Hawaii Leadership Forum preview: Hawaii numbers hit plateau

Hawaii's numbers level off after years of growth

By Margaret Myre


By 2006, Hawaii had been to the mountaintop.

For this mature destination, the past three years were glory years. Increased airlift and the introduction of all-American, interisland cruise ships to its ports drove visitor arrivals to record numbers: 6.9 million in 2004, 7.4 million in 2005, 7.4 million again last year, according to the state's Department of Business, Economic Development & Tourism.

In 2004, the U.S. West sent a record number of visitors, the U.S. East sent its greatest number since 1991, and the shrinking Japanese market stabilized and then quivered with modest growth.

Record average daily rates (ADR) combined with strong demand brought about a new high in revenue per available room, or RevPAR.

Last year, spending reached $12 billion for the first time. Domestic visits set a record at 5.4 million, while international arrivals declined 6.6%. 

In its 2006-2015 strategic plan, the Hawaii Tourism Authority set a course to increase per-day spending and length of stay, while moderating the number of visitors who tax the state's resources. It was, in effect, chumming for the more affluent tourist who would spend more, stay longer and stabilize the industry as tourism continued to grow, albeit at a slower rate.

By fate or good planning, significant investment into Hawaii's infrastructure in the early part of the decade helped reposition both individual properties and key hotel markets to attract those higher-spending visitors, according to a report by Honolulu-based Hospitality Advisors.

All islands benefited from this substantial cycle of new investment, the report states, but the greatest impact was felt in Waikiki, which continues to undergo a period of repositioning that has improved the product base of the urban beach resort. Part of the repositioning was the conversion of marginal accommodations to condo-hotels.

Repositionings and rebrandings drove up room rates in Waikiki and on the Neighbor Islands, yet occupancies remained high as rooms left the market for refits and conversions. But this year, as rooms and properties come back on line, capacity is increasing and occupancy is beginning to slip.

Hawaii now is finding a plateau, where the air remains rarefied but the crowds are less dense. There are more vacant rooms than last year across all classifications, although properties remain fuller than the national average. 

In February, room rates hit a record high, but with demand down almost 11%, hotels lost money for the first time since 1991.

Budget hotels fared the worst, with RevPAR dropping a sharp 14.6%, according to the DBEDT. Hotels began offering value-laden packages as advance bookings flattened from the same period last year.

For the quarter, room revenue fell for the first time since 2002, as a 7.5% increase in ADR failed to offset a 9.2% decline in room demand. But visitor spending grew 2.2% from first quarter 2006, to $3 billion, and average daily spending rose 4.4%, according to the DBEDT.

Yet officials here expect the tourism industry in Hawaii to emerge strong this year. In Voices From Hawaii, Travel Weekly's Allan Seiden spoke with four key executives about Hawaii tourism, present and future.

To contact the reporters who wrote this article, send e-mail to Margaret Myre at [email protected] or Allan Seiden at [email protected].

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