Hawaii’s tourism goals unlikely to keep up with inflation

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Vendors and speakers mixed and browsed during a lull in the action during the HTA tourism conference, on Monday at the Hawaii Convention Center in Honolulu. (by George F. Lee / Honolulu star-advertiser)
CRAIG T. KOJIMA / CKOJIMA@STARADVERTISER.COM Visitors at Waikiki Beach Tuesday enjoyed the sun and sand.
GEORGE F. LEE / GLEE@STARADVERTISER.COM Alex Lasry, deputy assistant secretary for travel and tourism for the International Trade Administration, chatted with convention attendees during the Hawai‘i Tourism Authority conference Monday.
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Times are tough.

The Hawai‘i Tourism Authority board on Thursday approved a goal for Hawai‘i Tourism USA, the global marketing team responsible for driving travel demand to Hawaii from its core U.S. market, to grow visitor spending by just 1.4%.

The new goal, which was part of HTA’s 2025 Brand Marketing Strategy adopted by the board, would equate to about $15.8 billion of the $21.7 billion that the state Department of Business, Economic Development & Tourism recently forecast for 2025’s total nominal visitor spending.

Nominal spending means that the number has not been adjusted for inflation, and that’s the rub for economist Paul Brewbaker and Hawaii visitor industry leaders Keith Vieira and Jerry Gibson — especially given that the spending key performance indicator is one of the few measures that isn’t subjective.

“So down is the new up?” Brewbaker said, adding that inflation is running about 2.5% in the urban Hawaii consumer price index.

“Inflation, if I’m to believe the political polls, is on everybody’s mind — maybe not so much for the Hawai‘i Tourism Authority,” he said. “If prices are going up 2.5% on average, but your revenue is only rising at 1.4% after inflation, your revenues have fallen by about 1%. That seems like a pretty low bar to set for an agency overseeing destination marketing and destination management (for about 80% of Hawaii’s visitors) in an economy that continues to struggle with sustaining recovery after the biggest shock that tourism has had since the World War.”

At the same time, Brewbaker thought HTA’s goal for Hawai‘i Tourism USA left a heavy lift for the other 20% or so of the market, “which is foreign and dominated (by Japan), a market segment for which the exchange rate has been worse than at any time in the last 40 years in terms of its deterrence of foreign travel to Hawaii.”

He said HTA’s goal for Hawai’i Tourism Japan to grow nominal spending by 43.5% to $1.62 billion seems “implausibly large.”

“A goal is not a forecast, but that goal would seem to be misaligned with anything except the most heroic of forecasts about the exchange rate,” he said. “I mean it could happen, and I do expect the yen will be a stronger currency over time, but that’s over a matter of years as opposed to a year.”

Daniel Naho‘opi‘i, HTA interim president and CEO, said the main goal of HTA’s 2025 Brand Marketing Strategy is to “recover demand domestically and rebuild internationally with visitors who can afford to travel in varied economic conditions.”

He said Hawaii’s global marketing teams will increase Hawaii’s competitive advantage, using campaigns that focus on Hawaii’s people, place and culture; a sustainable destination; beautiful scenery and relaxation; new things to explore; and volunteer and give-back opportunities.”

Naho‘opi‘i said marketing strategies will focus on deploying paid and earned media channels, digital and social content, and leveraging local voices and key opinion leaders. He said the global marketing teams are expected to drive brand awareness for all islands; adapt to market insights and trends; cultivate the next generation of mindful travelers; and encourage multi-island experiences.

The HTA board reacted positively to brand marketing plans presented by HTA’s global marketing teams, including Hawai‘i Tourism USA, Hawai‘i Tourism Japan, Hawai‘i Tourism Canada, Hawai‘i Tourism Oceania, Hawai‘i Tourism Europe, Hawai‘i Tourism Korea, and Hawai‘i Tourism China. It also heard from Kilohana, which doesn’t have a spending goal as it holds a destination stewardship contract.

Naho‘opi‘i told the HTA board Thursday the main way that HTA staff will measure the effectiveness of these teams is through total nominal visitor expenditures, a main key performance indicator.

“Our target is not growing visitors, it’s growing the amount of visitor expenditures that visitors generate here in Hawaii because it could be from the lodging, shopping, and activities,” he said, adding that distribution across the islands is also important to HTA.

