Hawaii hotels finished December with the lowest occupancy of any state in the nation. Only Washington, D.C.’s hotel occupancy was worse.

Tennessee-based STR estimates that just 23.8% of Hawaii’s hotel rooms were full in December, and that’s after factoring in pickup from the usually lucrative Christmas holidays. December occupancy was in the low to mid-20% range for every major Hawaiian Island, except for Kauai. The Garden Isle saw its occupancy plunge to just 13.4% after opting out of the state’s Safe Travels Hawaii program and temporarily ordering all travelers to quarantine or stay in a resort bubble.

Results are likely to get worse before they get better. The outlook isn’t expected to show improvement until around summer, with meaningful recovery not anticipated to begin until the third quarter — and that’s only if the COVID-19 vaccine rollouts are successful.

Kekoa McClellan, Hawaii spokesman for the American Hotel &Lodging Association, said the state’s hotel industry still has a long way to go. He estimates that the average Hawaii hotel needs to hit at least 52% occupancy to be profitable. If there is debt service on the property, McClellan said a hotel might need occupancy north of 70% to make a profit.

McClellan estimated that 4 out of 10 Hawaii’s hotel workers still haven’t returned to work, with recovery of the labor force expected to trail occupancy improvements.

“Occupancy is still through the floor,” McClellan told the Honolulu Star-Advertiser, adding that 2021 has begun much like 2020 ended.

According to STR, statewide occupancy plummeted 56.4 percentage points in December, while revenue per available room (RevPAR) decreased 75.6% to $69. RevPAR, which is the rate that a hotelier gets per room regardless of its occupancy status, is considered one of the best measures of hotel performance.

The one bright spot was that Hawaii’s average daily rate — the price paid for a Hawaii hotel room — dropped only about 17.6% to $291, which was about $200 better than most every other U.S. state.

Last month, room revenue across the state fell to $107.9 million. It was a 77.2% drop from the $472.6 million that Hawaii hoteliers realized in December 2019, when Hawaii’s tourism industry was firing on all cylinders.

Despite two good months in 2020, Hawaii hotels finished 2020 with an occupancy of 37.1%, down 43.7 percentage points from 2019. RevPAR fell 56.6% to $99, and ADR decreased 5.5% to $267. Hotel revenue in 2002 declined 69% to $1.4 billion from $4.5 billion in 2019.

It was the same story for the hotel industry across much of the U.S.

Jan Freitag, senior vice president for lodging insights for STR, told the Star-Advertiser, “There’s not a whole lot different for you than the nation other than that you have to fly to go to Hawaii.”

“When I look at the data that we produced for December, it mirrors not exactly, but trendwise, what we’ve seen for the state, which is that the occupancy is low or lower than the national average but that the rate in absolute terms is much, much higher than for the nation or really anywhere else,” he said.

Freitag said Hawaii’s December ADR drop, while steep in percentage terms, “only brought the room rate down to the highest room rate in the nation.”

He said what likely happened for Hawaii was that “the people who wanted to travel and who could travel and who had the disposal income did” and “stayed in a hotel that was likely higher- end.”

Freitag said when the American consumer finally started traveling last year, the “Great Caravan of 2020” disproportionately benefited drive-to and outdoor destinations. Hawaii, which is a fly-to destination, missed out on some of that traffic, but Freitag said the state could benefit in the future as it has “the nature part that people crave in this environment.”

Hawaii’s tight COVID-19 travel restrictions will serve as a deterrent for some, but Freitag said they also are an attraction.

“By adding this extra step, you give travelers comfort. It plays both ways. It’s not purely negative,” he said.

Freitag said the “pace of vaccinations will have a material impact on the pace of room rates and recovery.”

“The sooner that we can get people back on airplanes and into ballrooms, the sooner the industry will recover,” he said. “We need corporate and leisure travel.”

Freitag said the good news is that vaccinations have started. However, he cautioned that the “road warrior, the frequent corporate traveler in their prime- earnings time, might be someone toward the end of the (vaccine) line.”

“We’ll see an uptick once those vaccinations start and CEOs start allowing travel,” he said.

“There is this scenario that you could paint in your head of this year, and the year after, and the year after that as the ‘Roaring ’20s,’” Freitag said. “There is pent-up demand, and people with the means to travel spent less money in 2020 and 2021. Once they go, they’ll go and spend more than they would in an average vacation.”

In the meantime, Hawaii’s hotel industry continues its fight to survive.

McClellan said AHLA is projecting that Hawaii’s occupancy this year will recover to only 41.5%. He said AHLA is projecting Hawaii’s hotel revenue will reach $1.85 billion this year, not much higher than the $1.38 billion that it earned in 2020 and significantly lower than the $4.5 billion that it realized in 2019.

AHLA has projected that Hawaii hotels will add only another 2,208 direct employees this year, bringing the count to 24,290. That’s up from 22,087 in 2020 but not quite 55% of the 44,319 direct hotel employees that worked in the industry in 2019.

With continued struggles in the industry, AHLA is projecting that hotels will generate only $473.7 million in state and local taxes this year, as compared with $425.3 million in 2020 and $907.2 million in 2019.

The human costs are massive, too. Unite Here Local 5, a labor union representing 8,000 hotel workers throughout the state, estimates that only about 1,000 of them have returned to their hotel jobs.

Local 5 spokesman Bryant de Venecia said some hotels have temporarily eliminated entire categories of workers. The union also is filing more grievances protesting the use of hotel management to take over duties formally fulfilled by union workers, de Venecia said.

McClellan said Hawaii’s hotel industry is committed to get people back to work safely, albeit slower than some would like.

“It’s not 1-for-1 — it’s not as if we have 20% occupancy and then can return 20% of the jobs. It really depends on the economic impact of the property and the guests’ needs,” he said.

McClellan said conditions still haven’t allowed all Hawaii hotels to reopen. And if they don’t improve soon, McClellan said even some of the hotels that did reopen could face bankruptcy or distressed sales or closures.

“I’m very aware of a number of properties that are on the verge of bankruptcy,” he said. “They are doing everything that they can to stay open and get open and right-size their operations and to welcome guests back safely.”

Mark Bratton, senior vice president of Colliers International, said the CARES Act and the second round of federal stimulus that was passed at the end of 2020, as well as the vaccines, have provided “some light at the end of the tunnel.”

Bratton said that the day Pfizer announced the vaccine, stock prices for all lodging companies rose.

In most cases, he said, lenders are still able to “kick the can down the road.”

“The CARES Act II allowed banks and the lenders to have more ability to maneuver with their loans to the end of 2021,” he said. “If that wouldn’t have come through, the regulators would have been looking over the banks’ shoulders.”

Bratton said “the pressure on borrowers isn’t as bad as we thought it would be.” However, he cautioned that there are a handful of Hawaii hotels with loans due in 2021 and 2022 and that “their lenders might try to demand repayment.”

“You might see some movement as hotels try to refinance or seek out runway capital,” he said.

However, in general, Bratton said that “everything just keeps getting stretched out in the timeline.”

“When all of this started, we thought it would be 60 to 90 days and we’d be in good shape by summer,” he said. “There is a lot of pain on the owners’ side. However, we are about to get a lot of money from the government again, and that will help for the next six to nine months.”

McClellan said AHLA also is eager to work with the new administration and Congress on more policies that will bring back travel, and with it jobs and economic development. McClellan said priorities include a longer- term stimulus package; ramping up vaccine distribution and testing; protecting businesses that follow proper public-health guidance from undue liability, and reviving international travel to the U.S., which has been flat or declining for the past six years.