Hawaii’s hotel occupancy improved slightly in June, but further shocks are expected

It seems like it could go from bad to worse for Hawaii hotels.

Occupancy at isle hotels about doubled in June to 15.7% from a coronavirus-related low of 8.4% in April. However, the state still lags major U.S. hotel markets.

June’s statewide occupancy fell 68.2 percentage points from June 2019 when occupancy was 83.9%, according to data obtained Tuesday from Tennessee-based STR, a leader in global hospitality tracking.

The average daily rate fell 42% to nearly $162 in June with revenue per available room dropping more than 89% to just over $25. STR data also showed that statewide hotel revenue fell to just over $22.3 million — a more than 94% decline from June 2019, when hotel revenue rose to nearly $382.1 million.

Oahu, the only Hawaiian Island included in STR’s top 25 U.S. hotel markets, was the worst-performing on the June list. Only 15.4% of Oahu’s hotel rooms were occupied in June as compared with 87.9% in June 2019. The next-to-worst- performing hotel market on the June list was Orlando, Fla., at 25.4%, and the best-performing market was Norfolk/Virginia Beach, Va., at 54.9%.

Some drive-to U.S. hotel markets had started to rebound in May, but by the second half of June, travel demand had weakened significantly. With travel demand anticipated to worsen, hotels and other tourism-dependent businesses are bracing for more challenges.

Mufi Hannemann, president and CEO of the Hawaii Lodging & Tourism Association, said June’s hotel results provide “false hope” about rapidly changing conditions at Hawaii hotels, which “continue to be bleak.”

Hannemann said Hawaii hotels saw some pickup in June due to the reopening of kamaaina travel. However, based on current indicators, he expects July results might be worse than the industry’s June performance.

“We may go backwards,” he said.

Hannemann said future improvements won’t occur if Gov. David Ige and his team, including the four county mayors and the state Department of Health, don’t stick to plans to launch a pre- arrivals testing program Sept. 1. The program would allow passengers who take an approved COVID- 19 test within 72 hours of their departure and can provide a negative result on arrival to bypass a mandatory 14-day self-quarantine.

“We understand that there may be some disagreements among counties. If that’s the case, we ask that counties that are ready be allowed to proceed,” Hannemann said. “The whole state is hurting. It’s just going to get worse if we can’t open the islands that are ready to go.”

Jack Richards, president and CEO of Pleasant Holidays, said there’s been about a 20% decline in Hawaii bookings in the two weeks since Ige postponed the earlier planned Aug. 1 pre-arrivals testing launch by at least a month.

“Customers were calling today and attempting to change their Hawaii vacation for the fourth time. They gave up because there’s still too much uncertainty,” Richards said. “It hasn’t helped that there’s been an uptick of cases and quarantine measures in California, Arizona, Texas and Florida.”

Richards said it’s going to be difficult for Hawaii tourism to catch up even if the Sept. 1 reopening date firms up. Hawaii already has missed the peak summer travel period. Also, important details about Hawaii’s tourism reopening are still absent, such as at what age children must be tested, where people can get tested and obtain results in 72 hours, and what happens if someone doesn’t learn that they are positive for COVID-19 until after arriving.

Richards said the industry hasn’t been forthcoming enough, either. Customers won’t book unless they know which hotels are open and what amenities, including pools, are available, he said. They also want clear information about which retail stores, restaurants, spas and activities will be open during their trip.

“Give us a plan and give us all the details so that we can relay it to the traveler,” he said. “If Hawaii really wanted to start by Sept. 1, details should have been provided in June.”

In comparison, Richards said Tahiti, which requires a pre-arrival test and a second test, has seen a pickup in sales because it “put out a reopening date well in advance and has buttoned down on all its requirements.”

“Hawaii is the only destination in 2021 for us that’s tracking below 2020,” Richards said. “As bad as this year is, there’s more to come in 2021.”

Carroll Rheem, vice president of research and analytics for Brand USA, a public-private partnership to increase international visitation to the United States, said Tuesday that projections for 2021 and beyond might come down.

“We are anticipating it will take longer to get to a position of recovery than previously projected,” Rheem said during a Brand USA webinar. “Everyone is watching the case counts in the news. Anxiety remains high.”

The pullback in travel recovery is likely to have massive repercussions for the beleaguered hotel industry, especially in places like Hawaii, which doesn’t have a drive-to market and has tourism infrastructure built around its reliance on international as well as domestic long-haul travel.

The American Hotel & Lodging Association on Tuesday said hotels are still below 50% of their pre-COVID-19 staffing levels. The Bureau of Labor Statistics has reported that since February some 4.8 million leisure and hospitality jobs have been lost — that’s more jobs than construction, manufacturing, retail, education and health services combined

AHLA is calling on federal lawmakers to extend paycheck protection programs and to increase liquidity measures and targeted tax provisions. The organization also is advocating for more economic stimulus for the industry, the creation of a new federal travel tax credit to encourage people to travel and the restoration of the business entertainment expense deduction to bolster business travel.

Economically, there are no positive stories, bemoaned Ben Rafter, who serves on the Hawaii Tourism Authority board and is CEO of OLS Hotels & Resorts.

“Without progress, malls, restaurants, retail stores, airlines, hotels and other consumer-facing businesses are all going to be wiped out,” Rafter said. “The list of great, long-gone Hawaii institutions that we remember fondly — Aloha Airlines comes to mind — is going to get a lot longer.”