 Aloha, my name is John Kunching and this is the fifth episode of our show called Hospitality Hawaii where we have an opportunity to talk with leaders, executives, and others involved in the visitor industry to share some of their insight, thoughts, opinions on how business is going, what they see in the future, and any other topic they want to talk about, their own company and some of the initiatives and innovations that they're working through. But today I thought I'd do something a little different rather than having a guest interview on and having a general conversation about their company and their input. I thought I'd do something a little bit different. There's so many issues surrounding and challenges, concerns surrounding our very complicated visitor industry, especially now. And I thought we'd go through some of the more relevant topics. Now I will say upfront, they're not in any order of priority and some are more relevant and important to different parts of the industry, different parts of our community. So if nothing else, I hope that in the course of the next 28 to 30 minutes, I'm able to share with any of the viewers some of the nuances of this industry and by all means some of these issues may never be resolved, but we hope that we can continue to make progress on them throughout the months, the years and the decades ahead. But before we go any further, I'd like to remind everyone that we're in the midst of the Think Tech Hawaii Spring fundraising drive right now. Our goal is to raise $20,000. I believe that we're up to $17,000 and so we're almost there. It's a unique platform. Just today, there were shows that dealt with security, OBGT rights in the Pacific, hearing for the elderly, creativity, how to get it, how to get it back and how to maximize that. Then obviously, this opportunity to learn a little bit more about hospitality and then other shows as we progress through the afternoon. So if you have an opportunity to do so, this is such a unique platform where so many different views and opinions can be shared. You can go to thinktechhawaii.com, donate whatever amount you want to, any amount is appreciated tremendously and of course, it's all tax deductible. So thank you very much for your help. So we'll begin with this one. Obviously, tourism is back. I think everyone's seen the news, everyone's seen the press releases, the Star Advertiser Pacific Business News. So maybe we could show up that slide that tells us a little bit more about the story about how tourism is reopening. So yeah, I think the spring break time caught a lot of people by surprise, but it's continued. So if you'll look at this, the Hawaii Visitors and Convention Bureau sends out on an ongoing basis this seven-day passenger volume report. So this particular one I received yesterday, they talked about the visitor arrivals for the month of May through and including May 23rd. So you can see here, when you compare against 2019, 2021 is only behind 9%. So it is amazing how quickly, and this is only just a domestic traveler, as you can see, there's very few visitors from Japan. I think we had some on like 1500 or so in 2020. We actually had zero. So you can see with the domestic business alone, the volume has increased tremendously. At this same time, if we had the amount of Japanese business that we had in the previous, we'd be well over the 2019 level. So the things are moving very quickly. And then you can see on the bottom, the blue section is year-to-date. Of course, year-to-date is still way down because January, February, March, we're still suffering, but it is picking up a lot faster than others had thought. There is a pretty universal measurement or benchmark metric, however you might call it, that the hotel industry swears by and is put out by this organization called Smith Travel Research. So they called it their Star Report with the initial STR standing for Smith Travel Research. So the expert from Smith Travel Research about six months ago or so had forecasted that Hawaii was going to be one of the last regions of the major populated areas and visitor destinations throughout the country that was going to come back. In fact, they had estimated that Hawaii's numbers wouldn't get anywhere close to 2019 until either 2023 or 2024. So thankfully, it appears that we're not in that mode, but in fact, we're doing significantly better. Hotels are doing really well. This is purely anecdotal, of course. But when I talk to different hotel people and I hear some of the occupancies that they're doing, some of them are selling out over the weekend. Some of them, I think, are probably going to be running for the month of May, maybe in the high 60s or 70s and maybe even a little bit higher. So it'll be interesting to see how June and July and August shape up because we know those are the busiest months of the year. And from some accounts, from different contacts, different hotels, their month of June looks terrific, at least in the 80s, if not higher. Now, booking window, the time when somebody makes their reservation, is shortened pretty significantly from a year ago. And people are waiting to see the deals