 This is Think Tech and today we have a special show a community matters. It's about tourism. Can tourism save? Sustained I should say Sustained Hawaii and for that show we have Jerry Agrusi professor of hospitality and tourism at white Pacific University in the business school And Frank Haas who's a tourism marketing consultant and also what a teacher at Copulant community college right and I was at Hawaii tourism authority So I've and yes in years and years of experience and developing the industry at Hawaii tourism authority So the first part of our show I want to talk about how it's going gentlemen So Jerry you probably talk to your classes all the time. I know Frank talks to your classes, too Yep, he did a great job the other night. Maybe he should start. Yeah, how is tourism doing in the state of Hawaii? 2016 2017 we are doing extraordinarily well We have 8.8 million visitors. We've got almost 15 billion dollars in visitor spending So on the surface things are really looking good, but my nickname is dr. Doom Even when things are going well heard it here I'm always looking for you know What do we have to fix that's lying under the surface and there are some issues out there that we need to be addressing We're going to talk about that in a second part of the show. So let's get to metrics. What are the metrics? well, it looks like Yeah, Oahu is just gangbusters. Waikiki is full to the brim all the time So what we need to do is help disperse some of that tourism get it out to the outer islands the outer islands are still very cyclical They have shoulder periods which is good for them because then the employees at least can catch a breather here and in Waikiki they run a 90% minimum across the board and Everybody's tired. So Waikiki is still is still the top of the line most people go to Waikiki Structurally it's changed too because Waikiki is now a epicenter for international visitors coming here So the mix has changed it used to be Japanese and Western visitors domestic visitors now It's Japanese Chinese Korean Taiwanese. They all like this product here And actually it's displacing some of the domestic visitors to the neighbor islands, which is actually good You say displacing you mean that they're going there involuntarily. No, I think they there are two things going on one is they've become more familiar with Hawaii as a product and they've been been to Waikiki done that and now they want to see the other islands, but also the Just availability in Waikiki as Jerry said you're running eighty five ninety percent occupancy a lot And so if you can't find a room in Oahu, you might go somewhere else. Yeah, sure. What about room rates? How they doing average in Waikiki is running around 225 I can't remember the number for the state, but that is able by a car for that Well, those numbers have been steadily increasing and when I was at Hawaii tourism authority, which was I left in 2007 or so our strategy was to really focus on rates rather than Bodies and that gets back to your issue about sustainability. Yeah Yeah, we're gonna talk about that. I promise and then to add to that the outer islands are really really doing well Especially places like Maui where they're right now is high season whale season and they're getting close to 400 And you know when even Former students of mine that are running some of those hotels over there. They'll say dr. A. I can't get your room What about rates on the neighbor islands are they higher lower what they're they're generally higher Because hotels are cut above. Yeah. Yes, there are more resorts on the neighbor islands There's more pure hotels here, but things are changing. We have a four seasons resort that just opened here in Koalina Holly Kalani Trump Tower a lot of these places are there's a luxury product here that didn't exist in large numbers before Right the Ritz Colton just open to so I think it's moving through Kapolei. Are they moving west in a while? That's another complicated questions to some degree. Yes So if you look at where the product has sprung up you've got a Lonnie that went in Koalina You just had the the four seasons renovate a property there You've got a Inclusive resort that the Chinese are going to develop in that area. The other thing that's happening and this gets back to capacity and Sustainability is the rise of non-traditional accommodations bed-and-breakfast Airbnb We have to figure out how to live with that reality. You mentioned a little while ago that you want to get him out You want to get him out of Waikiki? They go to Kailua. They wind up in the middle of a protest Yeah, sure. And Kailua is not just that of Waikiki. We want to get him out to Kauai to Big Island, you know the Kona side as well as the Hilo side You know, we maybe get to Lanai Because you can it helps keep those people employed and and you know gets more than just the normal 35 40 hours a week get a little overtime once in a while. Yeah, well talk about that I mean there's a lot of jobs in tourism. Yeah, all kinds of jobs It's not just folding hospital corners and banquet management and gee, I don't know what in all hotels But there's a lot of jobs a lot of activity economic activity that flows out of tourism No direct direct employment is somewhere in the neighborhood of 25 percent or so Interest of the entire work for you. Yes. Oh and when you talk about indirect