Hotel industry continues to recover

Revenues in Hawaii have risen 7.1% so far this year

Hawaii hostelries, led by Maui, continue to scramble back toward financial health, but although they have come a long way, they have yet a long way to go.

In the Hospitality Advisors report for the first three quarters, released Monday, revenues statewide were up 7.1 percent to a total of $1.9 billion for nine months.

But that was still 20.6 percent lower than for the first nine months of 2006, the visitor industry’s best year.

Hospitality Advisors President Joseph Toy said Hawaii, New York City and San Francisco are leading the industry nationally. Maui is leading statewide, and the Big Island is trailing.

This is expectable. As the travel market collapsed in 2008, hoteliers first began to try to attract customers by “adding value, by adding a day or a room.” Operators hate to lower posted rates, because they learned by experience in the 1990s that travelers quickly become accustomed to cheaper prices and resist when they go back up again.

But when a downturn is as deep and long-lasting as this one, price discounting is sooner or later forced on operators. There is really nothing they can do to resist, Toy said, and not much they can do to prepare to put rack rates back up.

Operators everywhere face the same pressure, he said.

Through September, Maui’s hotel occupancy rate is way up, by more than 10 percentage points, from 59.9 percent in January-September 2009 to 68.9 now. A sustained rate under 60 percent had been unheard-of in Maui County, though it was common fare for Big Island resorts.

Oahu’s occupancy did not fall so low in 2009, and it has not recovered as fast as Maui’s, but it is up from 72.1 percent to 78.3 percent.

Discounting is not so obvious on Oahu, either. Posted rates this year have averaged $147, less than $3 below 2009 rates. By contrast, Maui’s posted rates of $225 are $15 lower than last year.

During a downturn, Toy said, rates tend to compress. The lowest don’t fall as much as the highest, and from the customers’ point of view, two things happen.

One, the traveler becomes more price conscious, choosing a cheap price over a more highly regarded lodging. On the other hand, some customers maintain the same level of expenditure but are able to trade up to a more fashionable resort.

With bigger inventories and a wider selection of places to stay, Oahu and Maui have a better chance of selling a room to either sort of buyer.

The smaller islands lag the larger ones in good times and bad, and especially in bad. Kauai’s occupancy rate this year has risen slightly, from 58.9 percent to 61.0 percent; and its operators have dropped average rates from $189 to $184. The Big Island occupancy is up slightly, too, from 54.5 percent to 56.5 percent; and rates are down from $184 to $182.

However, other things also are going into the mix, Toy noted.

Larger numbers of visitors encouraged airlines to add more seats to Maui, and more seats encouraged more visitors. Seats from Maui’s biggest catchment area, the western states, are up by 12.8 percent. From Canada, seats are up 39 percent.

The object of all this maneuvering is total take, and revenue per available room (RevPAR) is up by $11 to $155 on Maui.

It is up by $7 to $115 on Oahu, by less than a dollar to $112 on Kauai and by $2 to $103 in Hawaii County.

Owners – usually not the managers nowadays – continue, however, to struggle. Many, perhaps most, Hawaii resorts are more or less in default on their loans, but for the most part lenders are not rushing to foreclose.

The situation is different now from what happened in the mid-1990s, Toy said.

Then, owners were typically Japanese with little to no experience in the lodging business, and many properties were seriously deteriorated. In order to straighten things out, ownership had to change.

Today, the physical problem is not as acute, although capital infusions are going to be needed, and lenders are more willing to try to work with owners to restructure debt. It’s called putting the note into “special services.”

The statistics are compiled for Hospitality Advisors by Smith Travel Research, although Las Vegas does not participate in the voluntary surveys.

Of the destinations that do, Hawaii is holding up comparatively well.

In occupancy this year, the top five markets are New York City, 80.9 percent occupancy; San Francisco, 76.2 percent; Hawaii, 71.2 percent; Miami, 70.1 percent; and Boston, 70.1 percent.

The top five in average daily rate are New York City, $217; Hawaii, $173; Miami, $146; Washington, D.C., and surrounding areas, $143; and Boston, $140.

As usual, luxury properties are taking in half or more of all the lodging dollars in Hawaii: $1.09 billion so far this year.

Luxury resort revenue is up 9.1 percent.

The budget class (which does not exist on Maui) shows the same relative gain, up 9.7 percent, but its effect is negligible in the big picture: only $77 million.

The compression shows in the revenue gains of the sandwiched classes: Upscale resorts have taken in 4.8 percent more ($384 million); as have economy ($86 million). In the middle, midprice resorts have moved up the least, 2.5 percent, with a total of $264 million.