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The Honolulu Advertiser
Posted on: Wednesday, April 25, 2001

Mainland economic slump takes toll on Hawai'i hotels

By Andrew Gomes
Advertiser Staff Writer

Occupancy at Hawai'i hotels fell in March as fallout largely from economic troubles on the Mainland pinched the state's key industry for the second month in a row.

Visitors filled 80.5 percent of available rooms in the state last month, down 2.9 percentage points from 83.4 percent in the same month a year ago, according to a monthly survey released yesterday by hospitality consultancy PKF-Hawai'i LLP.

Industry executives knew last year's impressive gains in occupancy would be hard to beat. For instance, the number of rooms filled in March 2000 hit an 11-year high. Still, some said they were surprised by the degree of last month's drop.

"The numbers are slowing a little faster than we had hoped," said Keith Vieira, senior vice president of Hawai'i operations for Starwood Hotels & Resorts. "We are concerned."

The falloff in March occupancy followed a 0.4 percentage point drop in February, according to PKF-Hawai'i.

Vieira said April and May don't look good based on advance bookings. "The next three months we are definitely behind last year," he said.

Still, some local economists said they believe the second half of the year will be positive for the visitor industry, which they expect to rebound from this year's soft start.

Paul Brewbaker, chief economist for Bank of Hawai'i, told a group of travel industry executives yesterday that as the engineered economic soft landing on the Mainland smooths out, visitor arrivals to Hawai'i should pick up.

"I'm not really worried about the 'wannabe recession' on the Mainland," said Brewbaker, who called the national economy's slowdown a "garden variety" correction.

Brewbaker said events dominating headlines, like shrinking stock market wealth and California's energy crisis, have a small affect on Mainland travelers to Hawai'i. He said even the slight economic growth in Japan, projected to be about 1 percent this year, should help Hawai'i tourism.

The state's chief economist, Pearl Imada Iboshi, concurred, but hinted that visitor arrival statistics for March, which have yet to be released, are expected to be "pretty moderate."

Paul Tang, general manager of the Hyatt Regency Waikiki, doesn't share the economists' optimism. He worries that things like fewer conventions and dot-com layoffs will result in more rapid declines in hotel occupancy in the next few months that will overshadow any improvement in the second half of the year.

"I think as a market we are going to see a rough ride for this year," Tang said.

Vieira hopes the industry will improve later this year, but isn't convinced. He noted that summer forecasts look a little bit better, but added that it's hard to say how solid they are.

The Hawai'i Visitors & Convention Bureau has advanced the spending of marketing dollars this year in hopes of heading off a slowdown in coming months.

Ernie Watari, chairman and chief executive of PKF-Hawai'i, said it will be a challenge for the industry to turn itself around. "Hawai'i's tourism industry will have to once again reach deep into its magician's hat and pull out another rabbit," he said.

By island, hotel occupancy on O'ahu fell 0.9 percentage points last month to 79.0 percent from 79.9 percent in March 2000.

For the first time since December 1999, occupancy in Waikiki lost ground, falling 1.1 percentage points to 80.1 percent compared to 79.0 percent, according to the report.

Moloka'i eluded the downward trend, increasing hotel occupancy 2.8 percent, from 62.5 percent to 59.7 percent, though there were fewer available rooms because of the still-closed Kaluakoi Resort.

Occupancy decreased on Maui (down 3.9 percentage points to 85.3 percent from 89.2 percent); on the Big Island (down 4.7 percentage points to 82.9 percent from 87.6 percent) and on Kaua'i (down 8.6 percentage points to 72.0 percent from 80.6 percent).

Hoteliers got more for their rooms, with the statewide average daily room rate rising 3.2 percent to $165.45 last month compared to $160.35 in March 2000. But revenue per available room, a key measure of profitability, decreased 0.4 percent to $133.15 a night vs. $133.74 for the same period.

For the first quarter of this year, hotel occupancy was up 1.3 percentage points, at 81.5 percent vs. 80.2 percent, according to PKF-Hawai'i's report.

PKF-Hawai'i surveys 147 properties representing 56 percent of hotel rooms in the state. The survey does not include Outrigger Hotels, which operates roughly one-third of the rooms in Waikiki.

Andrew Gomes can be reached by phone at 525-8065, or by e-mail at agomes@honoluluadvertiser.com