Image: Strolling in Hawaii
Lucy Pemoni  /  AP
Pedestrians pass by hotels and shops along Waikiki Beach in Honolulu, Hawaii, earlier this year.
updated 4/16/2007 2:59:02 PM ET 2007-04-16T18:59:02

Visitors to Hawaii are paying record-high hotel rates despite a sharp drop in hotel occupancy this year. The softening has prompted many hotels to offer deals and incentives — from complimentary surfboard rentals to free room upgrades — months before they normally do.

State tourism liaison Marsha Wienert said such specials are traditionally offered during the spring, or the so-called "shoulder" period, but hotels started advertising them as early as mid-January this year. She said Hawaii tourists can expect "added value," such as a fifth night free, a meal or an activity.

The cooling comes after 2 1/2 robust years for the hotel industry, which has benefited from Americans leery of traveling abroad.

"Everybody realized over the past couple years that this is a phenomenon and there was going to be a right-sizing occurring within the marketplace. It was a matter of when," Wienert said.

Hotel occupancy in Hawaii fell to 77 percent for the first two months of the year compared with 84 percent for the same period in 2006, according to the latest report by Hospitality Advisors LLC.

The statewide average rate, however, surged 8 percent to $201, which is among the highest in the nation.

In February, revenue per available room, a key industry measure known as "RevPar," dipped 3 percent to $161, the first decline since August 2002. Slideshow: Polynesian paradise

"On a 10-year basis, we're having a perfectly fine first quarter. We're just a little disappointed because the previous two years were so hot," said Barry Wallace, executive vice president of hospitality at Outrigger Enterprises, which manages 30 properties statewide.

Outrigger, like other chains, often sets rates for its 9,000 rooms in Hawaii a year in advance for wholesalers. So adjusting the rates is not as simple as a highway motel changing the sign and turning on the "vacancy" light.

Wallace said the company is engaging in selective discounting to certain segments, such as Hawaii residents, in hopes of a short-term boost.

Hyatt, which operates three resorts in Hawaii, is also trying to stimulate some short-term activity by offering spring packages that include complimentary room upgrades, free breakfast or tickets to a luau show.

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"We deploy them when we see little pockets where we need some help," said Frank Lavey, vice president and managing director of the Hyatt Regency Maui Resort & Spa. "The second quarter has not improved as much as we had hoped it would, but it's certainly more promising than the first one was."

Hilton is running several programs to target the "soft periods," including a 10,000 Hilton HHonors bonus points offer and discounts for members of AAA and AARP, said Jon Conching, regional vice president of sales and marketing for Hilton Hawaii.

The company is also offering a spring deal for Hawaii residents that includes a free surfboard rental or discounted surf lesson.

Hotel consultant Joseph Toy, chief executive of Hospitality Advisors, said a number of hoteliers predicted the softening and prepared with contingent marketing plans, which are now being rolled out.

Toy said hotels should still have a good year, but not as good as they experienced in the past few years.

"I don't think the party is over, but I think we are definitely in a softer market and definitely past our peak," he said.

Many hotel operators say bookings are strong for the summer season and they will not need to offer many perks.

While the Japanese market continues to slump, a substantial decline this year was tourists from the East Coast. Fewer airlines are flying directly from the East Coast to Hawaii and more people are again considering foreign destinations, such as Europe or the Caribbean.

"Hawaii competes with the world now," Wienert said. "As people get more comfortable with flying, especially international, I think you will see travel patterns changing a little bit.

"However, we hope we're still perceived as foreign in nature, but domestic in all that we are and do," she said.

Some say fewer tourists and higher rates may not necessarily be a bad thing for Hawaii.

Walter Jamieson, chairman of the University of Hawaii's School of Travel Industry Management, said if Hawaii is sincere about attracting high-end tourists and not going for volume, it has to accept the fact that the numbers may be down.

He said it's very encouraging if the hotels can continue to charge higher rates.

"That says something about the quality of experience and perceived value," he said. "I'm not one that panics when visitor numbers go down."

Price sensitivity may also be an issue, but many in Hawaii's tourism industry don't believe so.

Hawaii is the most expensive state in the nation in which to vacation, according to a survey by AAA last year. The average cost for food and lodging for a family of four in Hawaii was $559 a day, more than double the national average and more than $200 higher than the next closest state, Nevada.

Jamieson said Hawaii hotels are still competitive with mainland hotels.

"You've got the beach at the front door, and within a short drive, you can be in a rain forest or watching world-class surfers," he said. "I'm one that's fairly bullish about the destination in terms of what we have to offer."

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