As travel professionals gathered in the Sheraton Waikiki at the invitation of Travel Weekly last spring, Hawaii tourism was contemplating a wild 2018 and uncertain future, including growing debate over tourism management and regulation of vacation rentals. This roundtable has been edited and condensed for clarity and length.
Arnie Weissmann, editor in chief, Travel Weekly: If you have the highest ADRs and highest occupancies in the nation right now, if those illegal properties were to go away tomorrow, would there be enough housing stock to put all the visitors somewhere?
Jennie Ho, president, Delta Vacations: If there is a stricter set of rules and regulations, it may be a motivation for [operators of vacation rentals] to go through the legal process, because the demand will still be there and people will still come. But there is an outcome that we would all prefer to see, which is that the rentals are legal, they're paying taxes, it's giving back to the community and we all have lots of wonderful customers, however we get them here. There's another path, and Hawaii has a better reputation, and all the hoteliers can also benefit, and the tide rises for all.
Beth Churchill, owner, Churchill Group: I'm a data person, so I love to look at these points. If we take a look at Oahu alone, in 2016, the average rent was $2,302. So in 2018, it was $2,318. It's relatively flat. So we have a problem. ... That tells me that there is enough inventory for people. It may not be affordable, but that's a whole different set of issues. But rental rates are flat. And the population on Oahu is declining. So the nexus here is people are leaving and there's more rentals on the market. So playing devil's advocate on the other side, if there's a glut of all of these other units that are then taken out -- a place like the North Shore that has always been having vacation rentals for 40 years -- you're going to have a glut of inventory and you're going to have houses that could sit empty across the state. So you can have zombie neighborhoods in certain areas, which is a whole other set of issues, and I don't think people are looking at the population decline and the rental market.
Weissmann: I would imagine that there'd be some who'd say the reason they're leaving is because there's not enough housing
Jenn Lee, vice president sales and marketing, Travel Planners International: I'm going to put an agency spin on this, an agent spin on this. If [rental regulations] pass travel advisors would use this as a way to drive traffic to hotels and legal [rentals] because they would say, you know, if you're going through an Airbnb, you don't know if that's a legal Airbnb or not.
They would actually use this the other way around to drive traffic to all of your locations, because that's one of the things travel advisors do: They try to protect their consumer from making bad decisions and bad choices. Now there are condo rentals and stuff that they get paid commission on. There's nothing wrong with driving traffic to that versus to a hotel if that's a better fit for their client.
Weissmann: So to bring the wholesalers into it: Jack, you've mentioned before that you use alternative accommodations. Do you -- any of you who do -- look into whether or not they're legal?
Jack Richards, president, Pleasant Holidays: The ones we use are licensed and ready to go. We do private homes and condos and everything all over, but let me make a key point. So I look at who writes in support of the legislation and who opposes it, right? The airlines are in support because why? Because they've added capacity. They want to get them in here. The hotels are not in favor of it for obvious reasons. So let's look at New York City, prime example, where I can only tell you what we've seen in New York. The number of Airbnb units is phenomenal, extraordinary, and what has happened is for me, inventory has opened up in the hotels and the rates have come down.
Weissmann: So you're all for Airbnb?
Richards: I'm not for Airbnb. But it's inevitable that Airbnb is going to buy a hotel and rent out the hotel rooms. So if you block this way they're going to go this way, and they're going to find a way to survive. I was originally against Airbnb. I'm not against it. I think it's opened competition. They're free to come in and do whatever. I think there's benefits and there's implications for both, but I'm in the middle. I'm just an innocent bystander.
Ray Snisky, chief commercial officer, vacations, Apple Leisure Group: I think that we underestimated Airbnb over the last five years and I think we all felt them coming and we looked at the information, but I don't think there was a material effect on our business until the middle of last year. Going into this year we had a softness that we couldn't understand, and it was across brands, it was across airline products, and it was softness across the board, but it certainly was this Airbnb. And I agree with Jack: You've got to embrace what the customer wants.
