Hopes fly on group bookings

The Hawaii Convention Center is on track for a record year in 2009

STORY SUMMARY »

A shrinking leisure-travel market has got state tourism officials up in arms to offset the losses by capturing more of the lucrative business-group segment.

But as global oil prices escalate and the economy softens, higher airfares coupled with companies tightening their belts make for an even more challenging environment for state tourism officials.

While group-market demand remains strong for the next two years, it has become more difficult for state marketers to convert the interest into definite bookings.

The group segment is highly prized by state tourism officials because those visitors tend to stay longer and spend significantly more than leisure travelers.

However, tourism officials are concerned about whether or not Hawaii can get over the hurdle of pricing and the boondoggle effect to avoid future booking cancellations.

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As Hawaii struggles to grasp its dwindling leisure-travel market, more pressure is being put on the lucrative business-group segment to pick up the slack.

But as global oil prices escalate and the economy softens, higher airfares coupled with companies tightening their belts make for an even more challenging environment for state tourism officials.

While group-market demand remains strong for the next two years, it has become more difficult for state marketers to convert the interest into definite bookings.

"It's one thing to secure conventions, but another thing to get all the attendants to the island," said David Uchiyama, Hawaii Tourism Authority vice president for tourism marketing.

And, when they do come, they often do not spend as much money as they did in the past. The group segment always has been highly prized by state tourism officials because those visitors tend to stay longer and spend significantly more than leisure travelers.

Indeed, Hawaii's group business only comprised 6 percent of last year's total arrivals with nearly 484,000 attendees, but these visitors spent 10 percent of the overall spending per person per day, according to the Hawaii Visitors and Convention Bureau. But that's not always the case in these trying times.

Higher prices and shrinking wealth forced Patrick Nunan, a podiatrist from West Chester, Ohio, who attended last week's American Podiatric Medical Association convention, to cut in half his initial two-week trip, which he combined with his 25th wedding anniversary.

"From an economic standpoint, especially in medicine when we're seeing lower reimbursements so we're not getting paid as much, you look at how you're going to spend your money," he said. "If it wasn't a special event, we'd have to rethink it."

Carrie Bartlett, an APMA exhibitor representing Saucony Inc., a running-shoe company based in Lexington, Mass., said the costs of travel to Hawaii prompted her company to send just one person, instead of a couple, to oversee the exhibition booth.

"It's definitely not a cheap trip here," said Bartlett, who paid $1,300 to fly to Hawaii from Boston. "With the costs of fuel going up, your travel budgets are dwindling a little faster than they have in the past."

Darron Daly, a San Antonio resident who came with seven colleagues as a conference exhibitor, said "if prices continue to rise, people would definitely reconsider coming to Hawaii. Everybody's cutting back; you have to."

The trend already was in place when Hawaii's travel industry began to feel the aftershocks of the shutdown of Aloha Airlines and ATA Airlines, the downsizing of NCL America and the impacts of declining consumer confidence in the economy. The state's meetings, conventions and incentive arrivals by air fell 12.4 percent last year to 483,407 from 551,924 in 2006, according to the state Department of Business, Economic Development and Tourism. That's because luxury-branded leisure destinations such as Hawaii are struggling to counteract travelers' fears about rising prices and diminishing disposable income, which is keeping them closer to home.

Bound for Hawaii Total business group travel by air for meeting, convention and incentive groups (MC&I): 2007* 2006 Pct. Change MC&I 483,407 551,924 -12.4% Year to date (Jan-May) 2008 2007 Pct. Change MC&I 239,681 237,512 +0.9% * Preliminary statistics Source: Department of Business, Economic Development and Tourism

The numbers show that Hawaii's group and business markets could prove to be more resilient than other markets. Indeed, total arrivals for the business segment is up 0.9 percent through May to 239,681 from 237,512 in the same period last year.

While the convention center has scheduled only 17 events for 2009, down from 35 this year, the return of the American Dental Association with more than 30,000 attendees is expected to generate record hotel-room bookings. The convention center is set to surpass its 700,000 room-night goal next year with 771,361 definite bookings for 97,285 total delegates.

"We've had no cancellations and we don't expect any change of heart in coming to Hawaii," said Joe Davis, general manager of the convention center, whose clients typically book five to 10 years in advance.

Business travelers are more immune to the economic swings affecting the leisure market, partly because of their obligation to their profession, which is often tied to continuing education and expertise in the latest research and technology found in meeting arenas, he said.

While some say the group market isn't insulated from the current economic conditions, others expect it will suffer less from the mortgage meltdown, air capacity issues and escalating prices.

"The business market is probably more predictable because we schedule further in advance," said New Jersey podiatrist Harvey Karpo, who spent part of his two-week stay island hopping before attending the APMA conference last week at the convention center. "It's all relative. Anywhere you go it's going to be expensive. Not that Hawaii is cheap, but for a resort destination, it's very reasonable."

However, tourism officials and members of the visitor industry have said that when it comes to Hawaii's group market, there is still some uncertainty out there.

"There's a group of folks sitting out there that want to do the deal, but with all the uncertainties in the marketplace, they're holding off on signing contracts," said Rex Johnson, HTA executive director.

The expense in coming to Hawaii is the No. 1 reason why it is difficult to sell the destination, followed by the boondoggle effect, said Chris Resich, president of destination management company MC&A Inc.

"It's not about perception, it's about the reality of the cost of organizing the meetings," he said. "They're not going to management teams to ask for more money because they're coming to Hawaii. They still have to operate within budgets."

At top of mind for tourism officials is whether the economic challenges will result in businesses significantly scaling back or canceling altogether, particularly for the Hawaii Convention Center, which is set to hit a record year in 2009.

Individual properties also are feeling the pinch with major groups considering canceling meetings, said Keith Vieira, senior vice president of operations for Starwood Hotels & Resorts Worldwide Inc., Hawaii and French Polynesia.

"Any group coming to Hawaii has a budgeted amount and have found out airfare is significantly more," he said, adding that groups have either decided to move, cancel or delay meetings in 2009. "It's a big concern for our destination due to our distance, airfare and the rest of the world having the availability to take last-minute business."

In addition, niche markets such as the business segment are the most promising in a down economy since companies have to meet to be able to operate more efficiently, officials say.

"People still need to meet; to do things virtually online isn't the same as when you're having a business exchange face to face," said Mike Murray, HVCB vice president of sales and marketing for corporate meetings & incentives.

On the flip side, hotels and marketers have been showing flexibility, sacrificing margins to seal the deal for businesses to come here. The latest lure for corporate travelers is that the price of Hawaii hotels and overall services have become more competitive as other destinations such as Europe -- with the strength of the euro -- become more expensive.

"When value is perceived to justify airfares and costs, it's a win-win," said Marsha Wienert, state tourism liaison. "We all just got spoiled."