After last month's Travel Weekly Hawaii Leadership Forum at the Royal Hawaiian in Waikiki, 10 travel advisers, wholesalers and hoteliers gathered at the Sheraton Waikiki for our annual Hawaii Roundtable.
Travel Weekly editor in chief Arnie Weissmann moderated a wide-ranging discussion that covered everything from the spreading of mostly unchecked (and unregulated) Airbnb and vacation rentals to the overbudget (and overdue) Honolulu Rail Transit Project. To see additional coverage of the roundtable in Weissmann's From the Window Seat column, click here.
On vacation rentals/Airbnb
Arnie Weissmann Photo Credit: Dave Miyamoto
Arnie Weissmann, editor in chief, Travel Weekly: Neighborhood groups and hospitality companies are not the biggest fans of home-sharing and vacation rentals. But estimates of the positive economic impact for Hawaii from these rentals are, at the low end, around $430 million, with perhaps $26 million being added to tax coffers. About 15% of guests in alternative accommodations say they would not have visited the state if not for these options. So, given that many hotels are operating near capacity, should there be an allowance for these additional rooms to house visitors?
Jerry Gibson, vice president for Hawaii, Hilton: There's no doubt that Airbnb and the like are here to stay. But the fact is that only 15% of Airbnbs have a "host" -- someone living there who has an extra bedroom, perhaps -- and the other 85% don't. If you're renting out a whole house, or multi-units, then that's called a hotel, and they need to be regulated as such. You need tax numbers, enforcement and penalties that are appropriate to keep honest people honest. Some of the counties are doing a very good job: Kauai, for example. All we want is a level playing field.
Sean Dee, executive vice president and chief marketing officer, Outrigger Enterprises Group: Philosophically, market disrupters or innovation that comes into a marketplace is usually good. It forces incumbents to be better and gives people alternatives. In this case, however, there have been studies and press releases that I think confuse the facts. Alternative accommodations have been in this market for years, and most of the folks -- VRBO, HomeAway -- have generally played by the rules. And [Outrigger is] in the timeshare and condo business.
Sean Dee Photo Credit: Dave Miyamoto
We know we need the alternative accommodations; that's not news. The news is that one of the alternative accommodations providers effectively moves faster than regulations. Their model is built on advertising illegal units. It's 30,000 units, roughly. And those 30,000 units are having a huge impact. It's state law, two years now, to put the taxpayer ID within the listing. But it's just not being enforced. In effect, they're marketing a product we don't believe is safe and we don't believe is fair. And at the end of the day, they're not collecting the Transient Accommodations Tax (TAT), which is critical for the general fund and also for marketing the destination. It's a big issue, very polarizing for the state. It's something that needs to be addressed and be a priority.
Ray Snisky, executive vice president, Mark Travel Corp.: From a distribution standpoint, we have an insatiable desire to get product that customers want. Airbnb is here to stay. But we're not going to [list Airbnb], even though it might increase our revenues, and that's because one of the most powerful things in travel, particularly for an intermediary, whether that be a travel agent or a tour operator, is that you are a trusted referral. Someone came to you because you are an expert. We feel really comfortable in what we're offering the customer, and we refuse at this point to put customers in an environment if we can't ensure what they're going to see. True, there are probably some Hiltons that we sell that we've never seen, but there's an infrastructure, a relationship. We work very closely with Hilton, and they have standards.
Jack Richards Photo Credit: Dave Miyamoto
Jack Richards, CEO, Pleasant Holidays: I have a different view. We have sold private homes in Hawaii for years. We don't know if they're Airbnb or not; they probably are, because they list on VRBO, they list on Airbnb, they list everywhere. We don't have a formal relationship with Airbnb, but we've been in the private home market for 10 years, and it's getting bigger because investors are coming into the market.
But it does require a lot of research to know who you're doing business with, what the regulations are, etc. Now, there's a flipside to that. From a wholesaler perspective, it creates more inventory for me. Because Airbnb is in Hawaii, I have more access to [hotel] rooms. I'm not saying that's good or bad, and I believe Airbnb should be regulated and taxed. It's not going to go away, so you've got to regulate it. And it's inevitable that these hoteliers' rooms will eventually be sold on Airbnb at some point. That is the natural evolution of the Airbnb model.
