HVB president: Image is everything

Paul Casey says that state mandates and budget cuts hurt Hawaii's sales pitch

By Russ Lynch
Star-Bulletin

Paul Casey, HVB's president and chief executive, said because the Legislature mandates how half of the bureau's $25 million budget is spent, advertising has to take the brunt of the cuts.

The HVB already has prepared a 1996-97 budget that counts on only $23 million from the state after the Department of Business & Economic Development said it will hold back $2 million in response to the state's budgetary woes.

Casey said state legislators are also discussing another $1 million cut. He's lobbying against any more cuts because, he said, it will hurt the HVB's effort to create a brand image for Hawaii as a destination.

"You need a brand and image globally to convince people to come to Hawaii," he said. "You need a central body to do that and that central body is the HVB."

But Seiji Naya, director of DBEDT and the person responsible for administering the state's payments to the HVB, says times are tough throughout the state and if the HVB needs more money it should go to its membership and the rest of the tourist businesses.

Too many isle businesses are getting a free ride from the HVB's state-funded promotions, he said.

"They have to raise their own funding. Membership (of the HVB) has not responded as they should be when tourism is not doing as well as it should be," he said.

Casey contends that private businesses already are doing their share.

They pay $2.2 million a year in membership dues, equal to less than 10 percent of the state's contribution. But they also provide $5 million a year in "in-kind" contributions, such as hotel rooms for visiting travel journalists, airline seats and rental cars for mainland travel sellers and so on, he said.

They also come up with $6 million a year in cooperative advertising funds, for joint marketing programs put together by the HVB but largely paid for by the private sector.

"So by any definition, we get about $13 million a year in private contributions direct into the Hawaii Visitors Bureau," he said.

Casey said the HVB has already reduced its staff, cut its rented space in half and trimmed operating expenses, but it still has to spend about $8 million on programs ordered by the DBEDT or mandated by the Legislature.

Other fixed expenses such as rent, wages, taxes, and supplies make up about another $3 million. That leaves the HVB with about $12 million for all of its marketing and market research and if cuts have to be made, that's where they'll come from.

In its steps to do without $2 million of the $25 million appropriation, the HVB has budgeted to trim U.S.-Canada advertising spending by more than 7 percent, chop off all advertising in Europe and reduce South Pacific advertising also to zero. The $840,000 in advertising cuts was the biggest bite into the budget.

DBEDT did allow the HVB to chop off its $50,000 in mandated funding for the Honolulu Marathon and trim its promotion of four neighbor island golf tournaments by 25 percent. However, Casey said, he was left with having to cut $1.2 million from discretionary spending and advertising had to take the biggest hit.

Naya said there are cooperative advertising and other ways that the private sector could step in and help.

He said he stands by the mandated sports marketing, for example. DBEDT did allow some cuts there but won't lose the program because sports marketing is very effective in bringing tourists to Hawaii, Naya said.

"It has what's known as externality," Naya said. He said events such as a major golf tournament bring Hawaii to millions of television viewers across the nation without the need for direct spending on advertising.

However, Casey said that Hawaii is in an extremely competitive tourism market and is far behind places like Bermuda and Jamaica in creating a brand image for itself as a destination.

Casey said cooperative programs in which the HVB provides the seed money and private businesses buy advertising are very different from the brand-image approach. They do promote Hawaii but their main point is to bring attention to the business advertisers.

The HVB is left, after budget cuts, with $6.9 million to do all its brand-image advertising.

It doesn't go very far, said Frank Haas, chief executive officer and managing director of Ogilvy & Mather Hawaii, the HVB's advertising agency. A 30-second spot on a hit network show like "Seinfeld" runs around $400,000 for one appearance, he said. A National Geographic magazine print advertisement costs $325,000.