employment I've been teaching a class and I've had people coming in who are have jobs that are not strictly tourism But it's related to tourism like a risk manager I just had a risk manager come in because we've got talked about risk But he's a very he's got a very highly paid job very specialist job But he's doing the risk assessment for a lot of important properties here What about you know, you talk about risk management? There's also accountants who specialize in tourism right and lawyers who do a lot of tourism work and banks that love to make facilities for for you know tourist operations big hotels included that's their favorite kind of business because it's a Gold-plated you know to get repaid. So there's a lot of the business community is some so you say 25% of the workforce That's direct. It's probably you know a good percentage of the whole economy I would say what if I'm calling my numbers. It's in the neighborhood of 40% of the GDP. Yeah, well Well, and it may not capture everything because of the secondary effect correct. Yeah, okay, so where is it expanding? Greatest, I mean would you say that the neighborhoods are expanding is capital going in there faster or is capitol going to Kapolei? Or there's been a lot of you know development around the reef there an international marketplace I don't know if you can say there's more hotel rooms, but there's been a lot of money put in the last few years Yeah, I think the big thing will be this out in Coalina the Atlantis 1.5 billion dollars. You know, this is Unbelievable amount of money that this Chinese group is going to put in and it's going to help Like we said you we're talking about direct. Well, they have to build that property So all the construction workers that will go into there and all of the delivery of the construction materials And then all the beds and all the carpets. It's going to be a monster But what does it mean that the Chinese are here? You know, we were waiting we wondered we wasn't sure they were coming The Chinese investors are here the the visitors are still coming but the not in not in huge numbers Which is probably good thing you want to balance your your markets You don't want to be dominated by any one market So if you do that then the other guys don't like it. That's right And we want we want the right kind of Chinese, you know, there's 1.3 billion people in China We want we want the people that spend money that That's that 1.2 billion Well, there are a lot of those but the other thing to your question is The brand is so strong that you're seeing development that we couldn't have imagined before it's repurposing buildings The Waikiki Trade Center is now a hotel The development of Airbnb's and vacation rentals are coming because Multiple repeat visitors are looking for a different kind of experience. So the market maybe lower price Some of them are lower price on them. It's just a different experience Yeah, it isn't always a lower price because sometimes Airbnb I did a study on it and last year and is Hawaii hotels ready for this and not all of the properties are lower priced Some of them are actually higher priced. They have the Airbnb's account for sometimes luxury properties where people want to spend a night or two Which they could never actually ever live there and it's a it's a good experience And my own advice and this personal to the hotel industry is they're not a threat that the people that are going to Airbnb and Vacation rentals are a different animal. So it's there's still a huge market a huge number of people that want the hotel Assurance the resort experience the location. Yeah, the luxury of it The security of it knowing what you're going to get as a product. That's the biggest thing You don't want to make a long trip with it with you know something unpredictable correct Well, I wanted to ask you one more question before we go to the break and that and that's this You know the the there's a lot of profit. I mean in the picture you paint. There's a lot of profit I've always felt though that the capital concentrations that earn the profit with their investments You know most most of big ones are offshore right leakage and that means correct me if I'm wrong But that means that the profit goes offshore. Am I right that that is called leakage. That's leakage. Yes, sir But you are correct. There's a flood of leakage We have a huge amount of leakage because of the number of properties now that have been purchased By either investment groups as well as we just had our rigor cell Just recently to a oh sure the big deal. Yeah big deal and then that company you don't know what it sold for No, they didn't tell me. This is neat. I know a lot of it more than a professor makes in a year That I can assure you But back to your other question J I we want to get before we go to break is on some other ways that we're attracting Visitors and one of the things that I wanted to share with the with the audience is that new movie on Moana Oh, yeah, please and We have one of my graduate students is doing a study on the Film and looking at it with people now after seeing the movie Moana. Are they wanting to go in? Come visit us They let this week is the 11th week of the showing of the show and it's already did $550 million there it is. Yeah, there it is and Well, that's working off the the brand is yeah Disney did a really good job