Lose-Lose for Hotels

Hawaii hotels report occupancy dropping

May was fourth straight month of record lows for resorts across the state

A Great little article from Robbie Dingeman a Staff Writer over at the Honoluluadvertiser

Despite Deep Discounts on Room Rates, Hawai'i Hotel Occupancy -During May 2009 the Worst Since at Least 1987.

Ok so here's another situation of how the Hotel industry is imploding in upon itself, which could be aided by economics class 101.

This example comes to us from the formerly happy little islands of Hawaii, where high rates and high demand kept us coming and kept RevPAR's high.

"It was "a very tough month," said Joseph Toy, president of Hospitality Advisors.

Hotels cut rates an average of nearly 13 percent to attract more visitors but still saw a 6.5 percentage point decline in occupancy from a year ago.

May was the fourth straight month of record lows for occupancy in Hawai'i's hotels. Toy said the steep decline does not bode well for the rest of the summer and the rest of 2009.

"We're really hitting new lows here with the industry," Toy said. "Right now we're still seeing some strong drops. It shows that we have not hit bottom yet."

Average daily room rates fell sharply by 12.8 percent to end the month at $165.78. The combined decrease drove statewide revenue per available room -- a key measure of profitability -- to $102.67, down by 21.1 percent compared to the same period last year."

While common excuses are being placed on a lot of Meeting business being down, and the general overall state of the economy, what I think is constantly being downplayed is the lack of any Rate Integrity from the hotels.

When area Hotels all start racing in the "Discount to the Bottom" wars, the consumer wins, but at costs which are usually insurmountable for Hotels to see a return. Not only is there the smaller pie from which customers are coming, but we are seeing less ADR on that smaller pie as well. Ultimately killing overall RevPAR's.

While some optimistic reports are seeing turn-arounds in RevPAR for early 2010 and even some say Q4 2009, I'm saying that these lasting effects from the Discounting Wars will effect Hotels for at least up to 5-10 years as a new precedent of Value has been set at these hotels which are now offering heavily discounted rates.

Targeted discounts can be a great way to encourage business, but permanent discounts are no longer just a discount, they quickly become the perceived rate and value of your Hotel. Always remember, your Reputation of Value will last with you much longer than your rates do.