The state's number one industry continues to take a hit.

According to a report released today, hotels across the state are on the average only three-quarters full.

Many industry experts say they haven't seen the numbers this bad in a really long time.

But many of the tourists who are coming are benefiting.

A gloomy outlook for Hawaii's tourism market.

"We've never seen the perfect storm of the loss in seats, increased fuel costs, the global economy. It seems like nothing else could go wrong," said Keith Vierra, Starwood Hotels Sr. Vice President.

According to Hospitality Advisors LLC, Hawaii's hotel room demand fell during August, with a statewide occupancy of 74.4%.

It hasn't been this bad since August of 1998.

The Big Island had the lowest occupancy with 63.5%, followed by Maui, Kauai, and Oahu with the highest at 80.4%.

"There is no view for bouncing back. We are planning for worst '09. I think there is going to be layoffs and other cuts across the state in the next couple of months. It's going to be as bad as we've ever seen anything," said Viera.

Viera says the Sheraton Princess Kaiulani's Japanese restaurant Momoyama will be closing next month because of the lack of customers.

But if there's a bright side to this, it's the deep discounts that are now being offered to attract more visitors.

"It could be 5th night free, 3rd night free, breakfast included, or meal credit for 5 night stay. What everyone is trying to do is add value because Hawaii's message is one of value," said Viera.

This group visiting from Pittsburgh, PA found out the Marriott dropped their rates just before they arrived.

"Very surprised, very surprised. Here I was paying $400 a night and I got it for half, so very happy. And they upgraded our room," said Mary Ann Klinger, Visitor from Pennsylvania.

There are also more package deals available.

For airfare which is usually about $1000 per person from Canada and Hyatt regency $400-$600 regular we got here for 10 nights for $1750. So that was a great deal," said Jan Ginther, Visitor from Canada.

So a lot of great deals -- good for the tourists but not so good for the hotels and our state.

Industry experts say it may take years for Hawaii to recover from this slump.