Hawaii hotel room rates increase but demand wanes

While Hawaii hotels saw their room rates grow in April, occupancy dropped and revenue per available room declined.

The average hotel room rate paid by visitors statewide rose more than 2% to $275, according to the Hawaii Tourism Authority’s Hawaii Hotel Performance Report released Monday using data from the data and analytics company STR. At the same time, occupancy fell nearly 3 percentage points to 78.4%, and revenue per available room, the rate a hotelier earned for each available room regardless of its rental state, dropped 0.9% to $215. Hawaii’s hotel revenue also dipped to $349 million, a decrease of more than 2%.

While several hotel properties across the state were closed for renovations, the nearly 5% drop in room nights filled during the month outpaced the nearly 2% drop in available room nights — meaning that demand for hotels statewide in April was down. Joseph Toy, president and CEO of Hospitality Advisors LLC, said it’s worrisome when the gain in room rates isn’t high enough to offset the decline in occupancy.

“In past cycles when we see that increases in ADR aren’t enough to offset the decline in occupancy over a six-month period, it typically shows that we are going into a market decline. Kauai and Hawaii island typically will lead this lag,” Toy said. “We appear to be heading toward a sustained softer market.”

Toy attributes hotel industry declines to a variety of factors, including continued fallout from last year’s challenges: natural disasters in Hawaii and Japan, the prolonged eruption at Kilauea Volcano, a 51-day hotel strike on Oahu and Maui, the federal shutdown and the current retreat in discretionary spending from U.S. consumers.

Growth in vacation rental popularity also has caused some shift in demand, said Keith Vieira, principal of KV & Associates Hospitality Consulting, During the first quarter, there was a one-tenth of a percentage point drop in the visitors who said that they planned to stay in a hotel during their Hawaii trip. While hotel stays had the largest footprint of accommodation choices available to visitors, stays in a vacation rental house were up more than 11%.

“Hawaii has to accept that vacation rentals are how some people travel, and they aren’t going to go away,” Vieira said. “But we have to better manage them and regulate them.”

Vieira said he was glad to see a room rate gain in April but cautioned that “it’s not a turning point” in what has been a softer market. For the first four months of the year, statewide occupancy fell nearly 3 percentage points to 80.2%, average room rates were about flat at $286 and revenue per room dropped about 3% to $230. Revenue fell 4% to nearly $1.5 billion.

Mufi Hannemann, president and CEO of the Hawai‘i Lodging & Tourism Association, said, “Maui is the only county that seems to be doing OK. The numbers everywhere else, including Oahu, are continuing to struggle.”

Hannemann said the Honolulu City Council needs to vote “no” June 5 on a measure that would increase taxes for Oahu owners of hotel and resort land to $13.90 for every $1,000 of assessed value, $1 more than the $12.90 per $1,000 they now pay.

“There are enough challenges in the market now,” Hannemann said. “Hotels aren’t doing as well and expenses are going up. Costs have gone up more than 20% for Kyo-ya Hotels and Resorts since they settled a new contract last year, and as bargaining continues, other properties are facing similar labor increases. These are not prosperous times.”

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First Hawaiian Bank has promoted Shari Kawasaki to vice president and senior product manager of the Credit Products Department. She manages First Hawaiian Bank’s Home Equity Line of Credit, Personal Loans & Lines and YesCheck products. Kawasaki has 20 years of experience in managing programs and products for businesses in Dallas and Honolulu.

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