Hawaii Leadership Forum explores divide between tourism and locals: Travel Weekly

Back from a two-year pandemic-driven hiatus, Travel Weekly’s Hawaii Leadership Forum’s longtime roundtable session participants debated the disconnect between Hawaiian locals and the tourism industry, solutions to overtourism and how best to educate visitors on Hawaii’s Malama campaign, which promotes voluntourism and cultural exchange.

This year, the conversation included John De Fries of the Hawaii Tourism Authority (HTA), Ray Snisky of Apple Leisure Group, Kama Winters of Delta Vacations, Melissa Krueger of Classic Vacations, Scott Koepf of Cruise Planners, Louis de Joux of American Airlines Vacations, John Van den Heuvel of Gogo Vacations, Jack Richards of Pleasant Holidays, Dale Carstensen of Marriott International, Sean Dee of Outrigger Hotels & Resorts, Tom Mullen of the Hawaii Visitors and Convention Bureau (HVCB) and Hawaii travel sellers Stephen Scott and Suzy Schreiner. 

This conversation has been edited for clarity and length.

Arnie Weissmann, editor in chief, Travel Weekly: What I’d like to talk about today are the ways that the pandemic may have changed tourism to Hawaii in a more permanent sense. I’d like to begin with the resident reaction to having no tourism and, in some ways, their happiness as a result, which led to some programs, like Malama Hawaii. 

John, if you could tell us a little bit about your take on how the pandemic may have systematically changed tourism to Hawaii.

John De Fries, CEO, Hawaii Tourism Authority: In 2019, the communities were already beginning to express concern about the scale at which the industry had grown and the impact that was having in some very specific hot spots. 

We end calendar year 2019 with a record number of arrivals, a banner year: 10 million visitors, $17.8 billion in expenditures and $2.2 billion in state tax revenue. Six months later, July 2020, we’re hovering around zero arrivals. One morning, I’m on the beach alone. My neighbors are euphoric. The pandemic hits and they get a snapshot of what it’s like to have the beaches back, no traffic, no parking problems. But I also know it’s a sugar high. It’s temporary. 

Historically, what happens every time when tourism suffers, everybody in the community starts talking about the need to diversify Hawaii’s economy. The minute tourism recovers, those speeches go in the drawer until the next downturn. What I’m trying to get leaders to understand is that tourism can actually be the driver of diversity.

We as an industry need to find ways in which we can offer more opportunities for the young to pursue whatever field they would like, whether or not they end up in a hotel. I do think that the pandemic is in many ways catalytic in us having to reimagine how we need to proceed going forward. And HTA today needs to be as much of a community advocate as an industry advocate, because we’re not going to get out of this without each other.

• Related: John De Fries on his first full (and very eventful) year at the helm of the HTA

Weissmann: It strikes me that this is happening all over the world, in terms of overtourism, that the economic argument doesn’t work. People are saying, “I don’t care. I want my beach. I don’t want to sit in traffic. Other cities have jobs. I can find a job somewhere else.” So to address that, do you think the efforts that have been made with the island-by-island community outreach and the input and the plans — is that going to be enough?

De Fries: No. We actually need better public policy and law. One of the reasons why the economic argument sounds hollow is, we’ve evolved an economic model that has made Hawaii fundamentally unaffordable for its own people. You cannot work enough hours in the day to keep up with what’s happened.

As an industry, we can do our part, but when you actually get down to what local residents who don’t care for tourism are complaining about, it is about infrastructure. It is about parking. It’s about dirty bathrooms at the park. That is not industry. That is a cross-agency — county, state, federal — responsibility. 

Stephen Scott, CEO and founder, Travel Hub 365 and Odyssey Travel: To your point, the hope is that the strongest driver of revenue or taxes coming into a country or a destination is improving the lives of the people living there. Do you think things have gotten better for residents over the years due to the economic impact of tourism?

