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Waikiki: Present and Future - Extended Version

Six tourism leaders gather for a Hawaii Business forum to discuss Waikiki’s strengths and weaknesses, and how to keep it a robust engine of Hawaii’s economy.

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Egged: A good example of that in Waikiki is the Ilikai. The Ilikai was a disaster for Eric’s workers.

Gill: An ongoing lumbering disaster (laughter).

Egged: It came from an unwise investment in the first place, then the investor tried to bail out by selling out condo units.

Carey: It started with Westin’s predecessor selling out these little bits and pieces of condos throughout the building for residences and it’s really difficult to mix in residents in a commercial operation.

Gill: The practical result is that, at one point back in the ’60s, we had 600 workers in that building. We have 63 left. All the food and beverages are basically out and much reduced standards. The latest buyer acquired it in foreclosure and is trying to sell off the last 200 rooms and eliminate the hotel in its entirety to make its numbers and then those 63 jobs are gone.

Aside from the iconic nature of the Ilikai – people have an emotional connection to it and it’s part of the (state’s) marketing – but it’s a real problem that they had a hard time finding a buyer to operate in that environment. Timeshare is a similar trend on the financing side. Equity wants to deal with only limited service rather than any full-service hotels.

Timeshare is limited service. You clean twice a week; that’s two-sevenths of the housekeeping staff. Your bags up and down once a week, you’re checking out once a week. By definition, timeshare provides fewer jobs, but now they are going a step further. They are saying, “We’re going to build limited-service hotels,” and the City Council permitted them, and I was shocked. We are permitting limited-service hotels, defined in this new law that they just passed, that’s opening up limited-service development (outside of Waikiki) without a conditional-use permit. So, why is our government defining what we are permitting by the lack of jobs that it creates, because when you say limited services, you’re saying limited jobs.

Carey: But there will be more jobs than zero if a building like that is built.

Gill: There will be a few of them, but that room night is coming from somewhere and they all testified before Council that it’s coming from Waikiki. They want to build out there (in West Oahu) so people don’t have to drive. There is a long-term threat from billionaires who live in a spreadsheet world, but the bottom line is we need to take care of our community here. That’s our mission in life. Our job is to try to defend standards and try to provide good jobs to the people of Hawaii and it’s getting harder and harder to perform that function where all the investment money is just pushing everyone. Should there be more condominiums in Waikiki? Should we turn it into a rich people’s home or is it going to be an economic driver for our economy?

Petranik: A lot of baby boom workers are going to retire soon and young people may not want some of these jobs, whether it’s housekeeping or wait staff. Is there another generation of Hawaii residents ready to take over those jobs?

Carey: The average age for a housekeeper in Waikiki is probably in the mid to low 50s, with an average length of service of 18 to 25 years.

Gill: We have a whole generation of people who came to work in the 1970s when Waikiki basically tripled its size – the Sheraton was built, the Hyatt went up, the Tapa Towers went up. And that group is retiring now a lot. I started in 1976 here (at the Sheraton) and I am at the young end. We’re seeing a lot of people retire and not enough backfill.

Nishizaki: We’ve been talking about workforce development and how do we create jobs and support the younger people who are not necessarily aspiring to take the jobs that perhaps their parents had? We’ve been working with Local 5 and we need to look at maybe combining positions, doing some things that don’t necessarily take away jobs, but make them more interesting and finding people that are more multitasked.

Egged: One of the ideas that came out of our Waikiki 2020 planning process was to develop workforce housing closer to Waikiki. Maybe you can’t afford to make affordable housing on the Kapiolani corridor, but what about the Kapahulu corridor, where we can build additional housing that would be affordable by workers in Waikiki? They would have fewer transportation issues because they could walk to work.

Gill: Just as Kakaako was supposed to be, but now we’re seeing affordable units going for 400 grand. The city’s blowing a chance here to let people build nearby.

Petranik: What’s the average commute for your workers? An hour and a half?

Carey: If you live in Waipahu or Waipio or Kunia, you’re on the road by 5 o’clock in the morning to get here before the traffic builds up. And then we have this issue of whether they can sit in the cafeteria or not. But certainly if you’re going to drive during the peak hours, it’s going to be an hour and a half for sure. But there isn’t affordable housing closer.