Karen Hughes, vice president marketing and product development, Hawaii Tourism Authority: From Canada, vacation rentals year to date in March are up 15%. Now, that doesn't mean they're all illegal vacation rentals, but just vacation rentals, and U.S. is up 10.6%. So, just some perspective, and we track that; the hotels, obviously, are where they are and vacation rentals are up significantly, so there you have it.
Lee: When Uber arrived in New York City, the taxis really got it together. They really all of a sudden snapped up, started cleaning their taxis. So whenever you've got competition that comes in, it gives everyone an opportunity to go, "OK, great. How can I up my game so that I can still differentiate myself?"
David Richard, area director of sales, Hawaii and French Polynesia, Marriott International: I think the other thing from the hotel standpoint, though, is the hotels have been doing all the heavy lifting. We have sales organizations out there promoting Hawaii. We do a lot of marketing, advertising and I think from the Airbnb standpoint, their skin in the game is not what the hotels' is, and I think that's one of the frustrating pieces from the hotel industry is that we are doing all the heavy lifting.
Churchill: Yeah, you're generating the lead and they're closing the sale.
Richard: Right, exactly.
Churchill: So what do you think? That's a great segue into what Marriott is doing now: basically creating their own Airbnb.
Churchill: If you can't beat them, join them, right?
Richard: Their model will be, again, legal. It's going to be luxury. it'll be two bedrooms-plus, all the units, so you aren't going to have the Ohana units down below in the garage. But the other piece is, they're really focused on looking at locations where they'll build inventory where we don't have a hotel presence [and] our guests are going to be able to redeem their rewards in these vacation rentals, which, quite frankly, just enhances their desire to use our hotels for business travel etc. to build those awards.
Snisky: I think two things. One is competition is great. It's just competition shouldn't have an advantage because the infrastructure took too long to administer taxation and those kinds of things. That was really our first and foremost concern: Put everyone on a level playing field and not have some group pay for all those things and have another group not. Secondly, you have to look at all the discussions that are going around [about] quantity versus quality, as far as visitors and so forth.
And there's a lot of really provocative things that come out of this Airbnb as far as, you know, arrivals are up but spending's down. Is there enough being spent in supermarkets, in local delis and things like that to make up for the loss that's happening in the hotel side? ... If economists aren't on top of that, really, you wind up being waist-high in water when you realize you have a leak in the roof. Spending is down, and I think hotels have held because historically they're very conservative and deliberate in how they make changes, but this isn't sustainable for them to keep rates really high the way they have been and not try to take some action.
Ho: There's also an aspect of generational differences. And with Hawaii being very public about going after the avid traveler, the avid travelers are the ones who are going to take the risk, perhaps try a different kind of accommodation, go to places where traditional hotels are not. And really, I do wholly agree with what Jack is saying. We can't change what the customer wants. And it's up to all of us, whether it's wholesaler, hoteliers, the tourism board, the agency community, we all need to meet the customers' demand versus saying, "You want the wrong thing." Because that's going to make us sound like we're completely disconnected.
Weissmann: Right. And David, you've been uncharacteristically silent, and perhaps your owner has something to do with it, because they're involved in the [rental] legislation. But perhaps you would also, though, like to weigh in on this.
David Hu, president, Classic Vacations: Yes, you are correct that my parent company [Expedia] is actively involved in this space, and so I do have to be a little bit careful. In principle, though, if you think about this market and you think about what's going on, there are parallels. To Jenn's point [about taxis], Uber was the villain years ago, but somehow, equilibrium has kind of come about in some markets, I'm not saying all markets, but there has been an equilibrium in the fact that with this competition, regulations kind of coming into play, the players have stepped up their game and they figured out how to come up with their own technology to play. So I think the competition is just fantastic, but at the end of the day, to everybody's point, this is what the customers want and for us to impede that progress is self-defeating.
