Hawai'i's hotels saw a slight drop in occupancy last month, but continued strength in the luxury and upscale markets helped drive average room rates to another May record.

Overall hotel occupancy fell 1.1 percentage points to 75.6 percent as more Mainland visitors stayed in alternative accommodations such as condos and time-shares, according to data released yesterday by hotel consultancy Hospitality Advisors LLC.

But the hotel industry is still as healthy as ever, with room rates and revenue per available room — a key measure of profitability — continuing to climb.

Hotels in Hawai'i sold about 7.3 million room nights in the first five months of this year, 3 percent fewer than the same period last year, said Hospitality Advisors president Joseph Toy. But room revenues are 13 percent ahead of the record pace last year, he said.

"We forecasted we would see a new record in room revenues ... driven more by increase in room rates, and that's exactly what we're seeing now," Toy said.

Statewide average daily rates last month grew 13.2 percent to $172.66, beating last year's May record. Revenue per available room, a key measure of profitability, jumped 11.6 percent year-over-year to $130.57.

The growth is largely because of continued demand for Hawai'i's luxury and upscale properties, which in turn was boosted by a higher number of U.S. East convention visitors and independent travelers last month.

But while the upper-tier properties are driving the market, the budget and economy sectors are also seeing higher rates, Toy said.

"During the last several years, we've seen room rates really pushed on the upper edge of the market and we began to see a rate gap between the upper end of the market and the budget, economy side," he said. "Now we're beginning to see the lower end of the market also rise. Part of that is due not only to demand, but it's also because we're also seeing some renovation of product."

Luxury and upscale hotel properties were slightly fuller compared to May last year, while lower-priced segments saw declines in occupancy. All hotel categories, however, enjoyed increases in room rates and revenue per available room.

Maui led all islands in occupancy and daily room rates, and Wailea properties reported "exceptional" growth with an 8.3 percentage point gain in occupancy and a 7.7 percent increase in room rates, the report said. Wailea's revenue per available room surged 20.6 percent to $263.81.

Big Island hotel occupancy grew 1.8 percentage points, while Kaua'i posted a 0.6 percentage point decline. O'ahu occupancy fell 3.4 percentage points, primarily because of lower demand in economy and budget hotel segments, the report said.

All major islands saw higher room rates and revenue per available room.

The survey, compiled by Smith Travel Research with Hospitality Advisors, included 139 properties representing 45,399 rooms, or 77.3 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.