Hawaii hotels turn to discounting to spur demand

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Hotel occupancy levels in Hawaii have been in decline for much of the year. The decrease, although modest, may be compounded should the drop in the number of inbound airplane seats and the number of cruise passengers continue to decline.

Suppliers are looking to stimulate demand through discounting. Value-added packages are already on the books for 2008, as many hotels are offering free nights, even in the winter and summer high seasons, and announcing them far earlier than is typical.

The results: Room rates are 15% to 35% off published prices.

When it comes to packages, flexibility and value-added incentives are the name of the game. That applies to all price segments, including top-tier brands resistant to discount marketing.

As a result, pricing for a Hawaiian vacation for 2008 is likely to remain at 2007 levels.

Higher air fares (as oil inches toward $100 a barrel) are expected to be offset by reductions in accommodation prices.

Wholesaler woes

Wholesalers are particularly vulnerable to a dip in hotel occupancy, due to airlines' and hotels' increased direct sales to consumers and travel agents.

Also, an increase in timeshare inventory in Hawaii has eliminated the need of a wholesaler for a growing number of Hawaii-bound travelers.

Many wholesalers are reporting declines in their Hawaii business for the first time in years.

"This is a dynamic marketplace," said Dennis Odom of Albuquerque, N.M.-based Blue Sky Tours. "Our Hawaii business was down in 2007, and some of that seems to be the result of hotels going direct to the consumer."

Dean Johnson, senior vice president for product development at Petaluma, Calif.-based Creative Leisure International, confirmed the impact of both vendor-to-consumer and vendor-to-agent marketing.

"Historically, Hawaii has been a wholesaler-dominated destination, thanks to the cooperation of airlines and hotels," said Johnson. "That's not the case anymore. With technology what it is today, all kinds of new tie-ins are happening."

Bad news for cruising

Hawaii's once fast-growing cruise market likely will have peaked in 2007, with more than 800 port calls.

In 2008, there will be drop of up to 30% in port calls, with the slide likely to continue for all the state's ports through 2011.

The biggest loss comes with Norwegian Cruise Line's decision to reposition the Pride of Hawaii, the largest of NCL's three ships in its Hawaii fleet, to Europe (the vessel will be renamed the Norwegian Jade).

The Norwegian Sun will make 35 fewer port calls in 2008, and other cruise lines are making frequency reductions, as well.

The cumulative impact may result in visitor counts of 7.1 million to 7.2 million for 2008, compared with an estimated 7.5 million for 2007.

Brand impact

Resort rebranding, much of it on the high end, will also have an impact in 2008. Hilton, after focusing on the expansion of the Hilton Hawaiian Village and on upgrades at its Waikoloa property, has recently added the Prince Kuhio in Waikiki.

Outrigger, ResortQuest Hawaii, Aqua and Classic have all added properties. Brand names are sprouting everywhere; both Trump and Disney properties are on the horizon in Oahu.

However, negative community reaction to Starwood's plans to expand facilities at the Turtle Bay Resort, on Oahu's North Shore, resulted in the cancellation of previously announced plans for resort development there.

While much of the talk over the past few years has focused on high-end development and rebranding, Hawaii still has a wide range of accommodations. The cheapest daily rates hover at around the $100 mark, and five-night packages out of Los Angeles include nights from around $66 per person.

Something in the air

On the transportation front, Aloha Airlines has sought to break the interisland fare war created by Go's entry into the market by unilaterally raising fares $10 to compensate for rising fuel costs.

It remains to be seen whether the increase will stick.

Go appears determined to remain in the interisland market despite operational losses and $80 million in damages that Go's parent, Mesa Air Group, was ordered to pay Hawaiian Airlines for misusing confidential information. Mesa is appealing that judgment.

The controversial Hawaii Superferry, which restarted service last month, might have trouble securing bookings from travel agents, who may be wary of the interisland service due to the on-again, off-again problems the ferry has experienced in its short history.

To contact reporter Allan Seiden, send e-mail to [email protected].

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For more details on this article, see "Hotels, wholesalers pitch best buys for '08."

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