United States -  Oahu Island

O'ahu maintains its status as a top-tier tourism destination, evidenced by its sixth record year of RevPAR performance in 2016, only trailing New York and San Francisco in RevPAR. Market-wide occupancy declined nine basis points in 2016 from the level registered in 2015, attributed to a moderate increase in new supply, as well as a number of renovations and rebranding projects throughout Waikiki. Average rates continue to register growth; except for 2015, ADR increased year-over-year from 2011 through 2016. Given the island’s dependence on the tourism industry, demand is susceptible to contraction during challenging economic periods, and typically rebounds to prior peak levels during prosperous economic periods. Fortunately, the strength of the domestic economy, coupled with increasing visitation from Asia-Pacific countries, such as South Korea, Taiwan, China, Australia, and New Zealand, bodes well for the O'ahu market.

According to Hawaii's Department of Business, Economic Development & Tourism (DBEDT), visitor arrivals are forecast to increase year-over-year through 2020, albeit at a slower pace than experienced in 2016 when visitation increased by 3%. Since the 2008 implementation of a visa-waiver program, arrivals to Hawaii from South Korea have grown approximately 545% (from roughly 38,000 visitors in 2008 to 246,000 in 2016). Tourism from China has also grown at a tremendous pace, with the country anticipated to become the largest source of new international visitation in the near future. Given the strong occupancy levels throughout the market, coupled with the anticipation of new supply, a flat to slightly reduced occupancy trend is anticipated in the near term, with gains in RevPAR fueled by strong rate growth. Occupancy is forecast to recover slightly in 2019 as ADR growth slows.

Despite O'ahu’s status as the most expensive place to build in the U.S., many new hotel projects are currently in the pipeline. Approximately 15 hotel projects (roughly 3,000 rooms) are proposed for the O'ahu market, with half of the developments located in Honolulu, and the remaining projects in West O'ahu. However, only two of these hotels are currently under construction, including the Embassy Suites by Hilton in Kapolei and the Ritz-Carlton Residence East Tower in Waikiki. Recent openings include the Four Seasons, Ritz-Carlton Residences West Tower, Hyatt Centric, and Hampton by Hilton in 2016. Despite supply entering the market at a moderate pace, O'ahu hotel values are anticipated to increase modestly over the next two years before stabilizing. The sheer amount of development throughout the island, in terms of both residential and retail space, suggest that there is a large amount of pent-up demand; hence, new supply is expected to be easily absorbed.

Transaction activity in O'ahu remained relatively stable in 2016. The sale of the Hyatt Regency Waikiki Beach Resort & Spa in September 2016 for $634,000 per room represented the top single-asset sale last year. Sales continued during the first quarter of 2017, with the Hyatt Centric and Pacific Beach Hotel representing the most significant sales, at $953,000 and $614,000 per room, respectively. Given the market’s high barriers to entry and strong RevPAR performance, investor interest continues to be strong, with high-price transactions also occurring on the neighboring islands of Maui, Kaua'i, and Hawai'i. The overall outlook for Hawaii is positive given the robust increases in international visitation, as well as the expectation that domestic visitation will remain stable.

* 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.

Change In Value For Market:

Legend
Significant Value Increase: Greater than +10%
Moderate Value Increase: Between +3% and +10%
Stable Values: Between -3% and +3%
Moderate Value Decline: Between -3% and -10%
Significant Value Decline: Less than -10%

Oahu Island RevPAR Change

Oahu Island RevPAR

Year RevPAR
2006 $127.25
2007 $128.16
2008 $126.34
2009 $109.45
2010 $117.71
2011 $133.76
2012 $155.79
2013 $174.42
2014 $182.51
2015 $187.33
2016 $191.63
2017 (f) $199.07
2018 (f) $207.97
2019 (f) $217.41

For more information, please contact:

Adam Lair, MAI
alair@hvs.com
  • +1 415 896-0868 (w)
  • +1 504 231-2651 (m)
John Berean
jberean@hvs.com
  • +1 281 381-3456 (w)