Hawaii roundtable: All-inclusives, authenticity and more

Travel Weekly invited a small group of travel and tourism executives to the Moana Surfrider, a Westin Resort & Spa in Waikiki, in late May for a roundtable discussion that focused, among other things, on Hawaii's rebounding visitor industry. Participants in the roundtable, moderated by Travel Weekly Editor in Chief Arnie Weissmann and contributing editor Shane Nelson, tackled topics such as this summer's peak season bookings; whether all-inclusive resorts might work in Hawaii; and the growth potential of cruise to the Islands. The original transcript has been edited for length and flow. Photos by David Miyamoto.


Shari ChangArnie Weissmann, editor in chief, Travel Weekly:Hawaii finished 2011 in a very good place, and the early forecasts for 2012 suggested an even better year ahead. We're about halfway through 2012: Is it looking as good as you had hoped? I'm seeing more promotions than at the beginning of the year, and these can be an indicator of some softness in advance bookings. Shari, I see you nodding. Tell us how things are going.

Shari Chang, senior vice president of sales, marketing and revenue management, Aston Hotels & Resorts: The first part of the year was great. I think we all had really good, strong starts in quarter one, and in most of quarter two, but we are seeing, on certain islands, some softening during what is traditionally a very peak period. The pace isn't there yet, and we're a little concerned, so we're checking the airfares, and they were all pretty high, over $1,000, and that's a big concern for people traveling to Hawaii, especially with families, during summer.

One of the issues we're wondering about is whether travelers are waiting to see if there's going to be a fare sale, and waiting a little bit longer than they normally would to book during this time period.

On Oahu, it's not so much a problem because you have a lot more international travel coming in. But especially on Maui, we're noticing there's a little lightness in the pace for July, just that one month specifically. That's unusual. And it may come through in the end, we don't know, but you're starting to see people go out with promotions that, for the summer, they normally wouldn't have.

Rob SolomonRob Solomon, chief marketing officer, Outrigger Enterprises Group: There's been so much reinvestment in Waikiki in the past five or six years and so many new openings and new owners, new brands, new product of every kind, so that it kind of makes its own weather. It can handle the ups and downs, including from the different geographies. For the neighbor islands, I don't remember having a discussion at this time of the year when somebody hasn't complained about thousand-dollar airfares, and somebody hasn't said, you know, July's a little weak.

I think what's fundamentally different now is just the online travel and marketing of travel and shopping and researching that has brought so much more immediacy. People don't think it's extraordinary now to not make up their mind about what they're going to do until two weeks before, or two days before, and so there's a lot more flexibility in the air system now. It does make it a lot harder to forecast or explain to owners or financial people what you hope is going to happen and then wait for that to come in. But the neighbor islands are always a little more interesting puzzle to analyze, including in the summer.

Keith Vieira, senior vice president and director of operations, Starwood Hotels & Resorts Hawaii: When you look at Waikiki, it's so balanced. Our Japanese business is up, our China business is up, our Korea business is up. It's not big numbers, but they're all up, so that balance helps Waikiki remain relatively stable. The neighbor islands tend to rely on the group market, causing compression more than any other place, so if Maui is a little soft, or Wailea is a little soft, and they start doing more promotions, then it's going to kind of suck from everybody. It hasn't been a great group year, and I think even going forward, it's going to be challenging to have those large groups again, tied back to airfare, because airlines aren't willing to commit major blocks and major share.

Jack RichardsJack Richards, CEO, Pleasant Holidays: I'm the only tour operator here, but we're not seeing that big of an impact for air, and for the following reasons. One is that the total air seats in the market will, in 2012, exceed 2008, and that's the year ATA and Aloha went out of business, so we're back to, if you will, 2007 levels.

Our data says that airfares are up 23% year over year for the month of July. But you have to keep that in perspective, because if you look at Europe, for example, airfares are up 25%. Now here's where the key difference lies. Fuel surcharges to Hawaii are $30. Fuel surcharges to Europe are $496 on average. In Europe, you have political unrest, you have the Summer Olympic Games in London, which takes out July and August, so that's pushing a lot of business from Europe to Hawaii.