I remember when Kakaako was first discussed people said we have a great resource in the city center, close to the bus lines and everybody doesn’t need a car and that’s even without the train. Yet we’re building high-end condos in that area where we should be building working people’s homes, so that we can get them off the freeways, so that we can reduce the traffic congestion, so that we can get people to work. And, of course, if you throw another APEC, then it’s a four-hour commute by train, if you can get there.

Nishizaki: In developing the McCully area, you could have nearby affordable housing not just for the workers here, but perhaps for the university students, too. That would also make it easier for university students to work part-time in Waikiki. Developing McCully would not just create university and workforce housing, but areas surrounding Waikiki will start to look a lot better. This could be a smart community, to Eric’s point about San Diego and the areas (surrounding the convention center) and developing areas where businesses can run nice restaurants and other things that can be used not just by the visitors but all of the residents in that area.

Egged: There are a lot of components to that. We’re looking at the whole transportation plan for access to Waikiki and how you move around Waikiki, not just in cars but in transit. We’re looking for a circulator system for Waikiki. We’re looking at developing pedestrian and bicycle connectivity. We’re talking about an additional pedestrian and bike bridge (across the Ala Wai) that would connect Waikiki to the university.

Petranik: By circulators, do you mean like a bus system that would loop through Waikiki?

Egged: Correct. The idea being that the circulator would be in place of a rail link into Waikiki.

Carey: There are a number of us who think that if you put an elevated rail down Kuhio or down Kalakaua it’s going to destroy a huge part of the success of Waikiki. So rather than complain about it, a lot of Hawaii businesses, under the WIA’s (Waikiki Improvement Association) guidance, have been discussing an alternative solution, some kind of circulator system that would connect with an ultimate transit plan and yet not create a concrete mass in the middle of Waikiki.

Egged: It will probably be a rubber tire (bus) system, a regular circulator that a lot of existing buses would feed into and rail would feed into when the rail is finished, but we’re hoping to get it into place before rail is finished. It has fewer stops and we’re looking at streamlining the trip by having better information about connecting to various bus lines and getting to various areas, prepay as opposed to paying as you get on the bus. All these things that slow down by seconds for each person the time it takes for the vehicle to circulate. The idea is that, as you wait at a bus stop, a bus comes every three to five minutes.

Nishizaki: David, I would imagine that would be great for a convention center with a circulator taking people from their hotels easily to the convention center – some of our private bus companies may not like the idea – but I think that would make the convention center even better.

Gill: One of the problems that hasn’t gotten better in Waikiki, and isn’t going to, is the parking infrastructure and that’s going to be exacerbated in August when Princess Kaiulani Hotel’s parking lot is torn down and a lot of the Moana customers will end up looking for parking here (at the Sheraton) and the workers will as well. We’ve had this discussion in various venues with various developers.

For example, when the new tower at Hilton was built, very little parking was put for those 500 or so rooms and there was a dispute about whether those rooms were residences or resort rooms, which have different parking requirements – 20 percent parking requirement for a transient hotel and so developers have been exceedingly squishy about that. Hilton, for example, in its 2002 documents, described those rooms variously as resort rooms or long-term rooms, depending on how it served their purposes in developing parking or not and that same thing just went through for the new Ritz that’s going up on Kuhio. For once, the (city’s permitting) department actually agreed with us that it shouldn’t be a big switch.

You can’t say it’s a resort, then put it up and all of a sudden say it’s now condos and, oh, by the way, now you need more parking.

Parking is one of the big disincentives for locals to come to Waikiki. That’s what we hear again and again: “I don’t want to go down there. I don’t know where to park. It costs too much. There should be free parking for food and beverage,” and that sort of thing. So, we have been supportive of the rail overall because something needs to be done. People are going to need to get to work one way or the other and the parking is drying up. We are sensitive to the ongoing viability of Waikiki, but we’re also supportive of the rail because we need to ensure that our workers can get to work.

Carey: I don’t think anyone disagrees with the notion of connecting Waikiki to the rail, but where? We looked at the models of it on Kuhio Avenue and it would be a massive concrete structure, which would destroy the retail and even worse while it’s being built. It would be best if it was close to Waikiki and then just connect up, like most cities have done.