De Fries: My generation committed to a career at a corporation, and that worked very well. Today, people aren’t as intent on doing that. So you’ve got that gap. But it really is the cost of living. We keep promoting an economic model that needs to be fixed. Yes, the income stream does help, but there are some other quality-of-life issues that are just as important.

Weissmann: Sean, I have a question for you. When you build a hotel, renovate a hotel, you borrow money and show the bank projections of your income, you show them your expenses, the anticipated revenue. But can Outrigger, as an example, say, “Our costs have just leapt in an unimaginable way, we’re not going to be making as much money because expenses have risen?”

How does a business that has hard investments and expects a return on those investments satisfy the lenders? 

Sean Dee, executive vice president and chief commercial officer, Outrigger Hotels & Resorts: Ask for help!

Interesting question. Some of you were able to see the work that we’ve done at the Outrigger Reef. It’s not quite finished, and it’s not just expense issues but timing issues; we had Covid issues and contractor issues. It is unfortunately about six months delayed, but generally on budget. We have a very healthy contractor community, and our laborers are fantastic and a very strong industry for us. 

The expense increases that we’re seeing in construction, that we’re seeing in all aspects of running the business, are here to stay. And so, what do you do about that? I mean, you have something like $80 million just set aside for operating expenses over the next five years that were projected to go up 3% or 4% — they’ve gone up 25%. It’s a combination of things. Utilities and labor are the two big drivers of expense for us. But there’s a lot of other little things that all add up the cost of goods.

The stairway that I spoke from at the Outrigger Reef reopening party was finished four days before our event. It literally took us six months to get the glass. In theory, it should have been on the island. And then the cost to procure it and install it has been 20% to 25% higher than we anticipated. I don’t see that going away. Now, we’re going back to the lenders, we’re going back to our owners and trying to revise five-year projections.

Weissmann: I would like you, Scott and Suzy to talk about how the traveler may have changed.

Suzy Schreiner, owner, Azure Blue Vacations: I actually have quite a few good friends who are local Hawaiians who gave me an earful of what’s going on when they heard I was coming back here. It’s always about their day-to-day experience in their lives. They’re not thinking about tourism affecting their economies. We look at it and we’re like, “You have to have tourism or you’re not going to have an economy.” Tourism is so significant, but that’s not the way my local friends are or how the local mindset is, even though they work in tourism. What is so important to them is how they feel during the day; when they are on their way to work, when they’re with their families on the weekends. That is what’s most important to them rather than, in their minds, the economy.

De Fries: That’s accurate. We in the industry talk about the community like it was a third party; “they need to understand, they need to value this, they need to know how important this is.” We need to redevelop a vocabulary that’s much more inclusive, because the reality is, the community checked into this establishment this morning and is making this building operational. 

I want to point out what happened with the Thirty Meter telescope on Mauna Kea, which is the leading-edge of Earth-based telescopes, the next generation of telescopes. I tried to get the company to understand that you cannot run this remote control from a lot in California; you’ve got to be on the ground here. It resulted in this massive pool of people that basically stopped it. And what struck me was that the leadership of this movement were Hawaiian women, in this very maternal instinct that our grandchildren are not going to have a future here.

The urgency that I feel to dig deeper into the community is in trying to offset that type of misunderstanding where we get through a summer and we’re bursting at the seams, and some of the community believes the only recourse they have is to go blockade the airport.

Ray Snisky, group president, Apple Leisure Group: Just out of curiosity, has there ever been economic modeling based on this current situation of reducing tourism to 8 million and what we need to do and where we replace the funding? I wonder if we’ve looked at modeling that’s been done to say, “If we reduce tourism by X amount, then this is where we would increase and see how we would be able to sustain.”

De Fries: I don’t know how current it is, but the University of Hawaii would probably have that information. And you’re right, because in the course of one month I can talk to someone who believes we should have 12 million visitors a year. And then the next week, I’m talking to someone who says to cap it at 6 million. More importantly, where are we going to get the other $800 million in state tax revenue? If you’re going to espouse a 6 million tourism cap, you’ve got to finish the paragraph and say as a result, we’re going to open up a steel mill.

