Hawaii hotels, which set a record of $4.06 billion in total hotel revenue for the first nine months of the year, achieved the nation’s second-best average daily rate and revenue per available room behind New York.
Through September, average daily rates climbed 4.9 percent to $241.28, according to a report released Wednesday by Hospitality Advisors LLC and STR Inc. Revenue per available room reached $187.72, which was 4.8 percent higher than the previous year. At the same time, statewide occupancy remained flat at 77.8 percent because a 0.9 percent gain in visitor arrivals was negated by a 1 percent decrease in their length of stay.
"The increase in daily rate is about half of what it was last year, but because we have stable arrivals and visitor days, any increase in daily rate potentially is a record," said Joe Toy, president and CEO of Hospitality Advisors.
That was certainly true in August and September, he said. Monthly results for September contributed to the strength in the sector. Total hotel revenue for September also set a record of $398 million, with room revenue alone contributing $269 million. Statewide occupancy rose 2.5 percentage points to 76.2 percent. Room rates climbed 4.8 percent to $219.96, which led to revenue-per-available room gains of 8.3 percent to $167.61, both records for September.
Hawaii hotels also set a new August hotel revenue record of $484 million despite the effects of Hurricane Iselle. The average daily rate in August climbed 3.2 percent year-over-year to a new August high of $251.19. However, occupancy dipped 2 percentage points to 78.6 percent primarily due to decreases in visitor arrivals and length of stay that were partially related to the hurricane. Still, rate gains helped boost revenue-per-available room slightly to $197.44, a record for August.
While Hawaii’s hotel industry is still in record-setting mode, Toy said it’s less healthy than it once was because price rather than demand is driving gains in revenue per available room.
"Ideally, you want arrivals and average daily rate increasing the pie," he said. "That kind of market is more sustainable because there is less risk of losing some visitors to price points."
The distribution of visitors across islands is another hotel industry concern, said Jerry Gibson, area vice president of Hilton Hawaii.
While Oahu averaged an occupancy of 85.2 percent for the first nine months of the year, the neighbor islands lagged behind, Gibson said. To be sure, Toy reported that occupancy rates for the first nine months of the year averaged 62 percent for Hawaii island, 71.3 percent on Kauai and 72.5 percent on Maui.
"I’m worried about the outer islands. They are somewhat flat in rate and in some cases minus in occupancy," Gibson said.
He added that a combination of factors is responsible for lackluster neighbor island performances. They range from the slowing of Japanese wholesale business to pricey interisland airfares, as well as the lack of direct flights and the closing of the international port of entry in Kona.
"There are a few months of the year, especially July and August, when Oahu is really full," Gibson said. "If we could get some of that overflow to go to the outer islands instead of not coming at all, it would behoove the state."
While bringing more people to the neighbor islands is still a viable growth strategy, the only way to keep the hotel industry growing on Oahu will be to attract visitors who are willing to pay more, said Barry Wallace, executive vice president of hospitality services for Outrigger Enterprises Group.
"Oahu, especially Waikiki, is pretty much at capacity. When you get to occupancy in the high 80s, the industry really can’t sustain much more since there are always some rooms that are out of order," Wallace said. "Practically speaking, that’s about as high as it can get, so for the next few years, growth on Oahu will have to come from higher spending."
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