Insights for Hospitality Investors
Fong Kazama Insights: Hawaii Hotel Market Overview
Key Insights for Hawaii Hotel Real Estate and Hospitality Investments
Fong Kazama Institutional Properties recognizes that the Hawaii hospitality market offers significant opportunities for institutional investors, albeit with some challenges. The post-pandemic recovery is progressing, with Hawaii’s YTD through October 2024 hotel occupancy rates reaching 74.0%, with a RevPAR of $266.65 and an ADR of $360.50. Understanding the complexities of Hawaii's hotel real estate remains critical, particularly in high-demand areas like Waikiki, Oahu, and the outer islands such as Maui, Big Island, and Kauai. As a firm with decades of experience in Hawaii hospitality investment, we provide insights to navigate this dynamic landscape.
Waikiki, Oahu: The Heart of Hawaii’s Hotel Market
Outer Islands: Opportunities and Risks for Hospitality Investments
Economic Factors Impacting
Hotel Real Estate Investments
Up until September 2024 interest rates and inflation continue to affect Hawaii’s hotel investment market. Higher borrowing costs challenged financing, but Hawaii’s enduring tourism appeal offers opportunities for strategic investments. The convergence of declining interest rates, positive market performance forecasts, and favorable supply-demand dynamics suggests a robust uptick in hotel investment sales. Investors are strategically positioning themselves to capitalize on these trends, anticipating enhanced returns in the near to mid-term. Sustainability trends are also gaining traction, with eco-friendly hotels and resorts in high demand, particularly on the Big Island and Kauai. Investors aligned with these trends are poised for long-term growth.
Waikiki continues to dominate Hawaii hospitality investments. As the state’s busiest tourist hub, Waikiki saw an occupancy rate of 81.4% YTD through October 2024, with a RevPAR of $219.64 and an ADR of $269.92, primarily driven by domestic travelers from the U.S. mainland. While international tourism, particularly from Japan, has shown slow but steady recovery, emerging markets from Australia, South Korea, Canada and New Zealand continue to fill the gap.
For investors, Waikiki hotel real estate presents a stable option with consistently high demand due to its proximity to Honolulu’s Daniel K. Inouye International Airport and a strong year-round visitor influx. Properties in this region continue to see occupancy rates that outperform state averages, making Waikiki a prime location for Hawaii hotel real estate investments.
Beyond Waikiki, the outer islands present diverse opportunities and challenges for Hawaii hospitality investors. Each island offers a unique mix of risks and rewards:
-
Maui: Maui’s tourism industry faced significant challenges following the 2023 Lahaina wildfires, but its recovery is gaining momentum. YTD through October 2024 occupancy stood at 62.0%, with a RevPAR of $332.23 and an ADR of $535.99, a sign of resilience as travelers return. Long-term investors in luxury and sustainable projects stand to benefit as the island rebuilds.
-
Big Island: The Island of Hawaii, commonly known as the “Big Island” offers a relatively stable investment environment, with occupancy rates of 66.7% in YTD through October 2024, with a RevPAR of $280.43 and an ADR of $420.48. Known for its eco-tourism and high-end resorts, the island appeals to niche luxury markets, presenting growth opportunities for hospitality investors.
-
Kauai: Known for its nature-centric appeal, Kauai’s hotel occupancy reached 74.0% in YTD through October 2024, with a RevPAR of $307.73 and an ADR of $415.73. With the rising demand for boutique hotels and resorts that emphasize sustainability, Kauai continues to attract investors targeting experiential and eco-conscious travelers.
Visitor Demographics and Market Trends
Visitor demographics remain pivotal to Hawaii’s hospitality market. Domestic tourism remains robust, and the slow recovery of international visitors, particularly from Japan, continues to impact overall spending. However, arrivals from Australia, South Korea, Canada and New Zealand are steadily increasing, diversifying the visitor base. Investors should focus on properties and strategies that cater to a mix of international and domestic visitors for long-term profitability.
Development Trends
Limited Service/Extended Stay Product
The profitability of extended-stay hotels continues to rise nationally due to their lower operational costs and longer guest stays. In Hawaii, several new developments embrace this trend, combining traditional hotel rooms with extended-stay options. This versatility appeals to both tourists and business travelers, making it a profitable segment for developers and investors.
Conclusion: Fong Kazama's Investment Outlook
Fong Kazama Institutional Properties believes that the Hawaii hospitality real estate continues to present significant opportunities for institutional investors who understand the market’s complexities. Waikiki remains the strongest market for hospitality investment, while the outer islands provide unique opportunities for those willing to take calculated risks.
As Hawaii’s hospitality market evolves, focusing on sustainable and luxury developments will be critical for maximizing returns. With our expertise and deep understanding of the Hawaii hotel market, Fong Kazama Institutional Properties is your trusted partner for informed investment decisions aligned with the state’s dynamic tourism trends.