as the US primary market becomes more vaccinated and more comfortable as states and cities and municipalities and counties continue to ease their mask requirements and their social distancing requirements. More and more people are traveling and wanting to get back out. It's really that pent-up demand. We're very fortunate in Hawaii that through all the natural and economic global disasters that we had experienced going back from the first Gulf War, 9-11, the war in Iraq, the big tsunami in Japan and the earthquake in 2011, and then the recession in 2008. And we bounce back very, very quickly. So the things are looking good. And along with that come some of those issues. I think the thing that I read yesterday was about this young man in one of the retail stores had had some kind of altercation with some guests who were not wearing their masks. So that's something I think the city and the state need to keep a close watch on to make sure that we're doing our best to educate the customers coming in. And a lot of that falls on the visitor industry and the hotels and the combination where people are staying at. So, yeah, great news. Tourism is opening up. I talked a little bit about occupancy. I was on a great call last week or, yeah, last week. And it was sponsored by the Hawaii Society of Business Professionals. And the main speakers were or the guest speakers were a gentleman from Kolo Ranch. He charged all the operations. A good friend of mine, Alfred Grace, who's the CEO of Polynesia Culture Center and a gentleman from Trility Cruises or Trility Activities on the island of Maui. Now, all three of them are very encouraging things to say. Their business was coming back. In fact, I believe that the Polynesian Culture Center, they were going to be fully open or if they're not fully open yet with all the attractions and the events. And I know Kolo is working towards that, which kind of leads us to the next topic about the challenge that employers, hotels, attractions, restaurants, retail shops, I think it's been pretty well documented lately about their challenge in finding employees to work. So, when the opportunity is coming and businesses opening up, businesses are having a challenge in being able to service the demand that's coming in. And I know for a fact, different hotels have had openings for quite a while. And whereas in 2019, those openings would have been snapped up very quickly. Now they're having some difficulties. So I think we know that Governor E. Gay made a change in the state unemployment benefits now, requiring that those out of work need to revert back to having at least three prospective employment searches every week. Now, whether or not that applies, I've heard some questions whether or not that applies to people who are furloughed or if you have to actually be laid off. So I'm not sure what the details are, but hopefully that'll stimulate some people to to maybe get off to unemployment gravy train for a while and go back to work. And maybe that work is, you know, the hours now don't quite match what you're getting for unemployment. But hey, at least you'll be there first in line. You'll be there working when business really comes back. You'll have that opportunity to really be in the right spot. Get the hours that you need and continue to thrive and support your family. So so big issue there and hopefully that get resolved as we move forward to the year. I believe the unemployment benefits are only we're only extended to sometime through August or maybe through September. So so it'll be interesting to see what happens. So another another major issue, which is one that had come up quite a while ago recently is the Hawaii Tourism Authority and the budget cuts that they're being faced with. So specifically that House Bill 862, which has passed and Governor E. Gay has until June 21st to either sign it, put it into law or veto it. And so this bill actually takes away the funding from the Hawaii Tourism Authority and gives it back to the legislature, where now the HTA would have to go back to the legislature every year to go and get their funds. I think I'm correct in that respect. So, you know, from all accounts, Alison Chafer, the star advertiser, did a great review earlier this month talking about the bill, the challenges associated with the HTA not having that funding. And Governor E. Gay seemed to voice some sympathy and agreement with that, that it'd be very difficult for the HTA to have long term planning and strategy if every year they needed to go back to the legislature and and, you know, ask for the funding or justify the funding. Of course, everything should be justified. But it prevents them from making long term plans and strategies, which are very important in this industry. So it seemed like a slam dunk that Governor E. Gay would veto that bill. However, we know that there's another issue with House Bill 200, the state finance bill that left out the HTA funding in it. So it'll be an issue. Now, now for the 2021-2022 year, the HTA is probably in a decent place, which I believe they have about 60 million dollars to work with and support our reopening industry, which