Aug

7

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Filed Under Sunrise on KGMB9 

If the current downturn in Hawaii’s hospitality industry is anything like the last three, the worst is yet to come, and will begun at the end of the summer.

That was the grim forecast of Hospitality Advisors CEO Joe Toy at his 15th annual Visitor Industry Leaders Briefing, Wednesday afternoon at the Halekulani.

“The last three months have just been terrible,” Toy told a roomful of hotel executives who already knew their own problems but now were hearing the big picture. “We’ve had this huge demand gap building.”

With a series of charts and graphs, all of them listing to the right, Toy compared the 2008 situation to previous downturns at the start of the 1991 Gulf War, during the 1994 economic downturn, following the Sept. 11, 2001, terrorism attack, and, finally, the current downturn, starting slowly at the end of 2006.

“If this one follows the pattern of the others,” Toy said, “We’re entering a period that will be characterized by shallower peaks and deeper valleys. We’re now entering that part of the cycle.”

Things are tough all over. Duane Vinson, vice president of Smith Travel Research, told his audience a lot of their concerns are not unique to Hawaii. Mainland hotels are in a similar fix, although on the mainland luxury hotels are hurting less and budget hotels are hurting more.

“I was trying to find some positive news,” Vinson said. “The positive news is, downturns don’t last forever.”

Mainland room rates have never been higher — the national average is up to $106 dollars a night — but there are lots of new rooms, so occupancy rates would be falling even in a prosperous economy. Urban hotels report room demand is up less than 1% – demand for resort hotels is down 2.4%. Resort hotels on the mainland have less occupancy growth than other segments and their revpars (revenue per available room) are down. Costs are rising.

Vinson did find some positive news, however.

“The weak dollar affects the cost of hotel rooms for people spending yen and euros,” Vinson said. Hotel room rates in Boston, Washington, D.C., and Orlando, which have risen when measured in dollars, have actually gone down when measured in euros.”

Oahu hotel room rates, up 7.4% in dollars, are up only 2.5% in yen.

Los Angeles rates, up 9% in the dollars, are up only 4% in yen. Room rates for yen spenders are flat in San Francisco and down in San Diego.

But, though Vinson didn’t mention it, the dollar has been rebounding lately. The yen is back to 108 to the dollar, erasing some of the discount for Japanese visitors.

In the past 12 months, Hawaii hotel occupancy has fallen 2.4 percentage points to less than 75% on average, but that is still the fifth best occupancy rate of Pacific Rim markets, behind Singapore and Tokyo (both above 80%) and Sydney and Bali (at 79% and 77% respectively) and well above Phuket (70%) and Tahiti (59%).

Average daily room rates in Hawaii are second only to Singapore around the PacRim and ahead of Phuket and Tahiti, while only Singapore and Tahiti lead Hawaii in revpar. Hawaii hotels are also fuller than resort hotels in the Caribbean.

“Holding these room rates will be very important to positioning yourself for the eventual economic upturn,” Vinson said, suggesting that owners use this time to invest in properties and ending with a quote from the Wall Street Journal that drew a laugh from the audience: “A recession is a terrible thing to waste.”

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