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The Center Despite the post Sept. 11 drop in tourism, it looks like the Hawaii Convention Center will continue to pay down its debt as it approaches its fifth birthday. Questions about whether it is really paying off for the state, however, remain.
of Convention
5 years after opening,
Marketing to emphasize customers
the Hawaii Convention Center
is paying its debts and drawing
visitors, but still not funding
all of its own operating costsBy Russ Lynch
rlynch@starbulletin.comIts debt is paid by a percentage of state hotel room tax collections, which so far have been sufficient. The theory behind the financing system was that taxes from additional hotel revenues generated by a convention center would pay for the facility, which was not itself expected to make money.
A convention center was to bring in big-spending conventioneers who would fill hotel rooms, dine in restaurants, take trips to other islands, visit attractions and through all of that activity, contribute to the economy, convention center supporters say.
While the 17.3 percent of room tax collections set aside for the convention center is an arbitrary number set by the state Legislature, it is an estimate of how much hotel business is created by conventions.
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The Hawaii Visitors and Convention Bureau, responsible for long-term bookings at the center, has figures that it says prove the estimate is on target. In what the HVCB calls the center's first five-year growth cycle, it has attracted 175 bookings with about 794,000 attendees. That has translated into 1.7 million hotel room nights -- the number of visitors times the number of nights they were here -- and by the standards used by the state for such calculations, that adds up to $2.36 billion in visitor spending, the HVCB said.According to the HVCB, the center also has attracted meetings that would have outgrown Hawaii's ability to handle them, such as the American Dental Association, which brought 32,000 attendees in 1999 and plans to bring 40,000 in 2009.
But the day-to-day operation of the center continues to run at a loss of $3.5 million to $4.5 million a year, said Lloyd I. Unebasami, chief administrative officer of the Hawaii Tourism Authority.
The bonds that finance the convention center don't get paid off until 2025 and the current payment schedule would mean a total cost of $768 million, more than doubling the $150 million land purchase and $200 million construction cost, according to state Budget Director Neal Miyahira.
The current debt schedule requires annual payments of $26.5 million to pay off a principal that totals $331.7 million, Unebasami said.
The center's portion of tax money has been able to foot the bill.
"That runs from about $29 million a year to $34 million or $35 million," Unebasami said. "So that supposedly should be enough" to cover the debt service as well as the operating losses, he said.
Room tax revenues dropped after Sept. 11, although rates remained high and mitigated the loss to some extent.
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The latest available figures from the state tax office show the transient accommodations tax collections for July through November, the first five months of the current fiscal year, came to $71.7 million.That was down 3.6 percent, or more than $3 million, from $74.4 million by the same time last year.
That should still be enough, however. The convention center's share for the five months, at 17.3 percent of the total, would be $12.4 million, close to half the debt service for the full year.
SMG Corp., the Philadelphia-headquartered professional management firm that operates the center for the HTA, says that the bigger the convention, the bigger the operating loss. The loss could rise to $5.5 million a year as the goal of attracting larger meetings is achieved, Unebasami said.
While a bigger meeting costs the convention center more to handle, it also brings more people who contribute more to the economy, the theory goes, boosting the overall economy by an amount greater than the center's deficit.
Conventioneers and those here for business meetings or incentive tours paid for by their organizations spend much more in the islands than leisure tourists do, making them a high priority target, the Hawaii Visitors and Convention Bureau says.
The best way to increase Hawaii's wealth without overcrowding the beaches and roads is to nudge the visitor balance in the direction of conventions, the bureau says.
Different views
One staunch critic of the center, former Ala Moana area resident William Lech, is unswayed by official comments that the center is a financial success."I firmly believe more and more that it is a white elephant," Lech said. He alleges that while the convention center debt officially is $332 million, the total repayment will be more like $600 million by the time the debt is cleared. Official figures show Lech's estimate is on the low side.
Lech, former president of the Sunset Towers condominium owners association and chairman of the Ala Moana Residents Advisory Council and now a Kailua resident, said the debt will be passed on for years.
And he said the original estimates of how much conventions would contribute to the economy has long since proved to be an overstatement of what really happens.
The 1995 environmental impact statement that convinced Gov. Cayetano to put aside his concerns and sign the enabling legislation said the center would attract an average of one event a week, bringing nearly 400,000 attendees a year. The real numbers quickly came down to 150,000-175,000 attendees a year and this year it looks like fewer.
The reality, Lech charged, is that the contribution of conventions to the economy is about 10 percent to 15 percent of what was originally estimated.
