Forum focuses on visitor confidence, competition

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Anyone expecting gloom-and-doom predictions for the Aloha State's tourism industry must have been pleasantly surprised by what industry leaders had to say at the recent Travel Weekly Hawaii Leadership Forum in Honolulu.

The travel agents, hotel and airline executives, vacation planners, marketers and government leaders gathered at Outrigger Hotels & Resorts' Ala Moana Hotel for the annual confab said that although summer sales have slowed slightly in some regions, there has been no significant dip in Hawaii travel.

Rex Johnson, president and CEO of the Hawaii Tourism Authority, kicked off the forum by announcing that the HTA had authorized $3 million in emergency marketing funds for the Hawaii Visitors and Convention Bureau to boost promotion in North America.

This is for "a comprehensive effort to include cooperative marketing programs and online efforts with airline, hotel and wholesaler partners," he said.

Continuing the "don't panic" theme, Johnson reminded attendees the state had avoided a public relations nightmare when 10,000 visitors found themselves stranded in Hawaii with the unexpected shutdown of ATA Airlines and Aloha Airlines in May and April, respectively. More than 2,200 visitors and residents took advantage of HTA-subsidized flights home, he noted.

But Jack Richards, Pleasant Holidays president and CEO, warned that "the public's confidence has been shaken just a little bit" with the airline shutdowns.

"In the short term, there is still some work to do to ensure people they can travel [to Hawaii] and enjoy their vacation and not worry about being stranded," he said.

Forum panelists were cautiously optimistic about Hawaii remaining a premier destination but expressed concern about Mexico's push into the luxury resort market and its open pursuit of Hawaii-bound travelers. Perhaps all that's needed, they agreed, is to update, not change, the Hawaii brand.

East Coast travel players agreed that Hawaii must promote itself more vigorously, keep the industry updated of new developments and understand that all travelers, including the affluent, want value for money spent, as opposed to simply lower prices.

Travel Impressions Vice President of Sales Barbara Groves said her company has seen some loss this year in the family market sector for Hawaii in part because of rising costs of the vacation package, but overall, numbers for Hawaii "are holding strong for summer and fall. "I think we're OK, but value is what it's all about, and we have to make sure we're delivering value and that this value is real," she said.

Panelist Dawn Bloom, a Liberty Travel agent from Levittown, N.Y., said her Hawaii sales, though small, will stay consistent, with little increase, through 2008.

Bloom said Hawaii needs to do more promotion on the East Coast to create interest. "That is just not there," she said.

Hawaii sales at Orbitz for the rest of 2008 "look pretty strong," according to Julie Szudarek, vice president of business strategy and planning at Orbitz Worldwide.

And Hawaii continues to lead in the family segment business for Classic Vacations, said company President Tim MacDonald.

"I can't think of another destination that has the wealth of family-oriented product and knows how to sell to families," he said. 

Another plus for Hawaii is its reputation as a safe destination, MacDonald added.

Travel Impressions' Groves said she's concerned that there is more "participation" between Hawaii vendors and West Coast travel businesses than with their East Coast or Midwest counterparts, which has hurt sales.

"Hawaii vendors on the West Coast receive tremendous knowledge and insight about Hawaii as a product ... which gives them a distinct advantage," she said.

Although Travel Impressions does get "great support and information" from Hawaii hotels and the HVCB, Groves said, the firm took a large number of its reservation staff to Hawaii for two weeks on its own, to experience the product firsthand.

"Hawaii is not a destination you just guess at," she said.

For its part, Classic Vacations plans to bring 75 agents to Hawaii this summer, according to MacDonald. Szudarek said Orbitz has brought workers to Hawaii but also routes call center customers interested in Hawaii to destination experts who have visited the state. Selling Hawaii through these destination experts has increased vacation purchase prices by 20% to 25%, she said.

Despite the U.S. economy problems, the luxury travel market remains strong, MacDonald said. Interestingly, Classic Vacations has "a surprising number" of clients who stay at high-end resorts but who were flying to Hawaii on low-cost carrier ATA.

"Some people are paying $20,000 for a vacation, but they don't see any reason to pay more for airfare," MacDonald said.

Aladdin Travel in Winston-Salem, N.C., recently began experimenting, diverting some meetings bookings to Hawaii rather than tried-and-true Las Vegas.

Kendra Kennedy, sales and marketing manager at Aladdin, said it's important to hold business meetings where there are still things to do at the end of the workday.

"When we started booking other destinations, Hawaii came up because there's so much to offer here [and] you can do a lot of things late at night," she said. "And Hawaii is a place where people can bring their children."

Elizabeth Spander, a travel consultant for Casto Travel in San Francisco, emphasized that people are looking for value.