Snisky: The best way to deal with emotion is black-and-white facts. Right? You can’t have emotion be dealt with emotion. There has to be a black-and-white response, and how it might be able to work with a little bit of this and a little bit of that. How do you replace the loss of those millions of passengers and the revenue they produce?

Melissa Krueger, CEO, Classic Vacations: I heard you guys all say yesterday that everybody’s happy to pay the average daily rates. So if everybody’s happy to pay $3,000 over $1,200, you’re not going to have a tax loss. You just created exclusivity. So you come up with the sweet spot of the number, and we keep the rate high.

Snisky: I think it’s dangerous to bank on the revenue and the average order value that we’re going through right now in the future.

Scott: If the rates are high, but their bathrooms are still dirty, that’s a problem. 

Schreiner: And what are you doing with the funds then to help solve the real problem?

Krueger: You can keep it exclusive. You can keep the rates as high as you want. There will be less people, and if the goal is less people then that’s what you do: Make it price prohibitive for others. We’re staring at Gen Z as being the wealthiest generation that’s ever going to hit our country. That’s going to take us into a couple of decades.

Jack Richards, CEO, Pleasant Holidays: If your rates are too high, the airlines are going to redeploy their assets somewhere else for sure. At some point. Once that happens, you have no control over the numbers at all. So I would be very, very careful. 

Historically, Pleasant Holidays has always been volume-driven. Our business model has always been the largest volume we can generate to Hawaii. So now I have my product and marketing people say, ‘Am I supposed to market Hawaii, Jack? I’m not quite sure what you want me to do.”

We’re a for-profit company. So there is a mixed message out there even for the locals about how we proceed going forward. But at some point, American Airlines and Delta are going to say, “If the prices are too high, I can move that asset somewhere else where I can get more money.” These are public companies. They’re going to do what they have to do to survive.

Schreiner: Walt Disney World has consistently been increasing their prices. For a family of four, we’re talking about $3,000 or $4,000. The tickets themselves are over $600 for a four-day Park Hopper, per person. So just in the tickets alone, this family is paying almost $2,500. I can’t find a room for clients this summer. Disney has been increasing not just the park tickets, but their resorts. Their average resort rates are between $400 and $600. And they’re still selling out.

Snisky: And moreover, their parks are selling out. Their hotels have sold out on and off for years. They’ve always been a prime location. Never has it been that they’re not letting people come into the park.

Kama Winters, president, Delta Vacations: And they’re not going to move away from it because that stability of knowing when people are coming, they can plan. That’s how planning can now happen in a much more concrete way, and they can structure everything around that.

Weissmann: Was there this anti-tourism sentiment among locals 20 years ago?

Dale Carstensen, market director of leisure sales, Marriott International: Honestly, not at all. The best thing the local community has is tourism. We just have to educate the community. 

Louis de Joux, president and managing director of leisure and group sales, American Airlines Vacations: We have to educate tourists who come here to be more responsible in their day-to-day behavior.

Carstensen: But we have to do a better job here. It starts at the top.

Snisky: You bring up a good point about the connection to Airbnb. A lot of this [anti-tourism sentiment] seems to coincide with “there’s tourism everywhere.” We’re not selling the fourth bedroom up in the neighborhood. So I think from that standpoint, the desire for authenticity that was driving the rise of Airbnb and the cost advantage in certain cases against hotels might be a bigger driver of all this angst about tourism. 

Tom Mullen, Hawaii Visitors and Convention Bureau: There are, I think, 9,000 illegal units on this island, at least. That is like having 16,500 hotels in Waikiki.

De Fries: Nobody wants to wake up to a new neighbor every week. Enforcement [of Bill 41] is going to be key.

Weissmann: Stephen, is there a cultural conversation even happening when you’re selling a destination like Hawaii? Is that a role you would want to play and a natural part of the conversation? 