Those measuring Hawaii tourism used to focus on “putting heads on beds,” but arrivals haven’t been a key performance indicator since the passage of HTA’s 2020 strategic plan. Now, it’s more about “ascending through spending” as well as ensuring visitors show signs of understanding the principles of regenerative tourism, which seeks to balance the economics of tourism with the well-being of Hawaii’s communities.

Naho‘opi‘i said HTA does look at the length of stay for visitors in each market and their per-person, per-day spending or per-trip spending, “but it’s not what we hold (the global marketing teams) accountable for — that’s total (nominal) expenditures. In the end, the state only cares about the total expenditure amount because that’s what drives our tax revenues. We will monitor quarterly spending forecasts, and we may make adjustments at that point.”

He added that HTA also measures programs and activity in consumer paid media, travel trade paid media, public relations, consumer shows, travel trade, social media metrics and other measures. Moreover, Naho‘opi‘i said HTA requires major market area contractors to meet qualitative goals such as visitor and resident satisfaction, and:

— Maintain or exceed percentage of “visitors recall hearing or seeing information about safe and responsible travel prior to arrival” compared to 2024.

— Maintain or exceed percentage of “visitors recall hearing or seeing information about caring for and respecting Hawaii’s culture, people, and environment prior to arrival” compared to 2024.

— Maintain or exceed percentage of “visitors recall hearing or seeing information about support local/shop local prior to arrival” compared to 2024.

— Maintain or exceed percentage of people “consider Hawaii‘i as their next vacation destination” compared to 2024.

— Maintain or exceed percentage of people “choose Hawaii‘i as a vacation destination that they are most likely to go” compared to 2024.

— Maintain or exceed percentage of people “plan to book a trip to the Hawaii‘i this year” compared to 2024.

Vieira, principal of KV & Associates, Hospitality Consulting, said in his view it’s challenging to hold contractors, some who have multimillion-dollar budgets, accountable based on qualitative factors and nominal spending.

“We’ve been saying all along that the (contracts) need accountability,” he said. “There should be a correlation between either booking pace or arrivals for whatever time frame that they are measuring on the various segments and then the money should be allocated to the various segments that are either driving visitors or have the highest spending visitors.”

Vieira added that when visitors arrive there can be various messages that are important to the community, “but let’s get them here. What we need right now is for our visitors to come and feel comfortable spending money and having a good time. That should be our objective.”

He said tracking inflation in spending has grown more relevant over the past several years of high inflation.

To be sure, in 2023 total nominal visitor spending in Hawaii was $20.78 billion, which was a 5.1% increase from 2022 and a 16.6% increase from 2019. However, when adjusted for inflation, it was about 10% lower.

Vieira said by not looking at inflation, HTA could end up with a “double-­whammy” related to the Maui wildfires, which because of the depth of decline requires that the global marketing teams “not just keep up, but go above and beyond.”

To be sure, West Maui is still showing devastating trends when it comes to total room nights booked and consumed and on the books through the end of the year. As of Sept. 15, the drop for TravelClick Data was 29.9% in September, 41% in October, 56.1% in November and 58.8% in December.

Brewbaker said he has pushed HTA for years to adjust its visitor spending for inflation, and for years has been met with resistance.

“You have to be living in a cave not to know that inflation is on people’s minds and that it matters,” he said. “Real spending matters because if prices at the grocery store went up more than your income went up, then you can’t buy as many groceries.”

Gibson, president of the Hawai‘i Hotel Alliance, said that’s why private industry considers real costs when calculating its budgets, and HTA should too.

“When we are doing the budget, we look at every single cost. If we didn’t account for that, how accurate could we be?” he said. “Even with a flat year next year, our spending should go up because pricing should go up by 2% to 3%. We have to somehow raise hotel prices a bit and hotel restaurant activity prices to keep up with the costs that we have. If it stays the same, we are losing margin.”

Gibson said the qualitative information that HTA collects is important peripheral information, but it doesn’t factor into economic performance the same way that real spending and arrivals do.

“Why wouldn’t you adjust for inflation? Why wouldn’t you count arrivals?” he said. “It’s pretty hard to evaluate a marketing contractor if you don’t.”