Hospitality industry executives said Hawaii’s economic recovery could backslide if the state raises taxes on tourists or diverts tourism marketing dollars to other programs as Gov. Neil Abercrombie proposed in his State of the State address.
While the start of the state legislative season always brings bills that aim to reallocate dollars from the state’s cash cow, Abercrombie’s words put the visitor industry on notice that this year’s effort will have support from the state’s highest level of government.
Abercrombie plans to propose taking about $10 million of the Hawaii Tourism Authority’s $44 million marketing budget and diverting it to basic government services, environmental protection, public facility improvement and advancing culture and arts. He also plans to ask the state Legislature to increase the transient accommodations tax paid by those staying in time shares by 2 percentage points to 9.25 percent. That would bring it in line with what visitors staying in hotels pay.
And, at a time when state tourism officials are negotiating with the NFL to return the Pro Bowl to Hawaii in 2013, Abercrombie proposed diverting capital improvement dollars for the aging Aloha Stadium — except for those needed for health and safety — to other projects. The state pays the NFL $4 million a year to host the Pro Bowl, and that money comes from the HTA budget.
"We cannot take full advantage of the rise in visitor arrivals because we are not able to maintain these public facilities or invest in the culture and arts programs that make our communities stronger and make those visitors want to return," Abercrombie said.
He said his proposals are designed to improve Hawaii as a visitor destination and place to live. However, critics said increasing taxes on tourists and taking away marketing funds from tourism could backfire.
"We could see lost jobs, reduced hours, less private infrastructure reinvestment and ultimately fewer collected taxes to fill state coffers," said Keith Vieira, senior vice president/director of marketing for Starwood Hotels & Resorts in Hawaii and French Polynesia.
Former Honolulu Mayor Mufi Hannemann, who lost to Abercrombie in last year’s Democratic primary and now heads the Hawaii Hotel and Lodging Association, said thoughtful discussion is needed.
"It’s early, so no one is hitting the panic button," Hannemann said.
He said the administration might already have enough to meet its goals without diverting funds.
TAT collections are projected to increase by $12 million this year, and the Department of Land and Natural Resources has unused infrastructure improvement funds, he said.
"They need to use the funds they have before going after more," Hannemann said.
Keeping a fully funded HTA budget is essential for continued growth of the state’s $11.4 billion visitor industry, said Mike McCartney, HTA president and chief executive.
Competing destinations like Mexico, the Caribbean, Thailand, Vietnam and Indonesia have greater resources to aggressively target Hawaii’s visitor source markets, said Barry Wallace, executive vice president for hospitality services at Outrigger Enterprises Group.
"Anyone in our industry will say that the reallocation of funds from the HTA is a very dangerous thing," Wallace said.