Scott: Hawaii is not gathering that level of conversation. Part of the issue with the East Coast customers is that they have beaches that are nearby. So if you are strictly talking about beach weather, there are closer destinations that are attracting that volume of conversation. But the “Aloha spirit” and everything we’ve been hearing over the last two days now, it’s not found anywhere else in the world. That needs to be taken into account when we talk to our consumers. They’re not coming to us right now saying, “I want to experience that.” So you should factor that into how you’re going to communicate going forward. 

Scott Koepf, senior vice president of strategic development, Cruise Planners: I tend to think of everything, and maybe it’s because I’m too much of a salesman, but I think of everything down to the consumer level. The truth is, and I almost hesitate to say this out loud, but a lot of what we talk about at these meetings, most consumers could care less. They’re just not talking about what we’re talking about. Now, that doesn’t mean we shouldn’t be talking about this, because I think the point you made Louis is doing the right thing. Leadership is what we are here for. They’re not thinking about the economic impact. They’re wondering, “Was the waiter friendly to me?” And that’s it. Most consumers, you’ll lose them after about two Hawaiian words. I’m being very blunt, but it’s true, right? Once they come here, they’ll embrace it if they experience it. But the consumer, they’re looking for “what about me, what do I get out of this?”

De Fries: Hawaii is going through a cultural reawakening. So how do we message this so that it respects the cultural reawakening that’s occurring? The market will eventually look for more things that are authentic. But right now, the mai tai at sunset even attracts me.

Malama cannot become known as kind of a voluntourism. It actually fits perfectly with the romance package because the one you “malama” most is the one you love. 

Snisky: If we don’t get this right and there’s some push and pull that the authenticity is different and consumers get out there and find people who have a chip on their shoulder and don’t want them to be here, that’s dangerous. There has to be a balance. All of us will be collaborative on whatever gets decided here. If you want to go from 10 million to 8 million, whatever the case may be, obviously we’re going to do whatever we need to do. But I just think that part of it really comes down to education and clarity because it’s one of those age old adages: Be careful what you wish for. It’s always tough to talk about the future when things are really great or really terrible. So we just got to plan this out, and we have to make sure that the core value and asset that you have doesn’t get damaged in this process because as much as people are pent up and surging on something, they will switch on a dime if they feel like it’s not the experience they wanted. 

Dee: We did some work on what drives people. “Why do you want to come to Hawaii?” We talked to 3,000 mainly domestic U.S. residents. The No. 1 driver is they just want a beach vacation. They want a mai tai, they want a sunset. But what’s interesting is we started to ask them about other things that are driving their intent, and culture has actually made the list for the first time in my career. Culture and sustainability. We put the question out: Do you care about ecotourism? So it’s made the list. It’s probably 10% of the audience that cares. But for that 10%, I think for malama to be successful, is how do we reach that 10%? They know they’re not going to go to Mexico. They’re not going to the Caribbean. Because in Hawaii, they get something special. I think that’s the challenge back to HVCB and the HTA. It’s not a mass market message — It’s a specific message.

Nicole Edenedo, senior editor, Travel Weekly: It sounds like the malama initiative is a voluntary suggestion. Is there any thought to making it mandatory but without putting people off from wanting to come to Hawaii? You can have your mai tai, but you’re going to respect the land, engage in cultural activities and interact positively with the locals. It’s almost similar to what the U.S. mandates for Americans traveling to Cuba, where you can’t just go there, lay out on the beach and just do what you want and not engage. You have to go and do certain activities that will benefit the locals there.

Richards: That’ll get the numbers down.

Mullen: We tried to get a malama campaign off the ground three years ago, and it was difficult because the market was busy and nobody wanted to do this. So the market went down. Then we started the malama storytelling campaign demonstrating how you behave when coming — not telling people, but demonstrating. And then we had everyone, over 100 people, participating in malama. One reason, because business was soft. So it was a hook to get people here by saying, “You stay for five nights, you do a volunteer activity, you get the next night free.” That worked. But what’s happening now is that [hotels, advisors, wholesalers] don’t want to give it out because they’re busy, right? It’s more of a hassle from a selling standpoint. They got to spend a couple more minutes doing that.