Keith Waldon, founder, the Departure Lounge and Global CommUnity: From a retailer's perspective, we are seeing a quick evolution of the private home market that is vetted and commissionable to the travel agency community. You just saw AccorHotels buy One Fine Stay -- I think they're going to blow that up. HomeAway is based five blocks from me, and I have preached to them for years on, "You need a subset of your million properties that is vetted and commissionable." I got two of their directors to come to Virtuoso Travel Week a couple of years ago, and their minds were blown. So they're working on a subset of their top properties that will be vetted and will be commissionable.
Weissmann: David, HomeAway is now your sister company.
David Hu Photo Credit: Dave Miyamoto
David Hu, CEO, Classic Vacations: So, from a corporate perspective, the question is: What is the best way to make this work for all involved? From a Classic Vacations perspective, we're about providing the right choice, we're about providing the right kind of information, we're about providing the right kind of experience. Our view is if you start trying to limit inventory, consumers start seeking places where they get a vast amount of inventory. So we are definitely exploring it. I've had many conversations with our sister company and things are in the works, and I think it's great to have that inventory at a marginal cost of zero. I get one connection to them, and instantaneously I get thousands of inventory -- making sure we have the proper disclaimers and the right kind of information. Could advisers help guide that choice? Absolutely.
Waldon: Could advisers increase your sales with those top properties much more than what you already have?
Keith Waldon Photo Credit: Dave Miyamoto
Waldon: I know we can do that.
Richards: One of the key issues for us is we're very concerned about any dilution that we would see with existing hotel partnerships, because our business is built on partnerships. Everybody faces that problem going forward. What scares me a little bit about Airbnb is, if there's a problem, I'm not quite sure how you get it rectified quickly.
On Hawaii as a destination
Waldon: The appeal is definitely the culture, natural beauty and the fact that it is part of the United States. When we have clients who want a close-in getaway and they realize that one member of the family does not have a passport, Hawaii always rises right to the top. That's a strength that could be pursued. "Need to get away? Don't have a passport? Come to Hawaii."
Snisky: The safety factor resonates extremely well, too. I think that's going to continue to play a bigger part in people's choices.
John Van den Heuvel Photo Credit: Dave Miyamoto
John Van den Heuvel, president, Gogo Worldwide Vacations: We're primarily an East Coast wholesaler, and for many clients Hawaii is seen as a once-in-a-lifetime opportunity. We need to retrain our people to see the opportunity for repeat visits. I think yesterday [at the Travel Weekly Leadership Forum], we hit the nail on the head when we talked about comparing Hawaii not to Mexico and to the Caribbean, but to worldwide destinations, because there's experiences here that people on the East Coast don't know exist. It's not just a beach destination.
Hu: Airfares are mostly in the $600-to-$700 range, and people think, "Hey, I could go to Europe for the same price, I could go to the Asia for the same price." Hawaii is no longer competing against a narrow competitive set; the world is in its competitive set.
Snisky: Hawaii and Las Vegas have experienced a little stronger convention and group business at some points in the year. In Mexico or Caribbean, there's not as much of that, so there's more continuity with great value leisure rates throughout the entire year. But in certain peak periods and over the holidays, we're seeing both Las Vegas and Hawaii draw higher average daily rates. There are some peaks now where the leisure customer is squeezed a little bit.
Kelly Hoen Photo Credit: Dave Miyamoto
Kelly Hoen, general manager of the Modern at the time of the discussion and since appointed general manager of Outrigger's Reef Waikiki Beach Resort and Waikiki Beach Resort: From a visitor experience, Waikiki is spectacular. Over the past 10 years, we've seen this incredible transformation of the destination -- I mean, every property.
Richards: And people migrate to new product and refreshed product. If you look at Ko Olina, for example, the moment Disney went in, it sparked a revitalization in an area that had been dormant for years. I went out the other day; I stayed at the Four Seasons -- beautiful property -- but more importantly, I have the site photo of the Atlantis that's going to be built out there, and that will trigger additional development. Newness draws people.
