FL MORRIS / FMORRIS@STARBULLETIN.COM
After 9/11, a war, SARS and a major change in marketing, Hawaii tourism is refocusing.
So ... where do we go from here?
Japan, the struggling No. 2 market for Hawaii tourism, is taking another hit this year, and recent flight cancellations have ushered in uncertainty about when a recovery will happen. North America is holding strong and is growing into Hawaii's dominant market, which is great for filling planes and hotel rooms, but means Hawaii is becoming less international.
Amid a tumultuous year, the Hawaii Visitors & Convention Bureau was stripped of its state duty to market the islands to international visitors, starting next year.
So, the Star-Bulletin sat down with a group, representative of the tourism industry, to talk about the state's $10.1 billion lifeline, and where it may be headed.
What does the tourism industry think of the state hiring new groups to take over international marketing from the Hawaii Visitors & Convention Bureau?
FL MORRIS / FMORRIS@STARBULLETIN.COM
Ron Williams, president and chief executive of Atlantis Adventures, right, joined Robert Calhoun, of Marriott Vacation Club International, left; Ron Wright, of Continental Airlines; and Thos Rohr, of Waikoloa Land Co., to discuss the direction of Hawaii's tourism industry.
Ron Williams: The decision is made, so we all have to move forward and trust that when the decision was made, it was the right decision to be made and support it. ... Change sometimes is a little uncomfortable, however, we all know that change can be a really good thing. So we try to keep very positive on it. My personal opinion is that it's a decision. Let's support it and move forward.
Ron Williams
>> President and chief executive of Atlantis Adventures.
>> Board member of the Hawaii Visitors & Convention Bureau.
>> President of the newly formed Activities and Attractions Association of Hawaii.
>> Maui resident.
Ron Wright
>> Continental Airlines' managing director of sales and marketing for Hawaii.
>> Vice chairman of the state Hawaii Tourism Authority.
Robert Calhoun
>> Hawaii/Asia regional vice president of sales and marketing for Marriott Vacation Club International.
>> Oversees four time-share properties on Oahu, Kauai and Maui; and a property in Phuket, Thailand.
Thos Rohr
>> Waikoloa Land Co. president.
>> Oversees master planning, design direction, financing, construction, government relations, marketing and operations of the Waikoloa Beach Resort on the Big Island.
>> Longtime president of Kohala Coast Resort Association.
Ron Wright: One of the things that led (the Hawaii Tourism Authority) to the conclusion that that was probably a good idea was Japan. We kept getting a lot of questions about Japan, losing market share, not quite living up to expectations, and that created the idea -- when combined with the law (that created the HTA): Let's just go out there and see what the other major market areas may have to offer. And it was amazing. There was some really good stuff out there. So, we weren't on a crusade to tear up something that's really very good. It has really nothing to do with performance. It had to do with partly the law, partly with the competition, and there was some very good competitive bidding that went on. So we'll see. I have high hopes, and it's a little early to tell. If these people perform like they say they're going to perform, I think we'll be as good or better off.
How do you keep five separate marketing agencies accountable for results? Who's in charge?
Wright: Well these people, they're sophisticated. They have reporting structures that are so streamlined that it makes it easier to monitor than what we had before, believe it or not. They were very accountable and they're very results oriented. So I think with reports ... on a monthly basis, I think we'll know very quickly what's going to happen.
It's hard to get into the mechanics of it, but all of us have interviewed different advertising companies, marketing companies, and some just stand out. Some have the mechanics already built into the system to make sure that the client gets immediate feedback, and reporting capabilities. ... Yes, perhaps it's a little extra work in the contracting phase; we have to do four or five contracts vs. one, but the benefits come afterwards where maybe three, four, five are more efficient. ...
We'll see. I have high hopes it's going to be quite good.
How's Waikoloa doing?
Thos Rohr: We had the best April and May we've ever had at our hotel. This week is biggest week ever in Waikoloa. We've been walking people to the other resorts. We've actually had a terrific 2003. From what I'm told by both Marriott and Hilton, the bookings for the rest of the year are fabulous. I think it's a tribute really to those who are out there marketing, both the hotel companies and airlines, who have really gone after our primary market, which we ignored for about 10 or 15 years. We ignored North America. I was a voice in the wilderness in the old days, saying, "Wait a minute. The Japanese are great, but that's just one market." We've got this wonderful huge market in North America, and boy, they're back. I think we're going to have a really terrific 2004. I'm looking forward to that.
