Waikiki hotels packed with displaced military families see short-term gains

Waikiki hoteliers were headed for a softer-than-expected holiday season before a sudden boost in occupancy when military families displaced by the Red Hill water contamination crisis began to fill as many as 3,000 rooms a day.

That represents only about 10% of Oahu’s hotel inventory. Still, it adds up, helping to offset the softer period between the Honolulu Marathon in early December and the “festive season,” which historically runs from Dec. 21 to Jan. 4, said Jerry Gibson, president of the Hawaii Hotel Alliance.

It’s also helping to make up for the sluggish return of international travelers and group business, which has caused Oahu hotels to come back more slowly than on the neighbor islands, which are more reliant on U.S. visitors. And, it’s creating compression, which allows hotels to get higher rates for their remaining inventory.

In a good year, fewer Waikiki hotels would be able to assist the military in housing these families, especially as the holiday season approaches. However, a confluence of factors has freed up space, allowing various properties to offer rooms.

“So far we have enough rooms to accommodate the needs,” Gibson said. “There will be some movement because of the guaranteed reservations that we have coming in. But we’ll work hard to find rooms for everybody.”

Gibson said their presence in Waikiki also is contributing to more work opportunities since hotel scheduling is based on occupancy.

Erik Kloninger, principal at Kloninger &Sims Consulting LLC, said that based on the federal rate of $177 per night lodging per diem, the Red Hill water crisis has so far brought at least $500,000 in daily room revenues to Waikiki, plus ancillary revenue from parking and food and beverage sales.

Hawaii’s military lodging per diem jumped to $312 on Friday and will stay at that peak rate through Jan. 5 to accommodate holiday pricing.

According to the Defense Travel Management Office, Hawaii’s total per diem, including food and lodging, is $326 from Jan. 6 to Dec. 16, but jumps to $461 from Dec. 17 to Jan. 5.

“Waikiki hotels are seeing a short-term bump. But you have to balance that against the risk,” Kloninger said. “If the contamination is not limited to sources that they’ve already identified, that could have potential long-term effects for Hawaii tourism. It could be catastrophic.”

Kloninger said Hawaii tourism has long benefited from the perception that the islands are a safe destination and that the water is clean.

“One of the advantages that Hawaii has forever had over Mexico is that you can drink the water here,” he said. “The uncertainty is on people’s radar. We will need to look at it closely every month.”

IT’S NOT known how long military families will need hotel housing or if the results of further water testing will result in more families being displaced.

Outrigger Hospitality Group expects that the majority of military families staying with Outrigger will reside at its properties through the New Year’s holiday, according to Monica Salter, vice president of global communications and social responsibility for Outrigger Hospitality Group.

“Due to higher occupancies over the festive season, some families are transitioning to different rooms/hotels. But from our understanding, all affected military families have hotel accommodations available through the holidays,” Salter said. “Outrigger is grateful for the service of our military members and glad to play a small role in ensuring their comfort and safety during this time.”

She said Outrigger has been assisting with Red Hill relocation efforts since early December by providing accommodations in its Waikiki hotels and resorts for several hundred military families and their pets.

Properties currently housing military families include Outrigger Waikiki Beach Resort, Outrigger Reef Waikiki Beach Resort, Waikiki Beachcomber by Outrigger, Waikiki Malia by Outrigger and OHANA Waikiki East by Outrigger.

“A uniformed Navy service member is stationed at each of these properties to assist families with relocation logistics, questions and communications,” Salter said.

Hawaii’s visitor industry is also helping military families, whose needs differ from vacationing tourists in a variety of ways. Hilton Hawaiian Village security is helping to control traffic on school days so that 17 buses can pick up military children and take them to their various schools.

“The visitor industry is doing all it can to help out the displaced military families. We are happy that we had the rooms available to house them at several of our Hilton properties,” said Debi Bishop, managing director of Hilton Hawaii.

ACCORDING to Jack Richards, president and CEO of Pleasant Holidays, one reason Waikiki had holiday space available for the families is due to new fears about COVID-19, including the omicron variant.

“We are seeing people staying closer to home,” Richards said. “We think it’s related to concerns about omicron. That’s not just in Hawaii, that’s everywhere.”

Gov. David Ige discussed the latest COVID-19 surge in Hawaii at a news conference Friday, the same day the state Department of Health reported 797 new cases, the highest count in more than three months. Saturday’s tally of new confirmed and probable infections statewide hit 707.

“We are seeing an alarming increase in the number of cases,” Ige said.

Richards said another reason Hawaii’s holiday season is less robust than expected is that vacation costs have soared.

While flight prices to Hawaii are stable, he said rental car prices remain high and hotel room average daily rates have increased some 25% to 40%.

Adding to the other price increases is a new 3% surcharge across all counties that will be in addition to the state’s 10.25% transient accommodations tax, which applies to gross rental proceeds from hotels, vacation rentals, timeshares and other transient accommodations.

That means travelers staying in these accommodations on Oahu, Kauai, Hawaii island and in Maui County will pay approximately 29% more in lodging taxes than they did previously.

Richards said that as a result of COVID-19 fears and price hikes, Hawaii bookings for the festive season are down about 18% from the pre-pandemic 2019 level.

“Hawaii (tourism) is not as strong as Mexico, the Caribbean or mainland destinations. We believe the price increases are forcing people to go to alternative destinations,” he said. “That’s not just for the festive season, we are seeing that in 2022 too.”