Visitors emptied wallets to stay in isles last month

Hawaii visitors were willing to pay, on average, nearly $600 a night to stay in a luxury property last month, which hotel executives say was one of the most remarkable months for Hawaii hotel performance in nearly three decades.

Five hotel categories set record high average room rates in February, as the continued boom in tourism to the state has allowed hoteliers to bump up prices.

Hawaii is in such high demand among vacationers that hotels can keep increasing rates even while they compete against a growing number of relatively new options for places to stay, led by companies such as Airbnb.

On average, visitors paid nearly $294 a night to stay in a Hawaii hotel in February, up 8 percent from a year ago, according to the Hawaii Hotel Performance Report released Wednesday by the Hawaii Tourism Authority. Occupancy also increased to 85.6 percent, up 1.9 percentage points.

“While I expected February to be strong, it was quite a remarkable month,” said Joe Toy, president and CEO of Hospitality Advisors. “It was the first time that I actually had to take a double take at the numbers since I started the (hotel) survey in 1992.”

That’s saying something considering Hawaii hotels have been setting records almost every month since 2013, when the hotel industry began its current expansion cycle. Two months into its sixth year of growth, the cycle doesn’t appear to be missing a beat. Today the HTA is expected to report February visitor arrival numbers, which will likely confirm the continued boom in tourism.

February “was an excellent month for Hawaii’s hotel industry across the board,” said Jennifer Chun, HTA director of tourism research.

“All classes of hotel properties on all counties performed well, and that’s great news for the industry as a whole. Wailea and the Kohala Coast stood out with exceptional growth,” Chun said.

Cheapest rooms found on Oahu

The hotel report, which was compiled using data from STR Inc., showed a statewide rate spread of nearly $587 per night on the luxury side to just over $175 per night for the midscale and economy class. The cheapest rooms to be had were on Oahu, where visitors paid nearly $138 nightly for a mid-scale and economy-class room.

The rate and occupancy gains helped push revenue per available room, or RevPAR, up 10.5 percent year-over-year to $252 per night. RevPAR, which is the amount a hotelier gets for each room regardless of whether it is rented or empty, is considered by many in the industry to be the strongest measure of success.

Hawaii island hotels led the state in February RevPAR growth — nearly 19 percent year-over-year to $263. February occupancy at Hawaii island hotels rose just over 2 percentage points year-over-year to 85.9 percent and ADR increased to $306, a 15 percent gain from the prior year.

Maui County hotels saw their RevPAR rise 16 percent year-over-year to $355, the highest RevPAR total of all the islands. Occupancy at Maui properties increased nearly 3 percentage points year-over-year to 82.7 percent, while ADR rose just over 12 percent to $430.

February RevPAR on Kauai rose just over 16 percent year-over-year to $256 per night. Occupancy stayed basically flat at 82.2 percent, while ADR rose nearly 16 percent to $311.

Occupancy at Oahu hotels in February rose nearly 2 percentage points year-over-year to 87.4 percent. RevPar increased nearly 4 percent year-over-year to $205 and ADR grew nearly 2 percent year-over-year to $234.

Time will tell if growth can continue

Only time will tell if Hawaii’s hotel industry is able to sustain its latest gains — without encountering price sensitivity or other headwinds, like growing competition from short-term rentals, which critics said could undercut the hotel market.

Mufi Hannemann, president and CEO of the Hawaii Hotel and Lodging Association, said a threat exists as long as “vacation rentals continue to be a problem that goes unresolved in the halls of government.”

Last year, visitors planning to stay in a hotel increased 4 percent, but that growth rate was outpaced by visitors who planned to stay in a rental house or private or shared room. Those markets grew 13 percent, 100 percent and 106 percent.

Hannemann said unregulated growth of short-term rentals could threaten Hawaii’s hotel industry’s quest to maintain high occupancy and rates, while ensuring that hotel workers can find affordable housing in the community.

But Beth Churchill, owner of Churchill Group LLC, said she thinks there’s enough demand to go around as evidenced by the fact that Hawaii’s diversified hotel market is growing at both ends.

“RevPAR grew more than 13 percent for the luxury class and for the mid-scale and economy class,” Churchill said.

Less concern about high prices

Price sensitivity discussions emerged during the first quarter of 2013, when Hawaii hit the nation’s highest hotel room rates. At the time, some feared price- sensitive tourists might cut trips short or look elsewhere.

Today there is less concern about prices getting too high. Hawaii has seen an increase in bookings from independent travelers, who tend to spend more than those on package tours, Toy said.

Cold weather on the U.S. East Coast, storms in the Caribbean and concerns about crime in Mexico have given Hawaii an edge on its closest competitors, said Keith Vieira, KV & Associates Hospitality Consulting LLC principal. Reinvestment in Hawaii hotels and more flights to the islands also has bolstered visitor demand, along with the strong U.S. economy, Vieira said.

“We came out of a strong fourth quarter and January’s momentum is carrying over,” Vieira said. “This will be one of the best months on record. Demand was so strong that the Sheraton Kona Resort & Spa at Keauhou Bay was running at 95 percent occupancy.”