Hawaii Hotel Investment Market
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Isle tourism on record trajectory

Here’s a recap of some of the recent good news for the Hawaii visitor industry.


 

Isle tourism on record trajectory

By Allison Schaefers
POSTED: 1:30 a.m. HST, Jul 31, 2015

Solid midyear tourism results have put Hawaii on pace for its fourth year of record-setting results — an industry accomplishment last achieved more than 20 years ago in the midst of the Japanese bubble.

The Hawaii Tourism Authority, which sets state tourism policy, established a goal in February of hosting nearly 8.6 million visitors this year, with a spending target of nearly $15.6 billion. Following a lackluster January and February, it seemed like a stretch for the industry to close in on these targets. But come June, the fourth consecutive month to notch higher arrivals and spending, the visitor industry is clearly on an upward trajectory.

“While visitor spending is slightly behind target, arrivals are pacing ahead, and we anticipate finishing the year ahead of 2014’s record-breaking numbers,” said George D. Szigeti, HTA president and CEO.

Total June arrivals rose 6 percent to 767,905 visitors, while spending grew 4.4 percent to nearly $1.34 billion, according to preliminary statistics released Thursday by HTA. The monthly increases pushed midyear arrivals up 4 percent to 4.27 million visitors, who spent nearly $7.6 billion, a 3.5 percent increase from the first six months of 2014.

“I’ve been working in Hawaii’s visitor industry for 20 years, and I’ve never seen a string this long,” said Barry Wallace, executive vice president of hospitality services for Outrigger Enterprises Group.

That’s because the last lengthy growth periods in Hawaii tourism occurred between 1994 and 1997 and prior to that between 1982 and 1987, said Daniel Nahoopii, HTA director of tourism research. Nahoopii pegged these historical runs on expansion of Japan’s economy and corresponding arrivals increases as well as the deregulation of the U.S. airline industry, which lowered costs for domestic visitors to fly to Hawaii.

Nahoopii said market diversity and greater airline capacity have propelled the latest visitor industry growth, which has cycled between domestic and international arrivals dominance.
“Our current growth phase started in 2010 and continues through today,” Nahoopii said. “Record arrivals growth has run from 2012 to 2014, and we expect 2015 to also surpass the previous year.”

Szigeti said that airlift will continue to remain key to the industry’s success.
“We continue to work with our partners to grow and maintain airlift, and, through our collaborative efforts, project reaching a record 11.9 million total air seats to Hawaii by the end of the year,” he said.

Wallace and others in the industry say the midyear results weren’t as bullish as they had originally projected; however, they expect the strength in the second half of the year to offset some of the first quarter’s weakness.

“We’ll probably finish the year 4 or 5 percent ahead,” Wallace said. “The results aren’t the double-digit increases that some of us projected, but it’s still real good.”

Jerry Gibson, area vice president for Hilton Hawaii, said Hawaii’s hotel industry is enjoying strong occupancy on Oahu, and strong demand also has improved neighbor island business. However, Gibson said that visitor spending is still below target.

“We are having a lot of short hops from California, so the visitor length of stay is down,” Gibson said. “Ancillary spending is down due to the unfavorable yen exchange rate and because China has its own economic concerns. This is something that we’ll need to work on as an industry. We need more marketing to get hotel rates up and length of stay extended.”

While there is still room for improvement, Wallace said if current momentum holds, Hawaii’s tourism expansion could extend to a fifth year.

YEAR VISITORS INCREASE SPENDING % INCREASE
2012 7.8 million 9.7% $14.4 billion 18.1%
2013 8.0 million 1.7% $14.5 billion 1.1%
2014 8.2 million 2.3% $14.9 billion 2.9%
2015* 8.6 million $15.6 billion

*Target. Source: HTA

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F. Kevin Aucello has established himself as a leader in the tourism and hotel investment markets in Hawaii, Micronesia, Japan and the South Pacific. Kevin possesses many years of diversified experience providing a full range of advisory services for companies with equity, debt and leasehold real estate interests in the Pacific Rim. Kevin contributes key experience in the sale, strategic management and loan structuring of all types of real estate assets. He has extensive knowledge of all facets of the major global hotel brands and has developed relationships with senior executives in these companies.

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