A recent state survey found that residents like tourism, depend on it for jobs, and want tourism to grow, but many oppose more hotel development. Thoughts?
Rohr: I think it's important for the resorts to develop responsibly ... Some people oppose any change, but if you look at the Big Island and Maui 40 years ago, and you see the assets that the local people now have because of the resort development at Kaanapali and Wailea, what fabulous places. They couldn't get to the beach at Kaanapali, or at Waikoloa, or at Kapalua. I built Kapalua -- couldn't get to the beach. Now there's great public access. Families are down there every weekend, or every day. I think that responsible resort development has been great for the local people, and I think we'd find out that if you took a real poll of the local people, instead of the activists, you'd find out that most local people are cheering for it. When we go present something to the Planning Department, we could have 5,000 people in our favor if we wanted to. ... They're building a cultural garden at Waikoloa that's going to have entertainment, hula shows, Japanese bon dances, movies and theaters. Twenty-five percent of the people who shop in the Kings' Shops are local. They love it. They didn't have it before. ... There's two sides to that story. A lot of local people should tell their side.
At what point does a resort development start to turn into a Waikiki?
Rohr: I think the biggest issue for all people anywhere is traffic. If you solve traffic, there's not a problem, because the reality is if you can solve traffic, locals love resorts. They go there. They shop there. They take their kids there.
Wright: That's a killer. ... You can have the best infrastructure in the most pleasing surroundings but getting to and from, if the locals can't get through that normal access, it's, all of sudden, tourism is bad. It's not necessarily the attractions, hotels or the venues; it's how the local people get to and from. In fact, I think that's a concern in Maui, that some of the main roads are getting busy. And that just takes responsibility to go back in there and make sure that the infrastructure is in sync with development. We need to do a lot more of that.
Williams: Where I live in Maui, I do what you call the commute. I commute everyday from Maui to Oahu, and I was born and raised on the Big Island, Hilo. ... It's an important time and government and private organizations really need to work on our infrastructure. ... Tourism has been a good industry for myself, my family, and I'm sure there are lots of people who feel that. I think we need to help that by making sure that we improve our infrastructure and continue to improve that as we improve our capacity. My criticism is I don't think we've done a very good job of that at this point, and I think we need to think hard on that. ...
A lot of these resorts have helped us improve infrastructure, by drilling for water; traffic, adding roads. I think we need to step up to the plate also at the state ... Another one is cruise ships, infrastructure for cruise ships, harbors. It's horrible. Kailua-Kona (pier) basically had to fall down before they decided to fix it. ... We need to make sure that we continue to fix the infrastructure because it's not only the experience for our guests, but it's the experience for all of us. We live here. I think that's the responsibility of government and ourselves.
What is tourism's outlook for the coming year?
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"I see that recovery from Japan occurring this year, but continuing very strong, right into 2004." --Robert Calhoun, Marriott Vacation Club International
Wright: I think the outlook is very stable. Hawaii has found its niche in that it's safe, it's American. It has a lot of attractions and a lot of places just to come and relax and heal, good health and wellness state. As such, there is a demand for Hawaii from the North American continent. Business is going to remain very strong through the rest of the year.
This is my own opinion; it's probably not that of every board member at HTA, but I think we're on about a three-year, pretty stable, growth rate, inasmuch as we'll keep filling the planes ...
However, as it relates in Japan because of the recent announcement in flights (reductions) and the residual of SARS and the economy of Japan, the cultural reasons why people don't travel out of Japan during tough times, I think we're in for a rough road there. ... I'm glad I wasn't quoted in my earlier predictions because I said it was going to be the end of the year -- it probably fell and is going to take a little bit longer than that.
As you know, there's a new marketing entity in Japan and we're looking for good things out of Dentsu. HVCB is going to help them in that regard, but that should enable us to get down to the core business of trying to develop a little more traffic out of Japan.
Robert Calhoun: I read with interest the same announcement by Japan Airlines talking about reductions of flights ... and frankly I was surprised by it. I then read at the end of that article a little ending note that things could quickly change, based on the demand you spoke of. I look for that demand to increase and perhaps I'm being a bit contrarian, but from what I've read and from what I've heard, speaking with colleagues, the recovery there is stronger perhaps than Japan Airlines is reading on, and not only do I see that recovery from Japan occurring this year, but continuing very strong, right into 2004. That's related to westbound traffic from the mainland.
I hope there are such things right now that benefit a strong recovery. I really am looking for a strong (second, third and fourth quarter) with major momentum into 2004 for the same reasons: It is a safe haven; it's a place to come relax and rejuvenate. Hawaii has forever been that paradise for those folks on the mainland.
