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No fast hotel recovery seen


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POSTED: Monday, June 01, 2009

Recovery is still a long way out for Hawaii's struggling hotel industry, which sustained its third month of record revenue losses in April, according to a Hawaii hotel report released today.

               

     

 

HOTEL OCCUPANCY

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

 

       

       

                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
By Island20092008
Oahu70.6%71.9%
Kauai56.9%69.9%
Maui59.0%69.6%
Big Island54.9%59.3%
Statewide64.1%69.2%

       

        Source: Hospitality Advisors LLC
       

 

       

While statewide visitor arrivals fell by 1.3 percent in April, occupancy fell by 5.1 percentage points to 64.1 percent, said Joseph Toy, president of Hospitality Advisors LLC, which issued the report. As a result of market softening and an increasingly competitive hotel environment, Hawaii's statewide average daily room rate for April fell 9.3 percent to $179.09.

Since fewer guests stayed in Hawaii hotels in April and those who stayed paid less than visitors did last year, revenue per available room (RevPAR), a hotelier's best measure of performance, declined. Statewide RevPAR fell 16.1 percent to $114.78 in April.

Most hoteliers expect to see continued softening in May and June, which are typically shoulder months.

“;Every month that has been weak continues to be weak,”; said Beth Churchill, vice president of sales and marketing for Aqua Hotels & Resorts. “;They're just weaker than they have been.”;

Waikiki will take a huge hit in May and June due to swine flu, said Keith Vieira, senior vice president and director of Hawaii operations for Starwood Hotels & Resorts Worldwide Inc.

“;We are getting cancellations from Japan tour groups daily,”; Vieira said.

While Hawaii's hotel market might begin to see signs of improvement in 2010, it will be considerably longer before it surpasses recessionary levels and begins to grow, Toy said.

“;We won't see growth for several years yet,”; Toy said. “;We have a lot of ground to make up.”;

To grow, Hawaii's hotels must be able to fetch average daily room rates above $200 and return to occupancy levels above 75 percent, he said. Demand for Hawaii hotels is still too low to make that happen, Toy said.

“;We're still seeing a considerable amount of discounting,”; he said.

Most Hawaii hoteliers have been going after occupancy rather than room rates, Churchill said.

“;Our average daily room rate is down by about 15 percent,”; she said.

Aqua's “;99 Days of Summer”; special, which runs through Labor Day, has made it possible to stay at any of the chain's Waikiki hotels for $99 or less, Churchill said.

As a result of competitive pricing, Aqua's April occupancy was at 86 percent overall and above 90 percent in Waikiki, Churchill said.

“;But from a price standpoint, it's going to take us a long time to get back to where we were,”; she said.

Total hotel revenue across the state fell to $194 million in April, an approximate 16 percent drop from the $231 million attained in April 2008, according to the hotel report.

The decline has translated into hotel closures, layoffs and reduced employee hours at hotels, Vieira said.

“;Hours are based on occupancy,”; he said.

Many hotels, including Starwood properties, also have reduced purchasing and energy consumption by as much as 25 percent, he said.

“;Those decisions have great trickle-down impact,”; Vieira said.

Although Starwood, which began its renovation cycle late, is still pumping money into construction, other hoteliers have downscaled or delayed projects and reduced the amount of savings going toward future capital projects, he said.

“;There's going to be less money for future renovations,”; Vieira said.