Travel Weekly's contributing editor for Hawaii, Shane Nelson, caught up recently with Jack Richards, president and CEO of Pleasant Holidays, to talk about travel agents' impact on the Hawaii visitor industry and his company's outlook for the year ahead.Travel Weekly: What role do agents play in Pleasant Holidays' Hawaii business?
Travel agents account for a big majority of the business for Hawaii at Pleasant Holidays. One of the key points, and I think we're different than a lot of tour operators, [is that] the majority of our Hawaii business consists of multiple-island visits, which are very complex, so travelers need travel agents to assist them with these itineraries and to understand what they want to do. A clear majority of our [clients] visit two islands, and sometimes three, so that's why travel agents are so important to the Hawaii vacation travel market. They help clients with their trip, they tell them where to go, what to do, what to see, how to do it.
If you look at it this way, you have not only the transpacific flight but you also have the interisland [flights] and then you have the hotels, the ground transportation and the optional activities. It's a very complex itinerary. It's not something that's easily booked online. You need to go see a travel agent to make sure you get the Hawaii trip you want, and the majority of our business comes through travel agents for Hawaii. Always has and always will. TW: Are you seeing more interest in multiple-island visits now than, say, four or five years ago?
In 2007, it was very strong. During the recession it kind of dipped down, and people tended to pull back a little on their spend for Hawaii and only visit one island. We think it was economic-related. So yes, we are seeing an increase in visits to multiple islands, and we're also seeing a huge increase, with all of the available nonstop flights now, to Kauai and to the Big Island. We're seeing people bypass Honolulu and go directly into places like Kauai, Maui and the Big Island. That's really come about the last several years because of the nonstop flights that have been added by Hawaiian and other carriers. TW: Can you give us an update on some of the tools you offer agents selling Hawaii?
We offer a variety of continuing education and training for travel agents, specifically for Hawaii. We have an online training program called Track, and it stands for Training Resources to Attain Continuing Knowledge. This is a set of modules for all destinations but more importantly for Hawaii. The agent can either attend these as a webinar or go up and listen to the recording later, so it's something they can do at their leisure. It's very, very detailed. It goes over all of the islands, what are the options, it gets into hotel categories and a variety of different things. That's probably one of the bigger ones that we offer. We also have a travel agent resource center online at PleasantAgent.com where they can go [and] make postcards, do their marketing and a variety of different things.
And then new for this year, Pleasant Holidays is going [to be available] in VAX VacationAccess, which is a travel agency-only portal. If you look at the agents who are associated with it, it's primarily those east of the Mississippi, so we're in there in a big way. We have a supplier center in there, and we spend a lot of time talking about Hawaii on VAX.
And then finally, we are one of the largest Hawaii activity operators in the state of Hawaii, so we have a dedicated activity website called PleasantActivities.com. We are seeing an increased use of that by travel agents. Travel agents are now very, very focused on commission income, so we want them to prebook their activities. They make a commission on it, and so this is part of the total share of wallet. But here's the key, [and] this gets overlooked by a lot of people: Our most important tool that we offer to travel agents is our reservations sales agents. They have an average tenure of 6.6 years, most of them are certified destination specialists, they've been to Hawaii many, many times, most of them travel on vacation to Hawaii [and] they're incentivized to sell Hawaii. They are commission-based salespeople, so their knowledge, experience and service is really what differentiates us from any other tour operator to Hawaii. TW: You mentioned VAX. Have you joined that organization hoping to expand market share among Midwest and Eastern U.S. agents?
We are [expanding our share]. We're seeing a lot of traction east of the Mississippi now, in particular in the Midwest cities [in] places like Ohio, Indiana, Minnesota, Illinois. New York is becoming more important for us, Virginia, all the way down the East Coast. We have business development managers today in Boston, we have two in Chicago, we have one in Atlanta. We have one in Florida, and we are going to hire two new BDMs on the East Coast. TW: On Jan. 3, Hawaii World Resorts, a unit of Pleasant, announced that it had changed its name to Journese. Can you explain why that change was made?
It's a 34-year-old company that we acquired over 11 years ago, and as we started to expand the brand beyond Hawaii, the name became problematic, especially in Europe, Caribbean, Tahiti [and] Mexico. Holding up a Hawaii World sign in Italy just doesn't make sense. We also changed the management. We dedicated ourselves to building this as the luxury brand for Pleasant Holidays. So what we did is bring experienced management from Abercrombie & Kent, brought a new team in, and they're refocused on building this luxury brand for Pleasant Holidays' portfolio. It only offers four- and five-star hotels. It's a different level of service and a different price point. We started doing this in 2011 and did the formal changeover on Jan. 3, and we're seeing double-digit growth in this sector already. We sent out a new, 100-page 2012-2013 Journese brochure. We have all destinations consolidated in the brochure, and obviously Hawaii is very prominent. In our opinion, Hawaii will continue to be the single largest destination for this brand, but we could no longer carry the name Hawaii World when we're in Mexico, Tahiti and other destinations because it was confusing to the travel agents. TW: Year to date through October, average daily room rates at Hawaii hotels were up around 8% year over year. Is that too large an increase too soon?
We are concerned. We saw this back in 2007 and 2008, and if you recall, ADRs started going up pretty significantly, and I think at its peak they were up more than 20% at one particular time. I think any time you see a continued increase in ADRs, you see a corresponding decrease in demand at some point.
