The continuing drop in group travel business to Hawaii has put the big resort giants and the little guys head to head.

While growth from Hawaii's top source market, the U.S. West, helped stabilize the state's visitor industry in August, it did not make up for continued declines in the lucrative business travel market, said state Tourism Liaison Marsha Wienert.

Total visitors to Hawaii in August remained flat at 608,420 arrivals; however, the state's base meetings, conventions and incentive (MCI) business declined 37.4 percent from the prior year as the fallout from the taxpayer business bailouts and a weak economy continued, according to statistics released yesterday by the Hawaii Tourism Authority.

Year to date through August, only 237,696 visitors came to Hawaii for meetings, conventions or incentive-related travel; however, 346,767 visitors came for the same purpose in 2007, a strong year for tourism.

“;Not only has the ratio declined, but also the sheer number of MCI visitors is drastically down compared to 2007 figures,”; said Daniel K. Nahoopii, of HTA's tourism research division.

Since Hawaii's group business sets the rate threshold at larger properties, and business travelers tend to spend more than leisure travelers, the decline has led to decreased visitor spending, which is affecting all sectors of the economy, Wienert said.

“;The state's group business sets the base rates, so when we don't have it, the big guys start competing in a price war with the little guys,”; she said.

Hawaii's hotels also are competing for the leisure market against mainland resorts with smaller operating and labor costs, said Keith Vieira, senior vice president and director of operations for Starwood in Hawaii and French Polynesia.

Smaller, off-beach chains like Aqua Hotels & Resorts are competing with on-beach properties, said Beth Churchill, Aqua's vice president of sales/marketing.

“;It's a very difficult environment when the larger on-beach properties have thousands of rooms to fill and have lowered their rates to a point where consumers can't resist,”; Churchill said.

Aqua has room specials ranging from $79 per night at its recently renovated Aqua Waikiki Pearl to $99 at the Best Western Coconut Waikiki; however, Hilton Hawaiian Village and Sheraton Waikiki are offering nightly rates from $189 that come with add-ons. The Waikiki Beach Marriott Resort and Spa is offering rates from $179, while rates start at $159 at the Outrigger Reef on the Beach.

Larger resorts have more discounting options, said Jerry Gibson, Hilton's Hawaii area vice president and Hilton Hawaiian Village's managing director.

“;It's harder for the lower-end hotels to change their prices,”; Gibson said.

But without group business, the larger guys have less to drive demand, Vieira said.

“;The scary thing is that we are growing occupancy by dropping rates, and at the end of the day, we are losing money,”; he said.

Aggressive pricing contributed to a 13.9 percent drop in visitor spending last month. Average daily visitor spending dropped to $153 per day from the year-ago $176 per person.

It's encouraging that several major conventions are coming this fall to Hawaii, said Mike McCartney, HTA president and chief executive officer.

The American Dental Association convention, from Wednesday to Oct. 4, and the Congregation of Jehovah's Witnesses 2009 International Convention, which comes in November, could generate about $49.8 million in spending and 255,340 room nights, McCartney said.

Hawaii's group business is still slower than it once was, but decision makers have broken their long silence, Gibson said.

“;We are starting to get a lot more inquiries than we had four or five months ago, but they are price-sensitive,”; he said.