Positive signs foster a sunnier outlook for Aloha State

Hawaii Roundtable 2010Looking to appraise the state of Hawaii tourism, Travel Weekly invited executives from airlines, hotels and tour operators to gather with colleagues from government tourism organizations for a roundtable at the Trump International Hotel Waikiki Beach Walk in Honolulu to discuss travel and tourism to and within the Islands.

During the roundtable, moderated by Travel Weekly Destinations and Special Supplements Editor Kenneth Kiesnoski, participants tackled hot topics such as sustainable growth, affordability, airlift and competitiveness.

[Editor's note: The original transcript has been edited for length and flow.]

Travel Weekly: One theme that emerged during a recent Travel Weekly webinar, "How to Make More Money Selling Hawaii," was that we may be looking at the best summer for travel into Hawaii in a long while. How are things looking as we enter the second half of the year?

John Monahan, president and CEO, Hawaii Visitors and Convention Bureau: Hopefully we are starting to recover. [Hawaii] is such a strong destination that we are getting arrivals. But as with a lot of the other destinations, at what cost?

The customers are absolutely looking for value across all strata. And we've got to provide that great value. The hotels are considerably still off their [average daily rates] from the 2007 and early-2008 period.

So the good news is that we're such a strong destination, we have such a great product and we've added a ton of airlift, with over half a million additional seats for this year. But you still have to really motivate the consumer through value. The hotel and airline partners are doing it in a variety of different ways.

Elizabeth Churchill, vice president, sales and marketing, Aqua Hotels & Resorts: For quite some time it's been all about added value. That seems to be what the customer is seeking.

Keith VieiraKeith Vieira, senior vice president of operations, Hawaii and French Polynesia, Starwood Hotels and Resorts: We think of the value-add as a message to remind people about what Hawaii has to offer.

And as things get better, [hoteliers] obviously raise their rates or pull off some of these value additives, and hopefully things get back [to normal].

We have one basic struggle still out there, and that's the group market -- and not just in Hawaii. Most of our resorts [on] the mainland are about 50% to 70% group [bookings].

When the Biltmore or one of the other hotels, say, in Phoenix, that run very high groups don't get them, then they are dumping Internet rates to get FITs.

If you are in Chicago and you see Scottsdale costs X amount of dollars and Hawaii's still X plus more because of the time and distance, it's going to be a struggle.

But as we see those group markets start to do better and normalize a bit, then I think it will be easier for us to recover. Right now, there is just too much availability everywhere. And with Hawaii's time and distance [factors], it is going to take a little longer. But at least there are good signs.

Rob SolomonRob Solomon, chief marketing officer, Outrigger/Ohana Hotels and Resorts: I will try to look at it from the travel agent's end of the telescope and not speak for distribution. It is good news, bad news. The product has never been better, and I think it's remarkable here that the investment continues, and not just on the hotel side but even with the airlines.

We're winning more seats than we're gaining. That says that the market is responsive and that the demand here is consistent enough year-round that even in today's world the airlines can justify, one way or another, keeping us on the plus [side] in terms of capacity.

I think the other thing that we've noticed is probably due to the rates this year, which I call the VSP: Visitor's Scholarship Program. Everyone is essentially enjoying a subsidized vacation here in Hawaii. The value-for-the-money scores have actually gone up. We're not thrilled about that from the rate point of view, but the fact is that [customers] are getting a sampling of new [hotel] product in Hawaii, and it does exceed their expectations.

Another thing that is going on that's visible for the agents is that the brands are stepping up and "putting it out there" along with the destination. Product's never been better. There's enough solid promotion going on that we're holding a little better than our share. The challenge is going to be, can we build from that going forward? It's not just about the hotels earning better ratings; it's about the dollars that go back into the product. That's how we win as a destination in the long run.

Finally, travel agents are playing a more important role today in helping the customer understand the product and make the right choices, and Hawaii's coming up more often than not.

Jay TalwarJay Talwar, senior vice president, marketing, HVCB: Clearly, we see travel agents as bigger partners right now and, like every distribution channel, we are working hard with travel agencies, working directly with them, and with our wholesaler partners.