is not an easy task because Mexico, Bahamas, every place around the world is starting to reopen except some spots in Asia like like Japan. There was a recent thing about the CDC telling people not to travel to Japan, but generally speaking, Europe is opening up and a lot of the other major competitive destinations in Hawaii have been opening up as well. So we're good, 2021-22, but if something doesn't happen that resolves the issue with House Bill 200 and House Bill 862, it could be a considerable challenge as we move forward into the 2022-2023 fiscal year and the Hawaii tourism marketing and promotion efforts. So more to come with that. But as a side note with that, if in fact, while I take that back as part of House Bill 200, I believe that the legislature has taken back about 100 million dollars from the counties that was part of that transient accommodation tax or the hotel room tax money that they got. So now if the counties need to, and of course they need to make up for that budget shortfall, it appears likely that they may have to raise the hotel room tax. We started off as Keith Vera, formerly of Starwood, had articulated a few weeks ago in another interview that the TAT or the transient accommodation tax that really started at 5% as a means to fund the building and the operating of the Hawaii Convention Center and through the years because that money was coming from the visitor industry and not the local residents. It was an easy way for the legislature to increase that and use that money, probably rightfully so for infrastructure that the visitors enjoy roads, parks, et cetera, et cetera. So now that's gone from a 5% all the way up to the current 10.25%. So there have been some talks and discussions about in order for the counties to make up for that $103 million deficit that the hotel room tax may go up as high as another 3%, which would make our hotel room tax in the neighborhood of 13.25, 13.5%. Now, when you add the 4.712% general excise tax on that, now all of a sudden you're up to nearly 18 or maybe over 18% in total tax on every hotel room night stay. In an earlier press release or article, Senator Wakai has stated, hey, the hotel industry has cried and moaned about hotel room tax increasing every year and how it'll may be made prohibit visitors from coming in. And his comment was that each time the hotel room tax despite of it, visitor numbers kept going up. So that's a good point. I mean, that's absolutely true that the visitor numbers kept coming up. But at one point, we're all consumers ourselves. We all travel. We all hopefully, you know, are able to get on vacation or, you know, whatever we can. Not too many of us want to pay the 18 to 20% on top of your hotel room charge. So it'll be interesting to see as we move forward to the balance of this year, what actually happens. And then, obviously, the customer will tell us if the customers refuse to come, you know, then then maybe we might have to take another tactic. So definitely that's a big ongoing issue. Hotel room tax. And every time it comes up, it's more money out of potential visitors' pockets. Next, I want to touch briefly on the Oahu Destination Management Action Plan. So they call it the DMAP. This is one of the responsibilities of the Hawaii Tourism Authority. So I believe all the neighbor islands have either completed their DMAPs or are nearing completion of their DMAPs. And I had the opportunity to sit in on a community session on May 4th, and they had a follow-up session in May 5th, where the steering committee, the Hawaii Tourism Authority gave an update on the process, the genesis of it, some of the challenge and the progress that they've made in coming up with a major plan for the island of Oahu. And I have to say, I was tremendously impressed with every single one of the speakers there and board members, committee members who volunteered to give up their valuable time to participate in this very complicated issue. Through the course of the pandemic and pre-pandemic in 18 and 19 resident sentiment about tourism, it actually declined. There were actually, I think, in 2019 more residents that felt tourism or felt maybe more unfavorable to tourism than favorable. That's not to say they were totally against tourism, but there was a higher number of people who expressed some concern about the number of visitors. And in addition to the number of visitors, the fact that there were so many illegal vacations, rental homes and units in and around the neighborhoods, all of the major natural resources, the Pilbocke-Atlanticai, the different falls, the different hikes, the different beaches out on the west side, everything else seemed to be inundated with visitors as we worked our way through the 2019 pre-pandemic. And clearly no one's happy about that. And that's part of the allure of Hawaii, social media, the advent and the popularity of Instagram and all the other social media channels have made these previously secret, little known specialties of Hawaii very well known and people seek it out specifically when they come here. Take an Instagram photo, a Facebook photo, a selfie. They can share with all