For us, it's not air. We have plenty of air. Although, as Rob said, [customers] kick and scream every year that prices are too high, but the airplanes are full. It's summer and the airlines yield their fares to make money, [but] the price to Hawaii is reasonable when you compare it to Europe, and when you compare it to other destinations. So to me, you can't lay this totally at the foot of the airlines, because in this year, although they've restrained capacity, you're at almost 2007 loads.

Having said that, hotels have also raised their rates along the way, because historically, over the last few years, they've been low. So at the same time you have airfares coming up, you have average daily rates (ADR) coming up, and that's a demand reducer.

Arnie WeissmannBut hotels have to make money, too, so they have to raise their rates. It's just not air, it's that combined with hotels raising their ADRs and on some islands, in our opinion, they've raised them too quickly, too much. You lose momentum when you do that. People look at alternative destinations [and] Mexico, for the first time in five years, is back with a vengeance. It's doing better than we've seen it since 2007. It's bleeding traffic from Hawaii because of its all-inclusive resorts.

Weissmann:Could all-inclusives work here? Or is there something making them an undesirable product for Hawaii?

Richards: First off, I'm not a hotelier, and we have no idea what the operational costs are. You'd really need to take a hard look at that. Whether it will be successful in the market or not? I really question whether it could be successful.

Weissmann:Why?

Richards: Well, because Hawaii is different. It's not an environment for gated communities. It's set up differently, the cost structure is obviously higher, both from a labor standpoint and a food standpoint. So I don't know if you could make it attractive enough to lure business away from the Caribbean and Mexico, because it's two different cost structures. But I'm not a hotelier.

Chang: The other thing is, because I know we took a look at this at the [Hawaii Tourism Authority] a long time ago, one of the beauties of Hawaii is that it is a safe destination to go out and explore. One of the reasons there are a lot of all-inclusives in other destinations is that it's not that good to go out and explore around the islands on your own. So Hawaii has that unique opportunity for people to be able to go out, so they don't want to be confined to the hotels. And I have to agree, I don't think we would build them quite to the level, and have the service level because of the [advantageous] cost structure that you could have in other destinations.

Elliot MillsElliot Mills, vice president and general manager, Aulani, a Disney Resort & Spa: I don't think it could work, even if you had the cost structure. For instance, in Waikiki, you wouldn't be able to manage it, frankly, because you're not set up that way. You're set up for everybody to disperse and only have X amount of capture for dinner, X amount of capture for breakfast. If you doubled or tripled it, if you could even get to the cost structure, I think it would be really difficult to process and manage.

Richards: And Arnie, one other thing I think has been overlooked is the culinary reputation now of Hawaii. Over the past five years it has dramatically increased, and every one of these hotels sitting here at the table, just if you read Travel + Leisure, they're starting to get awards. In our opinion, [hotels] have dramatically upgraded the dining experience in Hawaii, and it is an attraction point now for tourists, whereas years past, it was not.

Scott Ingwers, managing director, Trump International Hotel Waikiki Beach Walk: I think the destination, specifically Honolulu and Oahu, is really showing well. You know, for the past five years, what's gone on here, and Jack mentioned it, it's really turned into a world-class, high-end destination, and a lot of travelers who are only looking at Maui or certain other destinations around the world, now they take a look at Oahu. Travel agents who haven't been here in the past five years need to come back and take a look, a good hard look at all the good things that have gone on here.

Weissmann:On the topic of travel agents, are they the primary channel populating your properties? Are travel agents still important?

Ingwers:
They'll always be important.

Elizabeth ChurchillElizabeth Churchill, senior vice president sales & marketing, Aqua Hotels & Resorts: Extremely. This is a channel that we have been seeking for a number of years. Aqua has been kind of late to the table, because we were focused on a lot of other areas, so we're actually putting a significant amount of money toward travel agents for the remainder of this year and into next year.

Richards: And now everybody wants a customized vacation to Hawaii, but that involves, typically, a multi-island visit that is very complex, that needs the expert assistance and the knowledge of a travel agent to facilitate the transaction. That's why people are migrating back to travel agencies, because you cannot get that service online, you can't book that online. You want to make sure you're at the right hotel, and not just the cheapest hotel. Customization and value and experience is becoming ever more important in Hawaii. If you're going to come here, you need the advice and knowledge of a travel agent to sell it because it is so complex.

