June saw the state RevPAR increase by 9% over last year, our strongest showing in quite some time. All islands had big gains, with Maui up 14%, Hawaii Island up 10%, Kauai up 7%, and Oahu up 6%. Maui saw another month with strong occupancy gains while Kauai and Hawaii Island did it with rate.

Meanwhile, the lower end hotels had a strong showing in June, for the first month in a long time keeping pace with their luxury and upper upscale brethren. We expect RIMPAC (June 24th to July 31st) will help Oahu’s hotels.

Oahu’s hotels are joining the other islands with some solid RevPAR growth.

Total arrivals were flat for the month, with the US up 3% to offset the big drops in Canadian and Japanese visitors. Year to date, arrivals remain 3% ahead of last year, so the fundamentals are intact.

The forward outlook tells the more useful story: capacity for the period ahead is up 2%, with domestic up 5%, but that increase is benefitting the neighbor islands while Oahu sputters. Kahului, Kona, and Lihue are all seeing strong outlook gains.

International, meanwhile, is heading the wrong direction across the board. Japan, Canada, Korea, and Oceania are all down sharply.

Kailua-Kona Leased Fee Acquired, and What It Says About That Market

Nine Brains, the owner of PACIFIC19, the extensively renovated former Kona Seaside Hotel, has exercised its option to purchase the leased fee interest underlying its Kailua-Kona property for $23 million. The transaction, structured in a 2022 agreement with Lanihau Properties, follows Nine Brains’ earlier acquisition of the leasehold interest from Alan Kimi. The name may be apt: the firm had the conviction to acquire a distressed, underperforming asset in a market that has since experienced substantial growth.

The King Kamehameha, Kona Seaside, and Uncle Billy’s shared a common profile as locally owned properties that suffered from years of deferred investment and declining physical plant. Pacifica Hotels, Nine Brains, and Sandy Shapery each recognized what local ownership did not: that the Kailua-Kona market was fundamentally underserved and that meaningful capital investment would be rewarded. The argument for local ownership carries little weight when the outcome of that ownership is deteriorating product. The more relevant question is whether an owner is willing to invest in the asset’s future.

This point is particularly salient given the Hawaii Tourism Authority’s stated objective of attracting higher-yield visitors. That goal is difficult to advance when the available lodging supply does not meet the expectations of the travelers HTA is trying to attract. Renovated, well-capitalized hotels are not in conflict with that mission. They are a prerequisite for it.

While there are a handful of Waikiki hotels on the market, here are some opportunities outside of Waikiki.