their friends and relatives back home. So it's a spiral that just keeps growing and growing. And so that's a concern. So as part of the D-Maps Committee's efforts, they want to somehow make sure that we have sustainable, regenerative tourism. And those are interesting words, right? You know, it's visitors who are poignol or treat our environment and our aina, our land right. Don't go trampling through private property. Don't leave nor the rules. Don't leave trash behind and just treat our land and our destination like they would theirs. They're old. So, yeah. So lost very short, they've been doing a terrific job. And I'm excited and anxious to hear to see what that final destination management action plan for the island of Hawaii will be. As we know, the key is going to be execution and implementation of that plan. I think the HTA CEO, John DeFries, put it very, very bluntly and very articulately when he stated that the Hawaii Tourism Authority had a tremendous amount of responsibility, but very little or no authority. And he's absolutely right. We've got all the city and the state and federal agencies that need to manage a lot of these natural resources, so forth. So, but I applaud the HTA and again, all the steering committee members, planning members for all the work that they're doing. And it's only for the better. If we can just continue to make progress and execute on them, I think we'll actually end up in a good spot for not only ourselves, but all the future generations to come because we know that despite all the efforts with diversification, the first diversification takes a long time. And are there going to be any one or a number of diversified industries that are able to significantly impact the economic needs that our state has? We're going on to the next one. So, as part of that D-Map exercise was that kind of like the never-ending discussion on how many visitors are enough. Senator Wakai has been stated as saying somewhere around six, seven million. Others have said eight and a half million. Remember, we were at nearly 10.6 million visitors in 2019. And look at where we are now. Through the month of May, we're only domestic business is only down 9%. Once the Japanese come back and everybody knows, I mean, Hawaii is the number one overseas destination for Japanese travelers. So I believe that once they get more of their population vaccinated, that I think right now they're about 5%, which is amazing to me that it's so low, but hey, it's progress, right? So as they make more progress, now whether it's later this fall or sometime in the first quarter of 2022, I think everyone believes that the Japanese market's gonna come back very strong and robust. And they're gonna be great customers. They spend more money than anyone else on a daily basis. They're generally more receptive to and caring just because of their nature of our natural resources. So yeah, we look forward to more of them coming in, but again, what's that right number? A very close friend and esteemed industry professional told me a couple of months ago that the secret is in policing the existing bill regulating the illegal vacation rentals. If we're able to do that and police it accordingly, then hey, then our number will organically drop down from that 10 and a half million to maybe 9 million. So we'll see. So yeah, we talked a little bit about Japan and I wanna just kind of end with the convention center. I saw a civil beat article the other day that talked a little bit about the convention. I think it was Lee Kataluna, love her writing, a little negative spin about the convention center. And we have to remember that the convention center was geared towards a long-term selective growth of quality type of customers for the islands. That business professional that spends more money is on an expense account. So entertains clients and vendors at restaurants. Generally speaking, might bring his or her family before and after and go to a neighbor island. So they're patronizing not just one island, but multiple islands. They have a tendency to stay longer and spend more. So yeah, we're in a little bit of a problem right now as most destinations are because a lot of those larger groups and conventions canceled due to COVID and they're beginning to figure out how to work through some of the safe distancing requirements and just being careful and aware. But we'll come back. And so I think convention center is a important component of our future business, business or industry. So with that, hey, you know, I know it's kind of been a whirlwind. I talked about a lot of different topics, some more important than others. As we work through the bi-weekly shows, I'm sure these topics will come up again. And as I get other guests from different facets of the industry, it'll be really interesting to see their viewpoints on these issues, concerns, and more that will come up later. So again, thank you very much for joining me. Again, my name is John Kanching. I'm with Hospitality Hawaii, the show every two weeks. And I wanna thank the producers and everyone with Think Tech Hawaii for all their support. Everyone have a great day. Aloha.