More visitors are coming to Hawaii, but they need to reach deeper into their wallets or the state will end the year $400 million short of its tourism spending goal.
An increase in visitors from every major market in May – except the U.S. East – boosted arrivals by 6.5 percent and spending by 17.4 percent from the year-ago period, according to data released yesterday by the Hawaii Tourism Authority. Total visitor arrivals rose to 549,954, and spending from visitors who came by air to Hawaii increased to $860.7 million, according to the HTA.
May, traditionally a slower tourism month, exceeded expectations, said state tourism liaison Marsha Wienert. May’s increase in visitor spending was the largest gain in expenditures that the state has seen since before tourism began declining in 2008, Wienert said.
"Tourism’s positive performance in May reinforces our optimism in Hawaii’s improving economy," she said.
Still, Hawaii is "not out of the woods yet," according to HTA President and Chief Executive Officer Mike McCartney.
May’s spending increase helped boost total expenditures for the first five months of 2010 to $4.3 billion; however, year-to-date visitor spending has underperformed HTA’s target by 11.1 percent. If it continues at its current pace, visitor spending will only attain $11.4 billion of the HTA’s $11.8 billion year-end spending target.
That’s bad news for a market that ultimately gauges growth by spending, the true measure of a destination’s performance. Hawaii’s visitor industry was forced to focus on putting heads on beds after the collapse of Lehman Bros., the global recession and the heyday of H1N1 took their toll on the arrivals.
Now that the tourists have begun to come back, increased spending will become the key to recovery. Since hotels are traditionally a visitor’s largest spending category, much will depend on their ability to increase rates, said Barry Wallace, executive vice president for hospitality services for Outrigger Enterprises Group.
"Occupancy is back or ahead of last year, but the price has not come back," Wallace said.
While most hotels are within 4 or 5 percent of last year’s average daily room rates, many are still down 25 percent – more than the profit margin for most hotels – from the visitor industry’s last peak in 2007 and 2008, he said.
"We’re at the lowest level that we’ve been since 2003, and we’re still going down on price," Wallace said. "There are a lot of hotels that aren’t bringing in enough revenue to pay their mortgage."
At this rate, Wallace said he anticipates that it could take Hawaii hotels another 10 years to get back to peak 2007 rates.
Hotel occupancy in Hawaii fared better than competitive destinations such as Las Vegas, Europe, Mexico, the Caribbean, Florida, Italy, France, Sydney, Guam, Shanghai, Seoul and Bangkok, according to HTA’s visitor data through May. However, the average daily room rate paid for a hotel room in Hawaii remained lower than these competitors.
While hotel discounting has resulted in increased arrivals, spending has not kept pace, said Kelvin Bloom, president of Aston Hotels & Resorts.
"It demonstrates the fact that other markets have recovered quicker and that they have greater pricing power than we do," Bloom said.
While arrivals from the U.S. East market dropped 2.9 percent, arrivals from Hawaii’s core U.S. West visitor market rose 2.4 percent and they were up
25.6 percent from Japan, 14.6 percent in Canada and 6.5 percent in the cruise market. As a result, spending for every market except the U.S. East rose by double digits.