Tourism industry
supports overhaul

Legislation would raise the room tax
but guarantee funding for promotion

By Russ Lynch
Star-Bulletin

A broad cross-section of Hawaii's tourism industry has thrown its substantial weight behind tax increase proposals before the state Legislature in order to get something they have sought for years -- state marketing funds guaranteed by a percentage of what tourists spend.

In a statement completed last night, the group said it supported a controversial increase in the hotel room tax, recommended by the governor's Economic Revitalization Task Force.

The changes endorsed by the industry group would mean more government oversight of how Hawaii is marketed as a destination and an end to way the Hawaii Visitors & Convention Bureau currently operates.

"While the visitor industry is not comfortable with the idea of higher taxes that will add to the cost of a Hawaiian vacation and reduce Hawaii's competitiveness, the visitor industry is willing nevertheless to support modest tax increases if it will lead to dedicated funding at globally competitive levels," said the statement.

Sent to legislative leaders, the statement was signed by 46 tourism leaders, including representatives of the HVCB, the Hawaii Hotel Association and the Chamber of Commerce of Hawaii.

The changes would mean the industry may get as much as $60 million in the first year in public funds for generic marketing of Hawaii as a destination, more than twice the current total annual funding for the HVCB.

That would be on top of the $300 million or so that private businesses spend on their own advertising and marketing.

In return, the state would play a stronger supervising role and have a much more direct involvement in specific marketing direction that it now has.

The HVCB has pitched hard for years for dedicated funding, a guaranteed source of money that is derived directly from its success in bringing tourists to Hawaii.

However, under the structure developed by Gov. Ben Cayetano's task force and backed by the industry, the marketing work would be done under contracts awarded by a new independent tourism advisory board supervised by the state Department of Business, Economic Development & Tourism.

"The tourism board would have full control over the direction of marketing and contract for the implementation of the marketing plan," said Seiji Naya, DBEDT director.

He said government oversight would be called for since the funding would come from tax revenues.

Requests for proposals would go out and the HVCB would have to compete for the work.

"The HVCB would have ample opportunity to respond to the request for proposals" to do the marketing, said Naya. "They're in a better position than others, but it will be on a competitive bid basis."

Proponents say using a set portion of the hotel tax makes the funding directly based on the marketer's success -- the more tourists, the more the money.

But the task force's hotel room tax proposal is under fire from the counties, which now get about 95 percent of the revenues from that source.

Tourism and economic development committees of the state House and Senate have been hearing bills based on the task force recommendations. DBEDT, the HVCB, the Hotel Association and private sector tourism representatives have testified in favor of the room tax increase tied to dedicated funding.

Yesterday's agreement by the visitor industry coalition, which has studied the economic revitalization proposals for several weeks, was an added boost for the argument.

"It's a broadly based industry coalition of airlines, hotels, retailers, small businesses, the Chamber of Commerce," and others involved in tourism, said Roy Tokujo, HVCB board chairman and a member of the governor's task force.

The tourism part of the task force's recommendation package was so important that the industry decided to wait until it could give some real guidance on how it should be done, in a unified presentation, Tokujo said.

The new bills would:

Raise the transient accommodations tax, known as the hotel room tax, from 6% to 7%.

Hand three percentage points of that, worth $60 million from last year's figures, directly to a new tourism advisory board to spend on marketing.

The board would contract private services to do the marketing.

The Hawaii Visitors & Convention Bureau could bid for the work and is seen as the likely winner.

If so, HVCB could become an independent business, no longer asking the state Legislature for funding.