STR property in Waikiki

[Nick Ung]

Aloha! I am looking to move to Hawaii with my partner from the San Francisco Bay Area due to flexibility of working from home. We are thinking of acquiring a STR property in Waikiki resort zoned area or NUC units. I am wondering what's the STR market is like right now and how feasible it is to acquire a STR unit in Waikiki, hold and ride out the pandemic. For folks who own a STR in Honolulu, what's your experience and how's the cash flow before the pandemic?

[Isi Nau]

Aloha @Nick Ung. We have several clients who invest in this niche. The conditions right now are about as bad as they could be. Bascially 0% occupancy. A number of them have decided to remodel their units now while they're empty.  Some buildings have almost shut down completely in order to reduce costs.  Hopefully others on here can share more positive results.

I would plan for an occupancy rate of 0 nights for a Waikiki STR through the end of 2020 (hope for the best, plan for the worst). As of now tourism is expected to open in Oct. If this happens it's likely that visitor arrivals will be fairly slow and gradual. Beyond 2020 it's anyone's guess.

Then there is the mind boggling government of Hawaii. I have almost 0 confidence in their ability to get the economy up and running. Based on the total lack of leadership and common sense in the past 7 months, I wouldn't be surprised if tourism didn't open up until 2021. Or they'll open it and then shut it down again. Sounds crazy, but so does opening the beaches for singles only.  ;)

I would not recommend buying now.  There isn't much need to.  The future is too uncertain, I don't think there will be a mad rush to purchase units right when tourism opens (so you'll have time to jump in), and the potential monthly losses between now and opening up would take a long time to recoup.  But, I have seen a few units sell recently for some pretty deep discounts.  You'll need all cash, find one that's been on the market for a while (100+ days), and find that one seller whose pockets aren't deep enough to weather the storm.  This will allow you to make up for the monthly losses in the end, but the big factor is still having sufficient reserves to make it through the next 6 months.

Prior to the pandemic we were seeing occupancy rates of 27-28 nights a month. Consistently.