The state kicked off the year with strong demand for vacation rentals, which are growing in supply except for on Oahu.

That’s because the city Department of Planning and Permitting in August began enforcing a crackdown on illegal vacation rentals.

The Honolulu Department of Planning and Permitting has issued 339 notices of violation since the new law took effect about six months ago. While most of the violations have been corrected, the department is still following up on 85 uncorrected cases, including 11 instances of recurrent violations. DPP has issued another 16 notices of order, some of which have resulted in fines.

Oahu was the only major island to experience a drop in vacation rental supply and unit demand in January, according to a vacation rental report released Monday by the Hawaii Tourism Authority.

There also has been ramped-up enforcement of vacation rentals on Maui, where voters approved increased fines through a 2018 charter amendment. On Dec. 22 Maui County raised the initial fine to $20,000 for operating a bed-and-breakfast home, a transient vacation rental or other transient accommodation without a permit. Each day the illegal operation persists triggers another $10,000 fine.

The late-December enforcement on Maui doesn’t appear so far to have affected HTA’s January vacation rental report, which showed strong double-digit increases in vacation rental supply and demand for Maui, Hawaii island and Kauai. The data came from Transparent Intelligence Inc., which gleans its information from listings on Airbnb, Booking.com, HomeAway and TripAdvisor.

HTA reported that statewide vacation rentals in January rose more than 8% to 797,257 unit nights, while monthly demand increased about 15% to 657,926 unit nights. The supply-and-demand ratio resulted in an average monthly unit occupancy of 82.5%, a gain of 4.6 percentage points, although vacation rental units, unlike hotels, aren’t necessarily available year-round or on a daily basis throughout the month. The average daily rate (ADR) for vacation rentals statewide in January was $247, a more than 15% increase from January 2019.

Amelia Lim, managing director of CBRE Hotels Advisory, who spoke at a fall HTA update, said technology and guest demand have allowed vacation rentals to become a “huge disruptive force” in the lodging industry.

“In the last 24 months Airbnb first overtook Hilton in terms of the dollar amount of bookings,” Lim said. “Sometime during the last year, they overtook Marriott.”

Despite strong consumer demand, regulation has affected demand across the country, especially in places like Boston, New York and San Francisco, she said.

“We remain concerned with Oahu’s dangerous reduction in vacation rental options since Bill 89 was enacted,” said Philip Minardi, Expedia Group director, policy communications. “Local homeowners are experiencing very real harm that ultimately impacts the broader small business ecosystem.”

“We believe there is a better path and look forward to continued engagement with Oahu community members, our partners, and local policymakers. Together we can find a solution that works,” Minardi added.

Erik Kloninger of Kloninger &Sims Consulting said Oahu’s vacation rental supply was increasing by 20%-plus leading up to August.

“What we were seeing on Oahu prior to enforcement was what we continue to see on the neighbor islands: increasing supply of vacation rentals driven by demand,” he said.

January room supply on Oahu dropped 13% year-over-year to 224,634 unit nights, while demand fell almost 6% to 181,852 unit nights. However, Oahu’s occupancy grew 6.3 percentage points to 81%, and its ADR rose 20% to just over $190.

Kloninger said in January 2019 that Oahu had substantially more vacation units than Maui, but now that’s not the case.

“Maui’s supply has now blown by Oahu’s,” he said.

Maui County saw its vacation rental supply grow more than 27% to 265,374 unit nights and its demand rise 29% to 227,218 unit nights. Occupancy increased to 85.6%, a gain of 1.2 percentage points, while ADR increased more than 10% to more than $311.

The Maui increases are interesting given that Maui County Department of Planning data also indicates significant progress in curbing illegal vacation rentals. The report said Maui’s Planning Department issued more than 180 notices of warning and 80 notices of violation to illegal vacation rental operators in 2019. The department said known illegal vacation rentals decreased in 2019, and it expects to see even fewer illegal rentals in 2020 as heftier fines and other enforcement actions roll out.

Hawaii island and Kauai also posted vacation rental gains in January. Hawaii island’s unit supply rose more than 9% to 192,034 unit nights, while demand increased 23% to 156,712 unit nights. Occupancy rose 9.1 percentage points to 81.6%, and ADR climbed more than 10% to more than $184.

Kauai’s supply increased to 115,215 unit nights, a gain of nearly 24%. Demand rose more than 19% to 92,144 unit nights. Occupancy fell 2.7 percentage points to 80%, while ADR rose 11% to more than $308.