Hawaii’s good fortune a challenge for agents as Oahu demand soars

By Shane Nelson
HONOLULU — On pace to set records for visitor arrivals and spending this year, Hawaii’s tourism industry is racing toward 2013 on a wave of unprecedented momentum.

In part, that momentum is fueled by soaring international demand for Waikiki, which is forcing some U.S. travel agents to change how they sell the destination.

“There are just times when we cannot get rooms on Oahu for our clients,” said Debra Stern, a travel consultant with San Jose, Calif.-based Peak Travel Group.

“And it seems like it’s because of the increased lift from Australia and the fact that the Japanese market is coming back and there are new flights from Korea. It just seems like Oahu is getting harder and harder to book. We’ve had to change our clients’ buying habits.”

Through the end of October, the total number of international travelers who visited Oahu surged 20% year over year, to nearly 1.8 million. Those arriving from Japan climbed 16%, while South Korean and Oceania visitors to the island jumped 44% and 31% respectively, according to the latest Hawaii Tourism Authority (HTA) figures.

“Waikiki has gone through such an impressive revival over the last few years, and I think all of those improvements have really been a home run,” said Jorn Kaae, senior vice president of relationship management for Funjet Vacations.

Kaae said his company has seen double-digit growth to the destination in 2012.

“But the issue on Oahu, and in Waikiki specifically, is there is tightness of inventory there now,” Kaae said. “What we’re seeing is travel agents are really encouraging their clients to book early to get the hotel and room category they want in Waikiki, because if you wait too long there may not be room at the inn.”

JackRichardsJack Richards, CEO of Pleasant Holidays, said 2012 business to Hawaii has been “phenomenal,” but he, too, noted that the international boom in visitors to Waikiki has created challenges.

“We actually ran out of hotel rooms in the month of August on Oahu,” he said. “Not because of the U.S. market but because of the Asia and Australia markets. They’re coming in and taking the rooms, and they’ll pay a higher [average daily rate], which is great for the hotels.”

Through October, the average daily room rate on Oahu had increased 10.6% year over year, to $181.39, while occupancy across the island climbed 4.2 percentage points, to just over 85%, according to a Dec. 17 report by Honolulu-based Hospitality Advisors and Smith Travel Research.

Kelly Sanders, general manager at the 1,600-room Sheraton Waikiki, said, “Our occupancy [percentage] has been in the mid-to-high 90s for August, September, October and November. We’ve just seen a really large increase in overall demand to Hawaii, and a lot of that’s been from international markets rather than domestic.”

While the Sheraton Waikiki has also enjoyed solid figures from the U.S. mainland, Sanders said Australian and Japanese guests are often booking rooms there more than 90 days out.

“I think some folks in the U.S. are taking their time and not booking as soon,” he said. “So Japan is filling some of those holes, and U.S. travelers are having more difficulty finding rooms.”

Busier Oahu hotels charging more for rooms, combined with a nearly 8% year-over-year increase in total available air seats statewide, helped spur the HTA to revise its 2012 visitor spending forecast to $13.9 billion and its overall arrivals target for the year to 7.9 million — both figures would be new records.

“We are on pace to hit those targets,” said HTA President and CEO Mike McCartney. “And in 2013 we expect more growth but not as steep.

He added that “one of the keys to growth in the overall destination” is the expansion of direct flights from the Mainland U.S. to Maui, Kauai, Kona and Hilo. “Alaska has done a lot of that along with Hawaiian and Allegiant. There’s just a lot of new direct lift there, and that’s been very, very important.”

Although Richards is also expecting more growth for Pleasant’s business to the Aloha State next year, he said the surge in international arrivals is continuing to drive average daily rates up on Oahu, increasing the cost of many Hawaii packages and leading a growing number of Pleasant’s clients to book trips elsewhere in 2013.

“We are definitely seeing a shift in business to Hawaii’s competitive set destinations, at least for the first quarter of next year,” he reported. “If you look at Mexico, Caribbean, Tahiti, even Central America, we are seeing high double-digit growth in these destinations, whereas the growth in Hawaii is very muted and very subdued. That indicates to me there is a share shift going on.”

Kaae said Funjet was also seeing growing strength in Mexico and Caribbean destinations. But since he is projecting double-digit growth to Hawaii next year, he is not ready to label it a share shift. Even so, he did concede that the recent surge in international visitors on Oahu is changing how hoteliers there approach U.S. travelers.

“In Waikiki, the other source markets, like Japan or Australia, have really limited the hotels’ need for the U.S. market,” he said. “I’m not saying they don’t need the U.S. market — of course they do — but they don’t have to be as aggressive with their rate structure as they have in the past in order to attract it.”
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