Global consulting firm Ernst & Young issued a generally upbeat outlook for Hawai'i's hotel industry, saying new construction and renovation projects are helping to fill growing demand and improve the quality of the state's hotel inventory.

In its 2008 U.S. Lodging Report, Ernst & Young also said a weak U.S. dollar is helping keep the hospitality industry strong across the country as foreign travelers find their money going further here than it used to.

"Hawai'i continues to be an in-demand destination, as illustrated by an increase in room rates during a period when occupancy rates have declined," according to the report.

It cited new hotel developments that include the Disney project planned at Ko Olina and the Trump Tower in Waikiki. And it pointed to renovations of existing hotels throughout the state and expansions at Neighbor Island hotels, including the Royal Lahaina Resort.

The flurry of renovations and new construction will provide much-needed supply to the Hawai'i market, the report said.

"With demand remaining high and an increase in new supply and renovations, the trend of rising ADR (average daily rate) is anticipated to continue as the overall quality of hotel inventory improves."

The report did mention that Hawai'i underperformed the national average for revenue per available room with a growth of 1.1 percent in 2007 — less than the national average of 6.1 percent.

However, exchange rates are working in the favor of hotel operators in Hawai'i and other markets that get high numbers of foreign visitors.

"The continued weakness of the dollar is producing multiple beneficial effects on the U.S. hotel market which is likely to continue for the foreseeable future and which may pull the sector through current recessionary pressures," Michael Fishbin, Ernst & Young's U.S. director of hospitality and leisure, wrote in the report.

The report noted that Hawai'i remains second only to New York City in room rates.

October's announcement by Walt Disney Parks & Resorts of the purchase of 21 acres on the Leeward Coast for the company's first mixed-use resort outside of its theme-park development is evidence that the Hawai'i cachet is still attractive to developers, the report said.

On the less rosy side, the report noted a drop in bookings of large conventions at the Hawai'i Convention Center and a decrease in visitor arrivals.

Nationwide, the report said international tourists are looking to the United States as a prime vacation spot and are spending more money, often upgrading to higher-end and even luxury accommodations because their local currency now buys as much as twice what it did just a few years ago.

Total arrivals in the U.S. have witnessed 18 months of successive growth since April 2006, according to the U.S. Department of Commerce. And in the first 11 months of 2007, international visitors spent $111.6 billion, up 13 percent from the first 11 months of 2006.

For a full copy of the report visit www.ey.com/realestate