Stronger hotel room demand in May broke a yearlong occupancy slump, helping Hawaii’s hoteliers hit three monthly performance records while achieving the nation’s highest room rates.
Statewide hotel occupancy was 72.7 percent, 0.6 percentage point above the 72.1 percent rate in May 2013, according to a report due out Wednesday by Hospitality Advisors LLC and STR.
Hawaii’s position as a world-class destination with limited hotel inventory resulted in May records for room revenue, $390 million; average daily rate, $218.64; and revenue per available room, considered a key measure of hotel profitability, which rose 4.8 percent to $158.95. Hawaii’s average daily rate was the highest in the nation, the report said.
"In general, we’re pretty fortunate to have a year that’s up there with the best, but it’s disappointing that we aren’t getting those double-digit revPAR increases" said Barry Wallace, executive vice president of hospitality services for Outrigger Enterprises Group.
May results were lower than most hoteliers estimated when they set their annual 2014 budgets, but they were pretty satisfying, Wallace said. "I think we’ll see occupancy come out a little better than flat (for the year). As we move into the third quarter, which will be better than the first and second, we’ll see it improve to slightly better than it was last year."
Oahu occupancy remained flat in May due to sharp drops in the average length of time that visitors stayed. Oahu hotels filled 80.5 percent of their rooms. Occupancy rose on the other islands, where it ranged from 70.8 percent on Kauai to 67.3 percent on Maui to 53.2 percent on Hawaii island.
"The gap in occupancy between Oahu and Hawaii island is still more than 20 percentage points, but I think by 2015 we’ll see that recovery has spread across all islands," said Joe Toy, president and CEO of Hospitality Advisors.
While May room rate growth varied by island, only Hawaii island, which is still recovering from the most recent downturn, saw meaningful gains. As a result, statewide room rate growth slowed to about half of May 2013’s pace, Toy said.
"Given the record highs that Hawaii enjoyed last year, the moderation in Hawaii’s visitor industry was expected," he said.
The perception that Hawaii is getting more expensive relative to other destinations may have caused some visitors to make shorter trips. Shorter booking windows — the time between when the visitor makes the purchase and their arrivals — also indicate some caution in the market, Toy said.
"It’s still a very respectable market, but it’s a different one than it was in 2013. Because there was so much pent-up demand last year, people were booking well in advance. The high occupancy filled in the shoulder seasons and caused more travelers to consider a neighbor island," he said. "Now the number of people booking hotels 90 days (before arrival) has softened. We are seeing more booking pickup 45 to 30 days out. With some of the pricing concerns, we should start to see some activity on Hawaii island, which is still a good deal. "
But, price is relative and Hawaii’s reputation as a safe, relaxing destination has worth, said Kerri Welsh, a visitor who is used to higher prices back home in Mooloolaba, Australia.
"I was stressed, so I decided to come here to relax," Welsh said as she floated in the Sheraton Waikiki’s adults-only infinity pool. "Hawaii always has been on my bucket list. Now that I’m here, I say it’s just brilliant. The North Shore was beautiful and the shopping is great. I’ll talk it up even more after another mai tai."
Price wasn’t a deterrent either when Michael and Wendy Winger of the Seattle area decided to take both sons and their families on an island vacation.
"There are eight of us," said Michael Winger, who has been visiting Hawaii since the late 1960s and was celebrating the latest vacation with his wife, Wendy, at The Edge of Waikiki, the Sheraton Waikiki’s new signature pool bar. "We love the laid-back atmosphere, the food and most of all the beauty of the people. Hawaii is where we want to be."
Toy said May results piggybacked on a record-setting April, which also saw total hotel revenue, average daily rates and revenue per available rooms set monthly records. In April statewide hotel revenue rose to $407 million, which included a new high of $276 million in room revenue. Likewise, ADR climbed 5.9 percent to $234.54, while revPAR rose 3.6 percent to $171.45. However, April was the 12th month in a row to experience slipping occupancy, which fell 1.6 percentage points to 73.1 percent.
"We were pretty happy with the last two months," said Jerry Gibson, area vice president for Hilton Hawaii. "April is normally a pretty heavy convention month, and we had some of those. We also filled it in with good government business and a little bit of leisure travel."
While May typically has less convention business and fewer leisure travelers because children are in school, Gibson said this year’s monthly occupancy increased along with rates.
"However, I don’t think that April and May are necessarily indicators of where we’ll go. In September we’ll figure out if the back of the year will remain solid and if the Asian markets will keep up. Everybody has their conventions in place for the end of the third and last quarters, but the unknown is how the wholesale business will come in. We’re hoping that it continues to get better."
Moving forward, Toy expects to see continued moderation on Oahu and the spread of recovery to more neighbor island markets.
"When you go through recovery, the first thing you do is see how well Oahu does. That’s been the story through last year, and then we began to see some neighbor island markets having stronger months," Toy said. "Once Maui starts to do really well, we’ll see more improvements on Kauai and Hawaii island, which tends to lag in recoveries."
