Hotels to keep gaining in '07, Toy says
Consultant Joe Toy also expects record visitor arrivals this year
Hawaii hotels are on track to bring in more revenue next year, and mainland investors continue to show strong interest in the Aloha State's properties.
That optimistic view was presented yesterday at a 2006 Visitor Industry Leaders Briefing at the Halekulani hotel, hosted by Hospitality Advisors LLC.
Joseph Toy, president and CEO of Hospitality Advisors, estimates total room revenue next year will surpass this year's, bringing in about $3.5 billion. In first nine months of this year, Hawaii hotel room revenue totaled more than $2.4 billion, an 8.2 percent increase over the same nine months last year.
The average daily room rate, year-to-date, is at about $185 compared to $167 last year, higher than competing destinations such as the Caribbean, Hong Kong and Australia.
Much of Hawaii's expected gains will come from the hotel properties that are being renovated and repositioned in Waikiki.
Toy said he sees statewide visitor arrivals likely to set a record this year, moving past the 7.5 million mark.
The majority of arrivals are coming from the U.S. West, according to statistics from the Department of Business, Economic Development and Tourism, followed by visitors from the U.S. East. The Japanese market has been comparatively soft since 1997.
Hawaii recorded one of the nation's biggest hotel property transactions this year, with the sale of the Four Seasons Resort Hualalai on the Big Island for more than $500 million. Hawaii ranks among the top 26 hotel markets nationwide, according to Jan D. Freitag, vice president of Smith Travel Research, with one of the highest occupancy rates nationally, at 85 percent.
The state's higher occupancy can be attributed to a decrease in hotel rooms, and increase in timeshare and condominium-hotel conversions.
The behavior patterns of visitors are also shifting: Year-to-date, hotel use declined by 3.9 percent, while timeshare use grew by 17.1 percent, and condo use by 2.5 percent.
Toy said he expects the real estate conversion pace to slow down next year.
Meanwhile, there is more competition than ever among lenders vying for Hawaii investment properties, according to Robert B. Stiles, managing director and principal of mainland real estate investment firm Sonnenblick Goldman.
Whereas three years ago, there may have only been eight lenders vying to invest in a typical Hawaii transaction, today there could be 20 to 30, Stiles said. More competition means more choices for local developers.
Also, many mainland investors are interested in a short-term investment horizon, so they are more comfortable with leasehold properties than in previous years, Stiles said.
He predicted lenders would continue to have a strong appetite for Hawaii in 2007, though fewer existing properties would be available for "repositioning plays."
"We are as bullish, specifically about Hawaii, and about where this market is headed," he said. "It's a bright future."