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James B Foster - Realtor, Principal Broker Vacation Rental Report

1) First Quarter - West Maui area - Our first quarter was down about 6% compared to 2002. We are actually pleased with our rental revenues and occupancy given the weak economy, mid-east problems, and high cost of airfares during the first quarter and poor stock market performance. Our April and May are extremely good as airfares have come down and the war in Iraq comes to an end. We are running a Spring Promotion with discounts up to 20%. It looks like our summer revenue will be a little better than last year.

1) Second Quarter - West Maui area - Second quarter rental revenue was up about 6% over 2002 with occupancy a little less than last year. Our unit type occupancy was up in the two and three bedroom condos and occupancy was off for our one bedroom units. This mix explains the increased revenue with a slight decrease in occupancy. Our higher priced one bedroom units performed badly in the second quarter. The weak economy and low wealth factor continues to hurt our vacation business with retired couples. Rental revenues are off about 2% through June 2003. Our July/August summer period looks good. Airline rates to Maui are attractive this summer. We have not had to offer our vacation rental clients any discounted rates for the summer period.

1) Third Quarter - West Maui Area - Third quarter for our West Maui vacations rentals was off by 3% compared to 2002. Our average daily rates also dropped about 3% during this time period. Marketing costs are up by more than 45% through the third quarter. So at this point we are spending more and discounting more to maintain our rental business. We continue to see a drop in the one bedroom revenue. This may indicate that fewer fixed income couples are traveling. We are happy to report that our return guest revenue was up by more than 11%. As the economy picks up we believe demand for Maui vacation travel will also improve.

1) Fourth Quarter - West Maui Area - Our 4th quarter 2003 bookings for West Maui were off by more than 5% compared to our 2002 4th quarter. Our average daily rates remained the same for 2002 and 2003 4th quarters. 1st quarter 2004 reservations made in 2003 are up by more than 15%. We did announce a price increase December 1, 2003, for selected properties based on our successful 1st quarter advanced reservations. This is our first price increase during the past two+ years. We see 2004 election year as a solid year for the leisure business due to favorable airline fares, a strengthening economy, a growing job market, good consumer confidence and a pent-up demand for vacation travel.

2) First Quarter - West Maui area - We were off to a strong start this year as occupancy and revenue was up approximately 10% for January and February and March over first quarter of 2002. April however will be down about 10% from last year as we go into the second quarter and May looks flat so far. The war, SARS and airline bankruptcy rumors have contributed to the slowdown in travel to Hawaii and elsewhere.

2) Second Quarter - West Maui area - This second quarter has ended better than expected. Gross revenues were up 10% from last year for all three months. It continues to be a challenge to estimate occupancy however in the coming months as many travelers are booking at the last minute. We have had to offer special discounts to compete with the wholesalers on many of our properties. July's occupancy looks better at this point than does August. Special airline rates for travel in September may give this normally quiet month a good jump-start.

2) Third Quarter - West Maui area - We experienced an increase for all three months with August showing the highest at 12%. We continued to offer discounts through this period to boost occupancy and continue to experience a very short booking window through September. Christmas has been sold out and many travelers are still looking for availability, which is encouraging as we had some open space up to the holiday period last year. Winter bookings look strong and we are seeing a surge for early summer 2004 as well. Recent reports projecting an increase in travel throughout the U.S. in 2004 look promising for several popular destinations, Hawaii specifically.

2) Fourth Quarter - West Maui area - Our numbers were up significantly during the last quarter of 2003. Compared to 2002, October, 2003 had a 19% increase in gross revenue, November, 2003 had a 12% increase in gross revenue in and December, 2003 had a 9% increase in gross revenue. The lower and discounted airfares late in year helped the fourth quarter revenue production and were also responsible for the booking window shrinking to one to two weeks prior to arrival date. Travelers have changed their planning and booking habits relative to advance preparation during the next coming 4th quarter. We believe the harsh and long winters in the Midwest and East areas are responsible for the substantial increase in advance bookings we are experiencing for the winter of 2004. The first quarter of 2004 is appears to be very promising and our numbers are noticeably way up compared to the first quarter of 2001, 2002 and 2003, specifically during the month of February and March.

3) First Quarter - West Maui area - January we were up 17% in revenue in February up 14% and March up 1.5%. All due to price increases in our rates. Our occupancy dropped almost 8% for the first quarter. April is looking stronger than last year, May and June relatively slow, July and August ahead of last years booking pattern so we are optimistic about a healthy summer. As usual the airfares are dictating the travel patterns. Some great fares are now open for the spring, but they're releasing them with a very short term booking window and tight restrictions.

3) Second Quarter - West Maui area - We do not process our financials until the 25th of the month so I do not have June's results yet. Provided are April and May and projections for June. April results were relatively good compared to April, 2002 with a 58% increase in revenue due to rates. We chose not to discount this spring and sacrifice the occupancy. It paid off in April; however the same strategy did not have the same positive results for May. May showed a 15% increase in revenue with a dramatic drop in occupancy compared to May, 2002. Our June forecast suggests the same as May with a slight increase over last year's revenues and a drop in occupancy. July is showing good potential with consistent short term bookings. We anticipate a fairly good July and have a good solid base for August. We have chosen not to discount our rates with the belief that in this economy it will not impact our occupancy enough to increase our revenues. Our two bedroom and three bedroom unit inventory has been exhausted for the summer. We still have one bedroom units available for August. We're still holding out for the short term bookings.

3) Third Quarter - West Maui area - Not available.

3) Fourth Quarter - West Maui area - During October we were up 5% over October, 2002; November we were even with November, 2002; December we were up 17% from December, 2002. At year's end for 2003 we were up 18% from year end of 2002. Although the rental income was up the occupancy was down 3% at year's end. The booking lead time during the fourth quarter was running about 45 to 90 days. The high airfares were having a negative impact on the number of travelers to the islands. The number of available timeshares are impacting occupancy for vacation rental condos. Special promos through large wholesale companies becoming increasing difficult to compete especially with free night packages.

4) First Quarter - Kihei Area - Occupancy was up about 10% from last year. ADR (Average Daily Room Rate) was also up, about 3%. Call volume for future bookings was slightly ahead of the pace of last year until the war started. Since the war, call and booking volumes have been erratic trending in the downward direction. Interesting to note - very few war related cancellations. We have concerns about the continuing financial condition of the airlines and it's effect on summer lift and rates.

4) Second Quarter - Kihei Area - Occupancy was up 12% from last year. ADR was also up about 4%. The late Easter holiday and strong June occupancy helped carry the quarter. Booking volume for the summer and the rest of the year is also well ahead of last year. The higher summer air fares don't seem to be deterring Maui vacations. We are 'almost optimistic'.

4) Third Quarter - Kihei Area - Occupancy was up 10% from last year. ADR was also up about 4%. July and a very strong August carried the quarter. Booking volume for the fall and next winter is also well ahead of this past year. Low seat capacity from Canada is the only dark cloud in the sky at the moment. We are optimistic.

4) Fourth Quarter - Kihei Area - Occupancy was up 8% from last year. ADR was also up about 3%. December carried the quarter with record room revenues. Q1 2004 will be better than Q1 2003, and booking volume for 2004 is ahead of last year. The anticipated drop in Canadian travelers has not hurt us. Last minute bookings have become the norm. We remain optimistic.