United States -  Oahu Island

Overview:

The Oahu hotel market, which includes the entire island of Oahu, remains one of the strongest in the U.S.; market-wide occupancy reached its highest peak in fifteen years, exceeding 85% in 2015. Occupancy is expected to remain in the mid-80s in 2016, and average rate is anticipated to exceed $230 following five straight years of rate growth. Oahu is one of the most popular resort markets in the United States, driven primarily by Waikiki Beach, a densely developed, pedestrian-oriented tourist district located between Downtown Honolulu and Diamond Head National Monument, along the southern coast of Oahu. People traveling for pleasure/vacation make up the majority of visitors to Oahu, constituting 80% of visitation in 2015, according to the Hawaii State Department of Business, Economic Development & Tourism, with the largest sources of demand coming from the U.S. mainland and Asian countries, particularly Japan.

Despite the market's high RevPAR, additions to supply have been minimal, as developable land in desirable tourism-oriented locations, such as Waikiki, is very limited. Hotel projects on the island primarily consist of the renovation and/or expansion of existing hotels, while most new-build projects represent condominiums or timeshare properties. New projects include the Ritz-Carlton Residences Waikiki Beach and the rebranding of the Four Seasons Resort Oahu at Ko Olina. With high barriers to entry keeping supply increases in check, we anticipate that the value of Oahu hotels will remain high; however, values are expected to moderate by 2017 and 2018.

Given the overall performance of the market and lack of developable hotel sites, transaction activity has been strong in Oahu in recent years, with buyers competing heavily for the limited number of assets for sale, and sellers seeking to monetize their investment gains. In 2015, transaction volume started to decline, with only half the number of sales compared to 2014. The most significant of these 2015 sales was the Maile Sky Court, which was purchased in June 2015 by Starr Companies for $102,600,000. While improving market conditions and high investor interest have put downward pressure on capitalization rates, driving hotel values to peak levels, further growth is expected to be held in check given that interest rates and capitalization rates are now beginning to rise.

* The HVI is an index, a statistical concept reflecting a measure of the difference in the magnitude of a group of related variables compared with a base period. As such, it is a measure of broad market trends, rather than a conclusion as to the specific value of any asset, and cannot be applied to an individual asset. A good comparison is the Consumer Price Index. While this index provides a reliable measure of the overall rate of inflation in a region, it does not indicate how the price of milk has changed at your grocery store. So how can the HVI be of use to an individual investor? Although the HVI cannot tell you what a particular hotel is worth, it does provide excellent big picture data, indicating which market areas are experiencing positive trends, and thus may present good investment opportunities. The HVI for the U.S. is a measure of the strength of the lodging industry as a whole and, specifically, the hospitality investment market. The HVI for the various identified markets can provide a basis to evaluate and compare different geographic regions. For more insight on the limitations and applicability of the HVI, please read the message on the HVI home page by clicking on the graphic at the top of this page.

Valuation Trends and Predictions:

Oahu Island United States
Previous Year +4% (12 of 71) +1% (49 of 71)
Growth in 2017 -1% (60 of 71) +2% (36 of 71)
Growth in next 3 years +8% (48 of 71) +10% (36 of 71)

Change In Value For Market:

Oahu Island RevPar % Change

For more information, please contact:

Suzanne Mellen, MAI, CRE, FRICS, ISHC
smellen@hvs.com
  • +1 415 268-0351 (w)
  • +1 415 896-0868 (w)
Adam Lair, MAI
alair@hvs.com
  • +1 415 896-0868 (w)
  • +1 504 231-2651 (m)