A study of hotels in three areas of Hawaii found that guests value the existence of open areas on their grounds. Visitors to Maui and Hawaii differed from those to Waikiki in that the former were willing to pay a premium for a room in a hotel with a large amount of open area

Cox, Linda J.

Eastwood, Frank

Vieth, Gary R.

ScholarSpace at University of Hawai'i at Manoa

Cooperative Extension Service Resource ManagementApril 2001RM-10Published by the College of Tropical Agriculture and Human Resources (CTAHR) and issued in furtherance of Cooperative Extension work, Acts of May 8 and June30, 1914, in cooperation with the U.S. Department of Agriculture. Andrew G. Hashimoto, Director/Dean, Cooperative Extension Service/CTAHR, Universityof Hawaii at Manoa, Honolulu, Hawaii 96822. An Equal Opportunity / Affirmative Action Institution providing programs and services to the people of Hawaii withoutregard to race, sex, age, religion, color, national origin, ancestry, disability, marital status, arrest and court record, sexual orientation, or veteran status.CTAHR publications can be found on the Web site <http://www2.ctahr.hawaii.edu> or ordered by calling 808-956-7046 or sending e-mail to ctahrpub@hawaii.edu.Hawaii residents and visitors enjoy the islands’ trop-ical landscapes. Policies to provide more open area,especially in Waikiki, have been enacted but have hadlittle affect. In 1976, for example, the Waikiki SpecialDesign District (WSDD) called for “landscaped openspaces to … contribute to a lush tropical setting.” But,the WSDD policies had little impact because much ofthe open space was quickly developed before they tookeffect.Open areas can provide value in two ways. An ex-istence value results when hotel guests enjoy looking atan open, landscaped area.  A use value results when thehotel guest actually enters the open area to enjoy it.Guests who value open space in either or both of theseways should be willing to pay more for a room in a ho-tel with more of it.Hotel managers are expected to charge as much aspossible for a room given the characteristics of the hoteland the room. If hotel guests prefer open space, thenhotels with more open space should be charging moreper room. The relationship between room rate and openspace will indicate the type of value guests get from theopen space. A relationship between room rates and theopen area per room implies that the hotel guests have ause value that depends on the amount of open area andthe number of people using it. Room rates increasing astotal open area increases indicates an existence valuebased on a general feeling of openness.A decision by a hotel to provide or not provide openareas depends on the costs and benefits to that hotel.The first step in a hotel’s decision to provide open areasis to estimate the costs of providing the desired openareas. These were reported in CTAHR publication RM-8, Providing open areas: the costs to hotels, October2000. In the next step, revenues that could result fromhaving the open area are determined, and these estimatesValue of Hawaii Hotel and Resort Open AreaGary R. Vieth, Linda J. Cox, and Frank EastwoodDepartment of Natural Resources and Environmental Managementare presented here. A third publication will bring togetherthe costs and benefits to determine the optimal level ofa hotel’s investment in open area.The data usedData were collected on hotel and room characteristicsand on room rates for 39 hotels in Waikiki and, on theNeighbor Islands, for 16 hotels on Maui and 11 on Ha-waii. No difference in the characteristics and room ratesbetween the Hawaii and Maui hotels were found, butdifferences between Waikiki and Neighbor Island ho-tels were found. Therefore, the data was divided intotwo groups, Waikiki and Neighbor Island, for the rest ofthe analyses. Hotels in Waikiki have an average of 17,289square feet of open area, while those on the NeighborIslands have an average of 455,853 square feet of openarea. The difference in open area between Waikiki andthe Neighbor Islands is shown in Figure 1.Estimated value of open areaVisitors make two decisions when choosing a hotel. Firstthey choose a geographical location, then they select aspecific hotel within that location. Both of these choicescan be affected by the characteristics of the hotel room.Figure 1. Hotel and resort open area.Area per hotel or resort(100,000 square feet)Waikiki Neighbor Islands(Maui and Hawaii)54321RM-10 Value of Hawaii Hotel and Resort Open Area CTAHR — April 20012Price models that determine the relation between roomrate and hotel and room characteristics were used to es-timate the actual value of hotel open area. The price mod-els are equations that measure the differences in hotelroom prices that can be explained by room characteris-tics. Open area is the characteristic of interest here, andthus the model controls for other factors such as serviceor employees per room, swimming pool size and qual-ity, spa facilities, and proximity to the ocean. The pricemodels explain 54 and 69 percent of the variation inWaikiki and Neighbor Island hotel room rates, respec-tively.The study found that hotel guests value the exist-ence of the open areas. No use value was found in thedata. Thus, we refer to open area value as the generalfeeling of openness that the existence of open areas givesthe hotel or resort. The only hotel room factor that seemsto be important to Waikiki hotel guests is the distancefrom the ocean. How far a hotel is from a publicly pro-vided open space, such as a park, may effect the results,but it was not included in this study. The factors thatvisitors consider when they choose to visit Waikiki needfurther study. The large variety of retail stores, restau-rants, shows, and clubs may influence visitors’ decisionsto stay in Waikiki. But, these factors are the same for allhotels in Waikiki.Visitors going to the Neighbor Islands value openarea and are willing to pay more for rooms in hotels andresorts with more open area. The relationship betweenopen area and room rate for Neighbor Islands is shownin Figure 2. The value, measured as added revenue, isgreat at low levels of open area and small at high levelsof open area.To understand what this means to a Neighbor Is-land hotel, let’s assume a 70 percent occupancy rate andan average hotel size of 452 rooms. At the open areaaverage, 455,850 square feet (10.46 acres), the addedrevenue per year is $7.78 per square foot or $338,947per acre. At the low end, 7900 square feet (0.1814 acre),the annual added revenue is $448.99 per square foot orover $19 million per acre. At the top end, 1,455,000square feet (33.17 acres), an increase in open area willincrease yearly revenues by $2.45 per square foot or$106,927 per acre.DiscussionNeighbor Island hotels can increase room rates and rev-enues by adding more open area. However, this studyconsidered only the quantity and not the quality of openarea. The affect of open space quality needs to be con-sidered in future studies. The reason visitors to the Neigh-bor Islands are willing to pay a premium for a room in ahotel with a large amount of open area is not clear. Largeopen areas provide a geographic barrier to other devel-opment, whether it is residential, other hotel, or com-mercial development. This study suggests that the valueto hotels is in the general feeling of openness, ratherthan physical use of open area. The number of employ-ees per room (representing service) and the size and qual-ity of the swimming pool are other factors that increasea visitor’s willingness to pay more for a room.A more complete presentation of this research isbeing prepared for publication in a professional journal.Also, analysis of the optimal amount of open space canbe done by combining benefit estimates given here withcost figures reported in CTAHR publication RM-8. Thisanalysis will be reported in a subsequent publication onthe topic of hotel and resort open area.Figure 2. The value to hotels of open area.Open area (acres)Value (millions of $per acre per year)201510500 5 10 15 20 25 30 35

Value of Hawaii Hotel and Resort Open Area

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Value of Hawaii Hotel and Resort Open Area

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