Posted on: Sunday, October 19, 2003

Hawai'i travel tough sell

By Kelly Yamanouchi
Advertiser Staff Writer

As companies pull in the reins on spending amid uncertain economic times and corporate scandals, business travel to destinations such as Hawai'i has suffered.

Hawai'i's image as a fun vacation spot has worked against it as businesses and associations have cut back on travel budgets and raised more questions about expenditures that seem extravagant.

There are some signs of a rebound, but many observers doubt there will be a return to the high-flying days before 9-11, when Hawai'i's travel industry benefited from companies' spending thousands on extravagant trips for employees.

"They are coming back because the economy is getting better, but it's a whole different world," said Pacific Marketing Corp. president Priscilla Texeira, who organizes the Pacific Rim Incentives & Meetings Exchange, an annual gathering of meeting planners in Hawai'i, "The budgets aren't as big as before," Texeira said. "That just has to do with a whole corporate culture. I don't think we'll ever see things like during the whole technology dot-com boom, when they brought thousands of people here."

A report by the National Business Travel Association showed that corporate travel budgets were curbed in 2003 "as the war in Iraq, SARS, terrorist threats and economic concerns forced corporations to spend conservatively" and companies "mandated stricter adherence to travel policies in order to keep costs down."

The good news is that the association forecasts increased meeting and convention budgets in 2004. Still, the business travel industry isn't popping champagne corks.

"There's been a fundamental change in business travel" driven by increased use of Internet bookings, decreased use of travel agents, and tighter spending, said Frank Haas, marketing director for the Hawai'i Tourism Authority.

When travel agents got commissions from airlines, they typically sold high-priced tickets to business travelers and reaped big commissions.

That changed when beleaguered airlines stopped giving commissions to travel agents in a move to cut costs. Now many travel agents charge travelers consulting fees, and work to get them lower fares. That's particularly important as companies watch their spending more closely, Haas said.

The result: "Business travelers who used to be very price-insensitive are now much more price-sensitive," he said. That could work against Hawai'i, which is perceived as an expensive destination.

A recent poll conducted for the travel agency Travelocity Business shows that many company travelers make decisions based on price and cost when they're booking flights and rental cars. The poll also showed the top cities for business travel are San Francisco, Chicago, New Orleans, San Diego, Las Vegas and Orlando.

Even so, this year "Hawai'i did pretty well," said Brian DiMartino, president of 21st Century Group Inc., a destination management company on Maui that assists meeting planners.

Travel to Hawai'i for meetings, conventions and incentive trips — the core of business travel to the Islands— is up 6.5 percent for the year through August compared with the same period last year, according to the latest state figures. But this year's figures are still behind 2000 levels.

One of the strongest areas for Hawai'i has been incentive travel, given to reward top-performing employees. Hawai'i tourism executives say the segment has remained strong because companies need to motivate employees even in a weak economy. And incentive travel brings in high-spending visitors.

Hawai'i also has benefited from U.S. companies rethinking foreign trips because of concerns about security, safety or costs.

Mike Murray, director of sales for corporate meetings and incentives for the Hawai'i Visitors & Convention Bureau, said convention and incentives business is up this year, while corporate travel for one-on-one business meetings is down slightly.

"Some of that has to do with the perception of boondoggle," Murray said, referring to Hawai'i's tropical paradise image.

Increasingly, chief executives who once made the final decisions on corporate travel now need to get approval from their chief financial officers or procurement departments. It's a trend that "might be Enron-related," Murray said.

He projects growth in business travel to be flat next year, with a strong return in 2005.

DAVID CAREY