So I think that this is really a mixed message for Hawaii going into 2012 for one reason: We believe that Mexico will have its best year in 2012 since 2007. So there is a concern that we could see a shift in business from Hawaii because of the price and the all-inclusive resorts and the airfare. The perfect storm for Hawaii would be that if ADRs continued to increase, and let's say they go up into the high double digits -- 10, 12, 14% -- and then all of a sudden you have higher oil prices driving airfares higher. You're going to see a fairly significant impact on travel demand to Hawaii. TW: Where does Hawaii stand in terms of direct competitors like Mexico?
Mexico is a huge value right now. We are seeing a huge increase in Mexico business already. It started in September of 2011 and it's continued. We believe it's going to be up high double digits in 2012, and I think that if the ADRs continue to go up and because of the lack of an all-inclusive product [in the Islands], it will impact Hawaii. There's no question about it. TW: What are your expectations for business to Hawaii in 2012?
We are forecasting low double-digit growth for Hawaii, and I think that's very significant because we've seen double-digit growth there since 2010. We did it in 2010, and we did it again 2011. But we're still forecasting a very good year. We came out of the box at the beginning of the year already seeing a fairly good increase.
Having said that, Mexico business is [up] much more than Hawaii. Caribbean is up double digits year over year, and [the region] had a good year last year. Our business to Tahiti did very well in 2011 and is also off to a good start in 2012. If travel demand is up to all destinations, then Hawaii will have a good year. But we're not seeing the same ADR increases in Mexico, Caribbean and Tahiti that we're seeing in Hawaii, and I think that's a point that [we] will continue to be very, very diligent on. How far can you go up? How fast can you go up?
Hawaii is more important to us than any other area, so we'll do whatever it takes to market the destination and keep it up [and] keep it at parity with the other destinations. It's getting harder now that Mexico is back, because I think Hawaii has enjoyed a hiatus from Mexico for about five years, and the tide is turning.
The Mexican government, the Mexico Tourism Board, the hotels, they've done a great job in marketing the destination. They have increased airlift going into Mexico for the first time in many, many years. They have a very good product, and they have a proliferation of all-inclusive resorts that Hawaii doesn't have. That's something Hawaii needs to keep their eye on going forward. As this market continues to improve, it's going to shift share from Hawaii. TW: Pleasant Holidays won its eighth straight Travel Weekly Readers Choice Award for best Hawaii tour operator in December, and you're the largest tour operator to the state. What's keeping you on top?
We're a Hawaii-centric tour operator and we have been since 1959. This company was founded on Hawaii, and we've never lost our focus. The second key point is our product directors were born in Hawaii, they live in Hawaii, and we are a viable part of the community. We have 100 employees that live in the Hawaiian Islands.
When we interview people and ask them why they book Pleasant Holidays, one of the first things they tell us is that [we] have the most knowledgeable reservation sales agents in the Hawaii market today. And that's important, because it gives them credibility and confidence and trust that they are making the right decision. We are also one of the largest activity providers in the state. But I think the key point is our commitment to Hawaii is really the heartbeat of the company. That's what we are focused on and have been focused on for over 50 years, and that's not going to change. TW: The Hawaii Tourism Authority just put out its Q1 air seats prediction, forecasting a 3.8% increase over the same period last year. Are the new flights out of California by Alaska Airlines and others to the Islands helping business?
Absolutely. If you take, for example, the change Hawaiian Airlines made with the new airplanes. You're putting a lot of new seats in the marketplace just by the change in airplanes. Then you add the Alaska service. Alaska is expanding a significant amount of seats. They're also going into different cities. The key to Alaska is that they're offering nonstop service to the other islands, and they're bypassing the Honolulu hub. Hawaiian's model is based more on hubbing everything through Honolulu, although they're starting to see that they're now going to have to start offering nonstop service to places like Maui, which we are seeing out of Northern California. Our opinion is, anytime you get increased air service to Hawaii, it's a positive thing. TW: Allegiant Air plans to launch nonstop service from the West Coast to Hawaii this summer, and Southwest Airlines has mentioned interest in service to the Islands. What impact would those additions have on the destination?
When you get into low-cost [service], [for] Hawaii that has historically been problematic, because it's one thing to offer Fresno to Las Vegas, [but] it's another to offer Las Vegas to Honolulu or Las Vegas to Maui. Aloha was low-cost, and that was not successful. ATA was low-cost, and that was not successful. Are the added air seats welcome? Absolutely. Low cost? I don't know if that is synonymous with Hawaii, because you have a minimum five-hour flight off the West Coast, and you had better have good airplanes and know what you're doing. You'd better have good codeshare and feeder flights.
The legacy carriers -- United, Hawaiian, American, Delta and now Alaska -- there's a lot of competition. It's different than simply saying, "We're going to do Fresno-Las Vegas." So is it welcome? Sure. We will not sell Allegiant because their business model is different. That's not a tour operator model. We're tracking Southwest. Obviously, their order of long-range Boeing airplanes is coming delivered "over-water qualified." They're gonna fly somewhere. Is it a good model? We're waiting to see. TW: Would Pleasant use Southwest flights?
I think we would. It just depends. Are they going to have first class? A lot of people want to fly first class to Hawaii. There are just a lot of unanswered questions. But the level of seats today is far greater than [when] Aloha and ATA went out, so we're very happy. We think this is a very good time for Hawaii. I think you're going to continue to see air seats increase, although some of the equipment now is being redirected into Mexico. Remember, particularly if you look at Alaska Airlines, they had a lot of assets in Mexico, and then during the downturn moved them to Hawaii. But I think any time you get additional air seats in the market it's good for everybody.