Hawaii’s hotel industry finished 2014 with a new total hotel revenue record of $5.4 billion.
The statewide hotel industry had the nation’s second-highest average daily room rate (ADR) and revenue per available room (RevPAR), which is considered by many to be the best predictor of hotel success because it measures the price that a property is getting for each room whether occupied or not.
According to statistics due to be released Monday by hotel consultancy Hospitality Advisors LLC and STR Inc., Hawaii’s ADR rose 5.5 percent year-over-year to $242.63, which was second only to New York’s $263.45 ADR.
Hawaii RevPAR increased 6.2 percent year-over-year to $186.83, which was just behind New York’s $223.53. While Hawaii’s 2014 occupancy rate only grew 0.05 percent year-over-year to 77 percent, it ranked fifth best in the nation behind New York, San Francisco/ San Mateo, Los Angeles/ Long Beach and the Miami/Hialeah markets.
"Statewide hotel demand began the year on a downward trend, but a strong summer, with the exception of August during the effects of Hurricane Iselle, and a particularly improved fall shoulder season helped Hawaii’s hotel industry end the year on a high note," said Joseph Toy, president and chief executive officer of Hospitality Advisors LLC.
"What’s nice to see is that we’ve had four years of year-over-year growth in a relatively mature market," said David Carey, president and chief executive of Outrigger Enterprises Group. "When we set our budget, we were not nearly as optimistic about 2014 as it turned out to be."
While growth after the 2009 recessionary period was mostly driven by occupancy and steep room discounting, Toy said rate increases have spurred the most recent increases.
"This year rate is driving about 90 percent of the revenue," he said. "But rate is starting to moderate in some categories of properties."
While more economical properties have room for higher rate increases, Toy said some of the higher-rate properties are starting to see price resistance.
"Essentially, we’ve got price corrections in the market place," he said. "The spreads between the top of the market and the bottom of the market are still healthy, but compared to the last two years, we’re hitting some moderations."
Still, growth in domestic visitor arrivals helped December occupancy climb to 74.7 percent, a 2.1 percent gain from the prior year. All Hawaiian Islands set new all-time December ADR highs.
Likewise, Oahu, Maui and Kauai also enjoyed double-digit RevPAR gains in December. December demand pushed the average daily rate up 8.5 percent from 2013 to a new single-month record of $288.02.
While revenue per available room grew to $215.15, the 11.6 percent jump from the 2013 results produced another single-month record. The gains propelled December statewide hotel revenue to a new all-time high of $525 million, with room revenues contributing $355 million to the total.
Jerry Gibson, vice president for Hilton Hawaii, said California traffic came out much better than expected during the third and fourth quarters.
"December is usually from good from the 23rd on, but this year the weeks leading up to it were fairly good with a strong group and transient base," Gibson said.
While the Hawaii Visitors and Convention Bureau has done a good job with North America, Carey said more resources are needed to market to that level around the world.
Moving into the first quarter of 2015, Toy said some hoteliers have reported unexpected softness.
"The slope is slightly upward but not by much," Carey said. "We have some momentum but it’s not as robust. The market is tepid but it’s not cold."
When consumer confidence is down, Toy said, long-haul travel is the first to be affected.
"They are essentially predicting about 2 percent growth in visitor arrivals, but not all of that trickles down to the hotel industry," he said.
Still, Toy expects to see the industry continue to grow this year, albeit at a moderate pace. He forecasts slight occupancy growth across all major isles in 2015 but said he only expects statewide occupancy to grow by half a percentage point, to 77.5 percent.
His forecast for 2015 has statewide ADR rising 4.9 percent to $255 with ADR increases expected for all major Hawaiian Islands, including Oahu, Maui, Kauai and the Big Island. He expects the closure of some hotels for renovations this year will cause compression on Oahu, resulting in a 1.1 percent gain in occupancy to 85.5 percent and a 6.9 percent gain in ADR to $236.
"Oahu will do well; we just need to boost some of the occupancy on the neighbor islands," Carey said. "More direct air service to the neighbor islands would help. Kona could be reopened as an international port of entry. We should also discuss extending the Maui runway so it can take wider-bodied planes."
