Hotels continue to struggle
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By David Butts
Advertiser Staff Writer
Hawai'i's hotel industry earned $20 million less last week, compared with earnings a year earlier, and $163 million less since the Sept. 11 terrorist attacks.
Hotels were running 56.1 percent full for the week beginning Oct. 14, according to the Hospitality Advisors survey of 65 percent of the state's hotels.
While that number is an improvement over the 50 percent occupancy in the weeks immediately after the terrorist attacks, it is still 25 percent below last year's level.
Even more disturbing to some hotel managers is the steady stream of future cancellations.
"Our main concern is with the future and bookings," said Rob Solomon, Outrigger Hotels senior vice president for sales and marketing. "There is an ongoing cancellation factor that makes it more challenging to get the net numbers going up."
In a little over a month, the hotel industry has earned less than it did during the first three months after the start of the 1991 Gulf War, when it took a $135-million hit.
Industry observers say the impact this time could cost Hawai'i even more in the long run as hotel owners delay renovations and other projects that would have pumped millions of dollars into the Islands' slowing economy.
"While we have seen some improvement over the past several weeks, the pressure on our visitor industry is tremendous," said Joseph Toy, president of Hospitality Advisors.
Hotels generally need between 60 percent and 70 percent occupancy to earn a daily profit. In addition, the industry must make up for revenue lost during the weeks immediately following the attacks.
A separate survey by PKF-Hawaii showed that average occupancy was between 48 percent and 50 percent from Sept. 12-30.
"Hawai'i's tourism industry will be facing a tremendous challenge in recouping the losses caused by this tragic event," said PKF-Hawaii chairman Ernie Watari.
And fall is traditionally a slow season for tourism.
"The litmus test will be what happens in the first quarter," said Toy, adding that he believes the industry is in better shape to weather this crisis than it was during the Gulf War.
Hotels are not burdened with as much debt because many of the highly leveraged Japanese owners have sold out, and workers have become more efficient since the early '90s, Toy said.
Despite the downturn, hotels have been able to maintain high average room rates so far, according to the Hospitality Advisor survey.
Last week's average rate was $152.30, on par with rates in 2000. Toy said many of last week's visitors booked before the attacks or before hotels began to offer discounts.
And Hawai'i hotel executives are reluctant to cut prices because they want to maintain the image of an upscale market and don't want to hurt business by raising rates in the future.
"Just giving the product away is a slippery slope," said Outrigger's Solomon.
