Summer season is in full swing on the islands, and while summer typically sees occupancy rates that rival the winter high season, recent visitor statistics reflect a definite and unusual decline in arrivals to Hawai’i, a trend that is mirrored on Kauai. We’ve been monitoring this so-called “summer slump” and what it means, and while the numbers can be concerning, read on to see why we’re still optimistic about the state of vacationing on Kauai

The Slump in Vacation Rentals

Although numbers continue to recover from the pandemic-era downturn, Kauai’s vacation rental market is experiencing a noticeable slowdown, with fewer bookings and declining occupancy rates. April 2024 visitor arrival rates dropped an enormous 11.5% compared to April of 2023, and 2024 year to date visitor arrivals to Kauai have dropped by 3%, statewide by 5%.. This trend has left property owners and managers across the islands grappling with reduced revenue and increased competition for bookings.

State-wide we are seeing a decrease in visitor arrivals, coupled with a shift away from short-term vacation rentals. While anti-short term rental sentiment is not new, this has been a particularly incendiary topic this year with the passing of Hawai’i Senate Bill 2919, which you can read about in our previous blog post, as well as the election of a new pro-hotel president to the Hawai’i Tourism Authority.

As average vacation rental occupancy statewide has slumped to barely more than 50%, hotel occupancy remains strong at close to 75%.  A search performed today (June 11, 2024) on Airbnb showed nearly 600 properties on Kauai with the entire month of July vacant; in other words not a single night booked. In fact, nearly 500 properties have no nights booked between June 11 and August 1.

This is not to say that those properties are all going to remain empty, as booking patterns have shifted so that lead times are shorter and last-minute reservations are more common. It’s another market shift we’re learning to navigate. One way we’re doing that here is by taking advantage of a new integration offered by an OTA (online travel agent) specifically marketing to last minute travelers. Units are offered at a discounted rate, naturally, but this integration provides a dedicated outlet for filling those unbooked nights.

Top industry presences such as Vacasa, Hawaii’s largest vacation rental company, have begun to feel the impacts of this prolonged slump as they recently announced layoffs of 13% of their staff, and a vacation rental inventory decrease of 25% in the last year. While these numbers certainly seem foreboding, we continue to feel optimistic about the state of the economy on Kauai.

Economic Resilience and Consistency on Kauai

Although Kauai is typically thought of as a microcosmic reflection of broader state trends, the Kauai economy functions slightly differently. As a more lush and remote location, Kauai maintains destination desirability that more populous islands don’t necessarily have. For instance, despite the decrease in both April and year to date visitor arrivals, visitor spending per person per day was up 18%, and per person per trip spending was up 18% as well. If this trend continues, Kauai should maintain the consistent economic growth we’ve seen in the years preceding the pandemic. As an economy, however, Kauai is highly dependent on the mainland United States visitor pool… This means that as the U.S. heads towards a possible recession later this year, the Kauai economy could take a hit as mainland tourists struggle to afford vacations.

Navigating the Challenges Ahead

Despite the current challenges facing the vacation rental market in Kauai, there are opportunities for property owners and managers to adapt and thrive. With an increasing number of vacancies in short term rentals across the island, fueled not only by the drop in visitor arrivals, but also by a dramatic increase in the number of available rentals, and a preference shift towards hotel/resort experiences, visitors are going to be more particular about where they stay, and will be on the hunt for a good bargain. Aging units that are not kept up to date have been, and will continue to be, hit the hardest by this slump, regardless of “bargain pricing”. By adapting to new customer expectations and keeping our units up to date, we feel confident that we will continue to rent more robustly than our competitors, retain repeat visitors, and continue to have customers leave feeling satisfied with their vacation.

More Information

For a comprehensive overview of the numbers, we recommend the following websites and reports:

1. Hawai’i Department of Business, Economic Development, and Tourism’s report on visitor arrivals and spending in April 2024: https://dbedt.hawaii.gov/blog/24-29/
2. The Economic Research Organization at the University of Hawai’i’s Kauai Economic Outlook Summary: https://kauaiforward.com/wp-content/uploads/2024/06/23q2_kauaiforecast_1.pdf