Hawaii’s hotel industry is still struggling despite tourism reopening, and isn’t expected to break even in 2021

More than a year from now, Hawaii’s hotel industry won’t have stopped bleeding.

A new annual Hawaii hotel forecast prepared by STR for the Hawaii Tourism Authority estimates that by the end of 2021, statewide occupancy will have hit only 46.3%, still short of the 50% to 60% occupancy that the industry needs to break even.

Many of Hawaii’s hotels temporarily closed during the pandemic as government restrictions and fear of COVID-19 significantly reduced travel demand. Quite a number were open by Oct. 15, the start of the state’s pre-
arrival testing program under Safe Travels
Hawaii. But so far, Hawaii’s formal welcome-
back to travelers hasn’t filled hotel rooms to the degree that many had hoped.

About 75% of Hawaii hotels are operating again. Still, only about 1,000 out of 8,000 Unite Here Local 5 hotel members are back to work. Some 5,000 of them already have lost their health insurance, and most are facing the loss of other support programs just after Christmas.

Local 5 spokesman Bryant de Venecia said, “Most of our workers have lost health insurance. They really want to go back to work, but that’s really out of our control. We can’t control how many tourists will
occupy our hotels.”

“If we are going to recap 2020, we barely left square one. Our members are still struggling, still dealing with how to pay for rent and food and health care,” de Venecia said. “It’s just heartbreaking, especially right before Christmas. People need help now.”

Mufi Hannemann, president and CEO of the Hawaii Lodging &Tourism Association, said Hawaii hoteliers are languishing, too.

Hannemann cited a recent survey of American Hotel &Lodging Association members that estimated 7 in
10 hoteliers (71%) wouldn’t make it another six months without further federal assistance given current and projected travel demand, and 77% of hotels report they will be forced to lay off more workers.

“I don’t know if Hawaii is quite at 71%. We’ve got a number of foreign hotel owners who might be able to survive beyond that period. Still, I would reckon a good number of our properties are in dire straits,” Hannemann said.

Chip Rogers, president and CEO of AHLA, said in
a statement that Congress must move quickly to pass additional relief for U.S.
hotels.

“Every hour Congress doesn’t act, hotels lose
400 jobs. As devastated industries like ours desperately wait for Congress to come together to pass another round of COVID-19
relief legislation, hotels continue to face record devastation,” Rogers said. “Without action from Congress, half of U.S. hotels could close with massive layoffs in the next six months.”

Rogers said U.S. hotels
already are expecting to face a difficult winter, characterized by a significant drop in travel demand — some 7 out of 10 Americans are not expected to travel over the holidays.

According to STR, U.S. weekly hotel occupancy has slipped further from previous weeks.

“After ranging between 48% and 50% occupancy from mid-July into the later portion of October, the last three weeks have produced levels of 44.4%, 44.1% and 43.2%,” STR said in a news
release.

STR reported that Oahu had the worst October occupancy level, 22%, of the nation’s top 25 U.S. hotel markets.

Hannemann said Hawaii hotels are bracing for even more negative impacts from Gov. David Ige’s most recent pre-arrival program policy change.

Starting today, under the new policy, trans-Pacific passengers to Hawaii who can’t present an approved negative pre-departure test upon arrival won’t be able to bypass the 14-day quarantine, even after their test results become available.

Hannemann said it doesn’t help that Ige is tightening Hawaii’s travel entry program on the heels of surging COVID-19 cases and lockdowns on the mainland. There was also a warning from the Centers for Disease Control and Prevention to avoid holiday travel.

“We saw immediate cancellations when it was announced on Thursday,” Hannemann said. “What’s more worrisome is all of
the people who now won’t even think about booking Hawaii.”

It’s not like Hawaii’s tourism reopening, at least from the hotel standpoint, had even been that robust to begin with, he said.

Some 360,023 travelers have been screened by the state’s Safe Travels Hawaii program between Oct. 15 and Sunday, according to the Safe Travels Hawaii dashboard. However, only 252,344 of those travelers have been classified as visitors, and 156,306 of the 252,344 said that they had come for vacation or pleasure, the category of traveler that typically needs lodging.

More than 800,000 visitors came to Hawaii in October 2019 and again in November 2019.

STR anticipates that
Hawaii hotels will end this year with only 26.2% occupancy and an average daily rate of $260. STR expects Hawaii’s statewide occupancy will increase in 2021 by 20.1 percentage points. However, STR is forecasting a 12.3% dip in the average daily rate, which it estimates will fall to $228, the lowest annual level in at least seven years.

Hannemann said the
2021 rate slide is likely due to increased competition
as more hotels reopen. He’s also concerned about a loosening of restrictions for short-term rentals, which he said outperformed Hawaii hotels in October with a slightly higher occupancy
of 22.7%.

“The counties need to do everything that they can to get rid of illegal vacation rentals,” Hannemann said. “They need to ensure that those that are operating are paying their fair share of taxes and following all the rules. It’s so important that government understand that if they want our hotel union members to come back to work.”

Sean Dee, executive vice president and chief marketing officer for the Outrigger Hospitality Group, said in an email that the company is in general alignment with STR’s expectations for 2021 and doesn’t even expect significant improvements to have occurred by 2022.

“Occupancy will clearly be challenged due to the slow recovery expected into mid-2022, and (average daily rate) will likely suffer with heavy competition — both within Hawaii and key alternative destinations, such as Mexico, that are operating with less restrictions,” Dee said.

“With Hawaii hotels’ historically high-expense infrastructure and downward pressure on (average daily rate), profitability will be especially challenged thru mid-2022,” he said. “While every property is unique in its segment mix and cost structure, 50% occupancy levels do not provide sustainable long-term profitability levels.”

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