Private Equity’s Impact on Hawai‘i’s Hotel Industry: A Closer Look at Ownership and Impacts

In recent years, the ownership of hotels in Hawaii has seen a significant shift towards private equity firms, raising concerns about the impact on local communities and workers. These firms, known for their aggressive investment strategies, have acquired a substantial number of hotels in the state, controlling nearly 30% of all rooms.

While private equity investments can bring capital and innovation to the acquired companies, they have also been associated with negative social impacts. Examples include the bankruptcy of Toys R Us and allegations of patient abuse at BrightSpring Health Services. The United Nations has accused Blackstone of contributing to the global housing crisis through aggressive evictions and rent inflation.

Despite these controversies, the presence of private equity in Hawaii’s tourism industry has largely gone unnoticed. Two dozen private equity firms own 33 of the state’s 144 hotels, with a concentration in West Maui. Community activists and local officials are concerned about the potential long-term impacts of Wall Street control on the hospitality industry.

Private equity firms typically aim to increase the value of their investments through cost-cutting, operational efficiencies, and physical improvements. They often use debt to finance their acquisitions and charge performance fees based on profits. Critics argue that this profit-driven approach can lead to negative consequences for employees and communities.

In response to these concerns, lawmakers have introduced legislation to hold private equity firms accountable for the outcomes of their acquisitions. President Joe Biden’s administration is also implementing rules to increase transparency in the ownership of nursing homes.

The impact of private equity ownership on Hawaii’s hotels has been mixed. While some owners have made significant property improvements, others have faced criticism for their treatment of employees and communities. Workers at hotels owned by private equity firms have reported increased workloads, reduced hours, and concerns about job security.

Looking ahead, experts predict that the trend of private equity ownership in Hawaii’s hotel industry will continue, with larger investments and fewer buyers in the market. Labor unions are gearing up for contract negotiations in 2024 to address worker wages and workload issues.

Overall, the increasing presence of private equity in Hawaii’s hotel industry raises important questions about the balance between profit-driven investments and the well-being of employees and local communities. As the industry evolves, stakeholders will need to navigate these challenges to ensure a sustainable and equitable future for Hawaii’s tourism sector.