Hotels gain in key areas

By Allison Schaefers
Article from: Star-Advertiser

Hawaii hotels began the year with increased occupancy, average daily room rates and revenue per available room, according to a report released today by hotel consultancy firm Hospitality Advisors LLC.

Statewide hotel occupancy rose 8.1 percentage points to 74.5 percent in January, the 14th consecutive month to post occupancy gains since recovery began in late 2009. Statewide, the average daily room rate, or ADR, increased 6.8 percent to $188.95, the largest price gain since March 2008.

These gains pushed revenue per available room, considered by many to be the best measure of hotel performance, up 19.9 percent to $140.77.

“We saw the momentum that began in the second half of 2010 continuing into this year,” said Joseph Toy, president and chief executive officer of Hospitality Advisors.

While most of Hawaii’s hotel recovery has been occupancy-driven, aggressive discounting has also strengthened statewide performance over the past three months, especially on Oahu and Maui, Toy said.

The return of the Pro Bowl helped as well, with arrivals gains from the state’s best markets — the U.S. West, the U.S. East, and Japan — he said.

“There’s a lot of pent-up demand for Hawaii, and hotels here are recovering faster than in other destinations,” Toy said.

Arrivals and spending are expected to go up this year for the U.S. West, the U.S. East, Japan, China, South Korea, Canada, Oceania and Europe, said David Uchiyama, vice president of brand management for the Hawaii Tourism Authority.

“We need to grow ADR, revPAR, airfares and ancillary spending while building experiential value,” Uchiyama told members of the state’s visitor industry during a marketing overview Wednesday.

Still, statewide occupancy and revenue per available room (revPAR) continued to trail pre-slump levels by a wide margin, Toy said. The best-ever occupancy for January was 86.7 percent in 2006, and the month’s best revPAR was $162.12 in 2008, he said.

Price recovery for Hawaii’s hotel industry is still another two or three years away, said Barry Wallace, executive vice president of hospitality services for Outrigger Enterprises.

“In the last few dollars of ADR lies almost all the profit,” Wallace said. “The vast majority of ADR pays for employees and taxes. Profit is the final dollar or two, and that’s the dollar that isn’t there. Many Hawaii hoteliers can’t pay the mortgage or are in some level of distress.”

As a result, hoteliers will continue to feel squeezed, and visitors will continue to get great deals, he said.

“We can’t pull back the specials because we are still using them to drive demand,” Wallace said. “We are all still very cautious.”

Hoteliers also are concerned that rising oil prices, the threat of hotel strikes and sprucing up for the Asia-Pacific Economic Cooperation conference, which will bring the leaders of 21 member economies to Hawaii in November, could further cut into burgeoning profits, he said.

If the price of oil, which recently topped $104 a barrel, continues to rise, it could cause the greatest damage to Hawaii’s fragile tourism recovery, Toy said.

“A strike would eventually be settled, but oil prices and how things play out in the Middle East could have a longer-term impact,” he said.

Labor concerns surfaced for hoteliers again last week after 97 percent of unionized workers at four Kyo-ya-owned hotels voted to authorize a strike, Wallace said.

“All the hotels are prepared to make reasonable wage adjustments, but the greater concern is that one way or another the argument will escalate and it will deter people from coming,” Wallace said. “Hawaii could be perceived as unfriendly.”

Contracts for some 6,600 unionized hotel workers expired last June, and workers already have held a five-day strike at Hilton Hawaiian Village Resort and Spa. Now the threat of another strike is coming to Hawaii’s hotel industry at a time when it needs to look its best.

“All eyes will be on Hawaii during APEC,” Wallace said.

Preparations for the two-day event are under way, he said.

“It’s expensive,” Wallace said. “Currently, hotels are ensuring that technology is up to snuff and people learn about language and culture.”

Commercial property sales surge

Investors spent about $1.5 billion last year on real estate ranging from retail to hotels

By Andrew Gomes
Article from: Star-Advertiser

Commercial real estate investors returned to Hawaii in a strong way last year, spending more than twice as much money buying property such as hotels and shopping centers compared with the year before, a new report shows.

Investors acquired about $1.5 billion in commercial property statewide last year, up from $630 million in 2009, according to the report by local commercial real estate firm Colliers Monroe Friedlander that tracks sales of more than $1 million.

The rebound occurred after four consecutive years of declines but still represents a relatively nascent recovery compared with transaction volume that varied from $2 billion to $4 billion between 2003 and 2007.

Colliers said last year’s pickup was driven by the availability of more financing and a relatively healthy commercial property market in Hawaii where not much overdevelopment happened during the economic boom years.

Colliers expects the positive trend to continue this year, with close to $2 billion in commercial property sales.

“Optimism seems to be the prevailing investment market attitude heading into 2011,” Colliers said in the report released yesterday. “As the economy gains firmer footing and there is a corresponding rise in business and consumer confidence, commercial real estate investment activity should benefit from both property appreciation and improved tenant demand.”

Last year, purchases were fairly diversified among property types — retail, office, resort, industrial, multifamily apartments and undeveloped land.

The bulk of the sales involved retail property, which accounted for 40 transactions totaling $441 million. This category had the largest single sale, Pearlridge Center, which was bought by a mainland investment partnership for $245 million.

Office property was the second-biggest category, representing 17 transactions for a combined $314 million, including the second-biggest single sale, Bishop Square, which sold for $230 million to a mainland firm.

