War dims economic hopes
By Kelly Yamanouchi and Sean Hao
Advertiser Staff Writers
Hawai'i businesses braced for war yesterday, tightening security and readying plans to cut worker hours, just as the state issued ominous visitor numbers showing international visitors are already avoiding travel to the state.
If the fear of wartime travel continues and spreads to Mainland visitors, the state could suffer yet another blow to its weakened economy.
Still recovering from the effects of the Sept. 11 terrorist attacks, Hawai'i's $10 billion tourism industry has for weeks watched as war preparations accelerated. Now with the launch of war, thousands of workers whose livelihoods are tied to the visitor business are left to wonder and worry about layoffs.
"If we have a reduced number of visitors here, the entire industry will be impacted," said Sam Shenkus, spokeswoman for tour operator Roberts Hawaii.
"People will not be in hotel rooms, people will not be at Ala Moana shopping, people will not be on our tour buses, people will not be on Aloha and Hawaiian flying," she said.
Major cuts could come even more quickly than after Sept. 11. The hotelworkers union cautioned earlier this week that employers learned from that disaster to cut costs quickly.
"I think you'll see more people in the industry putting people on part-time hours," said Chuck Gee, dean emeritus of the University of Hawai'i School of Travel Industry Management. "There will be layoffs. Hotels will close entire wings. That's going to have an effect on the economy."
During the first 17 days of March, Hawai'i saw a drop in international visitors, particularly the Japanese, according to the state Department of Business, Economic Development and Tourism. But so far, domestic tourists are making up for the losses, and passenger counts overall are up by 2.4 percent compared to the same period last year.
Propping up the numbers are Mainland visitors, whose counts are up by 5.7 percent while international travelers, including Japanese visitors, are down by 5 percent.
Some industry officials predict a worst-case scenario of more than a 30 percent decline in visitor arrivals resulting from the war. They are hoping domestic travelers will keep the industry buoyed, but their hope is tentative.
Tourism officials say Mainlanders are traveling to Hawai'i instead of other destinations because they perceive that a vacation within the United States, but far from the Mainland, is safer. Just how long that perception will sustain the visitor industry may be impossible to measure.
Even before yesterday's outbreak of war, guests who had reserved rooms at the New Otani Kaimana Beach Hotel were calling to cancel, most of them Japanese.
"As far as Western travelers, it's been pretty good," said New Otani sales and marketing manager Franklin Baltero. "We remain a very safe place to travel, so I believe in that.
"Unfortunately, the Japanese market hasn't gotten the message."
ANA Hallo Tours, a Japanese tour wholesaler, is expecting to lose as much as half of its Japan-to-Hawai'i business.
"We are seeing some cancellations — quite a lot," said Eiji Miyamoto, ANA general manager in Hawai'i. It's "very severe."
Gee said there isn't much the tourism industry can do now to avoid the damage.
"It's not just that there's war and safety is compromised," he said, warning that the most dramatic impact would be flight cuts by airlines, a critical link for the tourism industry.
United Airlines, a major carrier to Hawai'i, is attempting to restructure under bankruptcy protection. Local carriers Hawaiian and Aloha are also struggling.
Japan Airlines has seen a 10 percent to 15 percent decrease in business to Hawai'i in recent weeks, according to Gilbert Kimura, director of passenger and cargo sales in Hawai'i.
The Japanese visitor industry had just started to see a recovery in December and January. But if business continues to decline, "We'll probably consolidate and, yes, cut the flights," Kimura said.
Any significant decline in visitors is sure to ripple through the economy.
"I can't think of a business in the tourism industry that won't be impacted, which is why everybody is kind of holding their breath and praying," Shenkus said.
Terrorism concern
While the start of the war is unsettling, what follows could have an even more harmful impact on the state.
"The most undetermining factor that could probably have the most impact is what kind of terrorist attacks might follow," said Mike Fitzgerald, a member of the Select Committee on War Preparedness and chief executive of Enterprise Honolulu.
"The impact of terrorism, which is totally unpredictable and unknown — if even one severe one takes place — could have far more of a negative impact on travel than the war itself," he said.
In Waikiki last night, one shopkeeper said the decline in visitors hasn't hit hard, but it may be too early to tell.
"I think a lot of people may have canceled, but not yet," said Gina Fukeda, 46, a McCully resident who runs the Crystaland kiosk in the Royal Hawaiian Shopping Center. "It's not like 9/11 — not right now."
With the war begun, businesses throughout the state put their war-contingency plans into effect, including tightened security.
The greatest concerns were at businesses that provide critical goods and services, making them potential targets for terrorism.
Their worries were heightened when Gov. Linda Lingle increased the state's security alert status from blue to yellow, although Lingle emphasized that officials had received no credible threat.
Kaiser Permanente planned to start random bag checks today at its Moanalua hospital and increase after-hours security.
"We're always prepared for an emergency," said Kaiser spokeswoman Jan Kagehiro. "Now we've stepped up security a little bit more."
At TV stations KHON-2 (Fox) and KGMB-9 (CBS), armed guards were put in place yesterday, said Rick Blangiardi, general manager of both stations. The increased security is intended to protect employees and ensure the stations can continue to broadcast, he said.
Oil suppliers and the major utilities imposed extra precautions as well.
"We basically ramp up as a part of that (yellow alert) process," said Albert Chee, spokesman for ChevronTexaco Corp., one of two Hawai'i refiners.
ChevronTexaco is prepared to start searching visitor vehicles and preventing guests from driving into refinery areas, Chee said.
"If you wanted to come in, you would have to walk," he said.
ChevronTexaco expects no disruption of oil with the onset of the war. Just in case, the company keeps reserves of crude and refined products to cover the one-week period it would take to ship supplies to Hawai'i, Chee said.
Hawaiian Electric Co. keeps a 30- to 45-day supply of the fuel to generate electricity. Less than 1 percent of such fuel comes from the Middle East, said spokesman Fred Kobashikawa.
"We are tightening security along certain locations on the electrical system," he said. "We don't anticipate that there will be any supply disruptions."
Other businesses such as Verizon Hawaii were also reviewing emergency procedures, said spokeswoman Ann Nishida.
Food suppliers
Security concerns weren't limited just to the state's more critical services, but also its food supply.
Jackie Smythe, a spokeswoman for Meadow Gold Dairy, said that since Sept. 11, the producer of milk and ice cream increased security with new gates, doors and cameras.
"We're already at the max," she said. "For us it was as if we were in a war situation anyway after Sept. 11.
"We've never gone back to a lower security level."
Because of the critical nature of phones, electricity, gasoline and even milk, little if any fluctuation in demand for such goods and services was anticipated because of war.
"Milk is one of the staples you need, so we don't anticipate any change in demand," Smythe said.
The same could not be said of other types of businesses, which could see traffic hurt should war or terrorism cut into businesses.
Airport flower company Hawaii Greeters plans to cut staff hours and operate fewer locations should tourism drop. The company also is keeping inventories at a minimum and prioritizing its expenses, said Hawaii Greeters President Peter Fithian.
"That will depend on what the airlines do and if they indeed cut down flights," he said. "We're a 47-year-old company. We don't have any excuse for not planning."
Depending on the duration of the war and the steepness of any drop in business, Hawaii Greeters employees may need to take unpaid leave, Fithian said.
"You have to run a business like a business," he said, emphasizing that when a company stays viable, employees ultimately can return to their jobs.
Reach Kelly Yamanouchi at 535-2470 or at kyamanouchi@honoluluadvertiser.com; Sean Hao at shao@honoluluadvertiser.com or 525-8093.
