September 14, 2010 - --Hawaii was the third-most expensive state for nightly hotel rates during the first half of this year, but lagging group business kept room rates from growing as fast as they have in destinations where business travel has returned.

Hotel prices are on the rise for the first time since 2007, according to a biannual summer price index released yesterday by Hotels.com, which gleaned results from approximately 91,500 properties in more than 15,700 locations.

Still, it's an uneven recovery, said David Roche, president of Hotels.com, in an introduction to the company's index. Prices remain at 2003 to 2004 levels in much of the developed world, but business capitals such as New York, London and Singapore are seeing significant price rises again from the first half of 2009, Roche said.

On the leisure side, drive-to destinations like Seattle, Miami and Las Vegas also have seen price gains related to the rise in "staycations," he said.

That's why prices rose in New York and Massachusetts, the top two most expensive states for hotel rates in the nation, but stayed at $141 per night in Hawaii. Rates in Honolulu, which tend to be more affordable than on the neighbor islands, rose a scant 2 percent to $132.

"You have to travel to New York for business. Nobody has to come to Honolulu for vacation," said Keith Vieira, senior vice president of operations for Starwood Hotels & Resorts Hawaii and French Polynesia.

Since going on vacation is a discretionary decision, most leisure travelers are incredibly price-sensitive, Vieira said.

"When they come to Hawaii, they typically stay longer and it's coming out of their own pockets," he said.

While occupancy for leisure travelers to Hawaii has improved, the business market continues to lag, said Shari Chang, senior vice president of sales, marketing and revenue management at Aston Hotels & Resorts.

"We haven't seen the increase in corporate and incentive travel," Chang said, adding that businesses are still being cautious following the outcry surrounding planned trips by AIG and other companies that were on the government's bailout list.

Many planned business trips to Hawaii were canceled due to the "AIG effect," she said.

"Because group travel is booked so far in advance, it will be further down the line before we see the business travelers return," Chang said.

For the first half of 2010, Hawaii's convention traffic dropped by 21.5 percent, according to the Hawaii Tourism Authority. And, while the HTA reported that corporate meeting traffic improved by 4.6 percent and incentive traffic by 9 percent, the gains were on top of a dismal 2009.

Without a steady stream of group travel to stimulate demand, Hawaii hoteliers have not been able to yield higher rates, Vieira said.

"You can't yield until you have compression," he said.

Still, from a global perspective, Hotels.com reported that hotel prices stabilized during the first half of 2010. Worldwide hotel prices, which had fallen for seven consecutive quarters, grew an average of 2 percent in the second quarter of 2010.

"Hotel pricing trends, up to the end of Q2 of 2010, confirm that a stabilization has indeed been under way in the hotel industry, and there are hints of a recovery," Roche said. "In 2010, the key factors acting to stabilize and even improve hotel pricing are the return of corporate travel."

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