Hawaii 'Now is the right time' for expansion, Aqua CEO says By Shane Nelson / June 21, 2010 Share 1 -- The folks at Aqua Hotels & Resorts have been busy over the past year and a half, taking over management of their first property outside of Waikiki and inking deals with seven new hotels. Contributing Editor Shane Nelson recently caught up with the Hawaii-based firm's CEO, Ben Rafter, to talk about Aqua's expansion and his outlook for this year's busy summer season. Q: How long have you been with Aqua? A: Believe it or not, it feels like one week. But I'm 18 months in and loving it. The timing of November 2008 probably wasn't the best time to start as the new CEO of a growing company, but it's been a great ride. And as you've seen from the expansion, we've got all the islands covered but [the Big Island] and continue to outperform. And the consumers love the product, so that makes selling it easy. Q: How is it that Aqua has been able to grow in a time of so many challenges for the Hawaii visitor industry? A: For us, it's the chance to invest in the belief that Hawaii, long term, is a fantastic tourism market and that our model and our customer service and guest relations strategies work. So we think now is the right time to invest in expansion and to work with owners to expand. Certainly we had an advantage here, in that our goal has always been to be able to offer what Aqua offers on all of the major Hawaiian tourism islands. Q: Did the recent economic-related difficulties facing Hawaii tourism help you to acquire these new properties? A: Yes. I think that perhaps some of the hotels had gotten a little complacent and the market had been so good for so many years, and as things started to become more challenging, many of the owners started to say, "Are we maximizing the value of the asset?" Our message has always been to work pretty closely with the owners, to be transparent in what we're doing and to be very, very aggressive in making sure that basically we have guests in the hotel at the right price. Part of it is we're investing in the market, and I think part of it is owners are looking for the right solution for their hotels, whereas three years ago that might have been a little harder to know because the market was running at record levels. Q: What is the Aqua ideal? Can you define that? A: The ideal property for Aqua is a boutique property, and what I would call it is an affordable boutique. So we're certainly not trying to re-create an urban boutique experience, which is wonderful in New York or San Francisco. What we do instead is build a leisure vacation experience around the beach [and] the amenities that the state offers. I call it the beach boutique. The focus is on a very, very intimate environment and high level of service in a leisure environment, instead of an urban environment or business environment. The ideal size here is going to be between 75 and 250 rooms, but more importantly it's going to have something that, no matter what the size, you can embrace the guest and make him feel like he's getting a one-of-a-kind experience. Q: Aqua added its first property outside of Waikiki, the Hotel Wailea on Maui, in January 2009. Why was it important to expand to the other islands? Why was it important to go beyond Waikiki? A: Each island is unique, and what guests want from the Aqua experience isn't just limited to Waikiki. ... Hotel Wailea's setting is a true 72 rooms on 15 acres, and it's a perfect experience for Aqua to manage. Or with the Kauai Beach Resort: Kauai arguably is, for a first-time visitor, sort of what they're thinking about when they think of Hawaii. We can offer that experience they saw when they've seen all the movies that involve Kauai: the green and the scenery. If we can do one thing to further enhance that experience, [it] is to invest more in multi-island, multiple-property stays, which are fairly common in Hawaii. Then someone can do Waikiki and Kauai or Lanai and Maui. And then what we plan on doing in the future, as we're cross-promoting experiences all based around Hawaii leisure, you can use a [food and beverage] type approach, you can use a beach approach, you can use a historic property type of approach. Q: What are you doing now marketing-wise to put some of those plans into motion? A: I think we took a more traditional approach to it. Certainly travel agents are a great source for being able to book multi-island stays, and what we're trying to do is be able to enhance that by being able to offer an Aqua [food and beverage] type package if your client is interested in food and beverage, or an outdoors or hiking type package. Long term, what I'd like to have is a resource where an agent or wholesaler could work with us to render a vacation on the fly. And the easiest place to start doing some of that is for an event. Say somebody is coming out for the Maui Film Festival, and we know two or three other