Fortunately, we've got two tracks the state of Hawaii is working on. You step back a little bit and you see the state is still looking at long-term conditions. For example, the governor [was recently] in China. There's a lot of long-term planning going on. And [the private sector] is investing more; Hilton's investing more. While the times are tough, there's still a big eye looking out to make sure that the destination is still attractive down the road.

In the short term, everyone's buffing up and working hard. The hotels here are really providing value, [as are] attractions, activities, everyone. And the way we are working is that we are going to market together. We are going to communities, one at a time, down the [mainland] West Coast. We are heading out to Chicago in the fall, and the community of Hawaii is going [there] together.

We understand the long-term vision with respect to the brand. There's an ability for us to work together, I think, [that's] different than most destinations. And that includes going out and doing training for the agents.

TW: And Jack, how about the tour operator's perspective?

Jack RichardsJack Richards, president and CEO, Pleasant Holidays: The market is definitely in recovery from our point of view. How strong it is, I don't know, but it is definitely in a recovery.

But every destination is in recovery. You have to understand that Hawaii's competitive set, from our lenses, is Mexico and the Caribbean. They are all up; all destinations are up because 2008 and 2009 were not such good years.

But Hawaii's definitely recovering. We are seeing it in the 2011 rates. We are seeing rate increases from 5% to 50%. That tells us that they're expecting a good summer season. We are tracking slightly over 600,000 incremental receipts in the market, largely due to the up-gauging that Hawaiian Airlines has done, plus Alaska Airlines redeploying their assets out of Mexico into the Hawaiian market. So air seats are not a problem. Price on the air seats is not a problem. There is fare sale after fare sale.

Hawaii needs to have the air seat capacity in order to fill the rooms. It's a different destination than it was three years ago. You have a lot more luxury property sitting here today than three years ago. A lot of people are booking luxury properties today but paying midscale price. That's got to change. For us, our average transactions [are] coming up. It's the first time in two years we have seen an increase.

Ken Pomerantz, president and chief marketing officer, MLT Vacations: This year's shaping up to be much better than last year. Our business is up a lot. It's up from the Midwest and East, which I think might be unique for this destination. It [is] really driven by a couple of things: the rebound of the economy, but also the growth of our airline partners' flights, with Delta and Continental growing capacity and lift. Oahu business is up 15% but the outer islands, the Big Island and Maui, are seeing 80% year-over-year growth, which from our perspective is fantastic. We'd like to keep that growth up.

TW: We keep coming back to airlift. Peter, Hawaiian Airlines just took delivery of the first two of up to 27 long-range Airbus A330 and A350 aircraft you're planning to acquire by the end of the decade. What's the situation look like for your company?

Peter IngramPeter Ingram, CFO, Hawaiian Airlines: We do have increased capacity this summer. We also have some increased capacity in the fall, with those new airplanes and more seats in the market. For us, that means more competition, obviously, and that is putting pressure in the marketplace on fares.

So we are seeing demand recovery off where we were in 2008, but we are seeing an increase in supply, and that is keeping prices on air travel flatter than a lot of other travel markets are seeing.

As I listen to the rest of the conversation, I think we have to be thinking as a travel community about the longer term and how we sustain. I think there is a new reality. I don't know that the consumer who is looking for value is going to change, and I wouldn't expect that to change.

And I think one of the things we have to do is make sure we continue to have a product that is demanded across the spectrum. That's ultimately how you keep the demand for air seats high enough in the market with airlines like us.

TW: With these longer-range and larger aircraft, are you going to expand your network? Are we going to see New York and the East Coast on your route map?

Ingram:We are. We haven't got New York on the schedule yet. We will be launching service to Tokyo at the end of October. And that will be a big opportunity for us to begin growing more in Asia. We added Manila [in the Philippines] a couple of years ago. And we added Sydney in 2005, so we've been expanding to some other destinations. Airlines from other destinations in Asia have been growing over the last few years, as well, and I think you'll see that continue. The Japan market overall is a growth opportunity for us. There's still going to be a lot of tourism from Japan, and we are looking forward to being a big part of that.

