room rate 8.2 percent to a February high of $261.20. The gains helped Kauai achieve a RevPAR of $214.97, which was 10 percent higher than in February 2015 and the best RevPAR of any month.

Hawaii island occupancy climbed 2.8 percentage points to 78.2 percent. The average rate fell 1.6 percent to $249.50. The higher occupancy was enough to offset ADR and grow RevPAR, which rose 2 percent to $195.11, a new high for any given month.

While room rates on Maui rose 2.3 percent to a record $360.93, occupancy dipped a scant 0.3 percentage points to 80 percent. January had been the first month of occupancy gains for Maui in 16 months. Still, RevPAR grew 1.9 percent to $288.74, a new monthly record.

January’s hotel market looked to be driven more by occupancy than by rate. The pattern was reversed in February.

“For a lot of people February bounced back from a not-too-good January,” said Keith Vieira, principal of KV &Associates Hospitality Consulting. “But we need to be aggressive with managing yield.”

Vieira said hoteliers are using electronic flash sales offering discounts and value-added features to stimulate first-quarter travel.

“Group travel is down from last year. We’ve got more leisure rooms to fill,” he said.

Wallace said hoteliers will compete even more vigorously with the opening of the Hilton Garden Inn.

“They’ve got a lot of inventory to fill, so the competition should be fierce,” he said.