Perspective: The challenges of working in paradise

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HONOLULU -- Hawaii's business climate for travel agents is a study in sweet and sour -- sweet for the setting, sour for the obstacles to making a buck.

Still, many of the 1,411 state-licensed agencies here are doing well.

Despite the barriers to doing business in this highly regulated state, Hawaii agents said they have one overriding advantage in selling travel: Their customers are virtually trapped without the purchase of travel products.

Most potential travel agency clients in the U.S. can get in their cars and drive to the next state. Not here.

Even with that advantage, Hawaii agencies stagger under myriad burdens.

Consider the weight that travel retailers in the Aloha State have on their shoulders:

• A suffocating 4% excise tax on commissions.
• A licensing and trust account requirement.
• A cost of living estimated to be 27% higher than the national average.
• Stiff competition from an unusually high number of agencies for a small population.
• Labor laws that call for, among other things, employer payment of at least half of the health care costs of every employee who works more than 20 hours a week.

All this adds up to a business climate that's not always seen as warm and sunny.

According to the Corp. for Enterprise Development in Washington, Hawaii gets a D grade and two Fs in its Development Report Card for the States in 2001.

In the report card, Hawaii got a D in the Performance category, an F in Business Vitality and an F in Development Capacity.

But most Hawaii agents interviewed are happy here. They work hard and accept the business ballpark in which they are playing, and many are making money.

Take Bonnie Gutner, for example. As a travel agency owner since 1969, Gutner knows what it's like to do business here and what the rewards are.

The tax bite

"What's the biggest hurdle to doing business in Hawaii?" said Gutner, owner of Travel Inc. in Kailua. "That's an easy one, because right off the bat you make 4% less than mainland agents because of the excise tax."

That means a $100 commission nets $96. Give half of that to your independent agent, and she, too, pays 4% tax.

"That's probably the biggest difference between doing business in Hawaii and doing business on the mainland," Gutner said.

The excise tax has been around for as long as Gutner has been in business.

In the mid-1980s, the local ASTA chapter helped introduce laws in the state Legislature calling for an exemption to the tax for travel agents. Twice, the law passed out of the Legislature only to be vetoed by the governor. A third try didn't make it out of the Legislature.

"I think we suffer more here because of the 4% tax and the cost of doing business," said Gutner. "There's no question we suffer more. It's the overhead."

Cost of living

According to Runzheimer International, Honolulu had the fifth-highest cost of living in the U.S. in 2000, behind San Jose and San Francisco, Calif.; New York; and Boston.

A person earning $60,000 a year in Los Angeles, for example, would need $70,015 a year to live the same lifestyle in Honolulu, according to Internet-based Salary Calculator.

Likewise, a person living in Denver and making $60,000 a year would need $75,845 to afford equivalent goods and services.

Still, Gutner has been an agency owner for 33 years, and she can't see doing anything else.

"I like everything about this business except the airlines," said Gutner. "I have wonderful clients, great staff. You can't beat it. It's very satisfying."

Wendy Goodenow, owner and president of an $11.5 million agency called HNL Travel Associates, attributes her success partly to the captive audience here that needs to buy travel to get off "the rock" and to tried-and-true business practices.

"People [on the mainland] can get in their cars and drive and not even deal with a travel agent," said Goodenow. "Even traveling interisland, you have to fly, and that's about $55 each way."

Still, Goodenow thinks her business world is not that different from anyone else's "over there."

"I don't know that I feel so different," she said. "We all have the same basic problems -- we work too hard but don't get paid enough."

Being an agent in Hawaii does have its recompense, however.

"It's wonderful weather here, you don't have to put your galoshes on to go to work, and right now I'm sitting here looking out my window at the most awesome, intense rainbow," she said.

"It's hard to knock it, as frustrating as it gets now and then."

Goodenow said her business has survived on word of mouth, referrals and an experienced staff.

Conde Nast Traveler named one of Goodenow's agents, Polly Oliver, one of its "70 Secret Agents" in 2000, and in 2001 Oliver made the magazine's "107 Best Travel Agents" list.

"Our newest agent has nine years' experience," said Goodenow. "And we don't try to compete with those low-end dealers in the Sunday travel sections."

And that has paid off, she said.

Lots of agents

Competition among the high number of travel agencies in a state with a small population (1.2 million in 2000) is one of the biggest barriers to making a living here, according to Danny Ching, president of Non-Stop Travel in Honolulu.

"I think the biggest hurdle is we have a lot of travel agencies for the population size," said Ching. "Hawaii is probably more competitive than any other area in the U.S."

As far as ARC-accredited agencies go, Ching has a point.

Hawaii has more than double the number of agencies as Idaho and Maine -- two states that have about the same population.

As of March 21, for example, Hawaii had 205 ARC agencies, not counting unattended ticket printers on corporate sites.

Idaho, by contrast, had 87 ARC agencies, and Maine had 79.

And, Ching said, Hawaii agencies have fewer customers than other agencies on the mainland.

