United States -  Oahu Island

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O'ahu continues to shine as a top-tier tourism destination, experiencing its eighth record year of RevPAR performance in 2018, only trailing New York in this metric. Given the already heightened levels of tourism, occupancy only increased slightly from 2017. Greater gains were experienced in average rate, attributed to the completion of renovations and rebranding projects in Waikiki, as well as the ramp-up in operations at several new hotels that opened in 2017. The market still remains highly dependent on tourism, and demand is susceptible during periods of economic decline or unfavorable weather conditions. However, the strength of the national economy, continued increase in airlift, and projected growth in tourism 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 2022, with visitation projected to increase by roughly 2% in 2019. Significant improvements in airlift throughout the Hawaiian Islands is expected to support demand growth in the near term. In March 2019, Southwest Airlines launched service from Oakland to Honolulu; the low-cost air carrier plans to eventually offer flights to all the major Hawaiian Islands, as well as provide competition to Hawaiian Airlines servicing interisland flights. As such, demand is anticipated to grow modestly through the near term.

While O’ahu remains one of the most expensive places to build in the U.S., the market’s strong RevPAR performance continues to generate developer interest. Recent openings in the last several years include the Embassy Suites by Hilton in 2017, the redevelopment of the 'Alohilani Resort (formerly Pacific Beach Hotel), and the Ritz-Carlton Residences, Waikiki Beach Diamond Head Tower. While the Residence Inn by Marriott in Kapolei is currently the only hotel on O'ahu under construction, the 125-room Mandarin Oriental Honolulu & Residences is expected to break ground sometime in 2019. Although multiple projects have been proposed for the local market, new supply is not expected to increase significantly in the near term given the high barriers to entry.

Transaction activity on O'ahu increased in 2018 over the same period in 2017. The Aston Waikiki Beach Hotel, Hilton Garden Inn Waikiki Beach, and Modern Honolulu represented the three highest single-asset sales in 2018, bracketing the $200-million mark. Given the market’s high barriers to entry and strong RevPAR performance, investor interest is likely to remain strong through the near term, with high-price transactions occurring on the neighboring islands of Maui, Kaua'i, and Hawai'i. The overall outlook for Hawaii is positive, taking into consideration Southwest Airlines' new flight service, as well as the expectation that the domestic economy remains healthy.

* 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.

The widespread impact of the coronavirus (COVID-19) has had an unprecedented impact on hotels and hotel values worldwide. Consequently, the latest HVI analysis may no longer reflect the most current measure of lodging industry strength or the hospitality investment market.

In each of our offices across the globe, we are working tirelessly to analyze the impact of recent events and provide timely insights to help you navigate these uncharted waters. Because it is unclear how long the pandemic will last or how long related restrictions will be in place, we are updating our analyses on a weekly basis using the most current data.

Additionally, examination of value trends in prior cycles can provide useful information. Historical patterns, together with an understanding of the market’s current expectations for the eventual recovery of the industry and its performance, can provide insights on the likely trajectory of decline and recovery for hotel values.

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