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Hawaii - Pricing Itself Into A Corner

Hotels saw big slump in revenues this summer  Oct 06, 2008

Revenue at Hawai'i hotels slid by $156 million in April through August of this year in comparison to the same period last year, according to an industry analysis released today by Hospitality Advisors LLC.

The drop resulted from a general tourism slump statewide marked by recent double-digit declines in visitors arriving in Hawai'i and falling hotel occupancy. Officials trace the troubles to the economic woes nationwide, higher fuel prices driving up airfares and shrinking numbers of West Coast air seats following the double demise of Aloha and ATA airlines in the spring.

Hospitality Advisors reported that Hawai'i hotels witnessed a decline of nearly $136 million in total revenue during the 2008 summer months of June through August, representing a 10.5 percent drop compared to the summer of 2007.

Declining market
Room revenues declined by $92 million, with another $44 million in revenue drop from food and beverage, retail, spa and other hotel services, said Joseph Toy, president and CEO of Hospitality Advisors.

Toy said the losses reflect a sharp fall in room nights sold — 10.5 percent — and visitor arrivals — down 14.9 percent — for the busy summer season compared to last year.

This analysis was completed in advance of the release of Hospitality Advisors' Hawai'i hotel monthly report for August 2008, which is expected to provide more details when it comes out this week (see more information at

Although the hotel industry posted modest gains in the first quarter of 2008 over a weak quarter in 2007, April marked the beginning of steep market declines "due to rapid deterioration in air capacity, economic instability, consumer confidence and escalating fuel costs," Toy said.

Combined statewide hotel revenue for April and May totaled $20 million less than the previous year, bringing the total hotel revenue decline for April through August to $156 million.

"The losses have been substantial during what is typically the second-busiest period for the year in Hawai'i's tourism industry," Toy said.

And that downward trend is expected to continue.

"Unfortunately, we can expect these losses to continue through the end of the year as the market decline in the off-season is expected to be far greater than usual," Toy said.

Discount rates
While the statewide average daily room rate appears to have declined slightly to $209.55 for the summer, the swings in discounts have varied substantially depending on location and class of property.

This comes off a period of extensive and expensive hotel renovations. So, Toy said, the downturn now has some hotels charging well below the rates they had expected to after broad makeovers.

But he said the average daily rates are not reflecting some of the big hotel discount packages that offer free room nights, food, spa services, activities, rental cars, waived fees and other promotions.

He said hotels favor such deals over direct discounts in room rates. "Hotels saw a period of hotel discounting that began in the early 1990s during the last major economic downturn," Toy said, and it took about seven years for rates to recover and grow.

Hotels saw big slump in revenues this summer

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