Hu: There's a lot of investment in the outer islands. Just as Waikiki is nothing like what it was years ago, the same could be said about the outer islands. The investments that have been put in have been phenomenal.
Dee: I do think there's a related challenge: [The state's] stagnant marketing budget. We don't necessarily have the funds to tell the story. We still talk about Hawaii as this thing, when in fact it's a lot of things.
Snisky: Something we haven't chatted about is that as Southwest Airlines matures in their international growth -- and they've made a tremendous investment in California -- it's become a matter of when, not if, they start flying to Hawaii. I would think in the next year and a half, two years, they would start flying here, and I think that opens up the competition.
On the Honolulu Rail Transit Project
Hoen: It's a difficult situation with the cost overruns. [But] the difficulty in traffic that we have here in Honolulu and on Oahu detracts from the visitor experience.
Connie Risse Photo Credit: Dave Miyamoto
Connie Risse, owner, Ships and Trips Travel: [My clients] don't care for the traffic here, so anything that can reduce that is a great thing.
Chris Tatum, area general manager for Marriott International: The cost is significant, but we need options for our associates. Probably 80% of them live on the west side of Oahu, so rather than spending [90 minutes] to two hours in a car [commuting], this will bring them down to Ala Moana, where there will be a bus into Waikiki.
Dee: We've done surveys of our [staff] and they [responded that they don't] like coming to work. We thought it [referred to] their experience at Outrigger, but when we dug into it, it turns out that the actual "coming to work" part is what they don't like. I think rail would be a massive benefit to their lives.
Snisky: This is a destination that lives on its people, so it's imperative to get [train transportation] because the idea of having team members spending hours in traffic and then having to have the most gracious, smiley face to take care of a customer -- it's a social problem, and a very dangerous thing for Hawaii.
Hoen: But the TAT should not be tapped for the project. [Editor's note: It has been proposed that the budget overrun be paid from the taxes hotels collect.]
Chris Tatum Photo Credit: Dave Miyamoto
Gibson: I agree. We should extend the general excise tax for 10 more years; that's the way to handle it.
Waldon: For Honolulu particularly, there is some complaint about traffic. But oftentimes, those are clients who want a more out-of-the-way place, which probably means that Honolulu is not the best option in Hawaii for them anyway.
On airport modernization
Richards: Most people want to fly nonstop into one of the islands, which means they need international airports, which they don't have. So it forces a lot of traffic into Honolulu. I read a report card, and Honolulu Airport got a D-minus on a customer satisfaction survey. I'm supportive of the airport authority simply because I think it will get a lot of stuff done quickly.
Hu: Nobody's disputing that the experience is not optimal. I think the question is how do you go forward? There are so many models. Just pick one and go. All the Asian airports have all gone down the privatization route, and even some European airports have. There's a model. Pick it. Go. It's not that hard.
Hoen: I've lived here all my life. Oftentimes, politicians are trying to make sure that they make everybody happy. But that strength became a weakness -- we're at a very critical point because a lot of people are unhappy. And every time the state presents a plan, they're excited about it, but then they kick the can down the road again. It's embarrassing, especially in a state where the visitor industry is our pipeline for tax revenues.
Jerry Gibson Photo Credit: Dave Miyamoto
Gibson: We need accountability. We're disjointed in our efforts with retail, general maintenance, keeping up with capital expenditures. An airport authority may help do that. The islands are just so fabulous, but our airport doesn't match the product. I don't know if any of you have been on Maui lately, but there's a lot of nice upgrades going on there. We need to do it around the system. Honolulu, for sure.
Dee: The airport and homelessness are the two major visitor complaints. We have to be honest about this: We're competing against the world, and the airport is deficient.
Snisky: This destination has had five straight years of record visitor arrivals, and the airport is just ... it's embarrassing. And the airport experience is magnified because you've spent so much time traveling here. The visitor experience doesn't just begin when they check in to the hotel.
Richards: If you're going to attract mega-super-jumbo airplanes, this has to be fixed. They're not going to come here; first of all, the gates aren't ready to handle them. The airport is antiquated. You don't have speed walks and you can't accommodate elderly and disabled people. A lot of work needs to be done. But still, I'm very hopeful.