Uchiyama: I want to address workforce development because it is really important. Two years ago, with the industry, we got together with the DOE and their career and technology education program (CTE) and developed a curriculum with two classes that have been introduced to high schools: hotel management and travel industry management. We have it now distributed to 12 schools and the objective is to get it on to 26 schools statewide. With the DOE’s collaboration with the community colleges, it was able to get those high school classes accredited so that students get a jumpstart in travel industry exposure and they can go to the community college to get an associate’s degree or continue on to travel industry management. I think educating the community a little bit more through our kids is really important so that people can connect with what tourism brings to our community overall.

Gill: Getting people into housekeeping jobs is what was mentioned earlier. We don’t want to tell our youth the only good jobs in hotels are management jobs. Our training trust is working on a workforce development plan. But the standards that Kyo-ya (owner of the Sheraton, Royal Hawaiian, Princess Kaiulani and Moana hotels) have maintained for employment here are not universal. Not the wages, not the benefits and so on.

You walk across the street to the Hyatt and you got people paid half as much with no family medical or retirement medical or retirement benefit at all and so there is an uneven standard. When I was with the Teamsters, I was bargaining with gas companies, the bus companies and various trucking companies. This hotel provides better jobs than almost every other operation in the state and, at this hotel, you have family medical – you don’t pay for it. You have childhood medical. You have a decent pension, you can afford retirement. So you have what amounts to $29 an hour total package being delivered by this hotel and the other beachfront hotels to some extent farther back in the ranks.

That’s a very attractive package for any young person who wants to get a job and I think a lot of the problem is that people don’t recognize the value of the job. “I don’t want to clean toilets?” Do you want to clean toilets for $20 an hour and another $10 in benefits? That’s the question. I was a dishwasher here. I washed a lot of dishes. I made more washing dishes here than people driving trucks and the benefits are better. So, I think part of it is educating our young people about the fact that these are good jobs. We’re the third-highest total compensation package in the country.

Carey: It is important to realize that there are unique jobs that cover a full gamut. Not everybody is going to go through college and get a master’s degree. That’s not what everybody wants.

Gill: Even the master’s are working tables.

Carey: We have three-generation families in our housekeeping departments. I would invite you to come down to housekeeping briefing in the morning and or lunch and look in the eyes of these housekeepers – generally women, but sometimes men – and say they are not satisfied with what they do everyday. When someone cleans your room, how does it make you feel? It makes you feel great and the staff knows they are creating that feeling.

Gill: Is that invitation for me? Can I come to your place? (laughter)

Carey: There’s two buildings you can come to. (more laughter)

Gill: Just the two we have in the contract? (more laughter)

Egged: One thing that goes unnoticed, in the 15, 16 years we’ve had HTA, we have had a government agency that actually works on all the different aspects of tourism, such as workforce development. Like George and I, Mike McCartney is right on the frontlines and dealing with homeless issues, beach-erosion issues and the like. The HTA’s role in between the industry and government and the community is an extremely valuable one. So, I think our internal government system works better now than it ever has in the past.

Nishizaki: Another good thing the HTA has done is educate young people in the importance and value of our industry, because all too often people who are not in the industry look at us and say, “This is only for the visitors. Waikiki is only for the visitors. Don’t go there.” It’s important that young people learn the importance of the industry, more so than people of my age who are not in the industry.

So, David, you guys should be commended for what you’re doing about developing a workforce, not just for the management side but if they decide to get a culinary degree at community college and work in their own town, I think that’s equally important. We’ll find managers, but we want to find people who understand the value of hospitality and understand how important this industry is to the state and that is something that you can do.

Gill: We’re making an investment. Our training trust is taking this up and that’s going to cost money. Getting more people in is a real problem. On the other hand, people stay forever because it’s a good job and there aren’t better jobs out there. I thought I would work for six months or maybe a year in 1976, and, much to some people’s chagrin, I didn’t quit. The truth is that’s what happens to a lot of people. They come in and they’re not sure. They look around at their options and realize these are good jobs, not universally, but in general our industry pays better and the benefits are better here not just because of the settlements we’ve reached, which sets a certain bar, but also because of the law (Hawaii Prepaid Health Care Law of 1974). We can be grateful that we have a better law here, which spreads the cost out equitably. But we need people to recognize that these are good jobs and let’s not lose them. Let’s not give away these jobs.

