Hawai'i's hotel market is slowing, but revenue and profits should continue growing through next year, Hospitality Advisors LLC president Joseph Toy told tourism executives yesterday.

Toy said 2006 room revenue will likely beat last year's record of $3 billion.

Toy also projected that although 2007 occupancy will hover around the same levels as this year, the hotel industry will continue enjoying growth in room rates, revenue and profits, albeit at a more modest pace.

"Even though the hotel market is slowing from its peak, we are still at very high levels," he said. "Anyway you cut it, unless something drastic happens, we're in for another good year."

Toy attributed the continued strength in the industry to tight supply from out-of-service rooms and conversions to condominiums and time-shares. He also said the long-term outlook is also still "favorable" because of hotel property renovations and repositioning, particularly in Waikiki, which will continue for another two to three years.

"Even at 80 percent it's high demand," he said. "In addition to that, the premium hotels that are at the beach are going to continue to demand increased rates. And we have renovated hotels that will be coming out with higher rates as well."

Toy also said from 2003 through the end of this year, 35 major properties will have been sold at a total transaction value of $4.4 billion, and there will be more transactions to come.

Toy was among the industry experts who spoke at a visitor industry briefing at the Halekulani Hotel yesterday sponsored by Hospitality Advisors, Tenn.-based Smith Travel Research and San Francisco-based Sonnenblick Goldman.

The Hawai'i projections are similar to those for the U.S. market as a whole.

While hotel occupancy nationwide is expected to grow by just 0.1 percentage point next year, average daily room rates are projected to grow 6.5 percent, according to Jan Freitag, vice president of Smith Travel Research. That will drive "very healthy" growth in revenue per available room — a key measure of profitability — in 2007 and 2008.

Freitag noted the drop in O'ahu's hotel supply helped push occupancy this year through September up to lead the top 26 markets in the nation. And O'ahu's growth in hotel room rates so far this year is "phenomenal," he said.

"The demand is out there, the money is out there, so take it," Freitag told the hotel executives. "And you are."

Reach Lynda Arakawa at larakawa@honoluluadvertiser.com.