snippets of information about the person. Then we could render a great package and [say], "Here are our five suggestions. Drag and drop a few of them out if you like, and add others." Our belief is, the more specialization that can be done on the fly, the higher the conversion and the more likely we're going to have a satisfied consumer, [and] the more likely they are to come back to Hawaii. There are a lot of other competitive markets right now. It may be a consumer saying, "I have a week in June and I'm thinking about Santa Barbara, Mexico or Hawaii," and at that point they probably don't know a whole lot else, except that one costs X, the other costs Y and one costs Z. If we can say, "Well, if you come to Hawaii we have a film festival," and we can tie that into two films and a [food and beverage] experience, then suddenly that puts Hawaii on top of the list. Q: Summer is an important season for the Hawaii visitor industry. What does that mean to Aqua, and how does that impact your business? A: Well, summer is good. I'd say that one sign of a tourism recovery is we are experiencing more traditional shoulder and busy seasons this year. And I actually think that's great. Obviously, we'd rather not have any shoulder seasons, but this market has traditionally had shoulder seasons. We actually think summer will be busy this year. Certainly occupancy will be high. Whether we get the rate that we're looking for is an unknown for everybody, but at least it's growing over last year. Q: Have you been able to raise rates this year? A: There was a [recent] report that I think was a little bit misleading, saying that hotel profits are up. I would equate that to saying we've upgraded the Pacer to a Gremlin. At least it's pointed in the right direction, but we still have a ways to go. We think that summer will be busy occupancy-wise. We think that we can get a little more rate than we may have last year, but compared to 2007 or '08 we're still 15% to 20% lower. In some ways, Hawaii still represents a historically good value right now, and especially certain markets. Kauai and the Big Island are a little bit slower. And Waikiki: Without the convention base, there are still great deals right now in Waikiki. One other thing about Hawaii is that air is still fairly low. I'm not an airline expert, but I think air is probably experiencing something similar [to hotels], where [fares are] starting to go back up. More lift and a lot of hotel rooms end up being pretty good for the consumer. Q: What about the future of room rates? A: To use a four-year-cycle projection, I'd say last year was down, this year is flat and fairly predictable, next year I think we'll start to see a little bit of recovery, and in 2012 I think we could be looking at a pretty good year. Q: Do increasing fuel costs worry you? A: Hawaii is obviously dependent on the price of a barrel of oil. I think this summer we're OK. Unfortunately, the recession has really slowed down a lot of good efforts to invest in alternative technologies, so we're highly sensitive to that. And if in 2012, oil's back to $120, $130, $140 a barrel, then that's just going to delay that recovery. But from what we're looking at right now, oil is still manageable. The fuel surcharges for the most part aren't there. We do have new lift, and a lot of new, interesting airlines that traditionally haven't been here. Alaska, after a couple years in the market, is expanding. WestJet has really added a lot serving Canada. Allegiant Air will be new to the market later in the year. Hawaiian has always been a good partner. Whether we like it or not, the hotel industry and the airline industry in Hawaii are married, and I would use Hawaiian as a great example of a good partner. I think all of us in the hotel industry can benefit from continuing to build closer and closer relationships with the airlines and working on experiences and packages and things like that together. Q: What was the appeal of Hotel Lanai, and why bring it onboard? A: Lanai itself is a fantastic island, and the two Four Seasons properties there are great properties. But not every consumer is at the price point of a Four Seasons. Hotel Lanai is really the only other offering, and we think with our partnership we can offer the Hotel Lanai to some of the Aqua audience. And that's the second piece. Lanai is a historic plantation mansion that has been converted into a small hotel, and it really does offer a lot of traditional Hawaiian elements you're not going to find in a 1,000-room beach hotel. And so between those two things, when we started talking and were presented with this opportunity, it was an easy choice. If we can introduce our consumers, it's good for Lanai, it's good for Hawaii and it's good for the other small islands like Molokai. This report appeared in the May 24 issue of Travel Weekly. To view the entire How to Sell Summers to Hawaii special issue, click here.