Hotel occupancies and revenue decline
Declines forecast a tough year for hotels
Hawaii's hotel industry is feeling the burn of a slumping market, which saw occupancy and overall market performance drop again in April.
Despite some growth in average daily room rates at Hawaii hotels in April over the same month last year, room revenues declined 3.6 percent. Occupancy also fell 5.9 percentage points to 71.1 percent.
Statistics show that statewide hotel room rates continued to grow year over year in April. However, hotels say some of the price growth can best be attributed to higher-priced, upgraded rooms rather than strong demand.
A variety of factors have contributed to the slide in hotel occupancy, which hoteliers began feeling at the first of the year. The return to service of hotel rooms previously under renovation, as well as trends toward shorter booking windows and shorter stays, combined with a downturn in traffic from Japan, the U.S. East, Canada and the convention market, have continued to cause the market to lag.
If April's hotel market performance is any indication of times to come, Hawaii hoteliers could be in for a challenging year.
Growth in average daily room rates at Hawaii's hotels in April was not enough to offset the continuing decline in occupancy and led to a 3.6 percent drop in hotel room revenue for the month, according to a hotel industry report released yesterday by Hospitality Advisors LLC.
Fewer arrivals to Hawaii, especially from the U.S. East and Japan, caused demand for hotel rooms to fall. Occupancy slipped 5.9 percentage points to 71.1 percent for April, the report said.
"It's going to be a tough year, and next year is going to be tough, too," said Keith Vieira, senior vice president and director of operations for Starwood Hotels & Resorts Worldwide.
Since Hawaii's visitor industry softened along with nationwide travel, the state's hoteliers have been held hostage to market forces, Vieira said.
"It's not dire but we have some challenges ahead," he said, adding that it will take recovery in the Japan market and the Hawaii Convention Center market for hoteliers to feel relief.
The first quarter of 2007 saw an end to a run-up in room revenues that began in 2002, said Joe Toy, president of Hospitality Advisors.
A variety of factors have contributed to the continued decline in hotel occupancy, including the return of room supply previously out of service for renovation; shorter average length of stay; declines in the meetings, conventions and incentive market; reduced Japanese arrivals; and visitors choosing alternative accommodations, such as time-share units or small bed-and-breakfasts.
Visitor arrivals dipped 1 percent from April 2006 to 582,466 visitors, according to the state Department of Business, Economic Development and Tourism. At the same time, growth in room rates also began to retreat slightly in April, Toy said. The statewide average daily rate grew 4.9 percent to $197.67 in April, in comparison with a stronger ADR growth of 7.5 percent during the full first quarter of the year, he said.
Statistics show that statewide hotel room rates continued to grow year over year. However, much of the price growth can be better attributed to upgraded inventory rather than strong demand, said Barry Wallace, vice president of hospitality services for hotel company Outrigger Enterprises Group.
"There have been so many changes in Hawaii inventory that the numbers are a little skewed," Wallace said. "There's a scarcity of budget and economy properties in the state -- it's not like most hotels are seeing higher rates."
Outrigger alone closed thousands of budget and economy rooms to develop its Waikiki Beach Walk project, he said.
Overall, statewide revenue per available room, the chief measure hoteliers use to determine profitability, fell by 3.1 percent to $140.59 in April.
Oahu, which posted a 73 percent occupancy rate and a 4.1 percent increase in average daily room rates, fared best among the islands. However, even on Oahu, revenue per available room dropped by 3.9 percent when prices failed to offset the occupancy decline.
"At Outrigger and roughly speaking for the market, we had 30 months of record-breaking revenues, and now it's just sort of returned to historical norms," Wallace said. "We're at a reasonable place to be, it's just not very exciting."
April's report measured performance at 143 properties, representing 46,171 rooms in the state.