Hotels filling up

Strong hotel occupancy and room rates helped push Hawaii’s hotel room revenue last year to $2.87 billion — the highest since 2007, according to a year-end report released today.

The 12.7 percent year-over-year gain in 2011 room revenue represented the largest annual growth since at least 1996, said hotel consultancy Hospitality Advisors LLC and Smith Travel Research.

With the exception of last June and July, Hawaii’s hospitality industry has seen occupancy increases every month since December 2009. The industry also has experienced 14 consecutive months of average daily room rate growth and 22 consecutive months of revenue per available room growth.

The results represent a departure from the doldrums of 2009 and early 2010 and are a boon for Hawaii’s tourism-dependent economy. However, hoteliers and other industry watchers note that the gain in room revenue is well below the 2006 peak of $3.12 billion.

"We are definitely still in recovery mode," said Joseph Toy, Hospitality Advisors’ president and CEO. "Over the past four years, we’ve seen close to $2 billion in net income evaporate. It’s going to take a another two to three years to make that up."

If the market continues strengthening, Oahu hoteliers could see real recovery by 2013 and neighbor island hoteliers by 2014, he said. Still, lots of progress was made in 2011 with December providing a strong finish for the year, Toy said.

Statewide occupancy averaged 73.1 percent in December, a gain of 3.2 percentage points compared with the same month in 2010. The average daily rate rose 7.4 percent in December to $219.79. As a result, revenue per available room increased 12.3 percent to $160.67, which was a new high for December.

For the year, statewide occupancy rose 2.7 percentage points to 73.4 percent. The average daily room rates increased 8.5 percent to $189.62, and revenue per available room jumped by 12.6 percent to $139.18. Room rates for Hawaii hotels in 2011 were the second highest in the nation behind New York City, and occupancy was the fourth best in the nation, trailing only New York City, San Francisco and Miami, according to Smith Travel Research.

"Yes, we did really well last year, but our costs did better," said David Carey, who was one of about 10 industry leaders who appeared before the Hawaii House Tourism Committee on Monday lobbying for increases to the Hawaii Tourism Authority’s marketing budget and the avoidance of further industry tax increases and cutbacks.

Carey, who is president and CEO of Outrigger Enterprises, said hotel costs have increased significantly. Hoteliers are paying higher taxes, utility bills, wages and benefits and have seen profits further whittled down by increased regulation, he said.

"Our health care costs alone have gone up 4 to 6 percent on an annualized basis," said Greg Dickens, president of Kyo-ya Co. LLC, which owns five hotels in Hawaii including the Westin Moana Surfrider, the Royal Hawaiian, the Sheraton Waikiki, the Sheraton Princess Kaiu­lani and the Sheraton Maui Resort & Spa.

Redevelopment costs also have been staggering, Dickens said.

"Between 2006 and 2011 we spent $300 million on Waikiki renovations, but our revenues at those hotels didn’t grow. That’s not a good return on investment," he said.

Carey and Dickens want legislators to consider increasing the Hawaii Tourism Authority’s marketing budget by $2 million to support airlines that fly here and take advantage of opportunities, particularly in China. They also oppose further increases of the transient accommodation tax and siphoning of tourist dollars to the general fund.

When hotel profits are squeezed, Carey said less money is available to make the kind of reinvestment in the destination that visitors expect.

"The competition is growing like crazy," he said. "We have to compete against improving destinations like Bali and South Thailand if we want to get our fair share out of Asia."