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The Honolulu Advertiser
Posted on: Tuesday, May 11, 2010

Hawaii hotels report first profits in two years

By Alan Yonan Jr.
Advertiser Staff Writer

Hotel occupancy climbed enough in March that the local lodging industry was able to turn the corner on a key measure of profitability for the first time in two years.

Revenue per available room, or "revpar," rose to $122.43 in March from $119.21 a year earlier, according to a report released today by Hospitality Advisors and Smith Travel Research.

"After 24 consecutive months of room revenue losses, the rise in monthly occupancy during March was finally able to outpace room discounting for a modest revenue gain," said Joseph Toy, president and chief executive officer of Hospitality Advisors LLC, a local travel industry consulting firm.

Average statewide occupancy rose to 70.6 percent in March from 65.2 percent a year earlier. Occupancy has increased in six out of the past seven months. But with deep discounting, hotels hadn't been able to post an increase in revenue per available room until March.

The turn in revpar shows that hotel owners are beginning to regain some leverage in pricing power lost during the extended downturn in the visitor industry.

"The first-quarter results are encouraging as confidence continues to slowly rebuild in the market," Toy said.

That's not to say that discounting is over. The average daily room rate fell to $173.41 in March from $182.83 a year earlier. While room rates were down, the rate of decline continued to slow.

"People are shopping deals. They know they can wait to book their hotel until the last minute and still get a deal," said David Carey, president and chief executive officer of Outrigger Enterprises Group. "And it's not just Hawai'i. People are shopping for deals at all leisure destinations. When you have discounting and occupancy stays level, it's a huge profit squeeze."

But four consecutive monthly increases in visitor arrivals have helped fill hotel rooms, and airlines say they are planning on adding airseats in the months ahead. That has hoteliers feeling more hopeful.

"Signs are better than they have been for this summer in terms of advance bookings," said Carey, whose company operates 26 hotels on four islands. "But we're going to have to see volumes continue to increase in order to get sustained revenue gains."

The biggest increase in hotel occupancy in March was on Maui, where the rate rose by 9.7 percentage points to 72.4 percent. O'ahu's rate rose to 6.4 points to 76 percent. Kaua'i posted a 5.8 point drop to 55.7 percent, and the occupancy rate on the Big Island fell by 1 percentage point to 57.9 percent.

Nationally, Hawai'i's 70.6 percent March occupancy rate was the third highest in the country, trailing New York at 72 percent and Miami at 77.9 percent.

Hawai'i's $173.41 average daily room rate also was third highest, behind Miami at $182.70 and New York at $188.06.

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