Hotel acquisition models built for mainland U.S. markets often rely on assumptions that do not hold in Hawaii, and failing to adjust them can lead to substantial valuation errors. According to Mike Perkins of The Bratton Team at Colliers International Hawaii, the most critical difference lies in how operating expenses escalate over time. While a mainland pro forma typically assumes a 3% annual increase across expenses, several Hawaii expense lines—labor, insurance, shipping, and deferred capital—climb at 6% to 7% annually. “When we do a three percent annual increase on a mainland pro forma, some elements are six to seven percent here,” Perkins says. This divergence compounds quickly, producing a typical gap of 15% to 25% between a mainland-built pro forma and actual performance by year two. Buyers who incorporate the premium upfront can price it into their acquisition, rather than being surprised later.
Shipping costs represent another major adjustment. Hawaii’s dependence on inbound logistics affects nearly every operating category, including some that would not appear supply-chain sensitive on a mainland model. Inter-island shipping recently saw a cost increase of around 26%, yet carriers still operated at a loss even after the increase—a sign that underlying cost structure, not pricing opportunism, drives the number. Food is similarly exposed: Hawaii imports over 90% of its consumables, so food and beverage cost of sales carries a freight component absent from mainland comparables. The same dynamic extends to delivery schedules: an item that takes six weeks to arrive on the mainland commonly takes ten to fourteen weeks in Hawaii.
Labor, the largest single component of hotel operating expense, is shaped by two Hawaii-specific features. First, the union framework affects both cost and flexibility. Union hotels work from a base of roughly $30 per hour, with further increases anticipated. More significantly, staffing cannot be flexed down through soft periods, altering how seasonal variation flows to margin. However, the framework is more negotiable than buyers often assume; Perkins describes a client whose entitlement approvals required union construction and hotel operations, while restaurants within the property remained outside that scope. Second, labor scarcity—especially on the Neighbor Islands—means quality carries a premium simply because fewer experienced hospitality staff are available.
On the development side, Hawaii’s entitlement process runs long enough to belong in the financial model, not just the project schedule. A pro forma that assumes 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 first examines average daily rate, revenue per available room, and expenses as a percentage of RevPAR. The third metric reveals the Hawaii premium: rate and occupancy may look comparable to a mainland asset, but the expense ratio tells a different story—and that ratio is the fastest indicator of whether a model uses local or imported inputs. Owners can track monthly Hawaii market statistics to benchmark these figures.
None of this argues against Hawaii hotel investment; it argues for building the model correctly. Planning is the largest lever for reducing the premium. 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 some developers to re-source across countries, and those with existing relationships have adapted faster. Pandemic-era operating efficiencies—such as housekeeping on request and technology deployed to reduce costs—have proved durable. The market also shows a K-shaped pattern: luxury properties have absorbed cost increases through rate, while mid and lower tiers compete harder and innovate faster.
Perkins’s advice to first-time Hawaii hotel modelers is direct: don’t be too aggressive, be realistic, and apply a premium over the comparable mainland asset. Buyers who start 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. For those seeking expert guidance, Colliers International Hawaii provides specialized commercial real estate services.