Highlights from the 2019 Travel Weekly Hawaii Leadership Forum
Frank Haas, principal, Marketing Management: Now we can't blame Airbnb for everything. In fact, there was an armed robbery in Kailua and I was reading in the post on a community calendar and they said they blamed the Airbnbs for this. I'm a marketer and I'm all about what the customer wants, and you can't push that tide back into the ocean. However, the other thing that we have to consider is what the residents want. And there has to be that balance, and for too long with the illegal [rentals] that we've had and the fact that there was no regulation or limits, we've been on heroin.
And Arnie, you asked is there going to be an adjustment if we put limits and regulations around this industry? Sure. It'll affect retail. And there have been a lot of scary op-ed pieces about, oh, my God, the sky's going to fall if we regulate this. Yeah, there'll be an adjustment, but we've adjusted to things before. I think Marriott coming into this is great because it's going to up the game and it's going to increase the standards. And once again, as a marketer, I'm very concerned about the quality of the visitor experience, and if we get more people paying their taxes and following regulations, I think the visitor experience is more likely to be consistent. I mean, we rely on the hotels to provide a quality experience, and we don't have that. It hasn't been a problem yet, but we don't have that same sense with the Airbnb world that that quality is going to be consistent.
Sean Dee, executive vice president, chief marketing officer, Outrigger Hotels and Resorts: I think from our perspective, again, as a resident and as a hotelier, is disruption is great. It always has been, always will be. It forces us to think about our business differently. And we operate at Outrigger 1,300 alternative accommodations, so we get it and we know that customers want that. Our [concern] is just the legality, and it's to raise the point of the level playing field. And as a resident, I have Airbnbs on both sides of me, so with all due respect, as you guys get to travel home tonight, I have to go listen to Australians at 1 in the morning partying. So it is a personal impact for us ... and we're looking for some enforcement to help us survive for the long haul.
Richards: But Sean, we have that in California, as well. It's not limited to Hawaii. I have them next door to me. So it's everywhere. It's just not Hawaii.
Tovin Lapan, Hawaii contributing editor, Travel Weekly: What can be done to counter this threat to popular areas, to manage them better and maybe even restrict places to make sure that we maintain the ecological and cultural viability so everybody can enjoy?
Churchill: From my perspective, being a consumer and advocating for the state of Hawaii and trying to get people to visit overall, take a look at what the federal government has done with our national parks in the state. Haleakala was at the forefront of being able to limit the number of visitors and the time of day and things like that. The city and county of Honolulu did a great job with Hanauma Bay. And so those are examples, I think, when we look at best practices across the state and what's worked. Maybe tweak it a bit, things that haven't worked as well, but look at that for other areas.
From my experience, when the residential population is happy and they're given things like better parks and upgrades to infrastructure, it flows down and it flows through to the visitor population, as well. So it all works hand in hand if you've got happy local residents.
Haas: Taking a look at this, the issue with resident complaints about tourism are often very site-specific. You know, what's too many people on one site is fine at another site. Laniakea Beach is a good example: 200 people stopping there to see the turtles creates a traffic jam, which creates a problem. So 200 is a bad number there. One thousand people on a morning at Diamond Head Trail affects the experience that the visitor has. So we really need to take a look at what happened at Haleakala and Hanauma Bay and start to expand that to some of these other sites and that, too, is going to take some money and some management. I know HTA is now looking at an ambassador program at Maunawili Falls. Maunawili is a good example of a site where the residents were really angry because the trail head is right in the middle of a residential neighborhood. People were parking their cars all over the place, tracking mud all over the place. And we need to just take a look at these sites and say we either need to spend the money to enable capacity there or manage the capacity there. And that's a new issue. It wasn't an issue before the age of social media. But that's the reality now. We have 10 million visitors who have social media, and they can find these sites.
That's a new world for us, and I think we're going to have to look at things like restricted access, access fees. And we need to do it before they become a crisis. If you take a look at the resident sentiment study, we're seeing an erosion of the number of people that say tourism is a good thing.
