Losses in Japanese business foreseen as being extensive
POSTED: 1:30 a.m. HST, Mar 15, 2011
The state's visitor industry is grappling with thousands of cancellations in the aftermath of the tsunami that crippled Japan and caused tens of millions of dollars in damage in Hawaii.
Visible effects range from the temporary closures of the Big Island's Kona Village and Resort and the Four Seasons Hualalai to minor flooding at the Hilton Waikoloa's outdoor lagoon restaurant. The entire first floor of the King Kamehameha's Kona Beach Hotel was flooded. The Mauna Lani Bay Resort & Bungalows' Ocean Bar & Grill suffered minor damage.
Totaling up the physical damage is one thing. It will take the industry longer to identify the slowdowns in booking pace and cancellations that ultimately could do greater harm.
Gov. Neil Abercrombie said tourism in the islands would likely take a big hit from the devastation in Japan, as Japanese visitors cancel trips or hold off on future vacation plans.
"The economic impact will be profound," he said. "It's going to be rough."
A group of 2,000 Japanese visitors that was supposed to arrive in Hawaii in the next couple of weeks has canceled, said Keith Vieira, senior vice president and director of operations for Starwood Hotels & Resorts in Hawaii and French Polynesia.
"We are trying to rebook them, but there are so many unknowns," Vieira said. "We have to address the grieving and extend our sympathy before we can begin to repair the market."
Hundreds from Japan have notified Outrigger Enterprises they are not coming, said Barry Wallace, executive vice president of Hospitality Services for Outrigger Hotels & Resorts.
"It's still too early to figure out who is not coming, but we would expect to see significant cancellations," Wallace said. "For the second quarter, there aren't many alternatives so if they cancel those rooms they will go empty."
Any change in the fragile Japan market — Hawaii's third largest behind the U.S. West and U.S. East — could have major impacts on Hawaii tourism. Last year, Japan supplied about 17.3 percent of 2010 statewide visitor arrivals, according to Hawaii Tourism Authority figures. Some 1.2 million visitors from Japan came to Hawaii in 2010 and spent $1.9 billion, the HTA and Japanese government reported.
"It's a huge market for us," said Jerry Gibson, Hilton Hawaii area vice president. "We want to help them do everything that they can to make the situation better."
Expectations were high for this year after January's results showed an 18.7 percent gain in arrivals from Japan, a 34 percent increase in spending and a tripling of group incentive business, which was on its ninth consecutive month of growth. Bookings for spring and summer had been very positive, especially with Hawaiian Airline's new flights to Tokyo and Osaka.
Now, members of Hawaii's visitor industry say that they are bracing for losses to come over the next three to six months.
"Japanese may postpone trips in sympathy, which we saw after the Kansai earthquake and 9/11," said Dave Erdman, president of PacRim Marketing. "If there are potential cancellations, they most likely will come initially from group business. The FIT (individual) leisure customer has made their own decisions, and has potentially more flexibility in scheduling."
The booking pace, an indicator of market demand, has begun to show signs of a slowdown, Vieria said.
Golden Week, traditionally a strong holiday period for Japan because it encompasses four national holidays in late April and early May, could be damaged as well. During a typical Golden Week, travel from Japan boosts tourism by as much as 50 percent.
Golden Week travel this year had been expected to peak from April 29 to May 3.
Hawaii's hotel industry has long relied on group business and high demand periods like Golden Week to supply a layer of guaranteed business at preset rates. Periods with strong group bookings provide an opportunity to charge other guests higher rates for the remaining rooms. During slower periods, rates tend to drop as hoteliers try to build demand.
"With some of the group business off the books, it's going to be harder to yield (higher) rates," Vieira said.
Wallace said that any drop in hotel rates would be bad news for Hawaii's hotel industry, which has just begun to see prices recover from the lows of the last few years.
"It takes a few years to build back to where we were and we desperately need to get there," he said.