Hotel occupancy hits 18-year low


POSTED: Monday, April 06, 2009

February, typically the high-water month for Hawaii's visitor industry, was one of the worst on record for hoteliers, who suffered their worst occupancy in 18 years and saw the average daily room rate plummet the most since 1987.

As a result, revenue per available room, or RevPAR, the hotel industry's broadest measure of performance, endured its greatest decline since Sept. 11, 2001. Hawaii hotels suffered greatly as the ongoing global financial crisis translated into a 12.7 percent drop in February visitor arrivals and a 15.9 percent drop in visitor spending. Not even the Pro Bowl, which typically drives premium hotel rates and sold-out nights, was enough to help hotels rebound.

Statewide occupancy in February fell 8.8 percentage points to 74.7 percent; the average daily room rate, or ADR, dropped 12.4 percent to $187.21; and RevPAR fell to $74.26, a 26.9 percent decline from the same month in the prior year, according to a hotel flash report released today by Hospitality Advisors LLC.

“;The market drops were significant, particularly in the month of February, which is normally our busiest month of the year,”; said Joseph Toy, president of Hospitality Advisors LLC. “;The sharp ADR discounts that our market has been seeing are unprecedented as hotels are trying to generate volume.”;

Oahu posted the smallest occupancy decline of 6.5 percentage points to 78.3 percent, while the Big Island saw occupancy take a 13.3 percentage-point plunge to 63.9 percent. Maui's occupancy, which was the highest among the isles last year before the housing crisis affected high-spending U.S. West visitors, dropped 9.3 percentage points to 75.8 percent. Kauai's occupancy dropped 12.1 percentage points to 70 percent.

“;In Hawaii everyone builds a business model around 80 to 85 percent occupancy, so, quite frankly, 75 percent doesn't do it for us,”; said Barry Wallace, vice president of hospitality services for Outrigger Enterprises. “;However, Oahu's occupancy was No. 1 in the top 25 markets that we measure.”;

More concerning for hoteliers than the falloff in occupancy is the drop in prices, Wallace said.

“;Most of our losses have been in ADR, and we won't see any rate increases again until sometime in 2010,”; Wallace said. “;We need a stabilized occupancy before we can begin increasing rates again.”;

While there is a lot of turmoil at the hotel ownership level to pay down mortgages, the current situation is great for guests, Wallace said.

“;They'll see better and better deals,”; he said.

Even hotel chains that are known for combining discount rates with amenities such as free bottled water, Wi-Fi and continental breakfast have stepped up and begun offering more.

“;Normally our rates are well suited to the quality of the product, but at this point our rates are lower than they have been in years and we still have to offer additional value-added options,”; said Beth Churchill, vice president of sales and marketing for Aqua Hotels & Resorts.

Visitors are looking for the lowest rate first and potentially buying up if they see some value, she said.

“;That's why we are offering a full breakfast at IHOP to our upper-category rooms,”; Churchill said.

Since it is difficult for Hawaii's hoteliers to know how the economy will shift over the next several months, she said there will not be a pullback in specials any time soon.

“;You'll see specials now that are trying to drive business for summer,”; Churchill said.

While it is still too early to predict how Hawaii hotels will fare this summer, some hoteliers are hoping the occupancy decline will not rise above 5 percent, said Keith Vieira, senior vice president of operations for Starwood Hotels & Resorts-Hawaii & French Polynesia.

“;Hopefully, the drop will start to show some improvement,”; Vieira said.