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Hawaii News

Hotels gain in key areas

Allison Schaefers

Hawaii hotels began the year with increased occupancy, average daily room rates and revenue per available room, according to a report released today by hotel consultancy firm Hospitality Advisors LLC.

Statewide hotel occupancy rose 8.1 percentage points to 74.5 percent in January, the 14th consecutive month to post occupancy gains since recovery began in late 2009. Statewide, the average daily room rate, or ADR, increased 6.8 percent to $188.95, the largest price gain since March 2008.

These gains pushed revenue per available room, considered by many to be the best measure of hotel performance, up 19.9 percent to $140.77.

"We saw the momentum that began in the second half of 2010 continuing into this year," said Joseph Toy, president and chief executive officer of Hospitality Advisors.

While most of Hawaii’s hotel recovery has been occupancy-driven, aggressive discounting has also strengthened statewide performance over the past three months, especially on Oahu and Maui, Toy said.

The return of the Pro Bowl helped as well, with arrivals gains from the state’s best markets — the U.S. West, the U.S. East, and Japan — he said.

"There’s a lot of pent-up demand for Hawaii, and hotels here are recovering faster than in other destinations," Toy said.

Arrivals and spending are expected to go up this year for the U.S. West, the U.S. East, Japan, China, South Korea, Canada, Oceania and Europe, said David Uchiyama, vice president of brand management for the Hawaii Tourism Authority.

"We need to grow ADR, revPAR, airfares and ancillary spending while building experiential value," Uchiyama told members of the state’s visitor industry during a marketing overview Wednesday.

Still, statewide occupancy and revenue per available room (revPAR) continued to trail pre-slump levels by a wide margin, Toy said. The best-ever occupancy for January was 86.7 percent in 2006, and the month’s best revPAR was $162.12 in 2008, he said.

Price recovery for Hawaii’s hotel industry is still another two or three years away, said Barry Wallace, executive vice president of hospitality services for Outrigger Enterprises.

"In the last few dollars of ADR lies almost all the profit," Wallace said. "The vast majority of ADR pays for employees and taxes. Profit is the final dollar or two, and that’s the dollar that isn’t there. Many Hawaii hoteliers can’t pay the mortgage or are in some level of distress."

As a result, hoteliers will continue to feel squeezed, and visitors will continue to get great deals, he said.

"We can’t pull back the specials because we are still using them to drive demand," Wallace said. "We are all still very cautious."

Hoteliers also are concerned that rising oil prices, the threat of hotel strikes and sprucing up for the Asia-Pacific Economic Cooperation conference, which will bring the leaders of 21 member economies to Hawaii in November, could further cut into burgeoning profits, he said.

If the price of oil, which recently topped $104 a barrel, continues to rise, it could cause the greatest damage to Hawaii’s fragile tourism recovery, Toy said.

"A strike would eventually be settled, but oil prices and how things play out in the Middle East could have a longer-term impact," he said.

Labor concerns surfaced for hoteliers again last week after 97 percent of unionized workers at four Kyo-ya-owned hotels voted to authorize a strike, Wallace said.

"All the hotels are prepared to make reasonable wage adjustments, but the greater concern is that one way or another the argument will escalate and it will deter people from coming," Wallace said. "Hawaii could be perceived as unfriendly."

Contracts for some 6,600 unionized hotel workers expired last June, and workers already have held a five-day strike at Hilton Hawaiian Village Resort and Spa. Now the threat of another strike is coming to Hawaii’s hotel industry at a time when it needs to look its best.

"All eyes will be on Hawaii during APEC," Wallace said.

Preparations for the two-day event are under way, he said.

"It’s expensive," Wallace said. "Currently, hotels are ensuring that technology is up to snuff and people learn about language and culture."

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