Isle visitor arrivals continue downward


POSTED: Friday, June 26, 2009

There's no bottom in sight for Hawaii's struggling visitor industry, which in May saw arrivals drop for the 15th straight month and visitor spending fall by 15 percent.






The monthly percentage change in visitors to Hawaii and total arrivals.



Year total6,806,622-10.8%

        Source: State Department of Business, Economic Development and Tourism




Before the swine flu pandemic, optimists had anticipated the worst would be over for Hawaii's visitor industry by this fall or winter.

Aggressive marketing and pent-up demand had caused visitor arrivals, which had been in double-digit declines since June 2008, to rebound to a less formidable 1.3 percent drop in April. But the traction was short-lived as evident from last month's 15.5 percent reduction in visitor arrivals from the sensitive Japan visitor market.

Total visitor arrivals, including those by cruise ship, fell 6.9 percent last month while visitor arrivals by air declined 6.4 percent.

And even though visitors from the U.S. West rose 4 percent from last May, the sought-after, higher-spending U.S. East market dropped 8.9 percent and Canada experienced a 12.4 percent decline — its biggest drop since 2004.

“;The market's not going to improve anytime soon,”; said David Lewin, general manager of the Hyatt Regency Waikiki Beach Resort & Spa. “;There will be a lot more blood before there is any celebration.”;

While many of Hawaii's hotels have been able to maintain enough occupancy to keep going by discounting room rates and offering value incentives like free room nights and free breakfasts, it's cut into their bottom line, said David Carey, president and chief executive of Outrigger Enterprises Group. Deep hotel and package discounting brought 514,004 visitors by air to Hawaii in May, but they spent an average of $20 a day less than those that came during the same month in 2008.

“;The value message is the right one to get out there right now, but it results in lower-spending visitors, which means that there's less money for everybody,”; said Keith Vieira, senior vice president of operations for Starwood Hotels & Resorts in Hawaii and French Polynesia.

Average RevPAR (revenue per available room), a hotel's best measure of performance, is down 20 to 25 percent across the islands, Carey said.

“;Lots of rate cutting began at the end of last year and has continued,”; he said.

With business down and hotel profits under attack, owners that are not liquid and not financed properly are teetering, Lewin said.

During the last up cycle, hotel owners — like everyone else — were borrowing money like banks were never going to stop lending it, he said.

“;Now if they are mortgaged to the hilt and not making cash flow, they are out of luck. It's no different than the guy who bought the house that was bigger than his paycheck,”; Lewin said.

There already have been some high-profile hotel bankruptcies in Hawaii, such as the Ilikai and the Lotus at Diamond Head, and economic problems have shuttered Marc Resorts.

Still, there are probably at least 10 others that are waiting for the bank to decide what to do with them, Lewin said.

May's dismal results pushed the year-to-date drop in visitor spending to 16.4 percent off an already weak 2008. Year-to-date 2009 arrivals by air totaled 2,611,452 visitors — 10.5 percent fewer compared with a year ago.

“;The health of Hawaii's visitor industry and our economy, moving forward, will be dependent on increasing visitor spending,”; said state Tourism Liaison Marsha Wienert. “;Decreased spending is affecting our activities, restaurants and retail businesses as well as our accommodations.”;