The state lost an estimated $4 million in transient accommodations tax collections last year because of hotel conversions to time-shares and condominiums, but new development eventually will increase tax collections, according to a report released yesterday by the Hawai'i Tourism Authority.

The 122-page report, prepared by Hospitality Advisors LLC, estimated the reduction in the transient accommodation or room tax from conversions to time-shares and condominiums was $1.2 million and $2.9 million, respectively, in 2004. That's because some of the units were taken out of the visitor pool and no longer subject to the tax.

But the loss is a relatively small percentage of the $181.8 million in room taxes collected in the 2004 fiscal year, said Hospitality Advisors president Joseph Toy. The report noted that new time-share development added about $1 million to room tax collections last year.

There has been a lot of discussion about potential room tax loss due to conversions, said Rex Johnson, president and CEO of the Hawai'i Tourism Authority.

"However, based on the information provided in the report, it appears that the situation will not be as significant as anticipated, and that TAT collections from 2004 to 2010 are projected to increase," he said. "Furthermore, the trend in conversions have actually helped generate new investment into many of our budget and economy hotels that otherwise would have continued to deteriorate in the market."

State tourism liaison Marsha Wienert also said the report shows "the sky hasn't fallen" when it comes to a loss in inventory.

While the number of hotel rooms statewide fell from 50,218 in 2000 to 48,223 last year, the total accommodations inventory grew slightly to 72,614 because of additional time-shares and other units.

14 PROPERTIES CONVERT

From 2000 to 2004, 14 hotel and condo hotel properties were converted to condominiums, with most offering condominium owners the option of placing individual units into a hotel rental program. Of the 2,687 hotel and condo hotel units that were converted, 917 were permanently removed from transient hotel use.

During the same period, three full-service hotels and one condominium hotel underwent a partial or full conversion to time-share.

Most of the conversions were at lower-end properties that needed to be renovated, Toy said.

"The downside is it does mean for tighter supply, there's no question, but the upside is that we have better product to offer our visitors," Toy said. "It helped in the continued repositioning and rejuvenation of Waikiki."

He said there's a growing demand for alternative accommodations, particularly with repeat visitors.

But conversions have been a subject of concern to the hotel and restaurant employees union, Unite Here, Local 5.

The union's main concern is with job losses when hotels are converted to residential condominiums. But Local 5 also believes that conversions to condotels and time-shares also result in fewer jobs for hotel workers, particularly in areas of food and beverage and housekeeping, said Andy Lee, senior research analyst for Local 5.

"With a condotel, with people staying and oftentimes not getting nightly housecleaning service, it just stands to reason that a condotel would need fewer housekeepers, since they're not cleaned every night," Lee said. "We still believe that condotels do result in some significant job loss, and that could be because food and beverage operations are seized and because there's far less daily housekeeping, which eliminates the jobs of a good number of housekeepers."

Tourism liaison Wienert said with hotels and others in the visitor industry facing challenges in filling vacancies, that's not an issue.

"We know that a time-share doesn't take as many employees as a hotel does (and) a condo hotel doesn't take as many employees as a hotel does," she said. "But in the marketplace we have today, where every type of visitor accommodation and every business is crying for employees, I don't see this as an issue. If we had a high unemployment level, that would be a whole different ball game, but we don't."

According to the report, the number of accommodation units statewide is expected to grow to 77,734 units by 2010 — a 7.2 percent increase from last year — primarily because of development of luxury resort condominium and time-share properties.

MORE EXPECTED

About 3,225 traditional hotel rooms will be converted to condominium and time-shares through 2010, with the majority still kept in the visitor accommodations inventory, the report said. The reconfiguration and consolidation of units from conversions will permanently remove about 723 units from the inventory, while another 323 units will likely be occupied by owners.

Other details in the report: