Is that the Canary in the Coal Mine?

It looks like the salad days for the neighbor islands may be coming to an end. In March, we saw our first drops in RevPAR since the post-pandemic boom with Maui County down 0.5%, Hawaii Island down 4.4%, and Kauai down 1.1% relative to March 2022. In April, we saw bigger drops with Maui down 9.3%, Hawaii Island down 11%, and Kauai down 2.5%. Most of the decrease is occupancy-related.

It’s not like banks are going to be foreclosing on neighbor island hotels. In the big scheme, they are still crushing it. In April, relative to 2019 RevPAR, Maui is up 30%, Hawaii Island is up 54% and Kauai is up 73%. Neighbor island hoteliers will be fine, but it will be hard to push valuations higher given that you can’t underwrite much revenue growth and cap and discount rates are rising.

Air Seats

Relative to 2022, total air seats are up 5% with domestic down 2% and international up 73% from 2022. Honolulu is up 19%, Kahului is down 8%, Kona is down 7% and Lihue is down 13%. It looks like airlines are moving flights from the neighbor islands to HNL. Comparing 2023 with 2019, total air seats are down 3% with domestic up 9% and international down 38%.

Total air seats are projected to grow 5% in 2023, with Honolulu gaining 15% over 2022. Most of the increase for Honolulu is coming from increases in international seats. Projections show Kahului will be down 7%, Kona up 1%, and Lihue down 12% from 2022.

For the period June to August 2023 relative to the same period of 2022, Honolulu is the big winner with an increase of 17% over 2022 driven by an 8% increases in both domestic and international seats. Kahului is down 7%, Kona is down 5% and Lihue is down 13%.

Visitor Arrivals

Visitor arrivals are up just 1.1% over 2022 but US arrivals were down 7.4% and Canadian arrivals were down 8.8%. Japan and other international visitors were up dramatically. Japan’s 34,358 visitors were still less than 30% of April 2019 arrivals. April arrivals relative to 2022 were mixed with Oahu up 9.1%, Maui down 4.4%, Hawaii Island down 1.3%, and Kauai up 2.2%.

Visitor Spending

Total expenditures were $1.723 billion in April which is 8% above 2022 and 31% above 2019. Visitor spending is at record highs and the GET/TAT rates are higher. Given all this money pouring into state and county government coffers, it’s nice to know the politicians could find enough to fix the convention center roof.

Waikiki Pricing

Elizabeth Churchill’s review of Waikiki room rates indicates that hoteliers aren’t expecting a strong return of Japanese visitors anytime soon. She noted that Sheraton and Outrigger have both recently decreased rates for the next five months, but Hilton Hawaiian Village is bucking the trend and has raised rates in October signaling they may have a substantial group in-house.

Hawaii Hotel Investment Market Activity

A Korean consortium is purchasing the leasehold 230-room Hyatt Centric Waikiki. Per key metrics are tricky as the property derives substantial income from the large retail and parking areas.

Outrigger through parent KSL purchased the 430-room Kaanapali Beach Hotel in an off-market deal. The hotel is recently renovated and will provide Outrigger with an oceanfront neighbor island full-service hotel that it has been seeking to strengthen its Hawaii presence.