Hawaii performance strong in face of volcano worries
Hawaii performance strong in face of volcano worries
18 JUNE 2018 8:42 AM

While the volcanic fissures caused by Kilauea have been erupting for a little over a month, it remains unclear how much of an impact they’re having on hotel performance on the Hawaiian Islands.

REPORT FROM THE U.S.—While it is believed the news coverage of Kilauea’s volcanic fissures on the Big Island could be causing travelers to hesitate before coming to Hawaii, it’s still a bit too early to say for certain.

Traveler perception is difficult to measure, said Alison Hoyt, senior director of consulting and analytics at STR, parent company of HNN. Likewise, determining the effect an event will have on hotel performance depends on the event’s size and overall impact. The effect of the volcanic fissures will be difficult to isolate compared to the hurricanes, which resulted in a clear sudden increase in demand for at least six months afterward, she said.

“Generally all the islands run pretty a high occupancy,” she said. “There’s not as much seasonality as other markets.”

The Hawaii Lodging and Tourism Association did not respond to requests for comment.

STR combines data from the islands of Hawaii and Kauai because of the number of reporting hotels. Census data shows the islands have 38 independent properties, four luxury properties, two upper-midscale hotels, nine upper-upscale hotels and 18 upscale properties.

STR’s weekly data shows that occupancy levels on the islands of Kauai and Hawaii have overall remained fairly steady since the beginning of May when the fissures first started, ranging from 73.9% occupancy the week ending 5 May up to 77.2% the week ending 26 May and then back to 71.4% the following week. In fact, weekly occupancy levels increased year over year the first three weeks of the month before dipping 1.6% the week ending 26 May and another 0.7% the week ending 2 June.

Because the Hawaiian Islands have such high occupancy and rate and are mainly leisure-driven, the volcanic fissure might not have a large impact, at least not yet, Hoyt said. On top of that, the fissures haven’t forced any hotels to close at this point, she said.

The numbers might change later on if displaced residents stay in nearby hotels, she said, and construction crews come to rebuild any destroyed structures.

Likely a strong year
What many travelers don’t realize is the volcanic activity is only affecting a small portion of one island, said John Berean, senior project manager at HVS. He predicted that the hotels on the Big Island will still see a record year even with the volcanic fissures.

“There has been significant improvement in airlift for both airports, as well as a reduction in overall hotel supply, which should bode well for increases in roomnight demand,” he said.

The Big Island has some other factors working in its favor, Berean said. The Hilton Waikoloa Village has started taking guestrooms offline to convert to timeshare units, which will ultimately bring its room count of 1,243 down to 600 guestrooms with 450 timeshare units, he said. A 96-room tower at the Hapuna Beach Prince Hotel will convert to residences later this year as the hotel undergoes conversion to a Westin property, and the Mauna Lani Bay Hotel is anticipated to close this fall and will reopen in late 2019 as part of Auberge Resorts following a $100-million renovation, he said.

“These closures and reduction in room supply will not only drive occupancy at existing hotels, it should also create significant increases in rate growth,” he said.

As far as the other islands are concerned, Berean said, local hoteliers and tourism authorities will need to educate tourists that there are only three active volcanos in the state: Kilauea and Mauna Loa, which are on the island of Hawaii, and Loihi, which is currently underwater.

“There are definitely some similarities to be drawn between what’s happening in Hawaii and the recent wildfires in Napa and Sonoma last October,” he said.

Hoteliers’ experiences
People are hearing about the news of the volcanic fissures and that can be scary to see, said Jeff Wagoner, president and CEO of Outrigger Hotels and Resorts. The reality, however, is that the fissures are only on one part of one of the Hawaiian Islands, he said. Outrigger’s properties are about 100 miles away from the volcanic activity.

No resorts have closed there, and the nearby airports remain operational. All of the resorts are up and running, he said, and everyone there is taking things as business as usual.

“It unfortunately is a big story in the news today, but when you really look at the islands and the resorts, they’re in great shape and ready for travelers,” he said.

Sean Hehir, managing partner at Trinity Investments, said his company’s properties on the islands of Maui, Oahu and Kauai have not seen any adverse impact from travelers’ perceptions of the volcanic fissures.

While Hilton could not share specific numbers at this point in the quarter, a spokesperson said that Hilton has seen an impact on advance bookings for its two Big Island hotels that it attributes to mainland coverage of the volcanic activity. While the loss is not material from a Hilton perspective, the effect is meaningful to the two properties. The properties on the other islands are still performing well.

Both Hyatt Hotels Corporation and InterContinental Hotels Group reported their properties had not seen any changes in performances as a result of the volcanic fissures as neither have hotels near the affected area.

Editorial Director Jeff Higley and Editor-in-Chief Stephanie Ricca contributed to this report.

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