O'ahu sees drop in hotel rooms

By Kelly Yamanouchi
Advertiser Staff Writer

The number of hotel rooms on O'ahu dropped 2.2 percent last year as older hotels were converted to condominiums or apartment buildings.

O'ahu, home to more than half of the rooms in the state, has a collection of aging hotels in Waikiki that have recently been either renovated or converted to other uses. There were 35,664 rooms on O'ahu in 2003, down from 36,457 in 2002, according to a survey released by the state Tourism Liaison Office yesterday.

A shift to more condominiums and fewer hotels in Waikiki could lead to a drop in economic activity for the state's No. 1 tourist destination. Hotels typically employ more people to service rooms than apartment buildings or condominiums do, bring in more tax revenue through the general excise and hotel room taxes, and bring in spending from outside the state.

"If residents are living in the former hotels there's not new money brought into the system by tourists," said David Carey, chief executive of Outrigger Enterprises Inc. "It's the front end of a very heady trend that could change the face of Waikiki."

Among the conversions last year were several former Outrigger properties in Waikiki, including the 600-room Ohana Hobron Hotel, which was converted into The Windsor, a building of 181 condo units, and the 251-room Ohana Surf Hotel, which was converted into residential apartments.

"It's a sign of the times," said Marsha Wienert, Gov. Linda Lingle's tourism liaison. "If it's a trend, it's concerning."

With the Hawai'i Convention Center nearby, "we need enough rooms for those delegates," Wienert said. "One of the goals is to have the big groups here on O'ahu, even if there is a little bit of a concern."

When the convention center was first conceived, tourism officials expected during large conventions that some vacationers would be displaced from Waikiki to the Neighbor Islands, Wienert said. But recently Neighbor Island hotels have also been filling up, so "something that we need to look at is how much displacement can happen to the Neighbor Islands," she said.

Contraction in the O'ahu hotel inventory could be good for remaining hotels because it can lead to higher occupancy rates and boost room rates and revenues. Also, the buildings converted were on the lower, older end of the hotel spectrum that owners found to be better suited for other uses.

"That 2.2 percent was a correction," said Les Enderton, executive director of the O'ahu Visitors Bureau. "The news is basically very good in terms of increasing occupancy rate and increasing daily rate."

The report covered hundreds of properties that tourists in Hawai'i call home, ranging from the two-unit Hale Kimo at Sunset Beach on O'ahu's North Shore to the 793-unit Sheraton Moana Surfrider in Waikiki.

While O'ahu had a drop in hotel inventory, all of the other counties had slight boosts in their room counts last year.

Maui County had the largest increase with 3.3 percent growth to 18,578 rooms, reflecting growth on Maui and Moloka'i. Kaua'i had 3.1 percent growth to 7,257 rooms, while the Big Island had a 1.9 percent increase to 9,478 rooms.

The Neighbor Island growth offset O'ahu's decline, leading to a 0.3 percent increase in visitor accommodations in Hawai'i.

The Neighbor Island increases resulted from a bigger effort to survey properties, according to the report by the state Department of Business, Economic Development and Tourism. The results are based on a survey of available rooms as of May 2003.

Businesses have been investing in resort developments on Neighbor Islands such as the Westin Kaanapali Ocean Resort Villas, a time-share project on Maui.

The hotel room count is made up of 68.7 percent traditional hotels, 23.6 percent condominium hotels, with individual vacation units accounting for 2.8 percent and bed and breakfasts, and hostels, at less than 1 percent.

Time-shares made up 4,762 of the rooms in the state, up 4.5 percent from 2002. Kaua'i had the most time-share units with nearly 35 percent of the total.

"The growth in the future will be through the condo/time-share owners," Enderton said. That could be a positive because the time-share market is more "recession-proof" and brings higher-spending tourists, he said.

Reach Kelly Yamanouchi at 535-2470 or at kyamanouchi@honoluluadvertiser.com.