with it and as you can see the here in the slide You have both Maui the god demigod and then Moana and that's a local girl that played her that voice And she's a Kamehameha grad student. She's not a grad. She's only like 16 or 17 Oh, and she's done really really well for herself the next slide will have You can look how they partnered with Hawaiian Airlines I was on one of these planes recently and it's not just the outside Inside the plane where you put the baggage is all decorated as well So they've done a really good job of partnering with Hawaiian Airlines and it's a draw what they had some Pushback pickups. All right push back here. They had a costume that was for Halloween and actually they had to pull it and Disney very rarely pulls things and Disney doesn't make one or two at a time They make you know hundreds of thousands at one time and right before Halloween. They had to pull this costume and It wasn't culture is racist. Yeah, they felt it wasn't culturally sensitive to the Polynesian version of blackface. Yeah Yeah, so they pulled that and And people were not not very happy. I know that we are all speaking to some of the Folks here that are actually against the movie. They feel that it that it isn't Sensitive sensitive enough. Yeah, right and then there's a minute There is a funny character right there and in that movie they really go in the distance on this one Correct, and then one more slide here. I think we have it Here's a website that on my graduate student or former graduate student. She graduated already, but we still trying to get this paper published If you'd like to come in go on this survey monkey and fill out a survey on the movie Moana Like I said earlier. They did they've done 555 million dollars in sales in the first 11 weeks in box office sales another thing is they're selling is the The memorabilia. This is the number one selling product at the Disney store. This is his name is poor and The Disney store they can't keep it in stock as soon as it comes On the shelf. I was actually in line to buy this and two ladies came to me. Where did you get that? I said that was the last one there. Would you sell that to me? I said, I'm sorry. I need it for a TV show Yeah, yeah, so students must love you you guys you're so energetic But let's take a minute and everybody can fill out the survey and survey monkey And they'll come back when talk about the other side of tourism game They ain't watching this show at 12 o'clock on Friday afternoon Stan the energy man watch it Angus mctec Well, she knew welcome and join us to see us on hibachi talk on think tech Hawaii Joe my co-hosts go to the tags out and enter the security guy every Friday from 1300 to 1345 we look forward to see it We'll talk tech and we'll have some we've been a fun and remember let your wing gang free where area be ha Aloha, I am reg baker and I am the host of business in Hawaii with reg baker We broadcast live every Thursday from two to two thirty in the think tech studios in downtown, ala lulu We highlight successful stories about businesses and individuals and learn their secrets to success I hope you can join us on our next show on Thursday at two o'clock Until then aloha. Yes. Community does matter. I'm Jay Fidel We have Jerry a gruesome and Frank Haas here talking about tourism is tourism sustainable can tourism sustain Hawaii So the first question I'll ask you guys as professors of tourism is what what's eating away if anything at it? What is pulling in the other direction? What should we be worrying about if we have capital investment in tourism? Speaking is doubt as dr. Do there's there's lots of things that could happen and you do need to think about those things right now We're in a good place strong brands strong numbers But if you look at what's underneath that could happen. There's a variety of things Things like Zika virus if you remember the SARS virus in sure in 2006 yeah, no it's earlier than two early early anyway We lost more Japanese visitors to the SARS than we did to 9-11 so any of these diseases that could happen a bowl if it comes up again There's the the whole issue of the social fabric, you know The the eternal question is how many visitors are too many visitors and how and at what point do you start improving the Resonant experience because of the the visitor load is that happening already it depends on who you ask and where you are And there are ways to manage that but it's it's it's hard because we can't simply dictate things We can't if you if you buy a property, you're going to build to that capacity for that property So that's where you end up getting high density But as I said, they're probably some ways around that a lot of these visitors want to go out and see Neighborhoods like Kailua and if you go to Kailua on a weekend when all the residents want to go to the beach It's it's crowded and people complain Monday through Friday. It's not so much of a problem. So we need to think about those kinds of solutions Some other things that could happen certainly terrorism Certainly policy brand USA, which is the national promotional arm for the federal government came out with a A concern about extreme vetting, you know, what happens if we get so concerned about security that we start to choke off travel Crime to terrorism we've had these things occur before but We just need to be aware of them