What about SARS?
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"I think Oahu needs to get some attention, some revitalization, redevelopment, upgrading." --Ron Wright, Continental Airlines
Calhoun: We really weren't affected by SARS, to be honest. I think that the travel out of Japan, back a few months ago, I think the travel was so depressed coming eastbound that SARS didn't help it a bit. I didn't notice any real slowdown that I could attribute solely to SARS ... I think SARS was just frankly another layer that was heaped on.
Is Maui relying too much on North America?
Williams: The Maui market also has the luxury of having the cruise ship industry being another strong factor, and cruise ships for attractions is a very strong mix there. I think that Maui's market has been, knock on wood, great. The North American market is strong. The combination of things has helped us. Being, as Ron says, America, and being paradise in America, it's really helped. I think Maui's marketing efforts have been very strong to the incentive market, North American market, the cruise ships are a great market.
I don't think you ever can forget diversity. I think we need to continue to strive to keep diversifying because it's a cycle and we all go through it. I think Ron's point about a three-year is an interesting one because we have to keep continuously improving what we're doing. The world is a really small place now. There's lots of global markets. In the end, Hawaii is paradise. It's a great place to be, and I think people have to know that.
Wright: The cruise lines have been tremendous help with the airlines and the lift. Norwegian Cruise Line and its growth over the next two or three years is going to add a lot of stable seats to the marketplace, and enable the airlines to have a stable base to grow from. They'll have some seats in some off-peak times that will help us sustain some of the periods that we would normally lose a little bit of money. I'm really bullish on the cruise lines and the NCL movement, and I hope that the state and all the people associated with it work hard and make sure they're successful here.
Are the economic benefits of cruises worth environmental risks?
Wright: I think so, because the new ships are environmentally safe. That doesn't preclude some crazy employee from doing something that's out of the manual. I think if you look at the makeup of these new ships, they have their own environmental containment systems. They're different ships from the days when we had the first interisland ships. I think they're better.
Williams: I think the cruise ship industry's a great industry for Hawaii. They help stabilize the airlines. You can say environmental impact, some sense of that, however, cruise ships really don't stress the infrastructure, because they're kind of in, and they're kind of out, and it's a great opportunity for Hawaii. ... I think we need to look of that as a new market ... First-time travelers, good spenders. I think they bring a great guest to Hawaii.
Calhoun: They provide tremendous exposure to all of Hawaii.
What types of attractions will Hawaii need to be competitive?
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"The reality is if you can solve traffic, locals love resorts." --Thos Rohr, Waikoloa Land Co.
Williams: We just need to make sure we market the attractions that we do have here on the island of Oahu, because we have some great attractions. It can compare with anything we have on the neighbor islands, but it's just a matter of making sure that we market that.
Waikiki seems to be a conglomerate of hotels, but Oahu is a great place; you have a lot of things: Ko Olina, North Shore, Makapuu. You have events in Hawaii Kai; you have events off of Waikiki. Some of the best sunset dinner cruises are here in Waikiki. I just think it's a repositioning of what Waikiki, or Oahu, has to offer. ... And maybe that is something of Ko Olina, or showing somebody on the North Shore, or showing outside of Waikiki. And there's some great things in Waikiki. You have snorkel sales, you have scuba diving, there's just some really great stuff to do.
Rohr: Waikiki is still a very magical place. I got here a long time ago and everybody said, "Oh, too bad you got here so late." I thought it was the greatest place I'd ever been ... Yesterday, I went to Waikiki with my family. My daughter did the hula in that beautiful bandstand down there ... There was thousands of tourists, and thousands of locals, all intermingled. It's just a fabulous place and I think that the improvements down there on Kalakaua are just out of this world. Just the bandstand alone, just looking at it -- I know there's a lot of criticism for how much it cost -- I think it's going to be there for 100 years and it's gorgeous and it's a great facility and we should use it as much as we can. I'm a great fan of Waikiki. My daughter got married a couple weeks ago. We all stayed in Waikiki and went to all the attractions that you talk about. I never had more fun in my life.
Mind you, I'm developing a neighbor island resort, and it is different, and the great thing about Hawaii: It has such great variety. The reality is, I think, we need to simplify our marketing message. It's the people of Hawaii why people come here. They come here to shop, they come here to snorkel, they come here to dive, they come here to sail, but they really come here to meet the people. I think as we move forward in our new marketing organization, we have to return to aloha. That's why people come here. They remember meeting a bell hop or a maid or a waitress. That's all my friends could talk about was the waitress in that little coffee shop every morning. The beauty is already there. We've got the beauty. I think we're getting on message, and I think the people that are working on it right now will get the message right.
