Slowly, visitors return

By John Duchemin
Advertiser Staff Writer

After a turbulent two-year ride through a series of the worst shocks in recent memory, Hawai'i tourism finally seems to have entered a calm stretch.

The latest statistics show the tourism industry bouncing back after suffering through acts of terrorism, two wars and a sluggish economy. Tourism is still far from the peak levels of 2000, but it's significantly better than the depths of late 2001 and early 2002.

The outlook is better, too, despite persistent problems in some key areas — particularly a profound slump in Japanese travel. Economists and industry forecasters predict a higher-volume summer, with a big influx of visitors from the U.S. West Coast. If that happens, it could inspire hotels and airlines to raise prices from the current discounted level — meaning prosperity, instead of survival, would have finally returned.

"I don't know if we're going to hit peak tourism levels, but we're on our way up," said

Jerry Agrusa, a travel industry management professor at Hawai'i Pacific University.

"It's going to be a positive summer."

Many of the key tourism indicators are showing signs of long-term improvement. After a brief drop in March during the Iraq War, air passenger arrivals climbed above last year's levels.

Recently, with the Japanese travel slump, arrivals have dropped below last year's levels, but travel from the U.S. Mainland, particularly the West Coast, remains strong.

Strengthening economy

Local and national forecasters say a strengthening economy, the brevity of the Iraq War, and improved traveler sentiments are behind the rise. Importantly, travelers seem more likely to engage in predictable behavior — unlike the past two years, during which global turmoil spooked travelers into canceling vacations, curtailing flights and staying close to home, national travel forecaster Suzanne Cook said last week.

"Leisure travel should be quite strong, and while still affected by the trends of the last few years, should begin to return to more traditional patterns," said Cook, senior vice president of research for the Travel Industry Association of America. In her national summer travel forecast, Cook predicts a 2.5 percent year-to-year increase in leisure travel during June, July and August.

"We expect to see the long-awaited recovery in air travel begin in earnest in the next few months," she said.

The domestic travel surge has helped hotel occupancy and revenues, though still below peak levels, rise from their post-Sept. 11 low points.

Also, tourism companies are hiring more employees. The industry laid off thousands of employees in the weeks after Sept. 11, but labor force data show hotels, restaurants, retailers, and even the struggling airlines now employ more people than at the same time in early 2002.

A final good sign is that airlines are increasing their flights to Hawai'i — particularly flights from the Mainland to the Neighbor Islands. Increased airline "seat capacity" means airlines are more confident their planes will be filled with visitors.

Since air fares are still relatively low — courtesy of nearly two years of bargain-basement prices — U.S. visitors will likely make full use of the increased capacity, said Ron Krueger, executive vice president of Pleasant Holidays, a California tour company that arranges charter flights to Hawai'i.

"The airlines having such low fares is really helping trigger the upward movement this year," said Krueger, whose company's summer bookings to Hawai'i are between 4 percent and 5 percent higher than last year at this time.

"The very low pricing is encouraging people to travel — there're articles talking about how you'll never see air fares this low again," he said.

Lingering problems

As with other tourism observers, Krueger's enthusiasm is tempered by lingering problems and uncertainties that have forestalled a full-scale recovery.

Since mid-2001, severe difficulties have afflicted Hawai'i tourism in one area or another, causing tourism gurus to continually push back their forecasts for when the industry will regain peak capacity.

The current bugbear is the severe decline in Japanese travel, which of late has more than canceled out the surge in U.S. domestic travel and threatens to blemish the rosy summer forecasts.

Since March, international travel to Hawai'i — most of which is from Japan — has dropped more than one-third from already depressed levels. Experts attribute this to lingering fears of terrorism against U.S. targets, Japan's continued economic malaise, and the newfound threat of the severe acute respiratory syndrome epidemic.

"If you're waiting for the Japanese premium shopper-traveler to return in force to Hawai'i, you'll probably be out of business before they return," said Mark Hukill, acting associate dean at the University of Hawai'i School of Travel Industry Management.

While many tourism companies — particularly on the Neighbor Islands — have benefited by concentrating on the Mainland travel market, most of Waikiki has suffered.

"We're fairly confident we'll have a strong summer out of the U.S. Mainland, but for all Waikiki properties, the big concern is still whether the Japanese business will rebound," said Stan Brown, vice president of Pacific island operations for Marriott, which owns and manages properties on four Hawaiian islands.

Hotel occupancy still low

The damaging effect of a Japanese tourism down cycle is illustrated in the daily air passenger arrival numbers. Daily arrivals averaged a 7.5 percent decline in the month ended May 11 — even though domestic arrivals, in the same month, were up 1.4 percent on the average day.

The culprit: A 36.5 percent drop in international arrivals, of which Japan makes up the vast majority.

Without a robust showing from this important sector, large holes still loom in Hawai'i hotels' occupancies. Despite the recent rise to record levels of U.S. West Coast tourism, occupancy is still lower than it was in 1998 — before the big upswing of 1999, 2000 and early 2001.

On Maui, for example, occupancy averaged about 75 percent in the 12 months leading up to January 1999. The number rose above 80 percent in early 2001, dropped to 70 percent in early 2002, and now stands at 72 percent.

With supply of hotel rooms still exceeding demand, hotels have had no choice but to keep their prices low, either by slashing room rates or offering discount travel, hotel and activity packages. Airlines are in a similar predicament.

"The main thing for the travel industry is still getting people to travel," said Danny Casey, president of the Hawai'i chapter of the American Society of Travel Agents. "Granted, people may have to discount to do that, but it's better than people not traveling at all."

Tourism may not be totally clear of worries, but the present challenges seem tame compared to the problems of the recent past: the post-Sept. 11 shock that caused visitor arrivals to plunge 40 percent, and the subsequent fears and uncertainties caused by the Afghanistan war, the stock market crash and the Iraq war.

Paul Brewbaker, chief economist at Bank of Hawaii, notes that the traveling American public seems less susceptible to global instabilities. If visitors are still coming despite the threat of SARS and continued terrorism, it's a sign that stability could be returning to Hawai'i tourism, Brewbaker said.

"The big sources of noise and worry seem to have gone away for the moment," he said. "If we do indeed enter a period of relative quiet and calm, we may find ourselves recognizing that the situation isn't so bad."

Advertiser staff writer Kelly Yamanouchi contributed to this report.