"We need to say something like the price point of Hawaii is not going to cost you more than going to Mexico because you get more value in the hotel here," she said.

Spander suggested some additional value-adds might include complimentary breakfasts and free Internet service, "which everybody wants."

But perception of value depends on the visitor, noted Michael Reichartz, Expedia's vice president of market management. "Value has nothing to do with price but with services and experience," he said.

The Mexican threat

Mexico's investments in luxury resort destinations to lure the type of U.S. traveler who would normally vacation in Hawaii was another hot topic. Working in Mexico's favor: a prevalence of all-inclusive plans, even at five-star resorts, and shorter flying times from the mainland U.S.

"The Mexican government has a lot of money, and it's using it to support and promote its visitors industry," said Richards of Pleasant Holidays.

MacDonald said Mexico is "starting to catch up with Hawaii for the family market."

"You're finally seeing some big investments targeting families," he added, noting that Mexico's widespread all-inclusive formula provides travelers with upfront cost totals before they leave home.

"Consumers are not so much paying specific attention to the airfare but the total value they're getting and the overall price."

Richards said Mexico business is up "year after year" at Pleasant Holidays and added that the forecast through 2009 is for continued increases.

It's time for Hawaii to realize that Mexico is "very serious, and they're coming after the business which traditionally has been coming to Hawaii," he said.

MLT Vacations President and CEO Ken Pomerantz said Mexico is "easily winning" the battle of the wallet with his customers.

"Our clients are going in droves to Los Cabos and Puerto Vallarta ... where the all-inclusive [model is] expanding to even the Ritz-Carlton, Fairmont and Four Seasons brands," he said.

The concept hasn't caught on in Hawaii; the only all-inclusive in the state is Kona Village, on the Big Island.

But Expedia's Reichartz took an optimistic view of Hawaii's chances against Mexico. "Hawaii has one of the most powerful brands on the planet," he said. "Hawaii invokes very passionate images in the minds of consumers. I don't know if Mexico does that, yet."

Eric Maryanov, president of All-Travel, Los Angeles, agreed.

"If clients say they want to go to Four Seasons Punta Mita they're not really saying they want to go to Mexico," he said. "They're saying they want to go to a Four Seasons because they've probably had such a fabulous time at the Four Seasons on Maui or the Big Island."

The one intangible of travel these days is jet fuel prices that affect airfares. Oil prices have doubled in the past year, rising 13% from April to May. Airlines have raised fares nearly a dozen times this year.

Brad Walker, Alaska Airlines' managing director of leisure and group travel marketing, said airfares have to rise because they were based on oil costing around $95 a barrel, roughly $40 less than the current price, and fuel costs aren't likely to go down anytime soon, he said.

"Hawaii can help offset higher airfares by lowering room rates," Walker said. "But overall, it's ... not a pretty picture."

Despite "all the doom and gloom out there, Hawaii is still doing OK," Walker said.

"What we need to be concerned about is figuring out at what point do airfares go so high that people alter the way they travel," he said. "It's a scary outlook for our industry."

Alaska Airlines, like other airlines, will mitigate some of its expenses by exploring creating fees for services.

Some airlines already are charging $25 to check a second piece of luggage, but American Airlines, beginning this month, will charge $15 for the first bag.

Walker also predicted that carriers will stop flying to unprofitable markets, something Alaska is considering. "The industry is being forced to go there," he said.

[Editor's note: This month, American Airlines announced plans to phase out Chicago-Honolulu service.]

Higher fares are the immediate problem for Hawaii travelers, not "trouble getting seats," said Richards.

Competition between airlines will create fare levels whether high or low, said Ray Snisky, executive vice president at La Macchia Enterprises.

"If someone jumps out of the pack and raises or lowers fares others will follow."

Late summer and early fall will bring "some aggressive fares" back into the market, Snisky said.

Short booking windows for some long-haul flights from the East Coast and Midwest will be more difficult to stimulate in a short period of time.

The West Coast market, where the booking window traditionally has been about 30 to 45 days out, will remain strong if fares don't increase dramatically.

The longer and more expensive the flight, the harder it is to capture last-minute business, said Mark Noennig, vice president and general manager of Apple Vacations.

"But again, it has to be a collaboration with all the suppliers working together to pack in as much value as possible," he said.

Forum attendee Mark Simon, director of marketing at the Four Seasons Resort Maui, said Hawaii "should be looking over its shoulder at Mexico, but we also understand the tremendous demand of Hawaii in the last several years.

"We can reposition and 're-image' the product but what we should also do is band together, understand Hawaii's many strengths," he said. "We must stride forward with great confidence in our product. Hawaii is not operating from a position of weakness but a position of significant strength."

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