| | | | | the total transaction volume by contributing nearly |
| Hawaiian Hospitality | | | | $1.4 billion in activity. Topping the list were two major |
| The record air passenger arrivals and the increasing | | | | properties — the Hyatt Regency Waikiki sold for |
| popularity of timeshare and resort residential | | | | $475 million and the Makena Resort on Maui sold for |
| developments have boosted recent interest in | | | | $575 million. On the market and projected to close in |
| building new resorts in Hawaii. New, exciting concepts | | | | the near term are two Resort Quest Hotels and the |
| from family-oriented to ultra-luxury resorts are | | | | Fairmont Orchid on the Big Island of Hawaii. |
| entering this market with plans on widening the | | | | Hawaii Hotel Market Analytics |
| breadth of service offerings for the island’s | | | | For year-to-date October 2007, the Hospitality |
| visitors. | | | | Advisors LLC industry report noted that Hawaii’s |
| Topping this list is the recent announcement of | | | | hospitality industry continued to post solid RevPAR |
| Disney Resorts selecting Ko Olina on the island of | | | | and ADR gains. Average hotel room rates rose from |
| Oahu for its first stand-alone hotel development not | | | | $186.17 to $198.82 as RevPAR grew from a |
| associated with a theme park. Its plans are to build | | | | statewide average of $150.24 to $151.33 in the past |
| an 800-unit hotel that encompasses the Disney | | | | year. Overall, Hawaii’s hotels ranked second in |
| Vacation Club timeshare concept that has more than | | | | RevPar growth only to New York City. Percentage |
| 350,000 members. Disney paid $144 million to acquire | | | | increases in the past year in average daily room rates |
| the property, which is situated on 21 acres of | | | | for mid-priced hotels surpassed luxury and upscale |
| oceanfront land. This is a unique concept for Disney | | | | hotel brands by posting an 11 percent increase, |
| and a great opportunity for Hawaii to benefit from | | | | compared to 5.5 percent and 7.7 percent, |
| Disney’s marketing and brand name. | | | | respectively. |
| On the other side of the hotel development | | | | Despite these financial gains, hotel occupancy rates |
| spectrum are the plans by Starwood Capital Group to | | | | fell from the prior year. As of October 2007, the |
| build an upscale Baccarat Resort. Capitalizing on the | | | | year-to-date occupancy rate for Hawaii’s hotels |
| Baccarat crystal and jewelry luxury brand, the | | | | decline from 80.7 percent to 76.1 percent. This decline |
| planned resort will demolish the former Wailea | | | | coincides with increased economic concerns over the |
| Rennaissance Hotel on Maui and replace it with 193 | | | | drop in residential home appreciation rates, rising fuel |
| one- to four-bedroom residences. All units will have | | | | costs and decreased personal income being |
| ocean views and include access to personalized | | | | encountered in the United States. |
| concierge services. Architectural design and interiors | | | | After growing to 7.5 million air passenger arrivals for |
| are being directed by HKS Hill Glazier Studio and by | | | | 2005, capacity constraints limited our growth in 2006 |
| world-renown interior designer Yabu Pushelburg. The | | | | and 2007. Both Hawaii’s hotel inventory and |
| planned opening of the Wailea Baccarat is 2010. | | | | airline seats reached a level near capacity. After 4 |
| Similarly, an affiliate of Montage Hotels and Resorts | | | | solid years of robust growth in air passenger arrival |
| purchased 122 acres on the North Shore of the island | | | | counts and visitor spending, Hawaii’s hospitality |
| of Kauai. Overlooking picturesque Hanalei Bay, | | | | industry posted only marginal growth in the past |
| Montage has no immediate plans, but intends on | | | | year. |
| eventually building an ultra-luxury resort. | | | | Forecast 2008 |
| Timeshare Development | | | | Investors continue to remain enamored with |
| Most hotel and resort developments are focused on | | | | Hawaii’s hotels and resorts. Shortage of prime |
| the luxury marketplace as rising construction costs | | | | vacation resort properties worldwide attracted |
| and land prices dictate the need for higher hotel | | | | institutional investors throughout the world to |
| room rates. In fact, most resort developments have | | | | Hawaii’s shores. Japanese, Korean, Chinese and |
| had to incorporate a timeshare/fractional ownership | | | | Australian as well as North, Central and South |
| component as well as a resort residential component | | | | American firms are scouring the islands for attractive |
| to subsidize the development of a hotel. | | | | resort investment opportunities. The recent |
| Timeshare sales continue to be healthy with projects | | | | purchases of resort land bode well for increasing |
| in Waikiki, Ko Olina, Wailea, Kaanapali, Kapalua, | | | | Hawaii’s hotel inventory and allow for continued |
| Waikoloa and Poipu on the drawing boards. | | | | growth in air passenger arrivals and visitor spending. |
| Developers are capitalizing on the Hawaii brand and its | | | | Despite Hawaii’s isolated location, it is not |
| unique appeal. In fact, many timeshare operators | | | | immune to the subprime woes and credit crunch that |
| realize the importance of a Hawaii location as a way | | | | stirred concerns of a possible U.S. recession. Many |
| to bolster their appeal to timeshare investors, many | | | | transactions are likely to be re-traded or be faced |
| of whom are willing to pay a premium for a vacation | | | | with increased scrutiny of financial statements and |
| resort in Hawaii. | | | | projections by lenders. Investment sales transaction |
| Hotel Transactions Record Volume | | | | volume will slow through 2008 as investors reappraise |
| Hotel revenue and operating success bred increased | | | | their asset allocations into real estate. Those |
| interest from institutional investors seeking prized | | | | institutional investors willing to capitalize on this lull in |
| resort properties for investment. Sales transaction | | | | activity by conducting thorough due diligence will find |
| volume for commercial real estate increased fivefold | | | | that Hawaii hotels and resorts remain a lucrative |
| from $850 million to a 2005 record of $4.3 billion. For | | | | investment opportunity. |
| 2007, hotel properties constituted the majority of | | | | |