Wright: I just ran across a very interesting attraction on Maui -- the lavender farm. It was one of those places that was tucked away, but it was fun getting lost a couple times, finally finding the place, and having the lady say, "Come on in, come on in, make yourself at home." Great products and unique people and just a great beautiful place there. A good example of an attraction that's not typical, but I think those kinds of places really are going to resonate in the future because people are looking for unique attractions like that.
I probably should mention the county enrichment program that HTA is embarked on. They're in the process of going back out in each of those counties and giving workshops on how to use that money. There's $1.4 million that's going back the counties for enrichment programs, meaning more local type events, cultural events, fairs, and believe it or not, people are saying, "that's kind of fun." They like to do that. You can point to Mayor Jeremy Harris' events on the beach. ... It jazzes up Waikiki a little bit. We all know that Japan is very tied to cultural fairs, events, like that, so I think that's going to be an important development as we go along.
Where are we in terms of growing visitor spending?
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"Change sometimes is a little uncomfortable, however, we all know that change can be a really good thing." --Ron Williams, Atlantis Adventures
Wright: I know it's always the goal and we're striving. I'm a futurist ... and one of the things that I've started ... it's definitely a large collaborative effort, is health and wellness. It will take years to develop, but we're hoping to develop an industry, and take some of the good things that Hawaii already has, and develop some of the newer attractions and bring in some doctors and expertise and we'll marry up the major medical with some of the alternative medicine and make an industry. Therein lies, in the future, an opportunity to change the mix of visitors and have higher-spending visitors. Those people definitely spend more and stay longer.
Another aspect is we're getting more air seats from the East Coast. Those people have a tendency to spend more and stay longer.
The convention center has taken a little bit of a setback because of world events and that in itself was one of those pieces in the equation that help us with our higher spending per person. But I would say it's always going to be a tough sell. Even within the companies that I work for, Hawaii is a boondoggle sometimes, and it's not just Continental. I would say out of 10 companies, probably eight out of 10 would still say it's a boondoggle. So we need to change that attitude. They'll go to Las Vegas and they'll go to Orlando. ... So we need encourage more people to get out of that mode and say that Hawaii is not only a good place to relax but it's also a good place to do business. ... Attendance is up over years past, when it's not in other places.
What other strategies are there for higher spending?
Wright: Hotels, especially on the neighbor islands, have attracted those small-scale business meetings and incentives. They think it's just a great place to go. You have Microsoft and you have Airbus and Boeing, all of those high-level people. Really, they don't show up on the radar screen because they don't go the convention center, but if somehow we were able to survey the hotels, and say, "Would you mind telling us the names of companies that come?" you'd be really surprised. I was.
Rohr: On the Kohala Coast, we've got around 5,000 visitor accommodations. A couple years ago, we had Pepsi's 100th anniversary. We built a tent, we had a stage from Radio City Music Hall. Instead of the convention center, we had it right on the beach and 5,000 people came to see the Rolling Stones and Ray Charles, and it was fabulous. That's why I'm building this amphitheater in Waikoloa, so we can have more of that. That's really the kind of experience people come to Hawaii to have, and they never forget it. They go away, saying, "Can you believe we saw the Rolling Stones?" out there underneath the stars out in a tent on a driving range or on an amphitheater. Our whole coastline is really excited about my cultural garden ... If there's nothing going on, you can also have great events ... If you see the great conventions around the country, there it is: "some headliner" at that convention. That's one thing I hope, they go in that direction here in Waikiki.
The Hilton is an amazing hotel and probably gives the best parties I've been to in my life, and I've been to a lot of parties, believe me. It is unbelievable what they can convert that hotel into and then when you add all the hotels up and down the coast ... You've got the Big Island festival again this year. People love that stuff, and frankly, they become totally charmed by things that are so everyday and normal to us, like the lavender place you went to. All these places are indigenous to the neighbor islands and to Oahu, all kinds of wonderful places.
I don't think that our message has enough personality into it. We talk about swaying palms and hula girls; we have amazing array of characters in Hawaii. Don Ho. June Jones. Sam Choy. Roy. All these guys. Konishki. We ought to be selling their images. Because people come over here and they do these little simple things. At the Big Island festival, we had little lei makers out. They love it and the locals get to participate. The biggest night at the Kings' Shops is the kumu hula when they come down, all these little old ladies they do the hula; not some beautiful, God rest her soul, Rosie Alvaro; all these little old ladies, and people love it. The more events we have, it's better for Hawaii.