Egged: When you look around this table, you assembled six industry leaders. Four of us, I think, were born and raised here. George and David (Carey) have been here most of their lives. The industry is led by people with a long-term stake in the market.

Petranik: Rick, I want to follow up on rising sea levels. The redo of the Moana is taking that into account. What else is being planned to prepare for rising seas?

Egged: Ernie and I met with NOAA (National Oceanic and Atmospheric Administration) about a year ago and we talked about rising sea levels. All of our infrastructure, sewer systems and power, everything is gravity fed and everything goes to the bottom. As we look to the future, I like what Kyo-ya has done in elevating those systems because I think we’re all going to need to do that as we engineer the new buildings. We need to start going up.

Carey: At Waikiki Beach Walk, we put systems on the roof of the second floor that used to be in the basements.

Egged: If you look at the projections, any substantial sea level rise is still 50 to 60 years out. So that means that it’s not on a lot of people’s redevelopment horizon because you’re normally looking at what 30 to 40 years when you’re putting in a substantial amount of money. So, yes, you know it’s out there and it is starting to be included in some of the redesigns, it’s still not close enough to force substantial redevelopment at this point. That having been said, we are following it closely because it obviously is important. There are a lot of ways you can address the sea-level rising: You can pump ground water, for example. That’s why we were talking about building up the beaches, because that gives us a buffer. So, there are a lot of things you can do to forestall the issue and keep us competitive even beyond the time scientists are currently saying if we don’t do anything, Waikiki will be flooded.

Szegeti: Some of the really positive things I’ve seen recently include HTA’s support and things like the Hawaii Food and Wine Festival. People enjoy the sun and the surf, and when they are done, they want the culinary experience. The synergy between the culinary experience and the overall visitor experience. As they get on the plane and leave, a lot of times the last thing they remember is their dinner at RumFire or at Roy’s or at Alan Wong’s. The Farm to Table initiative that Kyo-ya is doing is really a hit. David mentioned that, five to 10 years ago, you couldn’t find a good place to eat but now you’ve got Roy’s, D.K. Kodama, Nobu’s.

Egged: Waikiki has once again become the culinary center of Hawaii.

Szegeti: That’s why the culinary center on Diamond Head (part of Kapiolani Community College) is very important to us, because it’s going to bring a whole new culinary experience.

Egged: Also important to Waikiki’s future is we have been able to increase our room values. We have gone from having 24 percent of our rooms fit into the luxury or upper mid-scale level 10 years ago to having 44 percent, and it is increasing, because as new units come online they are not going to be at the low end of that scale.

If you look at the total dollars generated from Waikiki using HTA’s figures over those 10 years, the total dollars generated just in Waikiki have grown 60 percent because we’re bringing in a higher-end spender to fit into our higher-end product.

Gill: That’s where some of the collisions have occurred with the investor groups. They have said tourists are not going to pay for services, so they are going to eliminate service, and that’s what we’ve seen. Hilton has eliminated room service.

We’re seeing 45-minute waits to check in because they’re not staffing the front desk. There is a push from the investors to reduce customer expectations. I’ve heard it described as similar to what the airlines did; nobody expects a flight meal anymore. You don’t get any of those amenities. You don’t get pillows any more so that the traveling public has learned to accept reduced expectations. There’s an international trend or at least a national trend that they are not building full-service hotels; they are building limited-service hotels.

The danger is in my mind that the investors’ short-term interest is going to drive a reduction in the quality of the visitor experience. We’ve got to have a product that survives some of these investor-driven fads. How do you sell a Hawaii vacation at the prices we’re asking without providing good service? There might be some market advantages for particular investors temporarily, but, in the long term, how does that serve our interest in terms of maintaining the quality of this resource for our people’s sustenance? We need people to understand they will get good service when they come to Hawaii and there are just some fundamental differences here in terms of economic interest. Bridging those differences of interest is very important.

Petranik: We’re in the middle of a boom now, but we’ve been around long enough to know it’s not going to last forever. How are we getting ready for that next downturn?

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