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The Honolulu Advertiser
Posted on: Tuesday, February 16, 2010

Hawaii hotel industry had dismal year in '09

By Alan Yonan Jr.
Advertiser Staff Writer

Hawai'i's hotel executives expect to see some improvement in Waikīkī bookings this year but caution that the recovery may take longer on the Neighbor Islands.

Hoteliers had good reason to celebrate the end of 2009, a year that saw revenue drop by nearly three-quarters of a billion dollars as occupancy rates fell to a record low.

Hotels, which employ nearly 40,000 workers statewide, have suffered more than $1.14 billion in revenue losses since the tourism slump began in spring 2008, including $741 million in 2009 alone, according to a new report from Hospitality Advisors LLC, an industry consulting firm.

The state's occupancy rate averaged 66.5 percent in 2009, down from 70.5 percent in 2008 and the lowest rate since Hospitality Advisors began reporting hotel data in 1987, said Joseph Toy, the company's president and chief executive officer.

"2009 has been a tough year for the visitor industry both in Hawai'i and nationally," Toy said. "The speed and depth of the downturn was unprecedented and the hotel industry has never experienced the level of rate discounting that is still in the market."

Indeed, hoteliers have been heavily discounting room rates over the past year to generate demand in a slumping market. The average daily room rate fell to $176.46 in 2009, down 12.6 percent from $201.85 in 2008.

The combination of lower room rates and falling occupancy took its toll on a key measure of industry profitability known as revenue per available room, or "revpar." That fell to $117.35 in 2009, a 17.5 percent drop from $142.30 in 2008.


However, the lower hotel rates, along with aggressive marketing and more flights to the Islands, appear to be helping stem the decline in occupancy.

Hotels were 64.9 percent full in December, up from 60.8 percent during the same month a year earlier. It was the second increase in occupancy in three months.

Toy noted that the decline in both visitor arrivals and hotel demand "seemed to have moderated somewhat during the fourth quarter."

"Still, it's going to be a tough year. The first part of 2010 will be soft and we hope by midyear we can start laying the foundation for recovery," he said.

Keith Vieira, senior vice president and director of operations for Starwood Hotels & Resorts in Hawai'i and French Polynesia, said so far the improvement has been mostly focused in Waikīkī, where visitors traditionally respond better to discounting.

"It's good, but the average daily room rate and revpar have dropped so substantially that the impact on our operations is going to be felt for years to come," Vieira said.

"We're not seeing visitors returning to the other Islands. I don't think they've seen the bottom yet."


Vieira said the slump in business travel continues to be a major drag on the overall visitor market. A return of the business traveler will help underpin hotel room rates and give the industry a base to build from, he said.

"Business travel has begun to improve on the East Coast and eventually that will filter to us. But we haven't seen any significant signs that lead to a higher level of confidence," he said.

Chris Tatum, Marriott's top executive in Hawai'i, said his company is starting to see increased bookings for group travel that will boost business in 2011 and beyond.

"We have a great product and we've put a lot of money into renovations in recent years," he said. "We see ourselves pretty well positioned when the economy turns."

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