Hawaii hotels benefited from the best visitor arrivals month ever and enjoyed record revenue in July even as occupancy dipped slightly from already high levels on Oahu.
The state, which at midyear had the highest average daily room rate in the country at $243.25 a night, is on track for its fourth straight record year of visitor arrivals and spending. That record pace was evidenced by the $507 million in revenue that Hawaii hotels generated in July, according to a report scheduled for release Tuesday by hotel consulting firm Hospitality Advisors LLC. The only better month for revenue was December, when Hawaii hotels took in $525 million.
It was a record month all around for hotels as the statewide revenue per available room (RevPAR), considered by many to be the best measure of hotel performance, rose 5.5 percent to an all-time record of $212.14 from $201 in the year-earlier period. The statewide average daily room rate, or ADR, increased 4.9 percent to an all-time high of $259.66 from $247.54 a year ago.
All three major neighbor islands also participated in the record month. Kauai hit July records for RevPar ($196.22, up 8.5 percent) and ADR ($262.32, up 6.6 percent). Maui had July records for RevPar ($253.54, up 12.7 percent) and ADR ($336.26, up 9.4 percent). And Hawaii island hit a July record for RevPar ($166.51, up 11.4 percent).
Despite the slight drop-off on Oahu, occupancy rose on the three major neighbor islands to boost the statewide number to 81.7 percent from 81.2 percent in July 2014. Occupancy slipped on Oahu to 88.1 percent from 90.4 percent while Waikiki, in particular, saw occupancy fall to 89.4 percent from 90.7 percent.
“Even though the Waikiki occupancy rate may be down a little, the increase in room rates were more than enough to offset the decline,” said Joe Toy, president and CEO of Hospitality Advisors. “That has led to the record room revenue that we’ve seen over the past three years. We’ve been setting room records for Waikiki and Oahu on and off for the past several years.”
Toy said revenue records have been set this year despite less inventory because of several notable closures for renovation, including the Pacific Beach Hotel and the Ohana West Hotel, as well as other partial closures due to renovation.
“The reason why we’ve been able to sustain room rate increases is because we’re in the 85 percent (occupancy) range (in Waikiki), which we’ve been at over the last few years,” Toy said. “That means we’ve had more frequent sellout periods and gives hotels the ability to manage their room rates better.”
The absence of the maritime exercise RIMPAC this year likely contributed to the lower Waikiki occupancy number in July, according to Barry Wallace, executive vice president of hospitality services for Outrigger Hotels and Resorts.
“It could be that occupancy dropped a little bit this year in July because there was no RIMPAC exercise, the Navy exercise that involves about 20 different countries that goes on every other year,” Wallace said.
Wallace said he expects occupancy levels on Oahu to remain high, however, because no new hotels are being built.
“One thing that’s different in Hawaii from all other places is that when many other cities experience record occupancies for several years in a row, as Hawaii has done, they build more hotels,” he said. “That’s something that doesn’t happen in Hawaii. There’s a good chance we can sustain pretty good numbers for a longer time because our supply doesn’t increase and demand doesn’t really grow that much. All good things eventually come to an end, but as long as we don’t build any new hotels, it’s possible our occupancies will stay at an unusually high rate.”
Even with tight hotel inventory, the state tourism industry has been able to digest record numbers of visitors because more guests have been seeking alternative accommodations at condominiums, timeshares and other individual rental units. Through midyear, Hawaii Tourism Authority data showed that there were an average 215,153 visitors to the state on any given day. Of that amount, 76.4 percent of the visitors were from North America, but they represented only 63.2 percent of hotel room demand. On the other hand, the Japan market accounted for just 10.2 percent of daily visitors, but nearly 90 percent used hotels and represented 16.3 percent of the daily rooms sold.
Although August just ended, Wallace said that when the new data come out, he expects to see more strong hotel numbers. Certainly, the July visitor arrival and spending numbers bear that out.
Visitor arrivals set an all-time record in July with 816,345 people coming to the state and spending $1.42 billion, according to preliminary data released last week by HTA. Arrivals and spending are up 4.2 percent and 3.6 percent, respectively, for the year.
“I think the industry experienced a record month in August,” he said. “The first two to three weeks were particularly strong. It was definitely a good month for all of us, and it promises to be a pretty good third quarter. We’re in a good spot for an industry right now.”
