Hawaii hotels kick off 2019 with soft start

Statewide hotel occupancy dropped to its lowest January level in four years, as every major Hawaii isle began the year with fewer occupied hotel rooms.

Statewide occupancy dropped 2.8 percentage points to 79.5 percent, according to a hotel report from STR, a data and analytics specialist. It was the lowest January occupancy since January 2015, when Hawaii hotels were 77.5 percent full.

The largest occupancy hits for the month were felt on Kauai, which experienced a 7.9 percentage point year-over-year decline, and Hawaii island, which plunged 6.9 percentage points. Maui’s occupancy dropped 4.1 percentage points and Oahu’s by half a percentage point.

Hotels across the state held onto their average daily rates, bolstering the statewide ADR to $299, up just over 1 percent from 2018. But revenue per available room — the rate that a hotelier would get for each room in a hotel if all were occupied — declined across every major island except Oahu. The declines reduced statewide RevPAR to $238, a 2 percent drop from 2018.

Hoteliers and hotel travel sellers don’t expect the market to begin recovering until at least April, and maybe not even before summer, because consumers tend to book at least a month or more out and Hawaii hotel sellers were plagued by challenges throughout the back half of 2018.

Also, the beginning half of 2018 was so robust that the current dip is magnified in comparison.

Keith Vieira, principal of KV &Associates Hospitality Consulting, said Hawaii tends to bounce back quickly from challenges, but a plethora of problems has slowed recovery. The heightened eruption of Kilauea Volcano, which began in May and lasted through the summer, created some softening. Then came a 51-day hotel strike on Oahu and Maui that wasn’t resolved until late November, followed by the longest federal shutdown in U.S. history.

“Extra marketing is needed. Hawaii can’t compete on deals, so we have to show all the value that it offers. We need to target higher-­spending visitors,” Vieira said.

Jack Richards, president and CEO of Pleasant Holidays, said Hawaii’s also getting quite a bit of competition from Caribbean hotels, which are aggressively marketing reopening specials to fill rooms after lengthy storm-related shutdowns. At the same time, Richards said, many Hawaii hotels decided to increase their resort fees, sometimes as much as 12 percent.

“Some resort fees at Hawaii hotels are now $45 a night. That adds another $315 to the cost of a weeklong Hawaii vacation. Consumers don’t like that and we’ve seen some pushback,” Richards said. “We’re down in Hawaii. At the same time, the Caribbean is up 50 percent year over year. They are having a record year.”

Richards and other members of Hawaii’s visitor industry also say the ever-growing popularity of vacation rentals, some legal, some not, has affected the hotel market. Last year hotels, which supply more than 54 percent of the lodging in the state, saw their unit count dip to 43,857, a more than 2 percent drop from 2017.

However, vacation rental units grew just over 3 percent to 13,082 units in 2018. That’s more than 16 percent of all the supply of visitor lodging in the state, making them the study’s second-­largest visitor accommodation category. The percentage could be even larger, according to a supplemental study that identified 30,139 individual units being advertised in 2018 in Hawaii on four booking sites, including Airbnb, HomeAway, TripAdvisor and VRBO.

During the January Hawaii Tourism Authority Board of directors meeting, it was reported that arrivals are up on Oahu but occupancy is down in hotels. HTA board member Sean Dee, who serves as executive vice president and chief marketing officer for Outrigger Hospitality Group, said, “Where is everyone staying, and more importantly, why aren’t they paying their fair share of taxes to the state?”

Observations like these are one of the reasons Senate Bill 1292, which aims to strike a balance between collecting vacation rental taxes and deterring illegal operations, is advancing. The Senate’s Judiciary Committee and Ways and Means Committee are slated to vote on the measure at 10 a.m. Tuesday in Room 211 at the state Capitol.