and then there are the natural disasters so tsunami hurricane if we had a hurricane on a Wahoo With the same magnitude as we had in the Niki and back then it's it's that's a game-changer Yes, and as you mentioned there about the and Frank mentioned about the vetting. We just got this week We got word that Asia air X is going to now come from Malaysia. They'll stop through Japan to come here with it, you know 300 Seat capacity plane will come four times a week. This is good except Malaysia is a Muslim country yeah, so it could be put on that list and it and it took six years for them to develop this type of Agreement to get Asian air to come here now snuffed in no time with an executive order As long as we're talking about airlines they there are some unintended consequences and airlines are absolutely critical I mean you can't drive here. So you got to be worried about the airlines So there are people right now talking about with some excitement about people like Southwest possibly coming in or another low-cost carrier coming in There may be some unintended consequences with that It's certainly nice for the consumer to have low fares But if the overall if it starts a fair war and then united in Delta and America and say we're not making any money here They're gonna pull their seats so Tourism is a very complicated and very delicate balance and we have to you know You we have to worry about air air air seats and airlines because nobody comes here any other way except by air Yeah, yeah Well, you know, that's a scary picture, but let me add one climate change climate change I just had a lot of talk to my class about climate change. They're talking about a one meter rise in sea level Nobody knows exactly when that happens for the one meter rise in sea level puts Waikiki underwater Yeah, right and it also floats the it floats the sewage That does that it's a lot of the hotels were built when nobody worried about climate change or sea level rise So a lot of the elevator equipment and electrical equipment is in the basement. Yeah, so those are all gonna be have to be moved We need to be thinking about those things now Well, it's you know, it's a domino kind of thing though I mean you some of these things that you've described can be fixed Yeah, we should talk about that and we should try to be resilient about what we can be resilient about Other things, you know a way as always the case in an island state are way beyond our control They happen somewhere else and and we're the unhappy recipients of whatever it is I'm thinking tsunami for example. Oh, sorry, and we had no control over those no control So, I mean really the question is being smart like Singapore is smart, right and and I wonder, you know HTA probably thinks about this all day Jerry a gruesome class writes papers about it. Yes, but you know, what is our advice? You know to the state Singapore is a good model. I did some work in Singapore for the Singapore tourism board this TV They do a 25 year plan They and you might say you're crazy to think in a 25 year What could you know think of all the things could happen? But they say yeah, things are gonna happen But we want to imagine what those things might be and prepare for them whether they happen or not our current strategic plan for For HTA as a five-year plan Okay, we're thinking five years. That's good ten years is better 15 years is better We need to at least somebody whether you actually have a plan with that time horizon or not We need to be thinking in those terms that how do we want to work now? To make the state what we wanted to look like 20 or 30 or 40 years And what I get also is that when you're looking at unpredictable And negative experiences a five-year plan doesn't see as many of them right as a 25 year plan So when you have a 25 year plan by definition, you're looking harder at what might bring you down Yeah, right and when we look at what we did predict, right? We saw this rise in the in the economy of for instance China and we thought okay Then the Chinese will be all will be our number one international visitor and now there's still only one-tenth of what they Japanese it but but shame on us if we saw that rise coming One of the reason we may not have realized what we wanted to realize out of China markets We didn't do enough about it, but we don't have enough Mandarin speaking Front desk true or signs or signs or signs. We don't have Mandarin channels on the TV We don't have green tea in all the rooms They're all those things that the Chinese visitor wants that you can accommodate you just have to purposely do that But there are certain properties for instance four seasons I know that they just last so last week or two weeks ago. They added another Chinese TV station to their one of my students works there and they said we just added another Chinese TV speaking TV station and They because the four seasons because they get the money and they can charge They can have people that are just Allocating their time and efforts to match the needs of our each particular guest But it like four seasons. Have you ever seen a commercial for a four seasons property? No me either So everybody's word of mouth a repeat visitor, but that's Chinese is one example But all these issues we talked about there's a solution for it and despite my dr. Doomtie. I'm an optimist for example, if if you want to