TW: Marsha, let's turn to you. The state tourism tax went up 1% last year and rose by another 1% on July 1. Will the added cost to visitors affect this nascent recovery?

Marsha WienertMarsha Wienert, tourism liaison, Hawaii Department of Business, Economic Development and Tourism: I think the impact for any tax increase has been that it's just another burden that we have put on travelers as well as on our properties here.

We weathered it this year. Yes, there were challenges with that [tax] increase. Jack [Richards] probably heard it loudest from a lot of people.

Richards: It is bad timing for the market. The way it was implemented was a problem to all the suppliers because we didn't have time to collect it from the customers, so we ended up eating it. It was a large number for most of us. It's not unique to Hawaii; every destination is doing that because the budget shortfalls are in every major metropolitan city in the U.S. It's the timing that's tough. We had enough time for July 2010 to implement it a year in advance, so this is from our perspective not an issue this year. It was a bigger problem last year.

Vieira: I'm more concerned about the message it sent to the market at a time when [the auto industry] was giving rebates on "cash for clunkers" and everything they could do to try to generate people to buy cars, and we were doing the opposite: making it more expensive.

And, yes, Jack, it's correct that it certainly was more than just Hawaii, but we are [almost] the only pure leisure destination out there, at least among large-scale destinations. So here you have people comparing us to New York, but 60% of their business is business travel.

It really was an issue of poor timing, the message getting out and also the confusion that it caused. If you look at Hawaii's success ... no greater segment has supported us [than] the wholesale distribution system. They're there marketing in good times, bad times. They spend more money when it's worse. They lose money when retailers go out. They're always at their tail end of it. ...Then they have got to come back and find a way to deal with this [tax] for the year when it is too late to collect it. It was a wrong message at the wrong time.

Scott IngwersScott Ingwers, managing director, Trump International Hotel Waikiki Beach Walk: [Consumers] are so well-educated now. They wait until the last minute, and it makes it difficult, as when Keith talks about the group market having a hard time reemerging.

They're waiting for that value they know is going to come on the hotel side, and possibly the airline side. It's scary. I've watched it over the years get smaller and smaller and smaller, and I don't know how much smaller it can get.

Richards: We're actually seeing [the booking window] elongate for the first time in two years. For the first time, we're seeing groups come back. We're seeing corporate groups coming in, but they're traveling differently.

Jerry Gibson, area vice president, Hawaii, Hilton Hotels and Resorts: But you're going from dinners to receptions, from three activities to one, and it's really starting to crush the margins quite a bit. Compared to last year we are getting a lot more group sites, but they're very cost-conscious, and they're looking at everything.

TW: Are all of Hawaii's tourism interests working together effectively with the operators and the agents to communicate a common message?

Wienert: I think that they probably are. Tough times force you to work better together. And I think that's what we have seen in regards to everyone coming together and working as a unit.

Everyone knows what the vision is. Everyone knows what the goal is and is doing everything they can to be able to meet those goals. The HVCB has done a good job in leading that with the blitz campaigns they have initiated over the last year, and I think everyone's really working together better than they have in some time.

John MonahanMonahan: One point that I think we need to bring up, though. There's one entity here that isn't represented at the table because they are all in Shanghai, and that's the Hawaii Tourism Authority.

With the efforts of some of the people at this table, we were provided the ability to have codified funding. In other words, we have marketing funding that's part of the law. And it's allowed us to do some of these cooperative things over the last two or three years.

We've actually had about a 20% increase in funding where a lot of destinations are being cut, and what that's allowed us to do is put together these marketing saturation blitzes that have allowed HVCB to go in and build a big-brand tent in these markets.

It then allows all of our partners to also come in and sell their product the best way they know how.

So the additional funding has been helpful. And I think that's all part of the cooperation. I know the state government took a little bit of a black eye earlier about the increased [tourism tax], but at the same time, [thanks] to the efforts of the industry and the state government, we've been given the ability to go out there and do something that maybe other destinations aren't doing.

TW: And what about partnership with the native Hawaiian community?

