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Tuesday, November 25, 2014         

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Japanese disasters threaten hotels’ gains

The industry is bracing to lose steam after posting strong revenue and occupancy rates

By Allison Schaefers

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February was a month to love for Hawaii hotels.

However, the gains might prove short-lived as the industry grapples with the tourism-dampening effects of the earthquake, tsunami and radiation scare in Japan.

Hawaii hotels saw occupancy in February rise 6.1 percentage points to 81.7 percent, a high-enough volume to begin raising room rates, according to a hotel flash report released today by hotel consultancy Hospitality Advisors LLC.

Statewide average daily rate, or ADR, also improved by 9.9 percent to $192.38, a value based on the largest monthly gain since August of 2006. Meanwhile, revenue per available room (rev­PAR), which is considered the best measure of hotel performance, rose 18.8 percent to $157.17.

“The ongoing recovery for Hawaii’s lodging industry started in late 2009, when statewide occupancy levels began to increase, and gained momentum last summer when ADRs began to increase,” said Joseph Toy, president and chief executive of Hospitality Advisors.

While February’s ADR and revPAR gains were measured against a bad year, occupancies above 78 percent allowed hoteliers to raise their rates, said Shari Chang, senior vice president of sales, marketing and revenue management for Aston Hotels & Resorts.

“We aren’t back to where we need to be; however, the momentum was starting,” she said.

Hotel occupancy was climbing in March, but visitor arrivals and bookings from Japan, Hawaii’s No. 3 visitor market, began falling in the islands after March 11, Toy said. Oahu, a gateway for travel from Japan, experienced the most hotel shocks, he said.

Now the best hoteliers can hope for is that strong marketing will offset some of the related losses and allow them to realize by year’s end the beginnings of market recovery that they saw in the first months of 2011, said Keith Vieira, senior vice president and director of operations for Starwood Hotels & Resorts in Hawaii and French Polynesia.

It’s hard to forecast when Hawaii tourism will rebound, Vieira said. However, the Japan market began recovering from the 1995 Kobe earthquake two months after the event and was back to business as usual within six months, he said.

“At the end of the day, I think we’ll end up slightly ahead of 2011,” said Jerry Gibson, area vice president of Hilton Hawaii, “but I don’t agree that it will be an automatic that Japan will start to travel again. It will depend on what happens to the radiation and its containment.”

In the first three days of the tragedy, Oahu hotels saw their preliminary daily occupancy climb by about 8 percentage points, to 14 percentage points, due to travel disruptions that stranded Japa­nese travelers and others in Hawaii, Toy said. Then, preliminary daily hotel occupancy on Oahu started to fall into negative territory, he said.

“From a Japan standpoint, everyone on Oahu can carve out a 25 to 30 percent drop in occupancy from where they were,” Gibson said.

Through March 26, Oahu’s preliminary daily hotel occupancy has run about 2 to 3 percentage points behind the same period the year prior, Toy said.

“Toward the third week of March, response from markets outside of Japan helped Oahu’s occupancy begin to pull even with last year,” he said. “Still, it’s too early to tell where the trend will go.” A lot will depend on how Japa­nese travelers respond to Golden Week, which is traditionally a strong period for them, he said.

“We aren’t getting any feedback on Golden Week, but I expect that the trend will remain the same,” Gibson said.

Japanese arrivals are expected to decline 45 percent this month, 35 percent in May and 30 percent in June, according to the Hawaii Tourism Authority. There also have been lesser drops from Hawaii’s No. 1 market, the U.S. West and its No. 2 visitor market, the U.S. East.

The HTA has mounted a $3 million recovery plan, and private companies also have stepped up marketing.

“We are all on the road,” Chang said. “Guests from Japan are a major portion of the business at some of our properties, and we’re hoping to fill booking gaps with guests from other markets.”

Hilton is running large banner ads with different e-commerce firms to spread the word about value in the market, Gibson said.

“Domestically, the advertising has started to kick in,” he said.

In the aftermath of the tragedy in Japan, Hawaii hotels are trying to hang onto room rates, Chang said.

“No one wants to go back to where we were with the heavy discounting because it takes too long to recover,” she said.

Bargain-basement deals can hurt the integrity of Hawaii’s hotel rate if enough of them make it into the market, Vieira said.

“We don’t want to take three steps backward just to take one or two steps forward,” he said. “We aren’t offering incentives in the U.S. market, and it would still be insensitive to offer them in Japan.”






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