Travelers tighten hotel spending
By Glenn Scott and Michele Kayal
Advertiser Staff Writers
Neighbor Island hotels catering to corporate and luxury travelers saw occupancy rates decline in February, but budget hotels across Hawai'i picked up business, many operating near full capacity, according to a monthly survey released today.
Luxury and upscale hotels, particularly on Neighbor Islands, led the surge in occupancies last year as nearly 7 million tourists set a record arrival rate here. In February, however, those top two categories in terms of pricing felt a shudder from the slowing Mainland economy.
Occupancy rates at Maui's luxury hotels, for instance, dipped from 90.1 percent in February 2000 to 82.6 percent this year, said the Hawaii Hotel Flash Report issued by Hospitality Advisors LLC and PricewaterhouseCoopers LLP. As the survey notes, though, the same hotels raised their rates from an average $299 a night in 1999 to $340 a night this year. Thus, even with occupancy declining, the hotels improved in the crucial calculation of revenue per available room.
It remains to be seen, however, whether hotels can sustain higher rates if demand slackens.
Joseph Toy, president of Hospitality Advisors, said the decline in the high-end occupancy rates was attributable in part to reductions in corporate travel for meetings and incentive rewards at resorts with proximity to golf and other leisure activities.
The luxury market traditionally remains resilient by catering to people less affected by economic ups and downs. Hawai'i's top-tier hotel business is anchored by corporate and incentive travel, a segment that, until this year, had grown steadily since 1996. Another part of the luxury market are the baby boomers who have reaped profits from stock trading.
As Toy noted, though, both businesses and affluent boomers have begun feeling less rich than they were 12 months ago
"During times of economic contractions," he said, "nonessential business travel is typically what contracts first."
If corporate bookings slowed, though, more travelers sought out the lowest-priced budget hotels. Statewide, budget rates jumped from 83.8 percent in February a year ago to 91.2 percent this year. Because the rate represents an average, about half of the budget hotels were running at even higher rates, meaning they were virtually booked for the month.
That increase in budget bookings helped nudge overall February hotel occupancy rates up from 86 percent in 2000 to 86.7 percent even as overall visitor arrivals dropped 4.4 percent. Budget hotels saw growth on all islands, with the state's average daily room rate jumping by 18 percent, from almost $60 in February 1999 to $70 this February. Revenue per available room jumped from $58 last February to nearly $80 this year.
O'ahu budget hotels, primarily in Waikiki, operated at 92.5 percent occupancy with an average daily room rate of $54. Maui's budget occupancy rate was a similar 92.3 percent, with a daily rate of $86.
Toy termed the month "somewhat unusual" for its cross-currents of travel patterns. Citing another variation, he pointed out that while the number of Canadian travelers to the Islands declined by 16.8 percent this February, their arrivals on Maui and the Big Island increased by 22.4 percent and 10.5 percent, respectively.
As researchers for the state Department of Business, Economic Growth & Tourism did when releasing arrival figures last week, Toy cautioned that comparisons against 2000 can be misleading because of record performances last year.
"February was still a good month for the hotel industry, particularly for Waikiki," he said, "and we continue to hope for a respectable first quarter overall."
However, Toy and others also have acknowledged that this February's bookings are in part a legacy of vacations booked months earlier when economic outlooks on the Mainland and Japan were more optimistic. As regional outlooks have deteriorated, bookings for later this year also have dropped off.
"The shortening booking windows, group cancellations and general eroding of consumer confidence in both the U.S. and Japan markets provides a lot of uncertainty in the market's vitality," he said.
Other tourist destinations, he added, are experiencing the same problems.
The hotel survey, compiled by Smith Travel Research, involved queries to 131 hotel properties representing 45,229 rooms, researchers said. The data was weighted both geographically and by class of property to compensate for over- or under-representations.
Glenn Scott can be reached by phone at 525-8064, or by e-mail at gscott@honoluluadvertiser.com. Michele Kayal can be reached by phone at 525-8024, or by e-mail at mkayal@honoluluadvertiser.com.
