Store closures reflect drop in Waikiki tourists

By Dan Nakaso
Advertiser Staff Writer

Agatha, a retail store that sells costume jewelry on Kalakaua Avenue, is one of many shops hurting for customers as a result of the tourism downturn. Photos by Gregory Yamamoto • The Honolulu Advertiser

Four Japanese college students, from left to right, Naoko Fujita, Hanae Okada, Saori Yajima and Yuko Shirakawa, say they could not afford to visit the Islands without large discounts on air fares and hotel rooms.

William and Helen LeRoux soak up the sunshine on the beach. The couple are annual visitors to the Islands from Vancouver, British Columbia, but say they spend less each year and no longer buy expensive gifts for relatives.

Nearly every aspect of Hawai'i's economy has been touched by the sudden drop in tourism following the Sept. 11 attacks, but the most visible and profound changes could come in the form of dozens of closed businesses in the hub of Island tourism.

"We're going to see empty stores for a while," said John Geppert, director of Tiffany & Co. at Ala Moana Center and chairman of the board of the Retail Merchants of Hawai'i trade association. "If we don't see an increase in incoming tourists, if it doesn't grow exponentially, you're going to see stores closing weekly."

But long before Sept. 11, a powerful, quiet economic revolution was under way in Waikiki.

Fewer visitors were coming to the islands and they were changing their spending patterns as the Mainland coped with a softening economy and Japan was rocked by its own economic crisis and a weakening yen.

And while visitor arrivals from both Japan and the Mainland plummeted after Sept. 11, Mainland travel rebounded to post a drop of only 3.5 percent for the year; the critical Japanese visitor market was still down 17 percent from the year before.

Left as the new face of Hawai'i tourism are two distinct groups: Mainland visitors whose spending is generally half of what a Japanese visitor spends; and increasingly bargain-conscious Japanese attracted by the discounted tour packages offered since Sept. 11.

"The mainstream has changed," said Taka Kono, who surveys businesses for his monthly Japan Report. "No more big spenders."

Both tourists and businesses who say visitors are spending less are expected to be backed up this week when the state Department of Business, Economic Development and Tourism is scheduled to release its visitor spending report, which is projected to show a drop of as much as 5 percent last year.

Signs of the changes can be seen across Hawai'i's No. 1 industry. Among the hardest hit of all hotel segments that struggled with low occupancy rates last year was the $1.9 billion luxury-hotel market, with a $148.9 million drop in total revenue, according to the hotel consulting firm Hospitality Advisors LLC. Budget hotels, according to the data, fared better.

JTB, Japan's largest travel company, is offering deeply discounted post-Sept. 11 package deals to Hawai'i, cutting its usual $985 price for round-trip air travel and three nights of lodging to $377.

"Those customers basically are very price conscious and could be on a limited budget," said Yujiro Kuwabara, JTB's general manager for tour planning and marketing.

Before Sept. 11, discount deals made up 20 percent of JTB's package tour business. Today, they make up at least 40 percent.

Many of the new Japanese visitors taking advantage of discounted package tours said they could not afford a trip to Hawai'i any other way. And with the yen weakened, they say they're especially unwilling to spend large amounts of cash while they're here.

Yuko Shirakawa and her friends, Hanae Okada, Naoko Fujita and Saori Yajima, had not been to any of Waikiki's shops in their first two days on O'ahu this month. They're all 22-year-old college students from Senshu University in Kanagawa, Japan, who made their first trip to Hawai'i because of a bargain package tour.

"We came because it's cheap," Shirakawa said with no hesitation.

Ten years ago Fujita's parents returned from their trip to Hawai'i with an omiyage present of a designer handbag for Fujita. When she went home from her own Hawai'i vacation, Fujita planned to bring along nothing more than a few boxes of chocolate-covered macadamia nuts.

"If we find something really cheap, we might buy it," Fujita said.

Kozutsumi Takashi, a 27-year-old owner of a second-hand clothing store in Fukuoka, may be the new face of Japanese tourism. He has tattoos on his shoulders, biceps and legs. Rings dangle from his nose, belly, right eyebrow and left ear.

On his first trip to Hawai'i seven years ago, Takashi estimates he spent $15,000 on airfare, hotel, meals and omiyage that included a surfboard and designer clothes.

This month he came on a discounted package tour and thinks he'll spend no more than $7,500. He'll return with chocolate macadamia nuts and an inexpensive tiki statue.

"I'm spending way less," Takashi said. "I only came because it's cheap."

Ten years ago, Japanese tourists spent three times as much as westbound visitors, Kono said. Today, Japanese visitor spending has fallen so much that they now spend only twice as much, he said.

Many of the westbound tourists in Hawai'i now are regulars, such as 85-year-old William LeRoux and his wife, Helen, 83.

Since 1965, they've made an annual winter trip to Hawai'i from their home in Vancouver, British Columbia. They live on fixed incomes and usually spend no more than $3,500 for a three- to four-week vacation.

No beachfront hotel. No fancy dinners. No more gifts for the kids, grandchildren and great-grandchildren.

"We spend less and less every year," William said, sitting shirtless under a coconut tree at Kuhio Beach Park. "We have to."

Tightened visitor spending already was pinching Waikiki businesses last year. Sept. 11 just forced them to adjust much faster, said Rick Egged, president of the Waikiki Improvement Association.

"This wasn't just a 9-11 problem," Egged said. "All these things coming together have just sort of brought what would have probably happened over a period of years into a short period of time. It is going to be a very fluid and dynamic situation."

Perhaps no area will be reshaped more dramatically than the retail industry. By the end of the year, Waikiki retailing could have a distinctive new look, Geppert and others said, although none of them would guess what kind of new businesses would fill the empty storefronts — or find success in attracting the new kind of clientele.

"Nobody knows what the next paradigm will be," Geppert said. "I certainly don't."

"The shake out," said Mark Hukill, interim/associate dean of the University of Hawai'i's Travel Industry Management, "could go on over the next couple of years. We may end up with a new mix of specialty retailers catering to an entirely new type of visitor."

New businesses "have to do their homework," Hukill said. "They have to see where opportunities lie and they have to be willing to be ahead of the curves. There will be a period of experimentation that will go in cycles."

The most vulnerable businesses in Waikiki are the 400 or so mom-and-pop retailers that survive month-to-month on the buying whims of customers, Hukill said. "They're the ones getting hit hard because they don't have deep pockets," Hukill said. "If the walk-in business isn't happening, they're not going to last very long."

An estimated 50 percent of Waikiki retail tenants have already asked for cheaper leases on their rents, which range from $4.18 per square foot to more than $100 per square foot for prime real estate, Kono said.

And many landlords are open to working out new deals, Kono said. They would rather receive lower rents instead of no income at all, he said.

On a recent weekday on Kalakaua Avenue, the Agatha costume jewelry store stood empty, except for the clerks leaning against the shop's walls.

"We are having a very hard time," said manager Akiko Onishi. "Everybody is."

Down the street, all of the jewelry was marked off 50 percent at Gold Hunter Gem. And still, nobody was buying.

Japanese tourists used to leave Gold Hunter Gem with expensive handbags and lots of gold jewelry to take home as omiyage for their friends and family. Not anymore.

The only two people in the store on this particular day were saleswomen Eunchu Oh and Suzie Kijo. They used the down time to pass each other a bottle of hand lotion.

"It's real slow," Oh said, rubbing lotion onto her arms. "Very slow."

Reach Dan Nakaso at dnakaso@honoluluadvertiser.com or 525-8085.