The September 11th attack
Retailers' survival may rest on whether Japanese come back

By David Butts
and John Duchemin
Advertiser Staff Writers

Bob Coe, the president of DFS Hawai'i, calls Japanese visitors "the best tourists in the world." And it is easy to see why.

As Jamie Bernal, left, greeted Japanese visitors at the Honolulu airport last week, Gov. Ben Cayetano and tourism executives went to Japan to restore Hawai'i's image as a safe place. Many admit it may take awhile for the message to sink in. Bloomberg News Service

Take away 40 percent of those customers, as the Sept. 11 terrorist attacks did, and it becomes clear why the head of duty-free shops likes the Japanese.

"Retailers' worst nightmare is a loss of Japanese consumers," Coe said.

Hoteliers aren't too happy either. And neither are their employees. More than 12,000 workers in Hawai'i, most of them in tourism-related businesses such as hotels and retail, have filed for unemployment benefits in the weeks since Sept. 11.

Staving off more such layoffs — as well as worst-case scenarios of closures and bankruptcies — was on the minds of many of the participants in Gov. Ben Cayetano's trip to Japan last week. Seven leading tourism industry executives joined the delegation to contribute what they could to restore Japanese tourism to the islands to its pre-Sept. 11 levels.

Losing Japanese visitor business for a long period of time will almost certainly lead to the closure of some retail businesses, Coe said.

"We must do everything we can to avoid businesses going out of business and avoid a downward spiral," Coe said. "What does Hawai'i lose when businesses — big and small — go out of business? You can't bring them back."

DFS Hawai'i's sales were down 80 percent shortly after the Sept. 11 attacks, and so far in October sales to Japanese are off 45 percent, Coe said.

The company already has had to lay off employees. "I'm trying to keep people working," Coe said. Most hourly workers have been cut to 25 hours a week, enough that they can keep their benefits, he said. "The other choice was to lay off 250 to 300 people. I have a big obligation to 1,400 people," Coe said.

"If we don't pull out of this, I'll have a whole other story coming," he said.

Stan Brown, Marriott vice president for the Pacific islands, expects tourist arrivals will take longer to recover from the Sept. 11 terrorist attacks than the three months to six months required following the start of the Gulf War in 1991.

At that time, Brown was manager of the Maui Marriott.

Marriott employs about 4,000 people in Hawai'i, including 2,500 on O'ahu. Brown said he has furloughed some workers at two Waikiki properties and cut the hours of others.

As for plans for further layoffs, he said, "We are going week to week."

Brown said O'ahu, where hotel occupancy still is down 30 percent to 40 percent, has been hardest hit. Neighbor Island hotels' occupancy fell by as much in the first week after the attacks, but are now off by only 10 percent to 15 percent, he said.

"For O'ahu, Japan is key," Brown said.

As for the effect on his company's bottom line, "It's too hard to tell now. We are doing projections every two weeks. It won't be a loss, but sales will be down. The next three to four weeks will give us a sign."

Keith Vieira, a director for Starwood Hotels, said he has reduced hours of many employees, scaled back restaurant operations, and closed off some rooms.

"But we've tried not to impact our guest services much, because we don't want visitors to feel they are witnessing the effects (of the crisis)," he said.

Vieira, who also was among the Hawai'i delegation to Japan, said he is confident the state's renewed and expanded marketing efforts will be effective.

"Japan has been the most severely impacted market, but it's also easiest to reach consumers there, through the travel agent channel and the media," Vieira said.

Perry Sorenson, the chief operating officer for the Outrigger Hotels, is hopeful that the drop in tourism will be short-lived. He expects hotel occupancy to be 80 percent to 90 percent of the previous year's level by the first quarter of 2002.

That's not to say the 11-year Outrigger veteran is not worried.

Sorenson said he has not yet laid off any of Outrigger's approximately 3,400 employees, but their hours have been reduced. Employees are taking vacation time and doing job-sharing to cope, he said. "Depending on the duration and the depth, we are looking at other measures."

Net bookings at Outrigger Hotels are about 70 percent of pre-Sept. 11 numbers, he said.

Sorenson, who spoke in an interview aboard the bullet train from Tokyo to Kyoto, said he was surprised to find during the trip "the depth of the immediate resistance of the Japanese to travel."

He noted that many Japanese expressed a fear of getting stranded, as thousands were in the days immediately after Sept. 11.

"You have to believe this is a temporary situation," Sorenson said, adding that Outrigger's continuation of its Lewers' Street construction project is an expression of his company's optimism.

Still the clock is ticking and if the recovery doesn't come soon, Sorenson may have to change his outlook. Asked if he expected any major hotels to fail, Sorenson said, "Tell me how long it is going to last."