Posted on: Sunday, June 1, 2003

Waikiki tourism hurting

By Kelly Yamanouchi
Advertiser Staff Writer

Waikiki has long been the heart of the state's tourism industry, but its beat has slowed as travel from Japan declines and more Mainland tourists head to the Neighbor Islands.

While tourism figures show that travelers continued to come to Hawai'i despite war and a deadly virus, O'ahu is missing much of the recovery because of its dependence on Japanese tourism. Travel from Japan is still down as much as 40 percent due to ongoing concerns in Asia over severe acute respiratory syndrome.

"The weakness on O'ahu has become much more apparent during the last several weeks," said Joseph Toy, president of Hospitality Advisors LLC.

For the week of May 18-24, hotels on Maui were 81.2 percent full, up 10.5 percent compared with the same period a year ago. On the Big Island, hotel occupancy was 63 percent, up 9.6 percent. Kaua'i hotel occupancy levels averaged 78.5 percent, up 4.4 percent.

But O'ahu hotels' average occupancy level was only 63.9 percent, down 9.7 percent, according to data from Hospitality Advisors.

"It's pretty bad in Waikiki," said Keith Vieira, senior vice president of Starwood Hotels & Resorts, which operates 13 properties on five different islands including five hotels on O'ahu.

The falling visitor count is a critical problem for the industry because Waikiki is where about 44 percent of visitors in the state stay and about 32,300 residents work in the industry, according to 2002 state figures.

O'ahu's diminished numbers are causing tourism leaders to rethink their strategy and look to the Mainland and elsewhere to bolster visitor counts.

The major contributor to O'ahu's diminished numbers is the slumping travel from Japan, where a sluggish economy, SARS fears and competition from closer destinations like Guam and Saipan have dampened enthusiasm for Hawai'i trips.

O'ahu's dependence, some might say overdependence, on international travel is clear from the numbers: Statewide, international visitors make up about 32 percent of all visitors. But on O'ahu, they make up about 43 percent of visitors.

"Because approximately one-third of our visitors come from Japan and the Japanese simply aren't traveling anywhere near the level they have in recent years, we have a serious situation on our hands," said Les Enderton, executive director of the O'ahu Visitors Bureau. "Business is off in excess of 20 percent in Waikiki this year because of Japan business being down so much."

Victim of success

In some ways, O'ahu is a victim of the state's tourism success.

Waikiki, where restaurants, shopping, entertainment and the beach are all just steps away from hotel lobbies, is a good choice for many first-time visitors to Hawai'i. The state has introduced millions to the islands through Waikiki over the years.

But repeat visitors often prefer the less-crowded resort atmosphere of the Neighbor Islands, Toy said.

The Hawai'i Visitors & Convention Bureau's message also may be contributing to the Neighbor Islands' growth. To boost tourism throughout Hawai'i, the visitors bureau promotes each island as offering a different experience. The result is that tourism to Maui, Kaua'i and the Big Island gained popularity while O'ahu lost business.

And more often than ever tourists can now go to a Neighbor Island without stopping on O'ahu, thanks to direct flights to Maui, Kaua'i and the Big Island. As interest in Neighbor Islands grew, airlines increased direct flights to the other islands and decreased service to O'ahu.

With O'ahu serving less often as a hub for Neighbor Island-hopping tourists, interisland air traffic has suffered along with Waikiki. This comes as Hawaiian and Aloha Airlines, the islands' major interisland carriers, have cut back interisland flights and increased fares, to the chagrin of tourism leaders and residents.

Aloha Airlines, for example, has reduced its interisland flights from an average of 131 a day a year ago to 97 today. Aloha chief executive Glenn Zander has said increased traffic from the Mainland does not compensate for the drop in Japanese interisland travelers because many domestic visitors take direct flights to the Neighbor Islands.

Fewer conventions

Another factor contributing to O'ahu's woes is a slowdown in large conventions. Gatherings at the Hawai'i Convention Center by groups like the American Academy of Neurology and the American Association of Orthodontists drew thousands of high-spending visitors to O'ahu earlier this year, but that business has ebbed in recent weeks.

"With these groups gone, we've seen definitely a sharp decline," Toy said.

O'ahu's concentration of hotels and relative paucity of time-share units also subject it to volatile swings in visitor numbers. Waikiki is home to 56 percent of Hawai'i's hotel rooms, but accounts for only about 19 percent of time-share units statewide.

Tourism on the Neighbor Islands has benefitted from time-share properties; they tend to withstand swings in travel since visitors are less likely to cancel their travel plans, having pre-paid for their share of their rooms. Time-sharers also tend to be repeat visitors and provide a reliable flow of travelers to the outer islands.

Financial consequences

There are, as well, financial consequences for O'ahu in the demographic of visitors that it draws.

People pay less to stay in Waikiki than on the Neighbor Islands. Visitors paid an average room rate of $111 in 2002 compared with the state average of $141. The gap widened in the past several years: in 1995, Waikiki hotel room rates averaged $107.34 compared with $111.46 statewide.

Waikiki would need to attract more visitors to compensate for the lower room rates — or up its rates. But clearly, less expensive rooms are what draw cost-conscious travelers.

Some tourism industry leaders hope O'ahu will regain momentum later this year with either an anticipated return of Japanese tourists once SARS fears ease or additional traffic from the Mainland.

But Murray Towill, president of the Hawai'i Hotel Association, believes O'ahu can't sit back and wait. He said the island needs to change its strategy and concentrate more on domestic travelers while preparing for a recovery in the Japanese market.

"You reach out and try to diversify your market as much as possible," Towill said. To that end, Waikiki hoteliers are marketing to people on the Mainland who continue to travel, he said.

Some believe it's also time to reassess the island's dependence on Japanese tourists.

"For the next several years, our recovery will be very dependent on the U.S. market," Toy said.

Others maintain it would be unwise to shift resources from the Japanese market, which could rebound down the road.

Enderton said while the Mainland/Canada is O'ahu's most important market, "one can't expect the North American visitor to take up that one-third place of the Japanese."

"We feel the Japanese market is going to come back but it's not going to come back anywhere near as quickly as we would all like," he said.

Enderton said the O'ahu Visitors Bureau is intensifying its Japanese marketing. It will be joining a promotional trip to Japan July 6-12 led by Gov. Linda Lingle to meet with government and industry representatives in Tokyo and Osaka.

Tourism leaders hope the visit will help to reassure Japanese travelers and persuade them once again to fly to the islands, including visitor-needy O'ahu.

"We're just going to have to get past this situation," Enderton said. "It's a serious issue."

Reach Kelly Yamanouchi at 535-2470 or kyamanouchi@honoluluadvertiser.com.

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