Alabama residents Laura and Kasey Harris, who were visiting Oahu on Tuesday, said they weren’t surprised to hear that Hawaii’s hotel prices were the nation’s highest during the first quarter.
“We booked at Airbnb for most of our trip because there’s no such thing as an affordable hotel here,” said Laura Harris. “We rented an oceanfront condominium at the Ilikai Marina for $150 a night. We booked another Airbnb rental on the Big Island. When we returned to Oahu, we couldn’t find another Airbnb rental that would let us stay for under three days, so we’re paying $400 a night.”
Lots of tourists beyond the Harrises are emptying their wallets to stay in Hawaii hotels. On average, visitors paid almost $293 to stay in a Hawaii hotel during the first quarter, the highest rate in the nation, according to the Hawaii Hotel Performance Report released Tuesday by the Hawaii Tourism Authority. Hotel occupancy grew about 2 percentage points to nearly 83 percent, its highest level since 2000.
Hawaii is in such high demand among vacationers that hotels can keep increasing rates even while they compete against a growing number of relatively new options for places to stay, led by companies such as Airbnb.
By far the vast majority of visitors stay in hotels, but alternative accommodations are growing at a faster rate.
Through February, 936,085 visitors choose to stay in a hotel for at least part of their trip to Hawaii, an 8 percent gain from the same period during the prior year, according to HTA.
In contrast, the number of visitors who rented a house rose nearly 18 percent to 152,301 from last year. During the same period, 26,733 visitors booked a private room in a private home, an increase of nearly 27 percent from 2017.
Some hoteliers have complained the vacation rental growth could negatively affect hotel performance. The latest hotel occupancy numbers seem to contradict that.
Given the strength of Hawaii’s current hotel market, “it would be hard to pinpoint anything that would say vacation rentals had a negative impact,” said Jan Freitag, senior vice president for Tennessee-based STR Inc., which collects the data on Hawaii hotels for HTA.
Many travelers prefer hotels. First-time visitors, who are unfamiliar with the destination, often choose hotels. Visitors who are celebrating special occasions tend to be more comfortable splurging. Sometimes, tourists simply feel safer or prefer resort locations and amenities. Others like Bill Howard, a repeat traveler to Oahu from Louisville, Ky., like to stay at hotels to use or gain loyalty points.
“I travel a lot, so I like to play with points,” said Howard, who was swimming with his grandson Noah Houchens on Tuesday at the Hilton Hawaiian Village. “A 5 to 15 percent rise in prices isn’t a big deal for us. I expect to pay a little bit of a premium here. We keep coming back because we like the weather, the chill vibe and the people.”
While popular among tourists, alternative accommodations have proved controversial. Some residents object to the way numerous vacation rentals can change the character of their neighborhood, increase traffic and raise rents by taking long-term rentals off the market.
Hotel executives have expressed disappointment that state lawmakers have yet to pass a bill that would ensure that the state is collecting the same taxes from vacation rentals as it does from hotels.
“We hope that government deals with vacation rentals by implementing rules and making sure they are paying their taxes,” said Keith Vieira, principal at KV & Associates, Hospitality Consulting. “We don’t want to stop the momentum, but everyone wants parity.”
The momentum has been impressive.
Tuesday’s report showed that Hawaii revenue per available room, or RevPAR, which is the measure of what each hotel room earns regardless of its occupancy status, rose nearly 9 percent to $243 in the first quarter. That’s the highest in the nation.
Hawaii’s first-quarter occupancy, 83 percent, was the third-best ranking in the nation. Only Miami/Hialeah and Orlando, Fla., posted better occupancy rates, the report said.
These quarterly achievements were bolstered by strong results in March, which saw Hawaii’s hotel industry achieve a nearly 12 percent gain in RevPAR to $236 and a nearly 8 percent increase in ADR to $289. Statewide occupancy in March also rose nearly 3 percentage points, to 81.7 percent, compared with a year ago.
“In the first quarter of 2006, ADR (average daily rate) was $190. Twelve years later it’s grown by more than $100 (to $293) — that’s amazing. Coming out of the Great Recession of 2009 and 2010, you’ve had growth on top of growth,” Freitag said.
Jerry Gibson, area vice president of Hilton Hawaii and vice president of Turtle Bay Resort, said the industry is monitoring alternative accommodations, which tend to negatively affect hotels during slower periods. While Hawaii exceeded its ADR and RevPAR expectations during the first quarter, Gibson said there are signs that April has bought some softening to Waikiki and the neighbor islands.
“It’s not all rosebuds. We are seeing some softening in the Japan market. We certainly hope it’s not systemic and we can keep occupancy up and our No. 1 economic lever moving in the right direction,” he said.