"On the mainland, you can draw clients from other states. ... They can pull a potential client base of 30 million, whereas here you have 1 million, so the odds are against us," said Ching.

Like other agents, Ching said good business practices are what help overcome the obstacles.

"We have a bigger challenge compared with the agencies on the mainland, so the ones who are the most competitive and offer the most unique services are going to win," he said.

"The key is, how do you get the customers to buy from you?" added Ching. "It's not going to be on price, it's going to be on your atmosphere, your service -- service more than anything else."

Still, the travel business has a hold on Ching, and he's doing just fine.

"You have a lot of personal satisfaction when people come back and say 'thanks,' and that's on top of the profit."

The inbound game

For Melissa McCoy, owner of McCoy Travel on Maui, selling inbound travel to Hawaii and to Fiji through the Internet helped her meet the challenges to become a profitable, $8 million agency with 11 full-time travel agents.

McCoy said she arrived on Maui in 1974 as a 19-year-old "trying to figure out how not to work."

But that plan failed.

Today, McCoy said, "I have so much business I don't know what to do with it."

This year, her agency received Classic Hawaii's Million Dollar Club award in the single-ownership category for selling inbound Hawaii.

McCoy said she opened her business as a walk-in agency in 1993 and "lumped along" until 1996, when she figured the Internet could help her.

"That's when we built our Fiji Web site, and that's what started us on a different road. We stopped being a walk-in agency in 2000," said McCoy.

Now she has a Hawaii Web site, as well.

McCoy said doing business in Hawaii "is like stepping back in time compared with the mainland."

There may be lots of opportunities for women, but, McCoy said, "some doors are open and others are harder to open with the old-boy system we have here in some areas."

Having the niche of selling inbound Hawaii, which few agencies do here, makes all the difference.

"Our key to success is knowing how to build Web pages and do the search engines and being experts in the field of tropical vacations," said McCoy.

"We're on a tropical island with palm trees and breezes, and when people talk to us we're already in paradise," said McCoy.

"We love being here. We know the product the best. Everyday we see it and can relate it better. We feel it."

Viva Las Vegas! ... where Hawaiians go to have fun

HONOLULU -- Ask a travel agent here where Hawaiians like to go on vacation and without hesitation they'll say: "Las Vegas!"

Hands down, Las Vegas is the top U.S. leisure travel destination for Hawaiians, drawing 250,000 annually. And a high proportion of them stay at the same property, the California Hotel.

The California Hotel caters to Hawaiians. It is a place where, according to general manager John Repetti, Hawaiians are always bumping into friends from home, and you can get rice for breakfast instead of hash browns.

And it doesn't end there -- Spam, saimin (Chinese egg-noodle soup), oxtail soup, Portuguese sausage, loco moco (a mixture of rice, hamburger, fried egg and gravy) and teriyaki beef bowls -- all of these are part of the Hawaiian's staple diet, and all are available at the California Hotel.

"If you walk into any other property in Las Vegas, a Hawaiian person [Caucasian, Chinese, Filipino, Hawaiian and Japanese] is a minority," said Repetti.

"If you walk into our property and you're Hawaiian, you're the majority."

Bill Smith, vice president and general manager of Vacations Hawaii, which sends a good many Hawaiians to Las Vegas each year, said the "obsession" with Las Vegas is based on value.

"Las Vegas is cheaper than going to one of the outer islands or even spending a week in Waikiki," he said.

Package prices start at $369 for air, four nights' accommodations and all meals.

Repetti said packages sold by Vacations Hawaii include nonstop air on seven flights a week, all meals, accommodations and transfers.

He said Hawaiian visitors go to fewer shows and "probably don't go see Hoover Dam."

"It's not about the vacation, it's about staying in the California Hotel," he said.

Vacations Hawaii and the California Hotel are both owned by Boyd Gaming Corp. -- D.O.

The coupon wars continue

HONOLULU -- In Hawaii, a coupon means a lot more than 50 cents off your next box of cereal.

A coupon in the Aloha State is an interisland airline ticket, and they're everywhere. They're almost like a second currency.

In no other U.S. market is there such a thing as an airline coupon. Travelers get them from automatic teller machines, from Aloha or Hawaiian airlines or from travel agents.

Valid on any flight, between any Hawaiian cities for the same price, coupons are a unique part of the Hawaii travelscape.

Wendy Goodenow, owner of HNL Travel Associates in Honolulu, explains: "We get them from a wholesaler. The airline sells them, but not as cheaply as the wholesalers. Everybody down the chain makes money on the coupons except for the airlines.

"Airlines will give them to wholesalers in exchange for cash, say $45 each way to start with," said Goodenow.

"Wholesalers turn around and sell them to an agency for $50, and our client buys them for $55.

"Very few people here or on the mainland understand how they work," added Goodenow.

"They are generic, and preprinted. And it's very easy for a travel agent [to sell] because you put on your own kind of commission, whatever you want to make. But it has to be reasonable, because there are companies that advertise in every Sunday paper to sell them. So you have to be competitive." -- D.O.

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