Stabilize Growth you look for diversification markets. So you want to you want to purposely develop markets in a portfolio sort of Approach you're covering all the possibilities all the areas of marketing and we went at one point in the 90s 12% of our visitors came from Places other than the US and Japan and that went down to about 3% that's back up to about 8 or 9% So we're doing a good thing isn't it? It's the good thing and then the question is We all should agree on what that number Should become and then work toward that Okay, I want to ask you guys to provide some advice. Okay, Jerry you're first I'd like you to provide some advice to the state legislature and the people of the state How to make tourism in Hawaii the engine of our economy? You know for sure how to make it resilient in the long term this camera one. Why don't you? Why don't you tell the legs? They're all watching right now. Yeah, hello. Aloha I think they did, you know first of all, let's give credit to those that are doing a good job HTA it has to be doing a great job because we have record number of visitors and record number of Tax revenue for for the state. So let's give credit where it's due What I would do is I try to maybe have a more An arm that helps the local community both the Hawaiian Native Hawaiian community, but also the other residents to understand how important tourism is To this state we have folks that are not understanding and whether it's because they just don't They don't see the numbers or they just no one ever explained it to them that you know one out of four people working in the state is working directly in this business and then there's another you know, You know almost 40% if we add in that 25% that have something to do with tourism and we need to have people understand that Yes, this is our number one life But we don't have another industry to take this over at this time and it employs lots and lots of people and you can't Outsource this. This is the great thing. You can't have it manufactured somewhere else. It has to be done here Okay, let me let me turn the question a little bit to you Frank What is your advice to the industry to the capital concentrations in China the US Britain? You know, what should they be doing to cooperate with the community to make this work with the community over time to build a product That's completely collaborative and which is our best product They're actually shades of the Moana and Webley Edwards and Hawaii calls How can we achieve that image that and and persist in our brand? One of the simple things to do is just realize what makes Hawaii so wonderfully special And to celebrate that because what's good for the visitor is good for the resident if we really do embrace the authentic Hawaiian culture authentic experiences if we invest in festivals events activities that everybody wants to enjoy it's a win-win and The state has a role in this and that is to take the long the long view and nothing against the industry The industry has done a terrific job, but they are looking at short-term results Hotel general managers are rewarded very generously often on short-term results like quarterly rev par and things like that We need to be thinking and as Singapore does in a 20 30 year time horizon and say well How can we how can we invest in this place? How can we celebrate those things that make us special so that brand remains vibrant? Yeah win win win win? Last question Okay, we have a new you may have noticed we have a new president and he is doing some things that we predicted No, maybe we didn't predict some of those things have an effect on Hawaii I don't think he's in love with Hawaii. It didn't vote for him And some of the things he's doing effect or could affect some of the things he might do could affect tourism So Jerry could you could you talk to him for us? Donald Trump I mean and give him some advice about what we would like from him For sure he cared to care about us. Well, mr. President I hope that you will look at a markets that that Could be beneficial to us. Maybe lower the visa for some of the Chinese visitors. We could get more of them. I I Sure that you and your security team understand why you put Blocks on those countries is I don't think we get a lot of tourists from Yemen So I can't see why we want to ever even worry about that that's not gonna help My students have jobs afterwards there. I haven't met anybody from Yemen ever here in Hawaii But I can see that if there's ways that we can help make it Our borders a little more beneficial and then get some of the you know the brick nations You know the the Brazil That Russia Russia's a lot of folks have a lot of money and and they like it for they like to go tourism They go to this place called sunny beach in Bulgaria and it is packed We're a lot cleaner and I say here than there. So I would I would think that if you can make that Bend and mend that together. Let's get some we had some Russian tourists here for a while There was some Russian tours and now I don't see them anymore. So it gets get some more and more diversity as as Professor Haas says more diversity and and who we get to come here. So we're less vulnerable when when our market drops Thank You president sherry gruesa Professor of hutch out in tourism and HPU Frank Haas a tourism marketing consultant a professor at Capulata Community College