Tourism drought


POSTED: Thursday, May 28, 2009

Hawaii's visitor industry, which began sagging in April 2008 after the abrupt closure of ATA and Aloha airlines, continued its descent last month with further declines in arrivals and visitor spending.

; After sustaining 10 straight months of double-digit decreases, Hawaii's visitor count fell 1.3 percent last month. The continued decline, while shallow, was hardly cause for celebration, given that it was lower than already-depressed numbers from the year-earlier period. In the aftermath of last year's airline shutdowns, April arrivals in 2008 were down 7.6 percent to 548,792 visitors while visitor spending remained flat.

Arrivals fell to 541,610 last month even though Hawaii's visitor industry had Easter and spring break to push domestic demand and Golden Week to drive Japan travel, which was one of the industry's brightest spots along with business conventions, which rose 9.8 percent from a year ago. Discounting kept arrivals from bottoming out; however, it also contributed to the 12.3 percent decline in visitor spending.

Preliminary hotel data shows a continued decline from a recessionary April last year, said Joe Toy, president of Hospitality Advisors LLC.

“;We haven't seen a bottoming out yet,”; Toy said. “;I think it will be mid-2010 before we'll see a more sustained uptick.”;

;  Lagging consumer confidence, falling financial markets, the housing crisis, the global financial downturn, unprecedented unemployment levels and the ill effects of business travel restrictions, swine flu and increased visitor taxes have clouded the outlook for Hawaii's visitor industry, said David Carey, president and chief executive of Outrigger Enterprises Group.

“;I'm not real optimistic that we'll see any improvement soon,”; Carey said. “;There is tremendous profit-margin erosion.”;

As Hawaii's visitor industry moves through the remainder of the year, the health of the visitor industry and the state's economy will be more dependent on visitor spending than arrivals, said Marsha Wienert, the state's tourism liaison.

From a bottom-line standpoint, Hawaii's visitor industry would be better off trading some occupancy for more spending, Carey said.

Steep discounting has put some Hawaii hoteliers on the edge of survival, he said.

“;Half a dozen or so properties are really struggling and have dropped their rates to barely profitable levels,”; Carey said.

The state Legislature's decision to increase room taxes for visitors is going to make it even more difficult for Hawaii's hotel industry to turn a profit, he said.

“;Right now, travel to Hawaii is very price-sensitive,”; said Jack E. Richards, president of Pleasant Holidays LLC, Hawaii's largest wholesaler. “;Any change upward will decrease travel because they will go somewhere else.”;

The Sullivans of Rockland County, N.Y., are an example of the importance of pricing to Hawaii's visitor industry, which relies on a mix of leisure and business travel.

James Sullivan and his family, who arrived at the end of April, turned a business trip to Hawaii into a vacation. They spent a week on Oahu playing in the water and surfing for bargains.

“;We used discounts to save money on breakfasts and dinners and we enjoyed getting a free mat at the ABC store,”; said Laura Sullivan, James' wife. “;Every little bit helps.”;

Even Japanese travelers — those who are still coming despite the swine flu scare — are hunting for bargains, said Akio Hoshino, senior vice president for Jalpak International Hawaii.

“;Our less-expensive tours are in demand,”; Hoshino said, adding that this development has lowered profit margins.

The Legislature's decision to increase taxes for visitors will cause more harm, he said.

“;We cannot change previously advertised rates through September,”; Hoshino said. “;With swine flu, that means we have a double hit.”;