Investors spent top dollar in 2017 to buy Hawaii hotels, which averaged the highest price per room of any state.

Last year the average Hawaii hotel sold for $536,481 per room, according to STR, a hotel research company based in Tennessee. That’s more than double the average price paid for hotels nationwide: $240,000 per room.

“People trust the Hawaii market. The destination does a good job from a visitor satisfaction point, and we’ve had increased demand along with significant increase in air seats to the islands,” said Keith Vieira, principal of KV & Associates, Hospitality Consulting. “Investors see that we’ve got a balanced mix of visitors and the returns are going to be there over time.”

Hawaii was such a hot hotel investor market in 2017 that four out of the 10 most expensive hotel transactions, based on total price, were in Hawaii. The $515 million sale of the 839-room Pacific Beach Hotel Waikiki in August topped the list. That property, which was bought by Commerz Real Investment, has been transformed into the ‘Alohilani Resort Waikiki Beach.

“The ‘Alohilani is a large hotel with large rooms and plenty of ocean views since its front tower is shorter than its back tower,” Vieira said. “The asset was in a great location, but it had deferred maintenance and was underperforming. Its renovation has completely repositioned it from a midscale to a luxury property, and its owners will get the reward for that event.”

Hotel owners often will invest in renovations prior to or following a transaction, leading to added jobs for construction workers, architects, designers and others. On the other hand, an ownership change can create anxiety among the current hotel employees, who find themselves with a new boss and are faced with the possibility their pay or work rules could change.

‘Alohilani’s new owners spent approximately $115 million transforming the Pacific Beach Hotel, which included the entire property, from its exterior facade to all public and guest spaces. Upgrades also included a new pool deck, fitness center and five new restaurants, including a collaboration with chef Masaharu Morimoto.

The International Longshore and Warehouse Union, which represents many of the hotel employees, said it had a contract with the Pacific Beach Hotel and now has a contract with ‘Alohilani that runs through 2022. ILWU would not disclose whether the changeover resulted in any job losses.

However, Unite Here Local 5 spokeswoman Paola Rodelas said employment changes accompany sales often enough that the union’s bargaining agreements typically include successorship language to protect employees in the event of a sale.

Ivan Hou, Local 5 research analyst, said Hawaii’s hot hotel market has attracted more private equity investors, whose “business model is to acquire, invest and flip properties.”

The union is watching to see how that situation unfolds at Hyatt Centric Waikiki Beach, a former office building that WTC Oahu Property LLC transformed into a hotel at a cost of more than $100 million.

Hou said a Korean news article reported last year that a consortium of investors was trying to gather more than $200 million to buy the 230-room Hyatt Centric Waikiki Beach. Broken down by per-room cost, that deal would cost $869,500 per room, he said.

Lady Anne Tapac, a housekeeper at the Hyatt Centric Waikiki, said the possibility of a hotel sale was the main reason she and more than 70 percent of workers at the property voted last week to join Local 5.

Oahu’s 450-room Turtle Bay Resort, which sold in October for $330 million, fetched the nation’s fourth-highest property price, according to STR data. The March 2017 sale of the 759-room Westin Maui for $317 million came in fifth. The Mauna Lani Bay Hotel & Bungalows, a 341-room Hawaii island property that sold for $225 million in August, was eighth on the list.

Another Hawaii property, the 311-room Courtyard Kauai at Coconut Beach, didn’t make STR’s top list, but changed hands for $61.5 million, bringing Hawaii’s 2017 transaction total to more than $1.4 billion.

Nationwide, STR Inc. expects hotel values “to remain at an all-time high in 2018, despite a rise in interest rates,” said STR consultant Hannah Smith in a statement.

Hawaii hotel transactions this year have continued the momentum from the last half of 2017. STR spokesman Nick Minerd said so far in 2018 there were three transactions totaling $437.6 million.

“Hawaii is routinely the top-performing state when it comes to hotel occupancy and room rates, and that has certainly been the case thus far in 2018. Even with high performance levels on an absolute basis, there has been room for growth well above the national average, so it stands to reason that the transaction climate has been active in the state, ” Minerd said.

In January the 623-room Hilton Garden Inn Waikiki Beach sold for $212 million. That same month the Hotel Renew, a 71-room property in Waikiki, sold for $25.6 million. In March the 645-room Aston Hotel Waikiki Beach sold for $200 million.

Minerd said STR also is watching two pending transactions in Hawaii: the Andaz Maui @ Wailea and the Grand Wailea.

Jennifer Chun, Hawaii Tourism Authority director of tourism research, said that “the resort region of Wailea is Hawaii’s strongest revenue-producing area, having led all other regions statewide in revenue per available room (RevPAR) in every year for at least the past decade.”