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The Honolulu Advertiser
Posted on: Wednesday, August 2, 2006

Hotel room revenue, rates hit record highs

By Lynda Arakawa
Advertiser Staff Writer

BY THE NUMBERS

$1.6 billion

Hawai'i hotel room revenue for the first half of 2006

6.5 percent

Increase in revenue over first half of 2005

$183.48

Average daily rate for a Hawai'i hotel room

13.4 percent

Increase in average room rate

80.9 percent

Occupancy rate for Hawai'i hotels, best among top 25 hotel markets

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It doesn't get much better than this for Hawai'i hoteliers.

Through the first half of the year, Hawai'i hotels set records in room revenue $1.6 billion and average daily room rates $183.48.

Hotels were 80.9 percent full, the highest occupancy among the top 25 hotel markets in the nation, and Hawai'i's average room rate was second only to New York City.

"It's been a terrific year from a rate-growth standpoint," said David Carey, president and CEO of Outrigger Enterprises Inc.

The occupancy numbers come on the heels of a state report Monday showing that Hawai'i is on course to set another record in visitor arrivals. Through the first six months, arrivals are up 2.2 percent, compared to last year, at 3.6 million. Last year the state hosted a record 7.46 million visitors.

It seems Mainland vacationers can't get enough of Hawai'i, and that means there's no need for price reductions.

"When you have adequate demand, it just enables you to limit the amount of deep discounted business," Carey said.

The record revenue could bolster the position of hotel workers as they negotiate new contracts with eight major Waikiki hotels. UNITE HERE Local 5 hopes the strong revenue will help it win better wages and benefits for the 5,500 employees the union represents.

"We're not surprised by these numbers," said Cade Watanabe, spokesman for Local 5. "Everybody knows that the hotel industry has been making these record profits. So it is time that the hotels share with the workers and share with Hawai'i their prosperity."

The numbers, released yesterday by Hospitality Advisors LLC, showed that room revenue for the first six months of the year was up 6.5 percent over last year. The average room rate was up 13.4 percent. Occupancy for the first half dipped 0.2 percentage points to 80.9 percent, but still led the nation.

The supply of hotel rooms statewide declined 3.1 percent and that led to an almost equal decline in demand by 3.2 percent to 8.7 million room nights sold, Hospitality Advisors said.

STRATEGY WORKING

Structural improvements in Waikiki, hotel upgrades and consistent marketing by the Hawaii Tourism Authority have contributed to the solid year for tourism, Carey said.

"We're sort of living the strategy that the Tourism Authority has laid out there," he said. "If you look at O'ahu in particular, the visitor numbers are essentially flat and yet visitor days are up and rate is up a lot. That's a terrific trend.

"That means we're getting better yield on the market without adding further weight to the infrastructure."

The one possible casualty of Hawai'i's high occupancy rates may be the Japanese tourist. Japanese visitors tend to book their travel later than Mainland visitors and have been missing out on rooms. That's one explanation tourism experts give for the 8.8 percent decline in Japanese arrivals through the first six months of this year.

The first half of the year saw strength in the high-end market that was boosted by increases in business and incentive travelers as well as independent and domestic leisure markets.

Hotels on Maui and the Big Island saw slight increases in occupancy year-to-date, while O'ahu remained flat and Kaua'i occupancy fell. But all islands enjoyed increases in average daily rates and revenue per available room a key measure of profitability.

For the month of June, Hawai'i's hotel industry slipped 0.7 percentage points in occupancy to 82.5 percent. Average daily room rates grew 13.4 percent to $185.63, and statewide revenue per available room set a June record of $153.21.

The survey, compiled by Smith Travel Research with Hospitality Advisors, included 139 properties representing 45,462 rooms, or 77.4 percent of all lodging properties with 20 rooms or more in the state, including full-service, limited-service and condominium hotels.

Reach Lynda Arakawa at larakawa@honoluluadvertiser.com.

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