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The Honolulu Advertiser
Posted on: Saturday, July 19, 2008

EVERYONE PAYS
Hawaii businesses try to cut expenses

By Dan Nakaso
Advertiser Staff Writer

Hawaii news photo - The Honolulu Advertiser

Each of SuperGeeks' four Mini Coopers racks up 60 miles a day. Owner James Kerr has passed some of the higher fuel costs to customers, but also looks within his company to save energy.

AKEMI HIATT | The Honolulu Advertiser

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Hawaii news photo - The Honolulu Advertiser

Signs near the front door in the SuperGeeks office remind employees to turn off the lights and save energy.

AKEMI HIATT | The Honolulu Advertiser

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The computer repair folks at SuperGeeks have raised the price of their new "trip charge" twice in the past year to cope with rising fuel costs, extended store hours so it's easier for customers to drive to them and put a sign near the light switch in the main office that reads, "Be an energy hero. Turn it off and save the world!"

Like other local bosses, James Kerr, SuperGeeks' self-proclaimed "chief geek," has made the difficult decision to pass a fraction of his higher fuel costs on to customers — while also looking inward to control energy use.

SuperGeeks' four Mini Coopers each rack up at least 60 miles a day, and "That math adds up really quickly," Kerr said. "The trip charge was my decision, but it gave me pause. We don't want to price ourselves out of business. At the same time, we have to remain viable as a company."

It's a decision being talked about among untold Island businesses, said Jim Tollefson, president and CEO of the Chamber of Commerce of Hawai'i.

"Everybody's examining what their costs are," Tollefson said.

Petroleum provides almost nine-tenths of all energy consumed in Hawai'i, according to the U.S. Energy Information Administration. And petroleumfueled power plants supply more than three-fourths of all electricity generated here, according to U.S. government data.

'ENERGY SURCHARGE'

Hagadone Printing Co., Hawai'i's largest commercial printer and mailing house, last year invested $1.8 million in energy-efficient motors to compensate for energy bills that have doubled in the past two years.

But with energy costs continuing to rise, company president Erwin Hudelist instituted a new 0.5 percent "energy surcharge" in October for every printing job.

It could have easily been 6 percent, he said, but "we didn't want to increase ourselves out of business — 99.5 percent of our customers realize it's not even covering the actual increases."

And the other 0.5 percent of Hagadone's customers?

"They weren't happy about it," Hudelist said.

With a Hawai'i inflation rate of 4.8 percent versus 3.1 percent nationally, many businesses say their customers are already struggling and can't afford to pay the higher prices that would be necessary to keep up with the actual costs of rising fuel, food and energy prices.

Most hotels are trying to attract customers so they can't afford to raise room rates or impose energy surcharges, said Murray Towill, president of the Hawai'i Hotel & Lodging Association.

"Obviously, higher room rates or higher charges are not in the equation," Towill said. "They're going the other way. They're offering discounts, reducing rates, offering deals. By default, they're eating all of those extra costs for increased operating expenses. They're getting hit from both directions."

So officials at the Hilton Hawaiian Village Beach Resort & Spa continue to look at ways to save money internally, such as keeping a closer eye on cooking oil and other items going up in price, and exploring locally grown produce to save on shipping, according to Sunil Wadhwaney, regional director of supply management for Hilton Hawai'i.

"Over the past year, we've looked at strategic alliances with manufacturers and suppliers, saving hundreds of thousands of dollars," Wadhwaney said. "For example, we switched from a Mainland supplier to a local one for Portuguese sausage. It's a move that has not only brought in a product more suitable for local palates, it's also more cost-effective and does not compromise on quality."

Whether to raise rates or pass on fuel and energy costs in the form of new surcharges depends on the individual business and the economics of their industry, said Leroy Laney, an economics and finance professor at Hawai'i Pacific University.

"It would be only natural to pass on these costs as much as they can and not squeeze their margins so hard that they risk going out of business," Laney said. "But restaurants, for example, are being squeezed from both sides. The demand for restaurants is going down while their costs are going up. That's an industry that's extremely vulnerable to food costs and energy costs."

FEELING THE SQUEEZE

Lane Muraoka, president of the Big City Diner chain of restaurants, has been pushing his employees to turn off the air conditioning in unused parts of his restaurants during off-peak hours and to use fewer burners during slow times.

His cost for a 50-pound bag of rice has jumped from below $10 a couple of years ago to more than $33. And a 25-pound bag of flour that used to cost about $9 is now nearly $25.

"This is crazy," Muraoka said. "I'm getting hit from all angles. The long-term effects of what's happening will be worse than even after 9/11."

Many Hawai'i restaurants have seen their overall costs recently double for things like food, propane, natural gas and energy combined, said Victor Lim, chairman of the Hawai'i Restaurant Association.

"We are getting an assault like we haven't seen for a long time," Lim said. "Your ingenuity comes in as entrepreneurs to find ways to survive. It is definitely a topic of discussion at our board meetings."

Restaurants always look for ways to prevent food from being wasted, Lim, but they are looking even more closely now.

They're trimming produce, meat and fish even more carefully to prevent waste. With the cost of corn and soy-based cooking oils up 25 percent to 40 percent, some restaurants are eliminating dishes that need oil for preparation.

SEARCH FOR SAVINGS

Others are trying to schedule their workers better to coincide with busy and slow times, Lim said. And most are looking for any kind of energy savings.

"They're doing all the basic things you do at home: Fix a dripping faucet and switch off lights behind you when you leave the room," he said.

Pet sitter Michele Holland of Hawai'i Kai runs her PKM Pet Care business by herself and even some of her customers have encouraged her to charge for mileage or impose a fee to cover higher gas prices.

Instead, she raised her prices only $5 per visit six months ago.

"Pretty much, I'm eating the cost of higher gas prices," Holland said.

But she has now restricted her clientele to residents of Hawai'i Kai and Kahala. Even so, taking care of people's pets means she can rack up 100 miles in 24 hours in her 2005 Jeep Cherokee.

"A lot of other people are charging gas mileage and stuff like that," Holland said. "I haven't had to do that yet."

SuperGeeks still doesn't charge for a technician's travel time. But the new "trip charge" of $10 that Kerr imposed last year has already gone up to $15 and then to $20 last month.

At the same time, Kerr has noticed that more customers in Leeward O'ahu are dropping off their computers themselves at the Kapolei SuperGeeks, where business has jumped 15 percent since December.

He's looking at making his air conditioning more efficient, putting in motion sensors in the bathrooms to control the lighting and is thinking of installing a wind generator or photovoltaic cells at his Punchbowl location.

Three months ago, he also created a team of technicians who can make computer repairs remotely, over the Internet.

"Everyone now is more conscious of what it costs to get somewhere," Kerr said. "In some cases, we don't even have to dispatch a geek."

Reach Dan Nakaso at dnakaso@honoluluadvertiser.com.

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