Hotel occupancy to remain ‘flat’ on Kaua‘i

LIHU‘E — Kaua‘i continued to experience the lowest hotel occupancy rate of the main Hawaiian islands in April, according to statistics recently released by Hospitality Advisors.

Editor’s note: This is the second in a series of articles regarding the state’s economic recovery as predicted by the University of Hawai‘i Economic Research Organization. Today’s focus is on the hotel industry and occupancy rates.

LIHU‘E — Kaua‘i continued to experience the lowest hotel occupancy rate of the main Hawaiian islands in April, according to statistics recently released by Hospitality Advisors.

This is in contrast to Maui’s “double-digit occupancy growth,” as Kaua‘i remained “flat” in the “mid-50-percent range,” the report says.

Typically, hotels lose money if they operate under 75-percent occupancy.

The “attenuated pace of recovery” in the visitor industry is expected to “pose challenges for hotels and other visitor-oriented businesses,” according to the University of Hawai‘i Economic Research Organization’s economic-recovery report.

“Occupancy will regain some ground over the next several years, but it will remain substantially below levels seen prior to the industry downturn,” the report says.

“The return of visitors will be a gradual process,” the UHERO report goes on to say. And Neighbor Islands will “remain roughly 7 to 8 percent below their previous peak values” through at least 2012.

And hotels “will have difficulty maintaining profitability or breaking even if occupancies remain at 50 to 60 percent or drop lower,” said county Office of Economic Development Director George Costa in an interview earlier this year.

“Depending on the owner’s financial reserves and their ability to draw on these, they may be able to stay in business for several years if all other factors remain constant.”

Many resorts across the 50th state are in distress, and “Kaua‘i is no exception,” he said last week.

“Hotel owners are unable to pay their mortgages, refinance or sell in a down economy, and more are expected to default as short-term, interest-only mortgages expire in the next few years,” he said.

But “all is not doom and gloom” Costa added.

“… there are some great opportunities on the horizon where some of these hotels will be purchased and re-branded during the next few years as well.”

And the occupancy rates reported by Hospitality Advisors are only surveying hotels which are “just part of the pie” and do “not give you a full read on the island’s occupancy,” said Kaua‘i Visitors Bureau Executive Director Sue Kanoho.

April’s survey from Hospitality Advisors consisted of 164 properties which included almost 50,000 rooms or around 85 percent of all properties with 20 rooms or more across the state, according to the press release.

A variety of other accommodations exist across the island, including timeshares and individual vacation rental units, Kanoho said. And timeshare occupancies are “usually in the 80-to-90-percent” range.

In fact, almost 25 percent of accommodations on Kaua‘i are timeshares. Another 28 percent are hotels, nearly 28 percent are condo/hotels, about 18 percent vacation rentals, and a little more than 1 percent bed and breakfasts, Kanoho said.

And while daily room rates on the island slid almost 4 percent to around $188 per night, any occupancy gains last month “were concentrated in the high end of the market, with statewide luxury properties having the largest occupancy gain,” according to Hospitality Advisors.

“I think the airlines are hurting the Hawaiian tourism the worst,” said Greg Johnson, a visitor from Illinois.

In 2009, Johnson flew from Chicago to Kaua‘i for $1,000, while the same ticket cost $800 in 2007 and under $800 in 2005, he said.

“We find very good deals on lodging and car rental, but the airlines are killing us,” he said in an e-mail.

Tickets this year cost $1,200, he said.

• Coco Zickos, business and environmental writer, can be reached at 245-3681 (ext. 251) or czickos@kauaipubco.com.