Reflecting on more than a dozen years of battles -- first to select the site and then to get the center built and operating -- Don Takaki looks at what he sees as a beautiful, functional and magnificent structure.
"My wounds are not so sore now," said the former chairman of the Convention Center Authority, who had a prominent role in the center's development.
"The primary purpose with the original legislation was to bring in more offshore groups, convention and meetings groups, who would then occupy hotels, spend money shopping and in restaurants and in various other ways that would enhance the state economy," said Takaki, chairman of Island Movers.
"Big meetings were balking at coming to Hawaii because we had no major central facility for meetings," he said. "Many other places already had significant convention centers or were building them. We were out of step with that market."
"Some major organizations, such as the National Association of Realtors and the American Medical Association, had made it clear that they would not return to Hawaii until we had a convention center," he said.
Takaki has one criticism. He doesn't like the way the HTA responded to local demand by opening up the center to local events. They don't add anything to the room tax base, he said, and his view is that the center should be kept exclusively for visitors from offshore.
The convention center was built "to get heads on beds," to generate taxes to cover the cost, he said.
But the public complained, seeing the $200 million construction bill and the $150 million land purchase as coming out of their pocket, for a facility they could not use.
The Tourism Authority defended opening up to local groups, even wedding parties, by saying it is a public facility owned by the people of Hawaii, who have a right to use it.
Great care is taken not to compete with hotels, which have their own meetings facilities, said the HTA's Unebasami.
"We had to really talk to the industry people to make sure they are comfortable with it," he said. "We did open it up to weddings," he said, but they are very short-term bookings, for events to happen within only one or two months after the date they are booked.
In those cases, the hotels have waiting lists and the wedding parties needed to find another place, he said.
Looking forward
The center is beginning to get recognized. The latest boost it got was from a Metropoll study of 40 convention destinations. Hawaii, which was ranked 11th in the study two years ago, jumped to second place, behind San Diego. The study measured a number of factors such as the availability and attractiveness of convention facilities, safety, community attitudes and the general comfort of a place to hold a convention.Despite the dragging national economy and the drop-off in travel, particularly from Japan, that followed the Sept. 11 disaster, the HVCB has 30 bookings for meetings at the convention center this year. Last year, the center booked 23 events.
Most of them are in the range that convention center officials believe is ideal for the facility, 3,000 to 4,000 attendees. But there are some big ones, too.
Two international jewelry shows, one in March and one in August, are each expected to attract 12,000 people to the center and produce more than 30,500 room nights of business for local hotels. The meeting of the National Medical Association in August is expected to attract 10,000 and fill 2,000 rooms to produce 15,500 room-nights.
In some cases, who the people are is more important than the size of the meeting. The state has high hopes for American Society of Travel Agents World Congress, for example. Scheduled for November, the meeting is expected to attract 6,000 people connected with travel agencies around the world.
They will get a first-hand look at Hawaii and be better able to sell island travel when they go home, organizers say.
Last month's convention of Meetings Professionals International brought in 3,000 people, mostly with roles in selecting sites for future conventions. "We need people to come from offshore to occupy hotels," Takaki said. "That's what it is all about."
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Randy Tanaka recalls visiting a noted wood carver on Maui years ago and seeing a sandalwood stump the carver had left untouched for 30 years. Convention center
marketing to emphasize
the customersBy Russ Lynch
rlynch@starbulletin.com"It hasn't told me what it wants to be," Tanaka recalled the carver saying.
Now director of sales at the Hawaii Convention Center, Tanaka said the center has said what it wants to be, and that is the theme of its current marketing approach.
He credit his boss, Joe Davis, the center's general manager, with coming up with the theme. Davis was riding the escalator in the center with Tanaka one day and they were discussing themes. Davis looked up at local artist John Wisnosky's painting "For the Adventurers," depicting early Polynesian explorers. "That's it," said Davis.
The center's marketing now will hinge on the "voyagers" theme, Tanaka said.
The theme was already there in the "sails" design above the main entrance.
"We're rolling out a product that speaks of navigation," Tanaka said, a gathering place in the Pacific Ocean.
"This facility is beginning to come to life. That mural is how we are going to tell the story," he said. "We look at the facility through eyes of the customer."
The voyager picture entrances them as they go up the escalator. "We're using it as a visual to tell our story about travel, about vision, about the destination and about teamwork," Tanaka said, the qualities that led the ancients to find Hawaii and explore elsewhere in the Pacific.
SMG, the center's management company, has set new standards internally to increase aloha and hospitality. The center doesn't have "security services" any more, for instance. "It's all customer service now," Tanaka said, and the personnel have undergone extra training with that in mind. Everyone is there to help, he said.