Hawai'i's hotel industry is selling fewer rooms than last year but is still on track to set another record in room revenues.

The industry generated room revenues of more than $2.4 billion in the first nine months of the year, up 8.2 percent compared to the same period last year, according to a report released yesterday by hotel consultancy Hospitality Advisors LLC. Room revenue reached a record $3 billion last year.

Hotels are enjoying success despite a declining demand for rooms as more visitors choose alternative accommodations — such as time-shares and condos — over hotels. Room demand this year through September dropped 3.7 percent to 13.2 million room nights sold. Occupancy fell by 0.7 percentage points to 81.6 percent.

Still, Hawai'i's hotel industry maintained its place among the top markets in the nation, ranking second only to New York City in hotel occupancy, average daily rates ($185.29) and revenue per available room ($151.24).

There is some "modest softening" in the market, but the hotel industry is still solid, said Joseph Toy, president of Hospitality Advisors.

"The outlook for this year remains strong and likely (we'll set) a new record in room revenues," he said. For 2007, "although we may be coming off of our peak years of 2005 and 2006, we should still have a good year given the constraint on our supply."

Toy said statewide October figures also look strong, although it's "certainly off its peak." He attributed that to the softening in the market and said any impact from the Oct. 15 earthquakes will be isolated to Big Island resorts that sustained damage.

The Mauna Kea Beach Hotel closed about 100 of its 310 rooms because of the earthquakes but is still open and busy, according to Prince Resorts Hawaii president Donn Takahashi. The Hapuna Beach Prince Hotel, which had reported some water damage, is fully operational and enjoying high occupancy, he said in a statement.

Takahashi said the earthquakes haven't caused a drop in demand for bookings at any of the company's hotels.

"This has been an excellent year for all four of the Prince Resorts Hawaii properties ... and business remains robust throughout the remainder of 2006 and into the first quarter of 2007," he said. He attributed strong bookings in part to lower fall airfares from the Mainland.

For September, Hawai'i's hotel industry set another monthly record in average daily rates, rising 7.5 percent year-over-year to $167.69. Revenue per available room grew 5.3 percent to $130.11, while occupancy slipped 1.6 percentage points to 77.6 percent.

O'ahu was the only major island to see a drop in hotel occupancy, falling 4.8 percentage points to 81.9 percent. But O'ahu's occupancy still led the other islands, and all islands enjoyed increases in daily rates and revenue per available room.

The survey, compiled by Smith Travel Research with Hospitality Advisors, averaged more than 139 properties representing 45,294 rooms, or 77.2 percent of all lodging properties with 20 rooms or more in the state, including full service, limited service and condominium hotels.

In other news, Hilton Hotels Corp. reported net income in the three months that ended Sept. 30 rose to $117 million, a 31 percent increase from a year earlier. The company said in a statement that its biggest U.S. markets, including Hawai'i, were exhibiting the strongest demand, though revenue growth per available room at the Hilton Hawaiian Village Beach Resort & Spa was "significantly impacted" by renovation disruptions.

Reach Lynda Arakawa at larakawa@honoluluadvertiser.com.