Hawaii’s May hotel results continue pointing to a weakening market

Hawaii’s hotel industry is still trying to hold onto its hotel room rates amid declining demand and occupancy.

In May, hotel average daily rate (ADR) statewide rose more than 1% to $256, while occupancy declined eight tenths of a percentage point to 79.2% and revenue per available room (RevPAR) was flat at $203, according to a hotel report released by the Hawaii Tourism Authority this morning using statistics provided by STR, a data and analytics company.

In May, Hawaii hotel room revenues statewide also were down more than 1% to more than $339 million. Several Hawaii hotels were closed for renovation or had rooms out of service for renovation during May, which caused the supply of available room nights to fall nearly 2% resulting in nearly 26,000 fewer available room nights. However, the demand drop in May was larger than the supply drop resulting in approximately 34,000 fewer occupied room nights, a demand dip of nearly 3% compared to May 2018. Statewide hotel revenue fell more than 1% in May to more than $339 million.

Pricing is strongly connected to supply and demand. Lower hotel supply creates competition for the remaining rooms; however, when demand drops faster than supply it’s an indication that the market or at least pockets of it may be weakening. It’s difficult to recover room rates so when demand first drops hotels will typically try to drive additional visitor traffic with add-on specials like offering on-property credits, free nights or other perks. When that doesn’t work, the market starts to see pricing shifts.

May results were mixed across the isles. Maui hotels experienced increases in occupancy, ADR and RevPar. Oahu realized a slight drop in occupancy, flat RevPAR and a slight increase in ADR. Hawaii island experienced a drop in occupancy and RevPAR, but saw a slight rise in ADR. Kauai suffered strong occupancy and RevPAR drops and saw a solid ADR decline.

The statewide monthly results contributed to a flat daily rate, with declines in occupancy and RevPAR during the first five months of the year. Through May, statewide occupancy fell more than 2% to 80%, while RevPAR dropped more than 2% to almost $224. ADR was just above flat at $280.

Through May, there was a nearly 2% drop in supply, which was outpaced by a more than 4% decline in demand. Year-to-date hotel revenue dropped nearly 4% to more than $1.8 billion.