2001: Trouble and triumph
Terror attacks, recession hit state tourism

Advertiser Staff and News Services

As 2001 winds to a close, perhaps no single industry has faced more challenges than tourism.

	Web site provides updates
•	The state Department of Business, Economic Development and Tourism has a special page on its Web site that continues to monitor the impact of the Sept. 11 terrorist attacks on Hawai'i's tourism and economy. The site provides estimates and tabulations of overseas passengers arriving at the state's airports, as well as weekly statistics on unemployment insurance claims. The daily arrival count includes travel by residents, military people and passengers in transit, as well as tourists, and provides a rough gauge of how Hawai'i is faring. Data on daily unemployment claims and weekly unemployment claims are added to the site as they become available.

As the state's No. 1 industry, tourism accounts for more than $10 billion in revenues and 6 million visitors annually. But immediately after Sept. 11, Hawai'i's once friendly skies were uncrowded, its beaches were deserted and many stores and restaurants were empty.

"Grossly speaking, there was a 45 to 50 percent drop following Sept. 11," said Katsumi Tanaka, chairman and chief executive officer of Enoa Corp., the operator of Enoa Tours and Waikiki Trolley Tours.

Many hotels reported occupancy rates below 20 percent; airlines said their planes were largely empty coming into Hawai'i. The downturn prompted Hawai'i businesses to lay off thousands of workers and reduce work hours for thousands more.

The state's major interisland carriers, Hawaiian and Aloha, cut routes and a combined 680 workers. Attractions and retailers have laid off hundreds more. The state's only domestically-based cruise line, American Classic Voyages, filed for bankruptcy, leaving more than 1,000 people out of work in the Islands. Dozens of hotels and eateries reduced work hours for employees.

Since the attacks, the state estimates more than 39,000 new filings for unemployment claims, mostly by workers in tourism-related industries.

The plunge prompted Gov. Ben Cayetano to quickly call a meeting of government, business and labor leaders to try to stabilize what he called the worst economic crisis in Hawai'i's history.

Up to $20 million worth of state and private money was approved for an emergency tourism marketing plan, and the state led delegations to Japan and the West Coast to encourage people to visit Hawai'i. Landing fees for airlines were waived, tuition waivers for those who lost their jobs were instituted, and a special session of the Legislature was called to pass an economic stimulus package.

While things have slowly improved — with hotel occupancy rates and visitor arrivals gradually climbing — political and business leaders agree it may be years before Hawai'i's economy returns to pre-Sept. 11 levels.

Earlier this month, the state Department of Business, Economic Development and Tourism issued a forecast that said Hawai'i's tourism industry won't match pre-Sept. 11 visitor numbers until sometime in 2003.

Tanaka said heavy discounting by airlines, hotels and tour wholesalers to lure travelers back to Hawai'i has contributed to the state's economic problems because he believes it has lowered average-daily spending by tourists.

"There is enough background to indicate a very, very slow return, if any, especially if you measure in terms of the amount of money people spend while they are here," Tanaka said.

Ultimately, Hawai'i in 2001 is expected to see about 9 percent fewer tourists overall than in 2000. Tourism next year should be about 3 percent higher, the department said. But even that is not expected to bring the visitor count up to pre-Sept. 11 levels.

The biggest drops in the aftermath of Sept. 11 continue to be among international visitors, which are still down almost 50 percent from a year ago, according to figures released by Japan Airlines, the largest international carrier serving Hawai'i.

Tanaka said a weak yen exchange rate has kept many Asian travelers close to home, but he thinks the threat of terrorism has played a bigger role in many people's decision to stay away.

"We don't live in a vacuum. Hawai'i is not the only paradise, and many Japanese, especially, are discovering other destinations in Asia," Tanaka said.

Recent statistics show that despite a gradual return of visitors, the U.S. tourism industry remains depressed, and will likely remain down next year:

• Airline traffic was down 20 percent in November over year-ago levels, according to the Air Transport Association, which represents the airlines.

• National hotel revenues were down nearly 15 percent in the first week of December compared with last year, according to Smith Travel Research.

• The Travel Industry Association of America predicts upcoming winter travel volume will be down 8 percent compared with 2001.

So far, locations that have weathered the downturn the best have been the ones that can attract visitors who drive rather than fly.

San Diego's tourism is down less than 10 percent because the area still lures visitors from other parts of California, Las Vegas and Phoenix, Ariz., said Reint Reinders, president of the San Diego Convention and Visitors Bureau. Area hotels will report overall growth for 2001 despite the falloff in recent months and have avoided laying off thousands of hotel workers as happened in Las Vegas and Florida, he said.

The hotel industry has been hit hardest in Hawaii, Florida and San Francisco — places dependent on air travel to bring in travelers.

But despite the doom and gloom in the hotel business, the industry is on track to report a profit this year of more than $17 billion. That's down from a $22 billion profit in 2000, but a far cry from 1991, when the lodging business lost $5.7 billion.

And, according to the Travel Industry Association of America, forecasts are that the number of trips taken by travelers will rebound to normal levels by the end of 2002.