TW roundtable hashes out Hawaiian tourism issues

Looking to appraise the ever-changing state of tourism in the Aloha State, Travel Weekly invited executives from airlines, hotels, tour operators and other travel suppliers to gather with colleagues from government tourism organizations for a roundtable at the Ala Moana Hotel in Honolulu to discuss travel and tourism to and among the Islands.

Moderated by Travel Weekly Editor in Chief Arnie Weissmann and Destinations Editor Kenneth Kiesnoski, and observed by contributing editor for Hawaii Allan Seiden, roundtable participants tackled hot topics such as sustainable growth, affordability, interisland transportation and competitiveness. In this article, we feature the first half of a two-part transcription of the roundtable (See "TW roundtable, round 2, tackles growth, culture," for part 2).

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

Travel Weekly:A recent Travel Weekly headline read "Hawaii numbers level off after years of growth." The ensuing article reported that Hawaii tourism seems to be doing very well but may have reached a plateau. Do you agree?

John Monahan, president and CEO, Hawaii Visitors and Convention Bureau: It's important to point out that although the total numbers are flat we are still experiencing record numbers from North America, particularly from the U.S. West. But we are seeing some softness from the U.S. cities. From a domestic standpoint we are at record highs, [but] it's clearly an issue from other parts of the world. Canada has gotten a little soft recently due to the loss of Harmon.

Marsha Wienert, tourism liaison, Hawaii Department of Business, Economic Development and Tourism: The bigger picture is the sustainability of the growth we had in 2005 and 2006. You really can't sustain those double-digit increases. John is correct; the U.S. has been gangbusters. But as we move forward, what you are going to see is a bit of stabilization in arrivals, especially from the domestic market.

A lot of the increases that we saw in '05 and '06 were the direct result of the cruise industry. So it will be interesting as we move forward when [Norwegian Cruise Line] does change its ships to another location. In regards to domestic travel, we'll see some decreases because of that ship going elsewhere.

TW:At last year's roundtable Ms. Wienert said Hawaii expected 400,000 additional leisure arrivals annually due to new cruise ship calls, so now is a good time perhaps to talk about NCL.

Andy Stuart, executive vice president, sales and marketing, Norwegian Cruise Line: We announced our temporary withdrawal of the Pride of Hawaii ... which comes in February of next year ... but still it will be a very big business compared to the cruise business just three years ago.

Jay Talwar, vice president of marketing, Hawaii Visitors and Convention Bureau: This is actually an opportunity. If you look at ... the infrastructure that the Islands have, what NCL has been doing to help build demand, but then one of its ships going away brand conceptions [and] demand going forward, it's all extremely positive for the Travel Weekly audience. Where sustainability or infrastructure had previously been capped ... there's now an opportunity there for the travel agent community to come in and fill that out.

Rob Solomon, senior vice president, sales and marketing, Outrigger/Ohana Hotels and Resorts: There are other numbers we don't track as frequently as we do visitor arrivals -- the spending numbers -- but they are very important to sustainability and for economic health and the future of the industry. 

One is net capital results. If you [look] back even five years you couldn't finance the kind of private expansion that we have going on in Hawaii today. It's mostly not investment underwritten by Hawaii financial institutions [but] capital markets from around the world voting with their pocketbooks. They are endorsing the future of the industry, whether it's cruise ships, air capacity, or hotel and hospitality developments. We are talking about projects from $50 million to well over $500 million.

What does that mean for the distribution system? Years and years of good news. We should be measuring it more systematically because it's absolutely a leading indicator of our future.

David Banmiller, president and CEO, Aloha Airlines: We've been working with United Airlines for a number of years as a codeshare partner. United flies a lot of places, but we happen to be in the right place, strategically located in the Pacific. [Editor's note: United and Aloha in May announced plans to expand the partnership, giving United a minority stake in Aloha and a seat on its board of directors.] It really makes sense. I do not think United would do this if they didn't have the same optimism I do. 

TW:Hawaii will grow, but is it a sustainable and environmentally conscious growth? And what's going on with infrastructure improvements, apart from new hotel builds?

Wienert: With all of our projects ... we are going to be putting in some renewable-energy types of things, ecofriendly generation of electricity from solar power, for example. Overall airport improvements are moving forward; Maui will be opening up a new ticket gate and ticket counters and in-line EDS at the end of July, and the parking structure will start construction this summer in Honolulu, where jetways for most part have been all redone and replaced. We are starting on a master plan for Kona [airport], which is an exciting one and one that definitely needs the attention.

As we move forward [we need] to make sure that public facilities meet the demands of our residents as well as our visitors, providing an experience that they want and expect [and] allowing us to get people to and from places in a timely manner.

TW:Can we touch on the "upscaling" phenomenon in hospitality? What's the landscape in terms of products and offers? Is it all going to be sort of high-end, luxury? Is it quality vs. quantity?

Solomon: It's important to do the math when we talk about this. If you analyze it, maybe the bottom 15% or 20% of the market doesn't exist anymore. It's like retiring old airplanes, restaurants or cruise ships. When you take out that 20% of your revenue mix, it has a lot of leverage on the average rate you are earning. Historically, that bottom 15% to 20% is where you have the least visitor satisfaction. So nobody really misses it when you take that inventory out; but mathematically it has a big effect.

