Spend big to profit big?

By Katherine Nichols
Advertiser Staff Writer

The Hawai'i Tourism Authority, the organization charged with marketing the state's biggest industry, is entering its fifth year facing a daunting task.

Although spending to market Hawai'i to visitors has increased substantially over the past four years, tourism has remained flat. Advertiser library photo

With responsibility for creating overarching policies for the state's $10 billion tourism industry, the authority was heralded at its formation in 1998 as the key to revitalizing tourism in the Islands and was given $61 million a year. The authority set a goal of increasing visitor spending — seen as the best way to boost the economy without stressing the state's infrastructure.

After years of effort, no one can prove, or disprove, whether the authority has achieved its goals. Visitor spending rose in 2000 but was falling last year even before the Sept. 11 attacks. It's hard to say whether marketing efforts or economic forces have been responsible for the fluctuations.

Without a clear way to gauge its progress, the authority faces increasing pressure and scrutiny, in part, because its $61 million budget is more than double what its predecessor, the Hawai'i Visitors Bureau, spent. And still visitor expenditures and arrivals have hardly budged.

Demands now are for the authority to be more diligent in showing taxpayers and lawmakers how it is spending money, its rationale for devoting dollars where it does, and its assessment of how the money was used.

"All of us are concerned about accountability," said Sharon Weiner, group vice president of DFS and one of the authority's new board members.

"It's a critical time," said Alice Guild, a newly appointed but unconfirmed authority board member and former executive director of 'Iolani Palace. "Now after the initial four years, there are expectations on the part of the community and the Legislature that the authority will offer a clearer vision for the future of the visitor industry."

Part of that vision means amending the authority's limited analysis of its past spending.

New board members

Larry Johnston, former CEO, Pacific Century Financial Corp.

Mike McCartney, former state senator

Sharon Weiner, DFS Pacific Group VP, business development

Stephen Yamashiro, Former Big Island mayor

Nadine Nakamura, Kaua'i planning consultant

*Alice Guild, former executive director, Friends of 'Iolani Palace *Not yet confirmed by legislature

Not pictured: Lorrie Lee Stone, Attorney, Rohlfing & Stone

Smaller amounts are spent with no visible results, such as $24,000 used to survey public attitudes toward tourism. Though completed last August, the results have not been made available.

Despite these concerns, Weiner is optimistic. "Everybody's concentrating on what's not working," she said. "To me, it's very fixable. I think we have to look forward."

How is the money spent?

But the question and challenge for the authority will be how to maintain consistent accountability without becoming a slave to bureaucracy. The tourism leaders who dominate the authority board are accustomed to action-oriented business practices and not spending time justifying their actions to the public.

Most agree that the accountability task should fall on the paid 17-member authority staff rather than the unpaid board members.

But the board has to let them do that job. In the past, many procedural details were left undone because of "big-time, hands-on" involvement by the board, according to Fishman.

"They did not delegate ... to the professional staff very well," he said, recalling that some board members tried to negotiate multimillion-dollar contracts personally.

"HTA was given an almost impossible mission that would be sensitive to all groups ... and at the same time make immediate results occur," said Fishman, who now is in Washington, D.C., serving as adviser to the chief of the U.S. Army Reserve on homeland security.

Fishman left the authority in November and was replaced by interim chief executive Richard Humphreys, formerly of Amfac Financial, First Federal Savings & Loan, and Bank of Hawaii.

The board is searching for a permanent executive director for a role that is considered crucial for the successful execution of a mission that is difficult to measure and for enforcement of staff and board member roles.

"Now more than ever the industry and community need bold leadership," said Keith Vieira, senior vice president of Starwood Hotels & Resorts and a member of the executive-director search team. "I don't think it's going to be easy."

The board's make-up also is pivotal to reforming the authority. Gov. Cayetano has added several members from outside the travel industry, including Larry Johnson, former CEO of Pacific Century Financial Corp.; Stephen Yamashiro, former Big Island mayor; and Lorrie Lee Stone, an attorney with Rohlfing and Stone.

Yet some front-line industry workers remain skeptical.

"These people are political appointees," said Dale Evans, president of Charley's Taxi & Tours. "How are we going to be able to talk to them? I think that these people don't know our business."

An open and analytical mind, however, can make up for a lack of technical knowledge about the industry, Weiner said. For her part, Weiner said she plans to assume plenty of responsibility.

"It can go to the staff, but it's got to get done," she said. "It's very important that everyone knows what the rules are and feet are held to the fire. Including ours."

Keeping the authority accountable has often fallen to Sen. Donna Kim, D-15th (Kalihi Valley, 'Aiea), who has been the authority's most vocal critic as chair of the Senate Committee on Tourism and Intergovernmental Affairs.

"They need to take on my role," said Kim, who repeatedly has pushed the authority and visitors' bureau to justify even such expenditures as $20,000 for membership dues to various organizations that couldn't be explained because nobody had used these groups' membership services.

Is marketing effort effective?

Still, some in the larger travel industry say the Islands' approach to tourism marketing has been sound. With about 7 million visitors spending $10 billion a year, Hawai'i earns more tourism dollars — with a larger government marketing budget — than comparable cities.

San Francisco drew 17.3 million visitors who spent $7.6 billion in 2000. The city's budget for tourism marketing is about $15 million a year.

San Diego tracked 7.5 million arrivals at Lindbergh Field last year (an estimated 14.8 million overnight visitors with car arrivals). Yet visitor spending was only $5.1 billion, half of Hawai'i. San Diego's budget for marketing was only $16.3 million, according to Jack Saniga, of the San Diego Convention and Visitors Bureau.

"Yes, (Hawai'i) spends a lot of money, but it's a big part of the economy," said Dexter Koehl, director of public relations and communications for the Travel Industry of America.

Sometimes results from marketing efforts aren't visible for two to three years, he said, "but we're pretty sure there's a correlation both ways."

Colorado eliminated its tourism department and budget about nine years ago, a move that nearly destroyed the industry, said Koehl. A couple of years later, "the bottom dropped out" in everything from roadside motels to the upscale Vail and Aspen hotels.

The state has since fixed the problem and tourism is recovering. But Koehl said the experience shows what can happen.

"Everybody holds Hawai'i up as somebody who's doing it right," said Michael Kenney, vice president for cultural tourism for the Greater Fort Lauderdale Convention and Visitors Bureau.

The debate in Hawai'i focuses less on a need for marketing and more on how to measure whether marketing dollars are being used effectively.

With all of the criticism of the past year, the authority is taking steps to improve accountability.

By the end of the year, evaluations of festivals, sports events and product development investments will be conducted by third parties, according to authority marketing consultant Frank Haas.

Humphreys believes this will help the authority's relationship with the Legislature, allowing the two to focus on helping each other, he said, "rather than constantly trying to clean up the HTA."