Hawaii hotels inched closer to recovery in April, with still-heavy discounting feeding into marginal gains in occupancy and room tax revenue.

Average daily room rates declined by 2.1 percent to $175.84 in April, while statewide occupancy increased by 2.6 percentage points to 64.5 percent, according to a report today by Hospitality Advisors LLC.

Joseph Toy, the company’s president and chief executive officer, said the continued recovery is good news as the state enters the busier summer months.

"As in past cycles, Oahu and Maui tend to recover first, with luxury and upscale hotels leading the way with visitors trading up in travel due to attractive price discounting," Toy said. "Summer will be very telling as it gives us a longer period to evaluate the strength and pace of the recovery going into 2011."

Oahu led the state in occupancy, with 69.9 percent in April, a 0.2 percent drop from the year before.

Occupancies on Kauai and the Big Island were flat. Kauai stayed the same at 54.1 percent, and the Big Island saw a 0.6 percentage point increase from last year to 54.9 percent.

"In Kauai and the Big Island, there is some occupancy improvement," said Murray Towill, president of the Hawaii Hotel & Lodging Association. "But the bottom line is that they’ve got the furthest to recover."

Maui lifted the entire state with a 10.5 percentage point increase to 66.7 percent in April. Its average daily room rate dropped by 7.1 percent, but it still had the state’s highest rate at $227.89.

And despite the heavy discounting, Maui’s revenue per available room increased by 10.2 percent due to the stronger occupancy.

Even though the Makena Beach & Golf Resort, formerly the Maui Prince, was recently in foreclosure, the once-troubled property was able to double its occupancy from last year.

The property was up for sale in a court-mandated public auction last month, and the highest bidder so far was the lender, Wells Fargo Bank, with a $55 million bid. The property could still go to other, higher bidders when the Maui Circuit Court holds its confirmation hearing next month.

"When we were in the foreclosure process, it was very difficult to do a budget," said Kelly Lewis, general manager of the Maui resort. "You’re pulling numbers from the sky."

Lewis said he expects room rates will continue to be a challenge throughout the year and even through 2011. The property was marketed as a resort destination with lower rates to keep it competitive with other hotels on the island.

"You might see a slight increase in 2011, but you won’t start seeing significant increases until 2012," he said.

"Once you have the compression (higher occupancy), you can go after the rate."

Lewis said that once the confirmation of a new owner is done, the Makena resort can look to renovations as early as 2011.

"With the foreclosure behind us … there’s capital dollars that can be infused into the property, which is a nice position to be in," Lewis said.

Towill also said occupancy must first increase before hotels can start increasing rates.

"Much of that occupancy increase is accompanied by discounting room rates; it doesn’t have a positive impact on the financial picture," Towill said.

"It’s supply and demand. Unfortunately the rate and revenue recovery is always a lot slower when you go through a drop like this."

Statewide, luxury properties gained 6 percentage points to 70.5 percent. Luxury average daily rates dropped 3.5 percent to $247.35. Revenue per available room at luxury properties increased by 5.5 percent to $174.38.

Visitor arrivals in April increased by 1.9 percent across all markets. But domestic arrivals slowed, declining 0.3 percent due to a drop in U.S. East arrivals.

Overseas visitor arrivals increased by 5 percent in April.