Talwar: That is the basis of tourism in Hawaii. The native Hawaiian host culture still permeates the destination tremendously. The aloha spirit is one of our brand pillars.

The duty is, again, looking at the consumers and what they are driving. They want authentic experiences more and more. As the marketers for the state, it's wonderful for us to be able to connect them with authentic experiences in the form the customer wants.

Solomon: It's definitely one of the major reinvestment areas for the industry. You just can look at Waikiki; you hear more Hawaiian music today here than you did four or five years ago.

We've made an incredible investment in our cultural program. We've gone to incredible lengths to make it authentic. It's something that enhances the experience, and visitors understand the value of that.

We have a vow-renewal program in Waikiki, we do it three times a week now, and it's attracted thousands of people. It's done in a very authentic way. It's been an incredible success. We actually brought our outer island staff to study it; we introduced it on Kauai recently to great effect.

TW: I imagine that at Hawaiian Airlines, native culture is integrated into the passenger experience.

Ingram: Yes, there are a lot of things. Service, from our standpoint, is at the very beginning and end of people's journey, but we think their trip really should start before they get on that airplane and not end until they get all the way home.

We are dealing with a part of the travel experience that is generally stressful and filled with anxiety. People just want to get from here to there, and anything we can do, particularly in flight, to make them more comfortable can actually become a real competitive advantage for us.

We do have the benefit of having employees who are from the islands, and they have lived here and understand the spirit of aloha. I think we do a better job than our competitors.

TW: That speaks to authenticity of experience. What about Hawaii's "cool" factor? Does it appeal to younger, so-called "millennial" travelers? Is it a hip place to vacation?

Ken PomerantzPomerantz: All the research says that all sorts of people want to come here, particularly the experiential traveler. They want a variety of experiences; they want to be near the ocean.

Vieira: For people who live on blogs, yesterday's rumor is today's truth. We now have three or four professional bloggers whose job it is to answer customers' online comments within 20 minutes.

We own the 45-to-65-year-old market. What we have to be aware of is how to get that 25-to-35-year-old market, who have so many choices, so many places and tend to like domestic travel.

At the end of the day, the spirit here, the culture, the beauty, the experiences, the rebirth, it all works well, but if we can't effectively communicate that in a way that appeals to them, that'll be a big challenge to us.

Gibson: And you have to target the activities to them. Mojitos with tropical drinks, the tapas with the steaks, all the things the young people are interested in, we have to telegraph that to them to make the destination attractive.

Churchill: There's an interest in trying to bring upscale boutique hotel product into Waikiki. We have our budget categories -- you know, the "boutique on a budget" product. Most travelers are used to an urban destination in the boutique experience and they're traveling for business rather than for pleasure. Leisure boutique is fairly new, and that's something we should try to capture in the marketplace. I think that it definitely has a place in Waikiki.

We've had great success with international travelers and younger travelers. These travelers have extremely high expectations, but their resources are limited. They don't have a lot of money right now, but they will someday.

TW: There's also a marketing appeal in going green. For the suppliers: Are you incorporating green consciences?

Solomon: Operating on an island in the Pacific, energy is a huge cost.

I remember one certain hotel that we opened one time; Keith had some experience with this, as well. When we first opened, the energy cost was higher than room revenue; when you start up, that's how high it can be.

Jerry GibsonWe are pretty sensitive here about water quality and ocean environment. But we do have a lot of old buildings, and it's not a destination where we are building thousands of units of, you know, new, [environmentally minded] products.

I think that the main consumer concern about Hawaii is, keep the environment that we have and keep the air clean and keep the water clean. ... I think that's the key here: to take care of what we've got.

Vieira: But it's a tough thing to market on. No question the younger traveler will want to know that you are being socially responsible and you have to be. The challenge you face as an operator is, a lot of times it is more expensive to be socially responsible. You don't get reductions in your waste removal if you get charged by the bin and different things like that. But there's no question it is going in that direction.

Ingram: Just to chime in from our perspective, jet fuel has been anywhere from 25% to 40% of our cost over the last several years, so we have a responsibility not just from a social and environmental standpoint but from an economic standpoint.