Weissmann:Are you getting enough pre- and postcruise business?

Richards: If you look at Hawaii, and if you look at the cruise industry, which is a $20 billion industry in 2012, the Hawaiian Islands are underserved. Hawaii has beautiful ports, and you can bring in a lot of money. At one time there were three ships operating out of Honolulu. Today, there's one big ship operating on a consistent basis.

The hotels benefit from pre- and post-stays on every single island, and when this happens, a variety of different taxes are collected. So if you compare Hawaii to the Caribbean, to Mexico, to Tahiti, to other areas, it's noticeable that there has been very little development on the cruise business for Hawaii, which I think could add millions of dollars to the economy relatively quickly.

Scott IngwersThere are some rules that have to be changed to allow the workers to be non-American, so [the lines] can be more competitive, and that's something that should be addressed at some point, because everybody benefits. The airlines benefit, the hotels benefit, the tour operators benefit, the taxicabs, everybody. If you look at Hawaii, from a cruise perspective, it's one of the most underserved cruise markets in the world.

Weissmann:Do you think that, in some ways, the cruise lines might be a little shy after Norwegian reduced its presence in Hawaii?

Richards: I think you need to change the law. I think you need to allow the lines to operate with non-American crews, because the cost to do that is different. But they're going to buy fuel, they're going to buy food, they're going to stay in hotels, and buy tours and activities. I can tell you that we sell cruises in Hawaii, and the pre-and post business is almost as large as the cruise business. 

Chang: And it's not just the rules about workers. There was an issue of [the state] wanting the cruise ships to pay for improvements to the harbors, and the cruise ships are saying, wait a minute, you want us to bring our ships here, we're going to be buying your goods. We're going to be doing all this, and we think that should be your investment. That's another one of the major issues that came up.

Keith VieiraVieira: Conceptually, I certainly agree with Jack's point, but when NCL came out, they jumped three ships into the market, pricing was low, etc. It was too much. And as a result, they lost badly. So I think if you're going to do something like this, and I do believe there are a lot of other benefits from cruise ships, but you've got to really do it on a building-forward basis, so that it's not over-absorbing. Also, you are going to get pushback from the community, who will say, how come their [cruise ship employees] are getting paid so much less? But an ongoing growth plan, which should be part of the [Hawaii Tourism Authority's] plan, would probably be beneficial to the destination.

Shane Nelson, contributing editor for Hawaii, Travel Weekly:I'd like to know where the Hawaiian culture fits into this destination's appeal, and how does it distinguish this place from competitors?

Richards: I think it's the key differentiation. The aloha spirit cannot be duplicated anywhere else in the world. It's No. 1 at the top of the list as to why people return: the friendliness, the engagement of the Hawaiian people, the Hawaiian culture, and that's absolutely key for this destination. You use that as a selling tool, and when a travel agent understands that, and they can communicate that to the customer, they're going to increase their sales.

Mills: The meaning of "Aulani" is "a messenger of the gods," or "a messenger from a greater power," so we intend to share that heritage and that culture with our guests in a genuine and really sincere way. It's not to be the experts, but to be the portal to experience. And in that way, to Jack's point, we really want to ensure that we're setting the bar very high from a Hawaiian hospitality standpoint. It's a unique thing in the world, and we're trying to create an environment for our cast to really be able to share of themselves, share the culture in its genuine state, and understand the heritage and the culture of our place, because that's really what makes us unique, and what people come to Hawaii for.

Shane NelsonChang: I think all of the hotels here recognize that there are many sun, sand and surf destinations, and what's going to distinguish this one from the rest of them is the Hawaiian culture, and the way we weave that throughout the properties.

Churchill: And the aloha spirit means something different to everybody. It doesn't matter where you come from or what your ethnic background is. People understand that and relate to it, and it's one of our core principles. The other thing we do at Aqua is really work in partnership with things like the Merrie Monarch Festival or the King Kamehameha Day Parade or the Waikiki Aquarium, to support local host culture events and nonprofits, backing it up with actual actions in order to keep this a special place to live and visit.
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