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Tourism's New Reality: Back to the future

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Hawaii faces a new reality when it comes to the state’s No. 1 industry.

No matter how long you stare into the crystal ball, it doesn’t look good for tourism in 2009. While industry leaders expect rough first and second quarters, some are hopeful that visitor arrivals will gradually begin to pick up as we head into the second half of the year.

In other words, it’s not all doom and gloom. Opportunities do exist for those willing to find ways to secure a piece of a much smaller pie. In many ways, experts say, success will come to those who are able — and flexible enough — to re-establish the fundamentals on which our tourism industry was built: the understanding that everyone has a critical stake in making the Hawaii experience unique and memorable for all visitors.

Smart leaders know that, in order to survive and thrive in a tourism downturn, you have to be aggressive, rethink operational and marketing strategies, streamline the business and, above all, deliver a great product.

So much right now is riding on the health of the U.S. and global financial markets. That’s why many tourism leaders are somewhat reluctant to make hard predictions about what lies ahead. Hawaii Business spoke to six industry leaders about what to expect for 2009:

Byron Gangnes (BG), University of Hawaii Economic Resource Organization
Murray Towill (MT), president, Hawaii Hotel & Lodging Association
Marsha Wienert (MW), state of Hawaii tourism liaison
Jerry Gibson (JG), area vice president and managing director, Hilton Hawaiian Village Beach Resort & Spa
David Uchiyama (DU), vice president of tourism marketing, Hawaii Tourism Authority
Lloyd Unebasami (LU), interim president and CEO, Hawaii Tourism Authority

1) One Certainty: Uncertainty

 BG: Obviously, the longer this downturn continues, the more negative fallout we’re going to see. So I would expect to see additional job losses taking place across the industry in hotels and retail. I think even though we may have seen the worst of the year-to-year drops in visitor numbers, we haven’t seen the worse of the fallout in the industry. However, as fuel costs fall, that’s going to provide some ability for airlines to lower their ticket prices. I don’t think that’s going to be enough to make a big difference in the near term. So, I think that means a very weak period for the industry, probably at least for another year. The real big question for Hawaii is what’s going to happen to the American economy. I think the prospects there are very poor. I think the good news is that we’ve seen some progress in getting past the worst part of the credit crisis. This is a consumption-led recession. It started with the credit crisis, but the problem now is that consumers are extremely pessimistic and they’re cutting back on consumption at a very rapid rate. But, we can look for little silver linings. The fact that our construction industry is doing somewhat better than some parts of the country, that’s great news. And the fact that we went into this having been through a period of relative strength is good news, because I think it means that, hopefully, many families’ budgets were in pretty good shape going into this. But I don’t want to downplay the likelihood of there being some pretty serious costs here.

MT: In the U.S. economy, obviously when people are looking at the value of their homes, the value of their 401Ks, the thinking is to hunker down, maybe not go on vacation this year. I don’t think anybody expects to see stabilization until the second half of the year. Hotels are trying for the most part to keep as many of their employees on board as possible. Sure, there have been some layoffs. I don’t think it’s been massive, but there have been layoffs at a lot of properties – probably more on the Neighbor Islands than we’ve had on Oahu.

MW: As we move forward, we need to keep air seats in the marketplace and we need those seats to be profitable, otherwise those planes will be flying somewhere else. We need to keep up the demand or we might be on the chopping block. We cannot afford to have a further reduction in seats coming to Hawaii. But the old model of $300 to $350 roundtrip from the Mainland to here is history.

 

2) Success Means Back to Basics

 MT: We face some fierce competition around the world. We are going to be dealing with a more sophisticated consumer whose expectations are going to be elevated, and all of that means that we just simply have to do our jobs better to be successful in the future. This is a $12 billion industry we’re talking about.

JG: The biggest asset that we have, that no one else has, is our people. You can’t go anywhere in the world and feel the aloha that we have here. It just doesn’t exist. But it’s all about attitude. If you keep on doing what you’ve been doing, then you’re going to get what you always get. The important thing is to remember that it’s our priority to keep the business healthy so that we can keep as many people working as possible in the industry. We need to be smart about what we do, what assets we deploy, keep the business as skinny as we possibly can until we get healthy again. At the same time, we have to do the marketing, the positive selling and take care of our customers.

DU: There are many choices available to the consumer in the way of leisure destinations — sun, surf and sand. I can tell you that labor in other destinations has got an advantage on us because the employee-to-guest ratio is 4-to-1 in some cases. Here in Hawaii, we’re lucky if we’re 1-to-1. It brings us back to what makes us different, and that’s the style of hospitality we convey to our visitors to make them want to come back again and again, because they feel at home. We have to remember that tourism affects everybody. Almost every family in the Islands has somebody connected to tourism in some shape or form. There’s a lot of support industry to tourism that I don’t think we recognize — people who are doing the laundry, maintenance, construction — all of these guys benefit by tourism staying healthy.

 

3) The Market Has to Diversify

 MT: It’s important to look long term. The more diverse our market is, the more effectively we can withstand downturns like we’re experiencing now. 

MW: We do believe that we will see increased travel from Korea. Now, its economy is not doing as well as it was either. So, our projections of doubling the numbers coming from Korea within the first 12 months may fall short a little bit, depending on what happens with its economy. We also see huge potential in the Chinese market. That number continues to grow month over month, and we firmly believe that is a market that is going to have significant impact on our economy and visitor industry as we move forward. Again, we’re hoping that number is going to double here within the first year. The Canadian market has been the mainstay, increasing month over month for the last year, year-and-a-half, so we hope to see that continue.


DU:
All indication is that interest in Hawaii is still very high. [The Chinese and Korean travelers] are more sophisticated, high-yielding visitors looking for experiences in cuisine, culture, soft activities. I think [what] you’re going to get is no different than Japan was in the initial phases. You’re going to get the up-and-coming executives, 28 to 45 years old. We’ll get the senior market as well.

BG: Growth prospects are poor in virtually every economy in the world right now. We always look for growth in the emerging Asian economies, especially now that we have some progress in easing travel for some Chinese and Korean visitors, but even though they’re going to continue to grow at rates that look very attractive to us, it’s probably not going to be enough to make a real significant impact. We’re moving back to a visitor mix that’s much more like the late ’70s, in terms of how big the United States’ piece (almost 75 percent of all visitors to Hawaii) is compared to everybody else. 

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