Isle tourism meeting
gives more bad news

Officials do not expect improvement
for the rest of this year

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By Russ Lynch
rlynch@starbulletin.com

Hawaii tourism is faring worse in November than it did in October. December does not look good, and industry executives have serious doubts about a turnaround anytime early next year.

Even in a period of pronounced bad news for Hawaii's travel-driven economy, yesterday's meeting of the Hawaii Tourism Authority was notable for its collection of depressing outlooks for the near future.

Also yesterday, the state Council on Revenues slashed its projection for this year's state general fund revenue by $158.4 million, to an estimated drop of 0.7 percent from a projected growth of 4.1 percent.

Preliminary data for October show hotel occupancy running 50 percent to 60 percent below a year ago, said Murray Towill, president of the Hawaii Hotel Association.

"The last detailed numbers we've seen were for September. At the end of the month, it was 57, 58 percent," Towill said. Now -- two months after the terrorist attacks that also demolished worldwide tourism -- it is worse.

"The end of October, unfortunately, was much worse than the beginning of October," he said. "It doesn't bode well for November or December." The "spooky thing" is the downturn in bookings for November despite a 10 percent drop in room rates, he said.

"I don't think that anybody sees any kind of marked improvement for the rest of this year, and the first quarter looks down," he said. "This is not going to change dramatically."

In the first month since the disaster, hotels in Hawaii lost more than $140 million in revenue, Towill said.

While daily passenger arrivals appear to show some improvement, those figures are skewed by the fact that the data do not separate returning Hawaii residents from tourists arriving for vacation, said Pearl Imada Iboshi, research chief in the state Department of Business, Economic Development & Tourism.

Preliminary information shows that Hawaii residents are less inhibited about traveling than mainland tourists, and the percentage of returning residents on flights to Hawaii is growing -- accounting for the overall passenger gain, she said. Detailed information about who came to Hawaii in October will not be available for about a week.

Although October was better than projected, "along came November and December, and it got worse," said Keith Vieira, a member of the HTA board and vice president and director of Hawaii operations for Starwood Hotels & Resorts Worldwide Inc.

Starwood laid off workers, and managers agreed to unpaid weeks off, plus a 20 percent pay cut. "We've never had a situation like that," he said.

The longevity of the problem, as shown in bookings, means more drastic action will be needed, Vieira said. Now people will be laid off whose skill levels are not high enough for them to be readily able to find other jobs, he said.

Increased marketing efforts and travel deals are failing to draw interest from the Japanese market, said Peter Schall, senior vice president-Hawaii region of Hilton Hotels Corp. and an HTA board member.

Schall was in a delegation from Hawaii that went to Japan in mid-October. While there, he learned Japanese travel companies were developing package tours to Hawaii, including the air fare and hotel rooms, for as low as &YEN7,800, about $310 -- less than half the lowest price in normal times. But so far, the deals have attracted only a few takers, he said.

"It's a good sign that they are actually aggressive" in marketing Hawaii now, he said. "It's really a bargain basement."

The trouble is, it takes time to get pricing structures in place and to get the word out, Schall said.

Carol Pregill, executive director of the Retail Merchants of Hawaii, said she polled her 43-member board, which represents a broad cross-section of island retailing, and learned mainly that business is "getting worse."

Initially, retail sales were down 20 percent to 60 percent from a year ago, she said. Now sales are down 15 percent to 70 percent, meaning that the numbers at the good end are getting better but those who were doing badly are now doing worse, she said.

The only positive aspect she could find is that island stores have plenty of merchandise, which will lead to lots of bargains for shoppers.

But Pregill said buyers may be few because of widespread layoffs arising from the tourism downturn.