Tourism slides deeper

Travel experts say almost all economic signs point to further declines in the industry

STORY SUMMARY »

The demise of ATA and Aloha airlines, the departure of a second cruise ship, surging oil prices and a tumbling economy continued to pummel state visitor numbers last month.

The state Department of Business, Economic Development and Tourism reported that air and sea arrivals to Hawaii fell 7.4 percent in May. The slump, which members of Hawaii's visitor industry and state economists expect will widen, could prove worse than Sept. 11, 2001, they said.

"9/11 was an event and everyone realized that one day it would all be over," said Barry Wallace, chairman of the Hawaii Hotel and Lodging Association and the executive vice president of hospitality services for Outrigger Enterprises Group. "The current downtrend reflects a fundamental change in our industry that we're going to experience for some time to come."

Hawaii, an almost exclusively fly-to destination, has been hard hit by the rise in airfares and fuel surcharges. In addition, economic woes and declining real estate values, especially in California, have made U.S. tourists less likely to spend their discretionary income on long-haul luxury vacations.

Air traffic from Hawaii's bread-and-butter domestic market was down 9.3 percent last month. Strong arrivals from Canada and other Asia markets besides Japan bolstered total international air arrivals by 3.2 percent to 142,927. However, Japan remained down by 6.2 percent.

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The state's visitor industry continued to slump last month as the impact of the demise of ATA and Aloha airlines, the departure of a second cruise ship, surging oil prices and a tumbling economy kept mounting.

Visitor arrivals The number of visitors arriving in Hawaii in May with the percentage change from the same month last year: VISITORS   PCT. BY AIR Domestic 406,090 -9.3% International 142,927 +3.2% Total 549,017 -6.4%   BY SEA Cruise ships 5,382 -56.9% Grand total 554,399 -7.4%   BY ISLAND (air only) Oahu 347,844 -5.7% Kauai 87,122 -16.8% Lanai 6,679 -0.9% Maui 169,404 -9.2% Molokai 5,831 0.0% Big Island 101,765 -17.5% Source: Department of Business, Economic Development and Tourism

Sea and air visitor arrivals to Hawaii dropped 7.4 percent in May, according to preliminary statistics released yesterday by the state Department of Business, Economic Development and Tourism. While May's result still reflects the airline closures, which left the market with 12.9 percent fewer seats last month, tourism officials and executives say they are braced for further market challenges.

"This is even worse than the first year after 9/11, and the worst is yet to come," said Keith Vieira, senior vice president of operations for Starwood Hotels & Resorts in Hawaii and French Polynesia.

While arrivals through May are down 1.3 percent, the University of Hawaii Economic Research Organization forecast a 4.6 decline earlier this month that members of the state's visitor industry have said is consistent with industry performance.

"9/11 was an event, and everyone realized that one day it would all be over," said Barry Wallace, chairman of the Hawaii Hotel and Lodging Association and executive vice president of hospitality services for Outrigger Enterprises Group. "The current downtrend reflects a fundamental change in our industry that we're going to experience for some time to come."

In total, DBEDT reported that air traffic from Hawaii's bread-and-butter domestic market was down 9.3 percent last month. Air arrivals from the western United States -- the largest visitor segment -- plunged 12.7 percent, and air arrivals from the eastern U.S. declined 7.7 percent, DBEDT said.

Air arrivals from Japan, still the state's highest-spending source market, dropped 6.2 percent to 92,195. However, total international air arrivals increased 3.2 percent to 142,927 as more visitors arrived from Canada and other Asian countries.

Higher airfares, combined with the latest round of fuel surcharges, are affecting all leisure destinations, but since Hawaii is an almost exclusively fly-to destination, it has been among the hardest hit, Wallace said. In addition, economic woes and declining real estate values, especially in California, have made tourists less likely to spend their discretionary income on long-haul luxury vacations, Wallace said.

"A lot of people are feeling that their net worth has evaporated, and that puts a damper on what they feel that they can spend on vacation," he said. "Hawaii will probably end this year around 2004 levels."

The state jobless rate for California, Hawaii's largest market, rose to 6.8 percent in May to a five-year high, according to the California Employment Development Department.

"There's no question that the California economy is continuing to decline, and given that, you would expect travel to drop," said Jack E. Richards, president of California-based Pleasant Holidays LLC, Hawaii's largest wholesaler.

Increased marketing efforts in the western U.S. are expected to help stimulate demand for summer travel, Wienert said.

"Our phones started ringing after Hawaii pumped emergency money into the West Coast," Richards said.

However, some Hawaii hoteliers have reported that cancellations have increased and advanced bookings have slowed, with further softening expected in the fall.

"I think people could be surprised by how bad it's going to get," Vieira said.

Higher operating costs also have exacerbated the impact of falling arrivals on the state's visitor industry, he said.

"Our annual utility costs are up by 10 to 35 percent," Wallace said, adding that Outrigger's new construction quotes are also up by 25 to 35 percent.