Posted on: Sunday, September 8, 2002
ONE YEAR, ONE NATION
Tourism-hurt businesses hone down expenses
By Dan Nakaso
Advertiser Staff Writer
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| The DFS Galleria on Kalakaua Avenue is part of the Waikiki retail scene, much of which is shifting focus to budget tourists from the Mainland, as those free-spending Japanese visitors have dwindled here.
Advertiser library photo |
Hawai'i businesses already were making cuts and streamlining operations amid a slowing economy when Sept. 11 made it even clearer that the key to economic survival depends on constantly looking for ways to do things better and more efficiently.
"It's a philosophy of becoming a lean, mean fighting machine," said Ronald Williams, chief executive of Atlantis Adventures, which went from 200 employees before Sept. 11 to 150 today, among other changes.
"It's almost like operating as a mom-and-pop operation where you implement whatever works," Williams said. "We have to make sure we're ready for whatever pops up."
Across all industries, Hawai'i businesses have reviewed operations top to bottom, changing everything from the way they market, advertise and negotiate contracts to how they reach out to new customers through new venues such as the Internet.
Regardless of whether the changes were caused by the economic upheaval in Hawai'i in the wake of Sept. 11, one thing appears clear: The efficiencies and corporate culture shifts that have emerged are unlikely to change anytime soon and stand to reshape local businesses in what could be profound ways.
Aston Hotels & Resorts, the largest hotel and condominium resort operator in the Islands, has been one of those companies that has shifted with the times. The company created an Internet team dedicated to marketing the company's 34 Hawai'i properties on the Web and to increasing online bookings.
"We haven't made any drastic cutbacks in print advertising or TV or radio," said president Kelvin Bloom. "However, we have dedicated considerably more toward Internet marketing."
Outrigger Hotels & Resorts, as well as its Ohana Hotels, quickly began targeting the kama'aina market, particularly after Mainland and Japanese visitors fell off right after Sept. 11.
"We're continuing with those programs," said spokesman Jim Austin. "Those have really shown to pay some dividends."
Company officials also are working harder with their wholesale tour operators and booking agents for dual marketing programs, which have increased 25 percent since Sept. 11. They're also more willing to lend the Outrigger name for promotions.
"We used to be more discerning," Austin said. "Now we're a little more liberal with any promotion that strengthens our brand."
Randy Coon, president of Trilogy Excursion, a boat-tour company based in Lahaina, Maui, saw his business plummet 35 percent after Sept. 11. He asked each of his nearly 75 employees for volunteers to take unpaid leave and saw 30 people go. (Twenty have since returned).
To cope with the downturn, Coon canceled all his advertising contracts, renegotiated some of them and now spends just 75 percent of his old advertising budget.
He also upgraded the company's Web site, sent 20,000 e-mails to customers offering them a downloadable slide show of Trilogy boat trips, and put more energy into online bookings, which come with online-only discounts.
Online bookings have since increased 400 percent and have gone from 5 percent of Trilogy's business to 20 percent.
Coon also stopped subsidizing customer parking and no longer pays boat crews to be on standby, opting instead to pay them extra if they need to be called in.
He's held staff meetings and tapped the knowledge of boat captains and crews for everything from cutting down on wasting food to booking passengers better so boats go out relatively full.
"We tried to be aggressive without spending a lot of money," Coon said. "Mostly we just went through every aspect of our business and tried to reduce or eliminate costs."
Coon now realizes that constantly revamping procedures and operations will be an integral part of doing business from now on in Hawai'i.
"I wish I could say we've done everything we can do," Coon said. "We have a ways to go. We also have to be careful. You don't want to compromise the quality of your product through ill-advised cost-cutting."
The corporate changes rippling throughout the tourism industry have spilled into other areas, including Waikiki retail — where what has become a long-lasting shift from high-spending Japanese to budget-conscious Mainland tourists is causing slow but fundamental refocusing.
Companies typically first look at cutting staff hours, advertising and rent, said Randy Yeager, president and chief executive of Retail Strategies, a retail consulting and leasing firm.
The biggest challenge is trying to hold down inventory costs while retooling inventory for the new Mainland-oriented market.
"They have to be nimble, quicker to react," Yeager said. But retailers often are at the mercy of suppliers who aren't as flexible and require long-range commitments.
"I would say that every retailer is having to struggle with these dynamics and is trying to find the formula of preserving their cash flow and preserving their flexibility as they move forward," Yeager said.
Another reality brought home in the months since Sept. 11 is that island companies have adjusted to the idea that they need to be ready to change staffing levels and procedures in response to unpredictable tourist patterns.
"Most businesses, certainly all businesses in the travel industry, have seen adaptations and economizing," said Murray Towill, president of the Hawai'i Hotel Association. "It's a reality that people will have to deal with. ... How do they make themselves more efficient? That's the ongoing revolution in the industry, and it's something that's going to continue as we move forward."
Changes to Hawai'i's hotel industry already had been under way since the late 1980s and early 1990s, when the Japanese investment boom went bust and properties sometimes were sold for losses, said Joseph Toy, president of Hospitality Advisors LLC.
Long before Sept. 11, Toy said, hotels were slowly beginning to centralize accounting, engineering, maintenance and purchasing procedures. Hotel managers also were bringing in more sophisticated technology to better schedule employees to match occupancy levels, Toy said.
In 1990, hotels had a national average of 80 employees per 100 occupied rooms, Toy said. Today, they're down to 72 employees for the same number of rooms.
"A science has come out of yield management, how to plan and manage your business much more efficiently in peak and valley seasons," Toy said.
Another corporate efficiency that has taken stronger hold since Sept. 11, with no sign of flagging, is that companies from tour operators to museums increasingly have turned to the Internet to not only attract business but also to make real-time bookings, said Toni Marie Davis, executive director of the 200-member Hawaii Attractions Association.
E-commerce also offers companies a chance to market themselves in less-expensive but perhaps more creative ways, she said. In particular, Davis said, companies are going after the captive kama'aina market, which has shown positive signs since Sept. 11. The Activity Owners Association, which is talking about merging with the Hawaii Attractions Association, also hopes to improve its Web site — www.kamaaina.org — aimed at attracting more local customers, Davis said.
And it's not just the big companies that have retooled for Hawai'i's more efficient corporate future.
Haleakala Bike Co., which offers self-guided bicycle tours of the mountain, went from 13 employees to seven. And it eliminated all part-time people, who used to clean the passenger vans, hang up the rain gear and clean the company's bicycle shop.
The result is that the remaining full-time employees do more work for the same pay, which general manager Jimmy Mullin said he appreciates.
Business remains down 20 percent, he said, and expenses have gone up. Insurance for each of the company vans, alone, went from $2,700 per van to $7,000 in July, Mullin said.
But Mullin now carries less inventory in the bike shop. And he's constantly trying to book tours more efficiently for the company's 14-passenger vans.
"If I take 16 people up the mountain," he said, "that means I have to take two vans and have to juggle two crews. I try to get them as full as possible."
Overall, Mullin said, "We're just looking at everything we do, just managing everything much, much closer."
Reach Dan Nakaso at dnakaso@honoluluadvertiser.com or 525-8085.
