Are lodging costs starting to tame the tourist boom?

The latest visitor highlights from the Hawaii Tourism Authority (HTA) show that both visitor arrivals and spending continued to increase through the first quarter of 2013, albeit at a slower rate than last year. However visitors to the state appear to be booking shorter trips and spending less at local shops, perhaps in response to higher hotel room rates.

In the first quarter of 2013 more than 2 million visitors flew to the state, 6.5% more than in the first quarter of last year. US mainland arrivals grew by an impressive 6.4%, though some of the gains may be attributable to seasonal changes. With Easter and the Spring Break falling in March this year, some of the domestic arrivals growth may be the result of Mainland travelers visiting the state in March instead of April. International arrivals also increased with arrivals from the two largest international markets, Japan and Canada, growing by 5.3% and 3.1% respectively. The fastest growing source of arrivals continues to be non-traditional markets around the Pacific. With new direct flights to the state the number of visitors from Oceania grew significantly, Australian arrivals increased by 30% while the number of visitors from New Zealand almost doubled. Visitors from China also increased by more than 40%, but despite rapid growth in the past several years, Chinese visitors still make up a relatively small share of the overall visitor mix.

While the number of visitors flying to the state increased in the first quarter, the length of the average trip fell for visitors from all markets. Visitor days, an alternative measure of visitor volume that takes into account both the number of visitors and length of stay, edged up only 2.6% as a result. Length of stay fell only slightly for US mainland and Japanese visitors but the effect was much more pronounced among other visitors. The average Canadian visit was 6% shorter, offsetting the modest increase in arrivals; Canadian visitor days fell by 3%. Despite robust arrivals growth, an 11% fall in length of stay among other international arrivals netted out to a small loss in visitor days from these fast growing non-traditional markets.

Visitors spent more than $3.9 billion in the state during the first quarter of the year, 7.5% more than the same quarter last year. While total spending increased, the data suggest that visitors spent more on rooms but cut back on shopping. The average visitor spent 12% more on lodging and 9% less shopping each day. Japanese visitors, who tend to be the biggest shoppers, seem to have cut back the most; the average Japanese visitor spent 18% less shopping each day compared to last year. That works out to each Japanese visitor spending roughly $100 less in local shops over the course of their entire visit. In our recent labor market update we noted a surprising slowdown in retail hiring in the first quarter. This new data confirms that visitors are indeed spending less at local retailers compared to last year, which could be a factor in retail hiring decisions.

Overall the first quarter was a positive one for the local visitor industry, though there are a few signs for concern. The number of visitors to the state continues to grow but the cost of a Hawaii vacation may be starting to weigh on some travelers. With lodging supply essentially fixed in the near term, the robust arrivals growth allowed hotels to keep raising their room rates. Some visitors are reacting to the higher lodging cost by reducing their length of stay and by spending less on other items.

– James Jones and Peter Fuleky

* this post was updated on May 10, 2013

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