Snisky: I think this is also an issue that's a little bit of a double-edged sword. I think that from a mass-market standpoint a lot of those items that you talked about, you do have to get into supply and demand and charging for things. I think that creates more revenue. Some people will be disenchanted by that, but that's just the way the world works. I mean, if you have 1,000 people that want to do things that only 200 people can do, there's a way to slow that down. But the other part of it is that's very difficult is that we're marketing these unique experiences and these unique places because they're eye catching and they're alluring. And so I think the "Let Hawaii Happen" campaign was the best that you guys had ever done. ... So it's a balance because you want to do things that jump off the page that you can offer that no other destination can. But then you can't be shocked when someone says, "I want to actually duplicate this picture I see here and I want to see that with my own eyes."
Weissmann: So who takes the lead here? Who is it that puts together the residents and all of the stakeholders?
Richards: That's the problem.
Hughes: Jack is looking at me. ... This new administration has been at HTA for four months. And so one of the things that we've really focused on is how we're going to organize this delicate balance. You know, we've gone from talking about we had a slowdown but we have too many visitors, and we have a resident issue and if we don't have happy residents, we're not going to have happy visitor experiences. So that's our job is to figure out how to take that jigsaw puzzle and make it make sense holistically. It can't take any one in a silo. So we've organized differently. We now have a director of Hawaiian cultural affairs and natural resources reporting directly to our CEO. Because tourists really want to do the right thing. They just have to be told what to do.
Tom Mullen, COO, Hawaii Visitors and Convention Bureau: I think a third of your budget goes to that.
Hughes: Yes. A third of the budget goes there. We also have a community director who is reporting directly to the CEO. Her job is to make sure that the community understands what tourism is doing for the community and get them engaged and involved in that process. We also from a marketing perspective have a responsible tourism campaign executed through HVCB that has done the rooted campaign, which is essentially a marketing campaign and a responsible tourism campaign all rolled up in one.
Haas: To the point about the economic understanding of tourism, people get it. They know it's a $17 billion industry and they understand it's the economic driver. But when you talk too much about it they say, "Wait a second ..."
Hughes: Don't shove it down my throat.
Haas: Just what Karen said. It can't be just about the money. In fact, when you talk just about the money, that's when people say, "You guys care more about the industry than you care about me." So you have to have this balance, and I think HTA's moving in the right direction. You've got to get everybody around the table. It's not just the industry. It's not just the community. It's not just the policy makers. It's all those people together have to figure out how to find that balance.
Mullen: In the past, HTA really never talked about those community benefits. They talked about the economic driver approach, and that's all they talked about.
Hughes: Right. We don't talk about that anymore.
Mullen: You don't, which is great. So you're now talking about what do we give back to the community and stuff like that, which is bringing the residents back into it.
Dee: If you go back to how HTA was established and its purpose, it's not just marketing, it's management and marketing of the destination. So by statute, that's actually what it was established to do. So to answer your question, Arnie, about who's responsible, in theory, it's HTA.
Haas: That's right.
Dee: But when it was established, the lion's share, nearly 100% of the TAT funding came back to HTA to do its job. Today you said it's 13% roughly. We had to fight hard last year to preserve the funding that HTA was going to receive. I do have a concern that we do not have enough resources that are directed back from the TAT from the legislature to actually allow HTA to do its core mission. Again, to balance between management and marketing.
Cheryl Williams, regional vice president of sales and marketing for Hawaii, Highgate: You know, there's a lot of things that are good about what the industry, including all of us here, are doing to keep our natural resources there, to take care of the place, to take care of our employees. And so that's always top of mind of what is at the core of what we do as a business and responsible tourism. So I do think that there are opportunities to bring us all together, and figure out how do we move forward stronger and better to really address some of these key items.
Churchill: I think there's a huge highlight which no one has talked about: the Governor's Initiative for Sustainable Hawaii, not just tourism for the state of Hawaii, has gotten U.N. recognition. And so we're one of, what, nine destinations across the planet that is looking, that the U.N. is looking at as a template for what sustainability can be across the planet. That's a huge accolade for the state of Hawaii.