2023 Year End Recap

Here’s our recap of the Hawaii hotel investment market for 2023. We’ll start with Erik Kloninger’s summary of visitor arrivals and the return of Japanese visitors.

Statewide visitor arrivals totaled 9.5 million in 2023, up from 9.1 million in 2022 but short of 2019’s 10.2 million. For the year, statewide arrivals in 2023 were equal to 93% of pre-pandemic arrivals, as shown in the chart below, up from 89% of pre-pandemic arrivals in 2022. While the US market continued to outperform pre-pandemic levels in 2023, the number of US arrivals decreased compared to 2022. US visitor arrivals equaled 108% of pre-pandemic in 2023, down from 113% in 2022. Japan arrivals increased dramatically in 2023, to 573K arrivals, up from 193K in 2022 but still far short of 2019’s 1.6 million arrivals. 2023 Japan arrivals equaled 36% of pre-pandemic, up from 12% in 2022. 

The chart below presents monthly Japan visitor arrivals for 2019, 2022 & 2023. Arrivals have increased steadily since early 2022 but remain far short of pre-pandemic levels. In January 2023, Japan arrivals were 27% of the pre-pandemic but by December, they reached 49% of the pre-pandemic level.

Hotel Performance

For the month of December, Maui’s 15% decline in rate and 10% drop in RevPAR drove the State’s RevPAR down by 2% relative to 2023. Maui luxury properties are being hit hardest with an 18% drop in RevPAR. Oahu saw a 2% increase in RevPAR aided by a continued rebound in Japanese visitors while Hawaii Island and Kauai were up 5% and 2% respectively over December 2022.

For the year, the State was up 3% in RevPAR led by Oahu’s 11% increase and Kauai’s 3% increase. Hawaii Island was down 2% and Maui was down 4% for the year. Oahu benefitted from a combination of positive occupancy and rate. The neighbor islands all had drops in occupancy, but Kauai was able to increase rates by 7%. The outlook for Maui is not good in the near term and the long term. Even when the high-yielding business returns, we will still be without Lahaina as a visitor attraction.

Air Seats Outlook

For the January to March 2024 period, total air seats to Hawaii are projected to be roughly equal to the first three months of 2023. Oahu will see a 10% increase aided by a 64% increase in seats from Japan while the neighbor islands will all see declines with Kahului down 20%, Kona down 2% and Lihue down 6%.

Investment Market

There were only four reported transactions in 2023 dominated by Outrigger’s strategic purchases of two quality oceanfront hotels on the neighbor islands that helped strengthen their brand. The purchase of the Kaanapali Beach Hotel, the Plantation Inn in Lahaina, and the Kauai Beach Resort totaled nearly $400 million. The recapitalization of the Ohia Hotel in Waikiki closed late in the year. Over the last three years, many hotels have tested the market at unrealistic prices resulting in few closed transactions. Our market normally averages $1 billion in hotel transactions annually. We are pining for those pre-pandemic markets.