Posted on: Thursday, June 28, 2001

DFS store on Maui slated for closure

By Andrew Gomes
Advertiser Staff Writer

Citing sliding numbers of Japanese visitors to Hawai'i, DFS Hawai'i, one of the state's largest retailers, is closing its Whalers Village store on Maui.

The 11,400-square-foot operation is one of seven stores of DFS Hawai'i, which until recently had been expanding with the expectation of better business.

Sharon Weiner, DFS Hawai'i group vice president, said the company is pessimistic about business from Japanese visitors, the retailer's primary market for duty-free goods and some of the strongest spenders among visitors to the state.

"Certainly, business from Japan is not where anybody hoped it would be," she said. "That's definitely hurting all of us."

The Whalers Village operation — consisting of a small duty-free and large regular retail store plus a separate cosmetics shop — is scheduled to close sometime between August and December, depending on when a replacement tenant is found, Weiner said.

The closure will affect 30 of DFS Hawai'i's roughly 1,300 employees. Of the 30, some will be reassigned. An undisclosed number will be laid off.

Weiner said DFS Hawai'i, which has been at the 111,000-square-foot Ka'anapali shopping center since 1989, decided not to renew its lease, which is up for extension. No changes are planned for any othe stores.

The company is a unit of the largest travel retailer in the world, San Francisco-based DFS Group Ltd., which operates more than 150 stores in 16 countries.

DFS Hawai'i has duty-free stores at Honolulu, Kahului and Kona airports. Its other stores, some of them hybrid duty-free/duty-paid stores, are on Royal Hawaiian Avenue and at Hilton Hawaiian Village in Waikiki and at Kings' Shops in the Waikoloa Resort on the Big Island.

The flagship DFS Galleria in the heart of Waikiki underwent a $65 million, 186,000-square-foot expansion that was completed earlier this year. The 10,000-square-foot Kings' Shops store opened around the same time.

As recently as late last year, DFS was optimistic that Japanese tourism would increase to support the new investments and its existing business. But that projection has not quite panned out.

For the first four months of this year, the number of days Japanese visitors spent in Hawai'i was just 0.5 percent higher than the same period last year. Since January though, the numbers have been falling.

On Maui, the number of Japanese visitors through April was up 1.4 percent, though the vast majority of them also visited other islands.

The weakened value of the yen against the dollar has made travel to destinations in Asia more attractive for Japanese tourists and reduced retail purchases among those who come here. Yesterday, the yen was trading at about 124 to the dollar, almost 18 percent weaker than a year ago.

Weiner said DFS Hawai'i is concerned that the Japanese, who are traveling overseas in greater numbers, are increasingly choosing to visit other destinations instead of Hawai'i.

"People in Hawai'i seem to think the Japanese are not traveling. They are. We're just not getting our fair share," she said.

Weiner said visitor data the company collects from airlines indicate that the state's share of Japanese visitors traveling outside Japan consistently fell, from 12.3 percent in 1997 to 9.5 percent for nearly the first six months of the year.

The Hawai'i Visitors & Convention Bureau collects similar market-share data from the Japan National Tourist Organization. According to these figures, which the state uses as a "rough reference," Hawai'i's share of Japanese travelers consistently fell, from 12.7 percent in 1998 to 9.8 percent for the first four months of the year.

To some extent, there is little Hawai'i can do to discourage Japanese travelers from taking what have become increasingly popular trips abroad that are shorter, closer and cheaper. But the state is not letting up on encouraging them to come here.

"We're not just taking it sitting down," said Steven Matsuo, the bureau's director of sales for Japan. "We're not complacent."

The state agency is in its second year of a multi-level marketing campaign in Japan. It has also pulled together $1 million from private industry to supplement its $10 million marketing budget for Japan.

Still, the outlook for boosting the number of Japanese visitors to Hawai'i is not positive.

Taka Kono, president of Japan Report, a Honolulu-based market research firm, earlier had forecast a 2 percent increase for the year.

In his latest report, released yesterday, Kono said that if the present downward trend since February continues, it could mean a 7 percent to 9 percent decrease for the year, resulting in a total of roughly 1.75 million visitors, about the same number that came in 1994 and 340,000 fewer than in 1997.

"The fact that the market has shrunk so severely has serious ramifications for those businesses depending on tourist spending," he said in the report. "With most businesses running under the assumption that there would be roughly 2.4 million Japanese coming to Hawai'i, it is not hard to imagine the impact of the declining number of tourists."

"We are very pessimistic about this market," Weiner said. "These are very important customers for everybody in Hawai'i."