Hawaii Hotel Investment Market
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2015 Year-End Hawaii Hotel Investment Market Report

Despite continued strength in Hawaii’s visitor industry, the total volume of Hawaii hotel transactions dropped by 63% in 2015 while the number of transactions dropped by 17%. Despite this drop, there is continued interest in the Hawaii hotel market as evidenced by the planned construction of new hotels and an increase in the renovation of existing hotels.

Visitor Metrics*

(2015 vs. 2014)

↑ Air Seats Up 5.8%
↑ Visitor Arrivals Up 4.3%
↑ Visitor Spending Up 2.3%

*Hawaii DBEDT data

Hawaii Hotel Performance Metrics – 2015*

Comparing 2015 with 2014, the State of Hawaii experienced a 2.3% increase in occupancy, a 3.8% increase in ADR and a 6.3% increase in RevPAR.  RevPAR was up on all islands with Maui up 9.7%, Kauai up 8.5%, Big Island up 8.2% and Oahu up 4.1%.  .

 

Occupancy ADR RevPAR
↑ State 78.8% $244 $192
↑ Oahu 85.3% $220 $187
↑ Maui  74.5% $316 $235
↑ Kauai  71.3% $243 $173
↑ Hawaii  65.6% $230 $151

*STR data

Hawaii Hotel Transactions

The Hawaii hotel investment market has maintained a brisk pace but transaction volume has dropped compared to the previous three years. In 2015, 10 hotels with 2,567 rooms traded at a total consideration of $505 million or just under $200,000 per key. Six of the ten transactions in 2015 were lower-end Waikiki hotels that will be receiving substantial upgrades. The weighted average cap rate on Hawaii hotel transactions rose from 4.5% in 2014 to 4.9% in 2015. A comparison of 2015 and 2014 transactions follows.

2015 2014
# of Transactions 10 12
# of Rooms 2,567 3,424
Total Sales Volume $505M $1,355M
Price per Room $197K $396K
Going-In Cap Rate 4.9% 4.5%

 

Some of the larger transactions of 2015 include:

  • Oaktree & Woodbridge sold the 542-room Fairmont Orchid to Mirae Asset Management for $220M or $400K / key
  • Blackstone sold the 545-room Marriott Waikoloa to a group led by Ed Mace for $68M or $124K / key
  • YHB Koreana sold the 314-room Queen Kapiolani to ProspectHill Group for $51M or $163K / key
  • The 600-room Maile Sky Court sold to Clearview for $103M or $171K / key

Hotels on the Market 

There are currently quite a few hotels being actively marketed. The 121-room Koa Kea closed in mid-January while the 226-room Park Shore and the 67-room Equus and have not yet closed after about a year on the market. Properties put on the market late in 2015 include the The 633-room Westin Maui, the 521-room Sheraton Keauhou and the 119-room Pacific Marina Inn. The Pacific Marina Inn is back on the market after some unsuccessful offerings over the past few years.

Courtyard By Marriott Laie.jpg

New Hotel Construction

The strength of Hawaii’s hotel market is encouraging the development of new hotel product. In addition to the recently opened 144-room Courtyard by Marriott in Laie, the following limited-service hotels are planned.

  • Hampton Inn at Debartolo’s Kapolei shopping center development
  • Hyatt Place in Robertson Properties’ Live Work Play Aiea
  • Embassy Suites on the former Kisco site in Kapolei
  • Globally-branded hotel for Krausz’s Downtown Kihei development

These developments / redevelopments will also add high-quality visitor product:

  • Waikiki Trade Center conversion to a 230-room hotel
  • Redevelopment of the Coco Palms into a 350-unit hotel with a Hyatt soft brand and management
  • A Hilton timeshare is planned for the former Maui Lu site
  • Two Ritz-Carlton Residences with the first 324-unit tower to be completed in early 2016 followed by a 246-unit second tower to be done in 2017
  • 248-unit luxury condo-hotel planned on the Kings Village site in Waikiki

2016 and Beyond

The Fed’s 25 basis point increase did not appear to dampen the hotel investment market, but China’s slowdown and related financial unrest could push the rest of the globe toward a slowdown. Lodging REITs are on the sidelines as their shares have fallen nearly 40% in the last year. I anticipate more hotels will be coming to market as owners take advantage of a strong, stable visitor market, cheap debt and lower investor yield requirements. For Hawaii hotel owners, it may be the time to take some chips off the table.

This entry was posted in: Hawaii Hotel Investment Market

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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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