Report: Hawaii Hotel Market Thriving

Hotel occupancy in the four major Hawaiian hotel markets of Oahu, the Big Island, Maui and Kauai increased 4.5% in the first six months of 2005 compared the first six months of 2004. Over the same period, average daily room rates (ADR) increased 6.8%, according to data supplied by Smith Travel Research. Nationally, occupancy increased 2.8% and ADR rose 4.8%.

"Hawaii is enjoying its strongest economy since the early 1990s, and is seeing significant increases in vacation travel to the islands," says Michael Fishbin, national director of E&Y's Hospitality Services Group. "With a projected increase in air travel to the islands next year and a rapidly expanding cruise industry, we see no signs of diminishing performance in the local hospitality market."

Girding the expectations are continued strong performance in the local economy and a projected 10% increase in tourist visits this summer over last. Hawaii continues to be a heavily favored destination for both US and foreign visitors. Foreign investors are taking advantage of the continuing weakness of the US dollar, according to the report.

Another major factor affecting hotel performance is the surging residential market, according to the report. Median home prices in Honolulu rose about 26% in the first three months of 2005, mirroring an overall national trend. "This has spurred strong residential construction as well as the conversion of a significant number of hotel rooms to for-sale condominiums or timeshares," states to the report. "This trend is particularly significant on Oahu, where, this year to date, more than 1,500 rooms are planned for conversion to residential, resulting in a probable net loss of supply in 2006."