We are doing everything we can, and it is little things like washing our engines, which we started doing long before all our big competitors on the mainland. We've got a little bit more fuel efficiency.

The investment in our new Airbus fleet is going to give us an enormous capital cost. It will be probably the largest private-sector investment in Hawaii's history as we go through this over the next decade. But we will get increased fuel efficiency, ultimately. It's also just the right thing for us to be doing in this business.

Wienert: The state actually signed [a] contract with a private company to work with all the hotels on all of the islands. The goal is to have 50% of all of our properties [certified by the Leadership in Energy and Environmental Design green building program]. It's about a two-year project that we are embarking on, and it should start probably by the end of summer.

TW: Ken, any sort of impact on your business in Hawaii? Does it matter to clients whether Hawaii is greener than Mexico or vice-versa?

Pomerantz: Well, it matters that it's green. I think that it matters to our FIT travelers; our groups are a little bit different, but for each traveler, as you get past location and the price and time, then I think the green factor is plausible. I think it's even more significant in terms of satisfaction at the end of the stay. So it definitely plays a role.

TW: I want to give everyone an opportunity to quickly make any final comments or maybe express your feelings about the rest of the year or your outlook. Are you happy? Are you sad? Worried?

Pomerantz: I think we have all learned over the last five or six years that you don't get too far ahead of yourself in this business these days. There is a little bit of excitement in the destination about how the trends are going, and I would just caution people that we will still need to stay on top of it.

Wienert: I think it's what we talked about earlier and the value of the experience and really putting that value out there. And it is not necessarily price point, although I know it is going to be price point for the next few years as we gain that market share and confidence. But again it talks to the value of the experience that can't be duplicated anywhere else.

Richards: From our perspective the Hawaii market is in a definite recovery. I don't know how strong it is, but it's definitely recovering. We think it will get a little bit stronger as time goes on. We think 2011 will probably be one of the better years in the last three to four years. We're very positive going forward.

Solomon: I think for the travel agent, take advantage of every training program and opportunity that you can and understand all the new product, touch all the new product, and you have a great opportunity to give more service to your clients.

Elizabeth ChurchillTalwar: I think if you are selling a product, you want one that has high demand, high visitor satisfaction, increased access. You know Hawaii's got all of that. It's an incredible mix right now in terms of the products that our travel agent partners can sell, and I think as long as they are staying educated and up to speed on the destination, it's a great product to celebrate right now.

Vieira: We wouldn't be the destination that we are if it wasn't for what travel agents have done in the past. They still do a great job for us, so we appreciate it.

Monahan: Following up on Keith and Jays's comments on travel agents, we're here to help. We have a great travel trade team headed by Julie Zadeh, and we would like to help educate that group on the great variables we have here in Hawaii that create an incredible diversity and the fabulous destination that it is. We are available.

Gibson: Looking forward to a good summer. I was just looking at some numbers across the country before I came, and the East Coast is rocking right now. Chicago occupancies are up. Rates are starting to catch up just a little bit, so as soon as it keeps coming west we are going to get better and better.

Ingwers: I think it's considered a strength [that this is] a multigenerational destination, which has become so important post-9/11.

People have returned to family values and understanding what's important in their life. We really have become that much more appealing, so the glass is half full.

Ingram: We're unique as an airline, and we are really tied to a single destination and it's a destination point, not an origination point, so we have a real vested interest in the success of Hawaii.

I think one of the lessons from the last couple of years of challenge is that we are at our best when we work together, not when we are working at odds with one another.

And I think if we can keep that going forward in a period of stronger demand, it will bode well for everyone in the Hawaii tourism community.

Churchill: We need to be as aggressive as possible even throughout the summer and into autumn. I am concerned about autumn. I am looking at numbers and figures for autumn, and I am not quite sure we are out of this yet.

We need to be as progressive as possible. We can't rest on [our] laurels and talk about how we have always been the gold standard for marketing and things like that. I think we need to be very creative in our thinking and [in] what we offer to consumers, the travel agents, all of our partners in the industry so that we can stay ahead of the curve and stay ahead of the competition as a destination.

This report appeared in the July 26 issue of Travel Weekly.

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