Lackluster Hawaii tourism widens losses for hotels

Holiday traffic in November — the first full month of the Hawaii Safe Travels pre-arrivals testing program — didn’t help Hawaii hotels much.

Only 22.1% of available hotel rooms were occupied in November, according to new data released by Hendersonville, Tenn.-based STR.

The 72.1% statewide occupancy decline from November 2019 was the lowest monthly dip since April, when Hawaii hotel occupancy plummeted 88.9%. Still, statewide occupancy in November was far below the 55% to 60% occupancy level that most hotels must reach to attain profitability.

Part of the issue for Hawaii hotels is that fewer arriving passengers are staying in them. Also, constant changes to the Hawaii Safe Travels program has created market confusion, which has lead to cancellations of existing reservations and a slowdown in future bookings.

Tourism is not expected to get much better soon, exacerbating already bleak trickle-down economic impacts that have left Hawaii with the nation’s highest unemployment rate.

From Oct. 15 to Dec. 17, Hawaii Safe Travels screened 617,889 interisland and trans-Pacific travelers. However, only 429,018 or some 69% were visitors. Some 263,717 or 61% of visitors said they were coming for vacation or pleasure. Only 167, 771 of the screened travelers, some 27%, planned to stay in a hotel and of those, 151,481, roughly 25%, were visitors.

The Hawaii Tourism Authority reported that 11,069 out-of-state passengers arrived in Hawaii on Thursday. HTA said only 5,203 of Thursday’s trans-Pacific passengers indicated they came to Hawaii for vacation.

Rules for arrival

Gov. David Ige reduced the quarantine on Thursday to 10 days instead of 14 days for travelers without an exemption from the state’s travel entry requirements. But the reduction in quarantine length isn’t expected to do much to prop up travel demand or counteract the negative impacts of other recent travel entry changes.

As of Nov. 24, trans-Pacific passengers to Hawaii who can’t present an approved negative pre-departure test upon arrival haven’t been allowed to bypass the quarantine, even after their test results become available. And since Dec. 2, Kauai hasn’t allowed interisland or trans-Pacific passengers to bypass the county’s quarantine.

“Nobody wants to come to Hawaii and quarantine for 10 days,” said Keith Vieira, principal of KV & Associates, Hospitality Consulting.

“They don’t want to risk a pending test either,” he said. “It’s just ridiculous to treat people who have done everything right so poorly. Hawaii’s tourism brand is taking a hit.”

Hawaii Lodging & Tourism Association President and CEO Mufi Hannemann said confusion surrounding the Kauai order also is creating a statewide tourism downturn.

“People don’t necessarily understand the differences between the islands,” Hannemann said. “Also, the change is off-putting to many of our travelers who like to book multi-island trips.”

A hui of visitor industry-­dependent organizations sent a letter to Ige Thursday urging him to increase the window during which travelers could take their pre-arrival test from three days to four or five days.

They want Ige to approve a provision that would allow travelers with approved pending tests taken within the appropriate timeline an additional 24- to 48-hour window to await their test results to be uploaded to the Safe Travels app before departing for Hawaii to avoid being subject to the mandatory 10-day quarantine.

They have also urged Ige to make testing available upon arrival in Oahu via the mobile testing lab at Daniel K. Inouye International Airport for passengers whose pre-arrival test results have not yet been uploaded to the Safe Travels website.

The letter was signed by HLTA, Chamber of Commerce Hawaii, Hawaii Agricultural Foundation, Hawaii Farm Bureau, Hawaii Restaurant Association, Hawaii Tourism Wholesalers Association, Hawaii Transportation Association, Activities and Attractions Association of Hawaii (A3H), ILWU Local 142, Waikiki Improvement Association, Retail Merchants of Hawaii and many other organizations.

Hannemann said Hawaiian Airlines, Alaska Airlines, Delta Airlines, United Airlines, Southwest Airlines and American Airlines are supporting the measure and have agreed to waive rebooking fees for travelers with pending test results who need the additional 24- to 48-hour window.

Ige’s office did not respond to a Honolulu Star-Advertiser request for comment on the letter.

Businesses hit hard

The groups say time is of the essence. Tourism projections prior to Oct. 15 indicated that Hawaii would receive roughly 2.7 million visitors by the end of 2020, but the hui said in its letter to Ige that recent changes to the pre-arrival testing program now make that unlikely.

“Local hoteliers have reported a steep increase in cancellations since November 24th ranging from a dozen cancellations at a small property to more than 10,000 cancelled room nights across one management group’s properties in a week’s time,” the letter said. “Our travel partners opine that they are losing thousands of potential visitors due to the ever-changing rules that lack consistency and reliability. Some hotels have had to adjust their re-opening schedules due to the recent changes, further delaying their ability to bring back workers.”

Market conditions prompted Expedia to announce last week that it expects to shut down its Local Expert offline concierge activities business in Hawaii at the end of January.

“COVID-19 has put additional stress on our business and the entire travel industry. When resorts reopened this year, we had the best intentions to build back our activities business in destination markets,” Expedia said in a statement. “While we remain committed to the activities sector and will continue to offer activities for purchase online, as these experiences enrich and add value to any customer trip, this move, while difficult, is a necessary one. “

Already this month, Hawaii HIS Corp. extended furloughs and announced layoffs could come next month. Montage Kapalua Bay on Maui brought most of its employees back to work but extended furloughs for 43 workers. The Grand Hyatt Kauai Resort, which reopened Nov. 1, closed again Dec. 7 in reaction to the Kauai order, which resulted in hundreds of immediate employee furloughs.

Empire Airlines, doing business as Ohana by Hawaiian, expects to begin laying off 64 workers on or around Jan. 30. Southwest Airlines also warned that pending collective bargaining, as of March 15 it could involuntarily furlough one customer service agent at Daniel K. Inouye International Airport.

The November hotel occupancy results reported by STR show that Hawaii’s hotel industry and other visitor-dependent businesses aren’t just grandstanding. Last month’s hotel occupancy in Hawaii was only 2.1 percentage points above October, the first month that passengers were allowed to bypass a mandatory travel quarantine.

And November’s occupancy was only 1.8 percentage points above September’s rate and was even a smidgen below August’s occupancy — months that came before the Oct. 15 launch of Safe Travels Hawaii.

The average daily rate paid for a Hawaii hotel room in November was nearly $230, a 12% decrease from November 2019. Revenue per available room (revPAR) fell to nearly $51, a 75.4% decline from the previous year.

RevPAR, which is the price that each available hotel room rents for regardless of its occupancy status, is considered the most telling measure of hotel performance.

In comparison, STR reported November occupancy for the U.S. hotel market was 40.3%, a drop of 34.5% from November 2019. The average daily rate fell 27.7% to almost $91, and revPAR declined 52.6% to nearly $37.

Among the top 25 U.S. markets, Oahu reported the lowest November occupancy level at 22.6%, which represented a 72.4% decline in year-over-year comparisons.

Oahu showed the highest average daily rate at just over $167, a decline of 26.7% from November 2019. However, Oahu’s November revPAR was $38, a 79.8% drop from the prior year.

HTA reported last week that data from Global Agency Pro, an online travel distribution system, showed that the travel agency booking pace for future arrivals had dropped to 84,604 in December compared to 219,836 in December 2019. Booking drops continued through the third quarter for the U.S., Japan and Canada, although there was some improvement for Australia in the third quarter of next year.