The number of people staying in Hawai'i hotels continued to slide in March and through the first quarter of the year, but industry analysts point out that even with the sag, revenue remains high for the state's top industry.

The March figures show that statewide hotel occupancy fell by 4.6 percentage points to 78.1 percent, according to a report just released by Hospitality Advisors LLC.

The report shows first-quarter occupancy declined by 6.2 percentage points, but the March average daily room rates set a new record at $201.39 for the month. Still, the decline in demand for rooms prompted the first-quarter overall room revenues to fall for the first time since 2002.

Hospitality Advisors President Joseph Toy said the softening of the market had been anticipated. "We are coming off four extraordinary years," he said.

He said the drop in visitor arrivals from the U.S. East, Japan and Canada markets contributed to the decrease in demand for hotel rooms.

Toy reported that Hawai'i remained No. 3 in the nation's top hotel markets for occupancy, behind Phoenix, Ariz., and Miami, but ahead of New York City and Los Angeles. And he said that Hawai'i came in second for the top average room rate after New York City.

For the entire first quarter, demand for rooms dropped more sharply on O'ahu as room usage fell 8.5 percentage points and Maui fell by 4.1 percentage points.

The island of Hawai'i dipped 3.8 percentage points for the quarter, and Kaua'i dropped 3.9 percentage points.

Toy noted the steepest decline in occupancy was at upscale hotels statewide in March. The only county to show a gain in March was the Big Island, where occupancy rose 1.5 percentage points.

Right now, bookings for the summer season look lighter than last year, Toy said, but that could change. He noted that the state is seeing more travelers making hotel arrangements in the same month that they travel.

"When times are good, people book their vacations well in advance," he said, but that changes when people are more flexible as some try for discounts that are offered to lure travelers.

The trend over the last decade shows that Hawai'i's visitor industry has sustained some strength even after the Sept. 11, 2001 terrorist attacks caused travel to plummet.

The statewide average daily room rate has remained high and kept the room revenue high. The March results also show there's been a substantial run-up over the last four years, but recent results have been cause for some concern. How deep the softening will go isn't clear at this time.

"By mid-2006, the increases were getting smaller and the room demand was starting to fall a little bit," Toy said. And that softer trend has turned up in Mainland states as well.

So analysts closely watch the changes. "Conventional wisdom is that the industry is looking at a two-year cycle," Toy said.

Since Hawai'i usually lags about six months, that means that the state's slowdown could hit a little later but might also stay around a little longer, he said.

The March survey, compiled by Smith Travel Research with Hospitality Advisors, included 146 properties representing 46,835 rooms, or 82.1 percent of all lodging properties with 20 rooms or more in the state, including full-service, limited-service and condominium hotels.

Reach Robbie Dingeman at rdingeman@honoluluadvertiser.com.