Although second in nation, hotel occupancy rates tumble

By Glenn Scott
Advertiser Staff Writer

The occupancy rate for Hawai'i's hotels fell so abruptly in April that the weight of higher room rates at most hotels could not counterbalance the decline in visitors.

As a result of the 4-percentage-point drop in occupancies, hotels overall endured a decline for the first time in almost two years in a key measure of industry yields, with revenue per available room falling by 1.4 percent, according to monthly data issued today by Hospitality Advisors LLC and PricewaterhouseCoopers LLP.

The decline in hotel occupancies parallels findings released last week by the state Department of Business, Economic Development & Tourism, which showed visits to the Islands were down by 2.4 percent in April to 558,253, with the lucrative market in Japanese travelers off by 7 percent to 128,243 people. The travelers who did arrive, however, tended to stay slightly longer than last year.

The figures from both surveys help to explain why, as a trend toward declining visits takes shape, some hotel executives and state tourism officials are stepping up marketing campaigns in a bid to lure more visitors this summer and fall.

The occupancy survey said average rates fell statewide from 73.9 percent in April 2000 to 69.9 percent the same month this year. The sharpest declines hit hotels on the Big Island, where the 62.8 percent occupancy rate was a drop of 6.7 percentage points from the same month last year. O'ahu's rate slipped to 67.6 percent. Maui held onto the highest rate, at 78 percent, but that still was down 4.7 percentage points.

Amid the general declines, just one sector of the market showed a gain. Occupancies at budget hotels rose from 64.6 percent in April 2000 to 68.6 percent this year.

Joseph Toy, president of Hospitality Advisors, said the consumer trend is moving away from the high-priced hotels that led the tourism industry's record growth last year and toward cost-saving alternatives.

"The change in the market that we have seen so far in 2001 indicates a much more value-oriented traveler, characterized by a strong Canadian market and an increase in more traditional lower-cost tour wholesale packages," he said.

Until April, the saving grace for many hotels was that, while occupancies may have slipped slightly, higher room rates pushed up by previous demand helped to sustain revenue growth. After 22 straight months of gains in the so-called RevPar formula, however, the state average showed a loss in April from $103.29 in the same month in 2000 to $101.85 this year.

Only one island avoided a drop. Maui's average $14.75 hike in room rates over the 12 months was enough to offset its 4.7 percentage point drop in occupancy. Its revenue per available room, at $144.28, remained $3.50 per room higher than in April 2000.

But behind that positive yield were some dramatic rate increases in the past year — for example, a $30 rise in rates for midpriced hotel rooms — that may not withstand softer demand.

Toy said his research suggests that the booking pace for Island hotels appears uneven for the summer, with some hotels reporting strong sales and others looking to boost marketing campaigns.

For the first four months of the year, the occupancy figures remain generally on par with the same period in 2000. Year to date, the state's occupancy rate averages 77.9 percent this year compared with 77.6 percent last year. More troubling, however, is the pattern showing results gradually sliding since a strong January.

Compiled by Smith Travel Research, the occupancy study was based on surveys of hotels holding about 68 percent of the state inventory. Researchers said data have been weighted both geographically and by class of property to ensure that all types and locations of hotels are represented fairly.

Glenn Scott can be reached by phone at 525-8064 or by email at gscott@honoluluadvertiser.com.