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The Honolulu Advertiser
Posted on: Friday, July 12, 2002

Hotels face 2-year road to recovery

By Katherine Nichols
Advertiser Staff Writer

Year-end forecasts for 2002 predict statewide hotel occupancy will hover at 71.5 percent, leaving Hawai'i's lodging industry in recovery mode for at least another two years.

Though recent trends are relatively encouraging and future construction of new hotels will absorb some demand, occupancy levels are still a long way from equaling the record 77 percent achieved in 2000, according to studies conducted by Hospitality Advisors LLC and Smith Travel Research.

"Things are looking up, but it's very fragile," Hospitality Advisors LLC president and chief executive officer Joseph Toy said after a briefing for tourism industry leaders yesterday.

Toy also said that it took seven to eight years for Hawai'i to fully recover from the last recession, and he expects a similarly uneven pattern now.

The state's problems can be traced to even before the Sept. 11 attacks.

Statewide average hotel occupancy last year was the lowest since 1983, finishing at 69.8 percent. The industry as a whole took a $261 million hit in total revenue, with the luxury market suffering the most, making $149 million less than in 2000.

The Mainland hotel industry also is suffering this year. Occupancy for U.S. hotels is expected to be about 59.8 percent in 2002 — the lowest in 30 years — with recovery not likely until 2004, according to U.S. Lodging Industry Reports.

Toy said the forecast is further indication that corporate travel will continue to lag with the economy.

"We don't see (corporate travel) returning (in Hawai'i); certainly not this year," he said. "Corporate travel books three years out. It's kind of a cascading effect."

Another element contributing to the labored return to record levels is the short booking window.

"A lot of hotels are depending on late pickups on rooms," Toy said. "It just makes it more difficult to know where we stand in the market."

Despite increased lengths of stay and slowly improving visitor arrival figures and occupancy rates, hotels also are still taking a hit from competitive deals highlighted by value-added packages and incentives that narrow profit margins.

The average daily room rate in 2001 was $149. Toy's year-end prediction drops that figure to $137.

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