Strong July gains at Hawaii hotels won’t keep if COVID-19 spread continues

Occupancy at Hawaii hotels in July came close to peak 2019 levels, while other leading indicators rose well above July 2019 results.

Travel demand from domestic markets in July exceeded pre-pandemic levels; however, it did not completely offset the loss of international and group business for the hotel properties that depend on those markets.

Tennessee-based STR reported Wednesday that statewide July occupancy hit 82.4%. The results were 2.8 percentage points below June 2019 when the pre-­pandemic occupancy was 85.2%.

Demand for Hawaii hotels in July also helped achieve a double-digit gain in statewide average daily room rates (ADR) and revenue per available room (RevPAR) over the same month in 2019. RevPAR is considered by many in the hotel industry as the key performance measure, as it is the rate that a room rents for regardless of occupancy status.

Hawaii has the most travel restrictions of any U.S. state, but they didn’t dampen the swell of domestic travelers earlier this summer. On July 8, the state began to offer vaccination exemptions for domestic travelers flying into Hawaii on trans-Pacific flights.

Still, July results were mixed across the islands.

Maui’s occupancy in July was just a little behind the same month in 2019, while ADR and RevPAR were up significantly. Kauai and Hawaii island were doing better in all performance categories last month versus July 2019.

Oahu hotels held the top occupancy, ADR and RevPAR of the nationwide destinations on STR’s Top 25 hotel list. The Norfolk/ Virginia Beach and San Diego markets were the only other destinations on the list that reached occupancy of over 80% in July.

However, Oahu hotels, which are more dependent on international travelers than the neighbor islands, tracked behind July 2019 in all hotel performance categories.

Sean Dee, executive vice president and chief commercial officer for Outrigger Hospitality Group, said the overall visitor trend in July was consistent with the expectation of strong demand from the U.S. mainland driven by increases in flights and seats from the majority of airlines that service the islands, including many new routes.

“This was positive news for the neighbor islands, but Oahu is still hampered by the complete lack of international visitors, which usually comprise nearly 50% of traffic and over 50% of tourism revenue generated for this island economy,” Dee said. “This resulted in lower occupancy and RevPAR for Waikiki hotels than 2019.”

Dee said results were still strong enough to allow Outrigger to reopen the Ohana Waikiki East by Outrigger on Aug. 1 and bring the majority of its employees back to work.

“All of our properties in Hawaii are now fully open,” he said.

While the July results were good, Keith Vieira, principal of KV & Associates, Hospitality Consulting, said they aren’t likely sustainable. Vieira said demand for Hawaii hotels is expected to shrink some as schools start and the highly transmissible delta variant of COVID-19 causes greater spread.

Vieira said he’s already seen evidence of demand drops at some Hawaii island and Maui hotels.

“They were picking up 2,000 nights a week in the later part of June and July, but once cancellations were factored in, it dropped to 700 or 800 a week in the later part of July and August,” he said.

Vieira said the lower bookings and higher cancellations are partially related to the uncertainty of the latest COVID-19 surge, which could prompt Hawaii to tighten COVID-19-related travel and other safety rules.

Mufi Hannemann, president and CEO of Hawaii Lodging & Tourism Association, said fear of traveling during the latest surge also could adversely affect Hawaii tourism.

“We are headed toward some kind of a slowdown. The 85% occupancy rate probably won’t hold into September and October,” he said.

Dee said travel sentiment is declining week over week as the delta variant surges across the mainland. That coupled with kids going back to school has Outrigger forecasting a softer third quarter than in 2019.

“We are keeping a close eye on the resumption of travel from international markets including Japan and Canada for potential (fourth-quarter) business, while Oceania will likely remain locked down into (the second quarter) of 2022, hampering recovery for our visitor market overall,” Dee said.

July 2021 hotel performance by Honolulu Star-Advertiser