Hotel acquisition models built for mainland U.S. markets often rely on assumptions that do not hold in Hawaii, and buyers who fail to adjust them may see significant deviations in financial performance. According to Mike Perkins of The Bratton Team at Colliers International Hawaii, the most critical difference lies in expense escalation. While a mainland pro forma typically applies a three percent annual increase across operating expenses, several lines in Hawaii move at six to seven percent. “When we do a three percent annual increase on a mainland pro forma, some elements are six to seven percent here,” Perkins says. The lines that behave differently include labor, insurance, shipping, and deferred capital. The cumulative effect is substantial: Perkins estimates the gap between a mainland-built pro forma and actual performance at fifteen to twenty-five percent by year two. This is not a reason to underwrite conservatively for its own sake, but to build the premium in at the outset where it can be priced.
Shipping costs further complicate Hawaii hotel operations. Inter-island shipping recently saw a cost increase of around twenty-six percent, yet carriers remained at a loss, indicating structural cost pressures rather than opportunism. Food is another exposure: Hawaii imports over ninety percent of its consumption, adding a freight component to food and beverage costs that mainland comparables lack. The same dynamic extends to any scheduled item—what takes six weeks to arrive on the mainland commonly takes ten to fourteen weeks in Hawaii.
Labor, the largest operating expense, is shaped by two features. First, the union framework affects both cost and flexibility. Union hotels work from a base of roughly thirty dollars an hour, with further increases anticipated. Operationally, staffing cannot be flexed down through soft periods, altering how seasonal variation impacts margins. However, the framework is more negotiable than assumed. Perkins describes a client whose entitlement approvals required union construction and operations, while restaurants remained outside that scope. Second, scarcity of experienced hospitality staff, especially on the Neighbor Islands, commands a premium.
On the development side, the entitlement process runs long enough to belong in the financial model. A pro forma assuming a mainland approval timeline understates carry costs and pushes stabilization earlier than realistic. For buyers evaluating development and income-producing opportunities, the entitlement position of an asset is often as material to value as its physical condition.
When reviewing Hawaii hotel numbers, Perkins focuses on three metrics: average daily rate, revenue per available room, and expenses as a percentage of RevPAR. The third is where the Hawaii premium appears. Rate and occupancy can look comparable to a mainland asset while the expense ratio tells a different story. Owners tracking Hawaii market statistics have a reference point for these figures.
None of this argues against Hawaii hotel investment, but for building the model correctly. Planning is the largest lever. Working with locally established groups that hold supplier relationships and can source from Asia as well as the mainland compresses lead times. Tariff changes have prompted re-sourcing across countries, and those with existing relationships adapt faster. Pandemic-era operating efficiencies—housekeeping on request and technology to reduce costs—remain durable. The market shows a K-shaped pattern: luxury properties absorb cost increases through rate, while mid and lower tiers compete harder and innovate faster.
Perkins advises first-time Hawaii hotel modelers to be realistic and apply a premium over comparable mainland assets. Buyers starting from that position find the market more predictable than its reputation suggests, and Hawaii has historically recaptured cost increases through rates in a way few markets can.
