Vacation rental occupancy in March tops hotels again

Vacation rental occupancy statewide topped Hawaii hotels in March, continuing a six-month trend that emerged in October after Safe Travels Hawaii allowed some visitors to bypass the state’s COVID-­related travel quarantine.

The average unit occupancy at a vacation rental in Hawaii in March was more than 62%, compared with just 43% for Hawaii hotels, according to a report released Thursday by the Hawaii Tourism Authority using data compiled from Transparent Intelligence.

The average daily rate paid at a vacation rental in March was $248, which was $37 less than the $285 that travelers paid to stay at a Hawaii hotel.

March was the highest month for vacation rental occupancy since March 2020, when the state and counties began introducing COVID-19 containment policies. The vacation rental shutdowns differed across the islands. However, by this March travelers were permitted to stay in legal vacation rentals as long as they weren’t being used as quarantine locations.

Transparent Intelligence’s local partner Erik Kloninger of Kloninger &Sims Consulting LLC said a reason occupancy at Hawaii vacation rentals in March was so much higher than at hotels is that the vacation rental supply is taking longer to return to pre-pandemic levels.

“In March, 93.2% of the hotel rooms that were operating in March 2019 were back,” he said. “For vacation rentals it was 67.4% of the prior year’s supply. So the hotels are largely back, and only about two-thirds of vacation rentals are back.”

Kloninger said the steeper drop in vacation rental supply came because, unlike hotels, they weren’t allowed to operate during most of the pandemic. County governments also have been cracking down on illegal vacation rentals, especially on Oahu, he said.

Still, the emerging pattern is heightening concerns for tourism and government officials — at the highest levels.

Gov. David Ige said vacation rental growth was a “big concern” during a Star-Advertiser Hawaii Spotlight interview April 5.

“The whole impact of illegal vacation rentals being in residential areas again is rearing its head. And we definitely need to make better effort on clamping down on illegal vacation rentals,” Ige said.

He said that he worried about the explosion of illegal rentals contributing to the spread of COVID, and said they were “one of the big causes of us not being able to be better managers of the visitors.”

Mufi Hannemann, president and CEO of the Hawaii Lodging &Tourism Association, said the state and counties must ensure that only legal vacation rentals are operating and that they are managed and taxed.

“They should be allowed to operate in areas that they are deemed legal, and I believe those are resort areas,” Hannemann said. “If they are operating in neighborhoods and communities on a legal basis, I think the County Council needs to think twice.”

Hannemann said a concern, especially during the pandemic, is that “you can’t really be satisfied with any kind of certainty that (vacation rentals) are adhering to all of the rules that they are asking us to do in the lodging sector — whether it’s masking or social distancing.”

Beth Churchill, owner of the Churchill Group LLC, said not all Hawaii residents oppose vacation rentals, which give local small-business owners a way to participate in the state’s tourism economy.

Churchill said vacation rentals are often blamed for negative community impacts that could be alleviated if tourism hot spots were managed with reservation systems and other technology tools.

“Everyone is looking for the next thing to blame,” Churchill said. “But overall visitor habits have changed. The way people are traveling has changed, and there are just more visitors.”

Kloninger said new technology and new visitor preferences already had caused vacation rentals to grow in popularity prior to the pandemic, but COVID accelerated demand.

“The thinking is that people were seeking larger accommodations with their own cooking and living space to allow for families to do a more socially distanced vacation,” he said.

Churchill said it will be interesting to see how demand for hotels is affected if owners and managers don’t restore the services that were eliminated during the pandemic. She said some large hotel companies already have signaled that they like the cost savings and will probably keep cuts that range from daily cleaning to coffee to room service.