Bargain hotel rates might have to become permanent

THE ISSUE Hawaii's hotels have had to offer bargain rates to lessen the effect of higher airfares and cuts in flight capacity.

FACED with increased airfares and cuts in flight capacity, Hawaii's tourism industry appears to be taking necessary steps to remain competitive with other resort areas that are reacting similarly. Bargain rates will have to become permanent until the economy improves and fuel costs decrease.

Visitors to Hawaii declined by 15 percent following the collapse of Aloha and ATA airlines, as round-trip fares from the mainland topped $800. Farecast.com, which tracks pricing patterns, projected that a mainland couple visiting Hawaii for eight days this month would spend about $460 more for plane tickets but $344 less for their hotel room.

That pattern is not likely to change anytime soon, if ever. Major airlines plan to cut domestic capacity during this year's third and fourth quarters by single- to double-digit margins. Airlines will have the power to raise fares for the fewer seats available to pay for higher jet fuel costs, which reached $4.26 a gallon in mid-July, compared to $2.16 a year earlier.

Airlines also are finding other ways to reach a profit, charging fees for everything from checked bags to soft drinks, pillows and blankets. US Airways has decided to begin charging $1 for coffee and $2 for bottled water. United Airlines figures to raise up to $1 billion for its "a la carte" menu of fees.

Hawaii's hoteliers have had to reduce costs or offer special deals to lessen the effect. The Grand Hyatt Kauai Resort & Spa recently offered a fifth night free, a room upgrade and a breakfast for two. Maui's Grand Wailea Resort Hotel & Spa offers a fourth night free through mid-December.

Outrigger Hotels & Resorts, where reservations are down 10 percent for the fall, is offering discounted rates for 30 percent to 40 percent of its rooms, compared to 15 percent to 20 percent of them last year.

"We think the writing's already on the wall for the fall," Barry Wallace, Outrigger's executive vice president, told the Wall Street Journal. "We're looking at winter and spring."

Hawaii's hotel business is not alone. In the Caribbean, a traveler can receive a "fly-free" credit of up to $550 for staying at any of Sandals' dozen resorts for couples, resulting in a record occupancy rate. Bargain hotel rates also are advertised for parts of Florida and Arizona.

Jet fuel costs have been dropping since July but airlines are unlikely to reduce their fees or eliminate the gimmick assessments. If that is the case, Hawaii's hotels will need to consider making their new bargain rates permanent.