Reason for hope, reason to worry
By Kelly Yamanouchi
Advertiser Staff Writer
After struggling through a rough year, Hawai'i's tourism industry faces another hopeful but uncertain 12 months ahead.
Associated Press library photo
As an industry that depends heavily on strong consumer confidence and discretionary income, some of the major factors that shore up tourism — a healthy economy, a strong airline industry, and a sense of safety and security — seem to be anything but sure things as the new year nears.
Beachgoers soak up the sun and enjoy the ocean in Waikiki. Hawai'i visitor arrivals and expenditures are expected to increase in 2003 as the state continues to recover from a long-depressed travel market. Many forecasts for the U.S. economy have been positive, which signals a continuing increase in visitors to Hawai'i from the Mainland. However, many say all bets are off if the United States goes to war, if there is another domestic terrorist attack or if there are major cutbacks in airline capacity.
Visitor arrivals and expenditures are expected to increase in 2003 as the state continues to recover from a long-depressed travel market. And many in the industry also hope tourism will garner more attention in the year ahead with the new governor's appointment of a Cabinet-level liaison for the industry.
But concerns about the effects of a war and the uncertain economy loom as threats to the hopes and predictions.
The state is projecting visitor arrivals will increase 6.1 percent to 6.8 million visitors in 2003, bringing in a record $11.1 billion in visitor spending, up 7.6 percent. University of Hawai'i economists foresee a less optimistic 4.6 percent increase in visitor arrivals, including a 10.2 percent increase in Japanese visitors after years of declines and a 3 percent increase in U.S. visitors.
"I think next year will be significantly better because this year was so bad," said state economist Pearl Imada Iboshi. The state Department of Business, Economic Development & Tourism predicts the number of visitors in 2003 will beat totals in 2001 and 2002 but will still be 2 percent shy of the 6.9 million that came to Hawai'i in 2000.
The good news is that most of the forecasts for the U.S. economy are positive, which signals a continuing increase in visitors from the Mainland, which so far has helped stabilize Hawai'i tourism amid a steep drop in international visitors.
But many say all bets are off if there is a war with Iraq or North Korea, another major domestic terrorist attack or major cutbacks in air capacity.
"There's a lot of 'ifs' attached," said Danny Casey, president of the Hawai'i chapter of the American Society of Travel Agents. "I think right now the biggest thing on people's minds is what's going to happen with Iraq."
Hope for stronger Japanese arrivals is dim because of continued weakness in Japan's economy, said Mark Hukill, interim associate dean of the University of Hawai'i School of Travel Industry Management.
The Hawai'i Tourism Authority projects about 1.65 million visitors will come from Japan next year, a 13 percent increase over this year, but still far from the 2 million Japanese that came to Hawai'i in 1998.
The tourism authority is betting that one of the best ways to bring back more Japanese tourists is the wedding market, and has plans for a Hawai'i bridal and honeymoon fair in Japan in May. Figures for Japanese wedding organizers show a 10 percent increase in Hawai'i weddings next year, in part because damage from the recent supertyphoon in Guam has redirected some couples to Hawai'i — and that's expected to continue through early next year.
Tony Vericella, Hawai'i Visitors & Convention Bureau president, said he expects visitor expenditures to increase because of efforts to attract higher-spending visitors and a stabilization in prices in the tourism industry. The state's projection for visitor spending next year is 7.6 percent higher than 2002 estimates, and even higher than 2000 expenditures of $10.9 billion.
So far, bookings for the first quarter of the year look promising, including projections for Japanese arrivals for the New Year's holiday.
"Invariably, we'll be much better" than the first quarter of 2002, said Hospitality Advisors LLC president Joseph Toy, noting that tourism was still trying to recover early last year from the terrorist attacks.
Toy said he does not, however, expect hotel occupancy to be higher than in peak years of 1999 and 2000.
Outrigger Hotels & Resorts already has steady bookings for the first quarter, but "every year it gets more difficult to predict the future," said Outrigger chief executive David Carey. "I'm very worried about what happens if another terrorist incident hits North America."
Soft corporate bookings and shorter windows of time to book vacations are part of the problem for hotels. Though there are signs of recovery in the corporate group travel market, 2003 will be a fragile year, particularly in the first half, Toy said.
There are 28 events booked by out-of-state groups on the Hawai'i Convention Center schedule for 2003 that will bring in 106,400 attendees, including eight events and 28,300 attendees that were tentative. This year there were 28 conventions that brought in 69,200 attendees.
Two major events booked for the Hawai'i Convention Center are expected to bring in big-spending visitors and produce high economic impact. The American Academy of Neurology is expected to bringing 10,000 attendees; the American Association of Orthodontists is expected to bring in more than 18,000.
"We'll continue to see the same pattern that we've seen in past recessions," Toy said. "The peaks will be shallower and the valleys will be steeper."
Toy said time-share development will likely continue next year and beyond because it offers a more reliable stream of business from tourists who have already paid for their stay. The number of visitors from the Mainland is the most promising, while the Japanese market is still on its way to recovery.
Next year will be "challenging," said Stan Brown, Marriott vice president in the Pacific Islands. "We don't think it is going to be a banner year compared to 2000, for example, but we do expect to see some growth on 2002."
Despite some tepid projections, Starwood Hotels & Resorts Hawai'i projects a 10 percent to 11 percent increase in revenue next year.
"This is not based on any great knowledge we have, or a crystal ball that says the market's going to be so much better," said Keith Vieira, Starwood regional vice president. "We've got to take an aggressive standpoint, because you've got a better a chance with shooting high and attaining more."
He said Starwood plans to invest heavily in marketing and new development, including one or two time-share purchases next year. However, he said, "Profitability is nowhere near, due to the increased cost of doing business. We won't attain that profitability, but our feeling is that if you stop looking backward and start looking at building on the year 2002, then we have a better chance of getting good results than if we compare to the past."
Statewide, the pace of hotel renovation and development has begun to slow as many of the under-performing properties previously owned by Japanese companies have already changed hands, Toy said.
Developing areas for tourism to Hawai'i, including South Korea and China, have yet to turn into major markets because of visa restrictions. In an effort to cut costs, the Hawai'i Tourism Authority made the largest budget cuts in those developing markets with the expectation that they would not become substantial players in 2003.
"Nothing indicates any substantial change," said Sharon Weiner, group vice president for DFS Hawai'i.
Tourism industry executives say in all areas of the industry, economic uncertainty continues to be a problem.
"The biggest unknown right now is corporate earnings in the U.S." and how it will drive corporate group travel and leisure tourism, Vieira said.
Some are taking a more conservative approach toward expectations for 2003, and are instead holding out hope for a brighter 2004.
Bill Fatt, president of Fairmont Hotels & Resorts, which owns the Fairmont Kea Lani on Maui and recently bought The Orchid at Mauna Lani on the Big Island and renamed it the Fairmont Orchid, said he thinks 2003 will be a relatively weak year for the new property.
"For 2003, the economy is not that strong," Fatt said. "Hawai'i has had a rougher time generally since 9/11."
Reach Kelly Yamanouchi at 535-2470, or at kyamanouchi@honoluluadvertiser.com.
