Hawaii hotel room rates tumble


POSTED: Friday, March 13, 2009

Room prices in Hawaii's hotels have been coming down, a trend expected to continue for the rest of the year.

The statewide average daily room rate fell 8.2 percent in January to $196.38, representing the steepest monthly decline in room rates since January 1993, according to the latest Hospitality Advisors report.




Hotel occupancy

        Occupancy rates at Hawaii hotels in January and the same month last year:




























Big Island56.5%






Source: Hospitality Advisors LLC




Hawaii's hotel occupancy rate, meanwhile, dropped to 66 percent in January, the lowest rate for the month since 2002. It was higher, however, than the 60.9 occupancy level in December.

Joe Toy, president and chief executive of Hospitality Advisors, noted a significant trend of discounting in prices, which is typically a last resort for hotels in a down economy.

Hotels are usually reluctant to lower their rates, said Toy, preferring instead to offer added values like free meals and beverages, free parking or spa treatment discounts.

“;We're seeing hotels doing a lot of value-added giveaways, but you can only do that for so long with the market being so weak,”; said Toy. “;I suspect we're going to see a much more pronounced period of discounting than we have seen in other downturns. I think the downturn we're in now is worse than what we saw during the 1990s.”;

Revenue per available room - the industry's main measure of profitability - fell 20 percent from a year ago to $129.54 for January.

Overall, industry room revenue fell by an estimated $57 million for the month, while total hotel revenue including food, beverage and retail sales declined by $88 million.

Hawaii's hotel occupancy drop in January is the second lowest for that month since 2002 when it was 65.2 percent, reflecting the recovery period from Sept. 11, 2001, according to Toy. The difference is that the market that year bounced back in April and went on to an extended expansion phase in 2003.

It will be at least a year before Hawaii's hotel market pulls itself out of the tourism slump resulting from the global economic recession, Toy said. He does not expect a sustained recovery until at least mid-2010.

However, the price discounts and added values at many of Hawaii's hotel properties, in combination with lower airfares, might help increase the volume of travelers and entice some to make last-minute bookings.

Many of the deals are even being offered at Hawaii's newly renovated properties, he noted.

“;We may be getting lower room revenue, but if we can get volume, at least it will provide more opportunities to sell food and beverage and retail,”; said Toy.

Keith Vieira, senior vice president of operations for Starwood Hotels & Resorts, said pricing adjustments can be made quickly in today's market due to travel sites like Expedia.

Starwood is taking the strategy of offering guests a third night free while maintaining its room rates.

“;The good news is if you put offers out there, people are responding to them,”; said Vieira.

Of all the isles, Oahu had the highest hotel occupancy rate in January, at 69.6 percent, down 7.2 percentage points from the same month a year ago. Toy said the rates on Oahu were partly cushioned by a 30 percent increase in economy and budget Canadian travelers.

Maui and Kauai also experienced drops in hotel occupancy levels, but the Big Island fared the worst.

The occupancy rates on the Big Island fell by 14.7 percentage points to 56.5 percent, while average daily rates dropped 10.1 percent to $201.46. The combined fall led to a substantial 28.7 percent decline in revenue per available room to $113.92 for the month.

Despite the drops, Toy said Hawaii still maintains its position among the top three hotel markets in the U.S.