Wright: What's interesting is people that have come over and told me, in one way or another, "We just come over to take a little bit of your lifestyle and try to live it for a while." Then ... the second time they take a little bit home, they'll start wearing Aloha shirts or like we have companies on the mainland that have Aloha Friday-type events. And then as they come more often, then they take a little bit more home ... Our lifestyle is more inviting than most mainland lifestyles, because it's rainy and dreary and windy or tornadoes, and economically depressed.
What trends are you seeing?
Calhoun: I see a trend, and having worked with and meeting our customers on the islands of Maui, Kauai and here, a much much different customer that we deal with, with Marriott time-share, on Kauai and Maui than on Oahu. Definitely the repeat, yes. Definitely know that they want to be on Maui or on Kauai, and for the most part, know that they don't want to be on Oahu. So as we look forward to the future, an opportunity exists to rebrand, or change, or strengthen or improve the Oahu experience so as to gain some of that market whether it's through additional attractions, through perhaps an image overhaul.
I know that our success in 2003 ... it's been not only a banner year, but it really truly exceeded everyone's expectations, especially ... the months of July and August. Phenomenal summer across the board. I try to put my finger on it, and I sense a real pent-up demand by travelers from North America. Frankly, they were tired of watching CNN and coverage of the war in Iraq, and I think that they really had delayed their trip to get here. I hope that they were elated to be here, but psychologically they were ready to not only be here, but in our case, to buy our product. A purchase of any kind is so psychological. They had just been beat on, back at home, with terrorism and such.
Wright: People are opting for the neighbor islands because of the newer infrastructure. Some of the resorts are a little more developed, and attractions are a little more updated, and I think that perhaps that lends itself to why Oahu may be lagging a little bit behind. I think we need to probably put a lot of emphasis on Oahu. I think the Oahu Visitors Bureau started diversity amongst Oahu, saying that it's the island of Oahu and look at all the good things that we do within Oahu. That really doesn't bode too well for Waikiki, because Waikiki in my opinion is the old on Oahu. We have to deal with the cards that are dealt. ... Waikiki is probably lagging. We need to, probably to diversify, look at Oahu, other places and other attractions. I think we're missing the boat. I think Oahu needs to get some attention, some revitalization, redevelopment, upgrading.
What's time-share growth potential for Hawaii?
Calhoun: I think that as an industry, if you look at back at the growth term, it's been one of the most phenomenal aspects of the tourism industry. ... It's been the advent of the brand names, the companies, primarily, that have fueled that increase. Typically, for Marriott, we have our hands full ... with some mammoth undertakings but we certainly see Hawaii as, first a destination that vacationers ... a destination that they want to come to, and that's where we always focus first, on. We're going to build where people want to come. Hawaii has not changed in that regard. Yes, the traffic on all of the islands has become a challenge, but that's part of being popular, that's part of being a destination.
Could we see time-share grow to become 10 percent of total visitor units?
Calhoun: We're a long way from that. A long way. Not in my lifetime.
Wright: We had speakers from the time-share industry come and talk to us from time to time at HTA. One of the facts and figures that came out very strong was that time-share was probably one of the foremost reasons that Hawaii rebounded so quickly after 9/11. It took a while for other people to figure out how to get back into vacation mode ... but time-share people said: "I have an interest. I'm going to get there, and I'm going make sure that I utilize my asset that I've purchased." I got real interested in time-share after hearing that ... People do come. They continue to come and I think that's good for Hawaii. And also time-share is a little bit changed. I don't know if you want to go back to the days when time-share wasn't so attractive but time-share is not what is was before. People need to be reminded constantly what time-share really means. It's a great upscale, luxurious experience. In the '70s it wasn't so. ...
I've heard -- I don't know for a fact -- that some hotels are scrambling to convert some of their hotel rooms to time-share.
Calhoun: And that will occur. In the recovery after 9/11, I scratched my head when I read those comments. It's true that a nuance of time-share ownership is that if you have a reservation, you go and use it. If you don't go, it goes unused. It stays vacant and you lose that usage right that particular year. So for those owners ... if they had a reservation to visit Hawaii sometime shortly after 9/11, if they'd didn't show, they lost out. Yes, that helps in the short-term recovery, but it's still a small tiny segment of the overall room count within the state. So perhaps it set the stage, perhaps it showed folks that it was indeed safe to come back.