At the top end, it definitely is a better return on investment to build a better product. What you can't measure when you just measure the room rate is what the quality factor of the experience is. For all the emphasis on Oahu, Maui's average room rate is $99 a night higher. And occupancy is higher, as well; so obviously the higher rates are killing Maui. [Laughter.]

TW:How is this upscaling effecting tour operator sales?

Brian Robb, chief of staff, the Mark Travel Corp.: We are not, as a group, I believe, doing as well with the destination, as our numbers are shrinking a little bit. When I look ... at statistics I'm seeing fewer people [booking through agents], and the traditional tour operators are fairly dependent on those travel agents. That is impacting us. We're changing our business to be more of a consumer-direct experience. ... This higher-priced product, with enough demand, is good for us, actually.

Wienert: Currently we're sitting at 65% repeat visitors. What we've started noticing [as of the] first quarter last year was those visitors coming to stay in what we'd call our commissionable hotels is declining. Where we are seeing an increase in regards to accommodations is in condo, timeshare and cruise. How much does that high 65% repeat rate have to do with [travelers] maybe going around the agent and booking direct or online?

Robb: [It is] definitely indicative of people's comfort level of booking direct and booking online. They may have always booked direct, but now online booking is far more convenient and provides more information to make a decision. But a lot of people booking online are booking with an agent. There are a lot of agents who are both online and offline. But traditional agents are seeing smaller revenue in every sector.

Stuart: We still see about 90% of our business coming through travel agents, and very strong agents specializing in cruises or the destination. We get a lot of first-time visitors and cruisers to Hawaii. And I think the customer [who is] not so experienced in Hawaii or cruising has a need for a travel agent to help them through the decision process.

Banmiller: We have a lot of frequent flyers, guys who come over once a month. These people have condos and come much more than the average person would suspect.

TW:Is Aloha Airlines doing any packaging on its Web site yet in terms of going direct and having people put together vacations online with you?

Banmiller: Yes we have traditional hotel, car and packages. Our Web site bookings are up where you expect because all the airlines are seeing that move.


TW:Hawaii Superferry is about to enter local waters. What's the game plan? Is it reaching out to the trade and visitors?

John Garibaldi, CEO, Hawaii Superferry: Initially Hawaii Superferry will be a great opportunity for residents; it will be very complementary to existing transport. Our first vessel will be starting service this summer. We have a second vessel under construction, but with just one vessel servicing Maui and Kauai ... there's limited frequency, and I think that doesn't give tourists many opportunities. But as we build our fleet, we see being a good option for tourists to look at Hawaii from another perspective. NCL has done a wonderful job exposing Hawaii as a maritime environment; I think we will now stimulate a lot of traffic and will be complementary to the airlines.

Wienert: It's a means of transportation, but it's also an experience. It will allow visitors to see the Islands much like a cruise visitor, but they don't spend the whole seven days on the ship; they'll spend three hours going to one of the Neighbor Islands.

TW:We've been talking about moving people off Oahu entirely. But what's the scenario in terms of getting people out of Waikiki and onto the rest of Oahu?

Les Enderton, director, Oahu Visitors Bureau: Waikiki remains the focal point for our visitors, but we do market Oahu's North Shore and the windward side; we've been doing this for some time with our Oahu destination specialist travel agent training [and] with our wholesaler partners. 

We did research [and] found that people don't think of Waikiki just as this very small area, 1.5 square miles, but [as] the island. If you look at our length of stay from North America, people ... are getting out and seeing [Oahu] from a home base in Waikiki. So I think our marketing has been positive, and the reaction from our visitor satisfaction surveys have been very positive, as well. 

TW:Is there any interest in developing a new destination somewhere on Oahu to give people a second, Waikiki-like option?

Solomon: I think I read that in Haleiwa [on Oahu's North Shore] they've had about 2 million [visitors]; the numbers are incredible. And 20 years from now they may have a sidewalk. [Laughter.] I remember when they built the [highway] cutoff out there. The community was worried that when they changed the route of the main road ... this little town would be cut off and just wither and die. But that hasn't happened. People seek it out, and that's part of the charm of the place: It doesn't have sidewalks.

TW:There are debates going on as to whether the level of development across the Islands is acceptable. Do you think there's a specific point that's the ultimate limit?

Monahan: Clearly the cap on visitors to the Islands is the number of hotel rooms. [Inventory is] not growing rapidly; we had 82% average occupancy last year. To combat that, the Hawaii Tourism Authority strategy has been [to target] visitors with the propensity to engage in the destination and allow us to grow expenditures. So far that's worked. That is not a great long-term strategy.

At some point we'll have to have some discussions about more [hotel] units. And if we're able to get over that hurdle and agree that new visitor units can be built, we'll have infrastructure issues.

Wienert: Counties determine the number of units. There are discussions going on [statewide] in regards to where visitor units should be located -- if new ones are built.

To contact Destinations editor Kenneth Kiesnoski, send e-mail to [email protected].

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For more on Travel Weekly's Hawaii Leadership Forum and Roundtable, see "TW's Hawaii Leadership Forum stresses singularity, strengths."


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