Richards: We just can’t do it. I can’t answer my phones now. So having something like that, my average handle time will go up 50%, my sales will plummet — I just won’t do that.

Weissmann: What Sean said was really interesting in terms of [culture and sustainability] has kind of made the list right. Is there a branded hotel brand, a tour operator, who might say, ‘This is my differentiator,’ and everybody else might rise to it because they see it works. But who would be the leader?

Carstensen: We need to think of malama as a process. The process is not going to be turned around overnight. It’s got to be something that’s said in the same breath where, as we say “aloha,” we say “malama” and we say “mahalo.” It’s got to be a transition of understanding. The white elephant in the room is that 2022 will probably be the most pivotal year that Hawaii as a destination votes. You will have a new governor, legislature, we have acts that are going into place — you’ve heard about Bill 41. This is the year that our future could truly be determined.

John Van den Heuvel, president, Gogo Vacations: How does the education work? Because everything we’re talking about, we as tour operators and the agents, we can sell the aloha spirit, we will sell ADRs as they fluctuate — I agree that the metrics are going to change in a year — but how does education begin? You’ve all said that education, with the culture, locally, with the legislature — where does that begin? I think that’s the key start to all of this. I agree with you; this is a pivotal year, and if malama’s the program, we can talk about all of our strategies, but it starts with the Hawaiian culture and the people.

Snisky: We’re very, very high volume, and we don’t have the ability to sit on the phone for 45 minutes explaining the malama program, so where you can capture them is having these elevator conversations saying, “Here are the three takeaways and this is how we’re all going to consistently send the message.” I think that is really the way to go. 

Where we’ll add value is, as we better understand your vision of how you’re trying to preserve state parks and things along those lines, such as there are reservations for Diamond Head now. I think that’s how it will serve our customers and helping to guide them on how to enjoy the destination based on some changes that are being made.

Schreiner: Your seedlings are with the travel advisor. You don’t have the time to answer all the questions and make the suggestions to the clients. But we’re booking our trips through you. We are the ones who are your advocate. So the key is this is something that will start smaller and it will gain traction and it’ll grow.

Weissmann: With the whole rise of experiential travel, it really could be about selling branding more at the agent level than the operator level. Because when people come back and they want to talk about their vacation, nobody wants to hear that they sat on the beach in Waikiki. But if they had this taro field experience, or they had any number of other cultural experiences, there’s a big thick slice of travelers who want that and want to be able to talk about it. You kind of have to appeal to that.

Schreiner: We need educational tools for the agents because agents won’t sell what they don’t feel confident enough in. So your average agent who may sell Hawaii, they’re going to sell the snorkeling and they’re going to sell the helicopter tour because that’s what they know. What are the malama opportunities that we can sell, or that we can offer, or we can encourage for our clients? It doesn’t even have to be a commissionable experience for me — I am all about my client’s overall experience and the suggestions I’m making for them.

Mullen: The malama campaign is tied into hotel stays right now. What we’re learning is that because hotels are so busy right now, we have to take it off the hotels and put them on separate sites, separate experiences. People can sign up how they want to; it’s evolving.

Snisky: My only request would be that we’re courageously candid on where you want to go. I think that as partners, we’re adaptable. I’d rather be paddling with you than against you. And I think sometimes there are decisions that maybe aren’t shared because they think it might be negative. All of our companies are where they are today because they were adaptable. They were adaptable to change or they were adaptable to change in distribution, pricing, etc. So wherever it is where we want to go, let’s just collaborate about it and find ways to solve it versus finding little surprises like, “We’re removing all the costs and we’re doing this and we’re doing that,” and then you’re kind of like, “Where’s this going?” Let’s just talk these things through. We want to partner with you; we just want to better understand how we’re going to do it and we choose our unique abilities.

Highlights from the forum over the years:

• Sustainability a recurring theme at Hawaii Leadership Forum
• Insights and optimism at Hawaii Leadership Forum
• Hawaii Roundtable panelists tackle home-sharing, transportation issues

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