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Hawaiian Hotels Set Revenue Record for October, But Occupancy is Down

Dec 26, 2013 3:00 am

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With low occupancy will come discounting, and that’s not what the hotels want in the current market.

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 / Sheraton

Exterior of the Sheraton Princess Kaiulani hotel. / Sheraton


Rising room rates helped Hawaii hotels set a new revenue record for October, but the high prices continued to chip away at occupancy rates.

The average daily room rate rose to $208.85 a month in October, up 10 percent from the same month a year ago, according a report released Tuesday by Hospitality Advisors LLC, an industry consulting group.

The room rate represented a new high for October, as did the $269 million in total revenue collected during the month.

Meanwhile, softening room demand led to a decline in hotel occupancy for the sixth consecutive month on a year-over-year basis. Hawaii’s hotels were 72.7 percent full in October, down from 74.4 percent in October 2012. The decline in occupancy was partly the result of a 1.2 percent drop in visitor arrivals for October, according to the report.

Even with the decline in occupancy, Hawaii hotels were still able to boost their profits significantly. Revenue per available room, a key measure of hotel profitability, rose to $152.83, a record high for the month.

The declining occupancy rates, which are expected to continue into the first quarter of 2014, have prompted some hotels to trim their prices and others to offer incentives like free parking and late checkouts, said Barry Wallace, executive vice president of hospitality services for Honolulu-based Outrigger Enterprises.

“We’ve reached a tipping point,” Wallace said. “We had been expecting this for some time. It was a surprising 36-month run leading up to this.” he said.”The first quarter will still be very good on a seasonal basis. It’s just that we had gotten used to extraordinarily good numbers,” Wallace said.

Travel wholesalers that Outrigger works with on the mainland have said that some travelers are opting to go to Mexico instead of Hawaii because it’s cheaper, according to Wallace.

The hotel occupancy numbers in 2014 will be skewed by a temporary reduction in available rooms due to three big renovation projects. A total of 1,200 rooms will be removed from the inventory as a result of projects at the Princess Kaiulani, Ohana West and Miramar hotels, Wallace said.

Although visitor arrivals and spending are slowing from their recent rapid growth rates, both categories are expected to reach new records for 2013 and 2014, according to the latest forecast from the state Department of Business, Economic Development and Tourism.

When 2013 is finished DBEDT expects 8.23 million visitors will have spent $14.79 billion. In 2014 the visitor count is forecast to grow to 8.49 million, with spending of $15.41 billion.

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