Ten hotels sold for a combined $262 million. There also were 41 industrial property sales for $197 million, 22 land parcel transactions for $190 million and 27 apartment sales for $79 million.

The total number of sales last year was 157, which was more than the 113 a year earlier but less than 166 in 2008 when transaction value reached only $788 million.

The average sale price last year was $9.4 million, up from $5.6 million the year before.

Colliers said it had anticipated that more distressed property would be among sales last year, but in several cases lenders have been holding onto foreclosed property to wait for more improvement in the market.

Mark Bratton, a Colliers agent, said in the report that lenders foreclosed on six Hawaii hotels, but only two of those are for sale: the Sheraton Keauhou and Kauai Sands. At the same time, investor demand for hotels is high, Bratton said. “We receive a call a day from someone interested in acquiring a 100-room fee-simple beachfront hotel,” he said.

Airline maps out China-Hawaii runs

The carrier that flew the first direct charters to the isles hopes to add scheduled flights

By Allison Schaefers
Article from: Star-Advertiser

China Eastern Airlines, the carrier that brought the first direct charter flights from China to Hawaii last month, has taken the next step toward offering regularly scheduled nonstop service between the destinations.

China’s second largest carrier has applied with the administrative body of the People’s Republic of China for permission to operate direct flights between China and Hawaii, Michael Merner, managing director for Hawaii Tourism Asia, told members of the visitor industry yesterday.

The Shanghai-based carrier took the step after successfully partnering with China CYTS Tour Holding Co., one of China’s leading tour operators, to bring about 777 visitors here on three inaugural charter flights during the Chinese New Year holiday, Merner said.

“They sold out these flights in just 14 days,” said David Uchiyama, the Hawaii Tourism Authority’s vice president of brand management. “They would definitely like to come back.”

The carrier would still need to obtain permission from the U.S. Department of Transportation to begin the service. Merner said the airline also plans additional charters this year.

Members of Hawaii’s visitor industry and business community who heard the news at a spring marketing update at the Hawaii Convention Center were pleased. They have been trying to expand Chinese air service since 2007 when the U.S.-China Memorandum of Understanding made leisure travel from China possible.

“There are over 170 cities in China with over 1 million visitors,” said Keith Vieira, senior vice president and director of operations for Starwood Hotels & Resorts in Hawaii and French Polynesia. Vieira said he is looking forward to welcoming President Hu Jintao at the Asia Pacific Economic Cooperation meeting in November. “We are looking at it (China) as a market with huge potential based on sheer volume.”

While there is a lot of interest in Hawaii from Chinese tourists, a lack of direct flights and a difficult visa process have tempered demand.

Arrivals from China would grow if leisure travelers who wanted to visit the islands could fly nonstop, said Benny Wang, director of Xinhua Travel’s international department in Beijing.

Even with these impediments, Merner said that China’s outbound travel to Hawaii grew 57 percent last year to 66,047 arrivals. This year, arrivals are expected to grow another 16 percent, he said.

“Hawaii is outperforming all other major overseas destinations in the China market,” Merner said. “Visas are getting more predictable.”

Direct air service will only make the market stronger, he said.

However, Uchiyama said its hard to determine whether China Eastern’s plan will take off.

“We’ve been here before,” he said.

Hainan Airlines, China’s largest private carrier, was expected to begin direct service between Honolulu and Beijing in 2009, but postponed plans.

The state then began eyeing new prospects.

“We’ve been talking to China Eastern for some time,” Uchiyama said, adding that the carrier’s dominance in the market and its connections with the Chinese government, a majority owner, could help it overcome challenges. State tourism officials have also discussed direct routes with China Southern and have continued to seek a start date from Hainan Airlines, he said.

Joel Chusid, general manager for North America for Hainan Airlines, has said that “visa issues” and “tour operators who were hesitant to guarantee enough business to make the route profitable” were among the chief reasons for the delay.

The success of the charters may help bridge that hurdle, Vieira said.

“China is heavily wholesaler dominated,” he said. “If they have confidence that they can book the business, the airlines will be confident.”

State hotel occupancy continues to rise

Article from: Maui Weekly
POSTED: March 2, 2011

Pacific Business News – According to a weekly report by Smith Travel Research and Hospitality Advisors, eight out of 10 hotel rooms in Hawai‘i were occupied during the week ending Saturday, Feb. 12, and most islands’ average room rates were higher than during the same week last year. The weekly report is based on a daily hotel survey of about 100 properties, representing 40,744 rooms, which represent 71.5 percent of the state’s total hotel rooms for properties with 20 units or more.
The average statewide hotel occupancy rate was 81 percent, a 2.7 percent increase from the same week a year ago. O‘ahu recorded the state’s top occupancy rate at 87 percent—4.2 percentage points higher than the same week in 2010. Maui’s occupancy rate of 82.9 percent was 1.7 percentage points higher than last year, and Hawai‘i Island’s 67.9 percent occupancy rate was 3.7 percentage points higher than the same week last year. Kaua‘i’s occupancy rate of 63.5 percent was 4.9 percentage points lower than the same week last year.

Room rates averaged in at $187.12 across the state, which is a 3.9 percent increase compared to the same week a year ago. O‘ahu saw the largest increase with an average room rate of $162.38—7.7 percent higher than the same week a year ago. Maui’s average rate was $236.68—0.7 percent lower than the same week in 2010.