Visitor numbers up but experts forecast coming slowdown

A 7.6 percent increase in visitor arrivals and a 7.8 percent rise in visitor spending in March kept Hawaii’s tourism industry ahead of last year’s record numbers, but travel experts warned the growth rate could slow later this year.

The 769,047 visitors who came to Hawaii in March spent $1.3 billion, which surpassed last year’s record.

During the first three months of the year, the nearly 2 million tourists who visited gave the state a $279 million pay raise by upping their total spending to nearly $3.7 billion and their total state tax contributions to $29 million. On average these visitors spent $4.8 million more per day than visitors did during the first quarter of 2012.

But some see signs of a future slowdown. Earlier this week state tourism officials learned that airline schedule reductions in the second half of the year for the core domestic market could stunt industry growth as it moves into 2014.

The move raised concerns that Hawaii may be bumping up against accommodation and pricing constraints.

"Spending and arrivals have been on the upswing, but there has been a decrease in visitor average length of stay for markets like U.S. West and Canada, which could be an indication that visitors may be reaching their spending threshold. Furthermore, the reduction of (air) service from the U.S. East and U.S. West and the weakening Japa­nese yen could also have an effect on arrivals and spending this year," said Mike McCartney, president and CEO of the Hawaii Tourism Authority, which released its monthly visitor report Thursday.

Others are worried that crisis in Korea, the bird flu in China or cutbacks to U.S. air traffic personnel and lengthy airport delays could throw off travel to Hawaii. While each of these clouds has the potential to dampen the market, the impact is likely to be moderate unless they hit all at once or in combination with one or more of the larger threats — like natural disasters, geopolitical strife, heath concerns or economic downturn — that always loom over Hawaii’s fragile visitor industry.

"It’s usually never one thing that turns the market. It’s when we have two or three or more major things happen," said Keith Vieira, senior vice president and director of operations for Starwood Hotels & Resorts in Hawaii and French Polynesia. "We’ve got a few clouds on the horizon. It looks to be minimal at this point, but you never know. We have to stay vigilant to keep the momentum in the market."

The good news is that Hawaii has a better mix of visitor traffic than it has had in the past, giving it greater ability to adjust to market downturns, Vieira said.

"We are diverse enough that I don’t see any slowdowns on the horizon for us at this point," said Jerry Westenhaver, general manager of the Hyatt Regency Waikiki Beach Resort & Spa. "We just finished another record time, and the summer is going to follow suit. We are still very optimistic at this point."

While Aqua Hospitality, which has properties on six islands, has seen some spring softening, the chain’s outlook still is positive, said Beth Churchill, Aqua’s senior vice president of sales and marketing.

"The sky is certainly not falling," Churchill said.

Despite looming challenges, McCartney said Hawaii expects to see at least moderate tourism growth through the rest of the year.

"We won’t see the growth rate that we’ve seen the last year and a half, but we’ll probably still see single-digit growth this year," he said. "I’m more concerned about what is going to happen in 2014. That’s when we could see the impact of the airline changes."

McCartney said HTA would mitigate potential softening by focusing on growing its meetings, conventions and incentive business and distributing visitors across all of the Hawaiian Islands, particularly during off-peak season. Tourism officials also will work to support airline growth with the knowledge that all business must adjust to consumer demand, he said.

"We’re getting close to the tipping point," McCartney said. "Over time we will need to support the growth of our economy and our base. I see that growth in Ko Olina and in Waikiki renovations and in the neighbor islands. We also need to refresh inventory and realize that at some point in the future, we will have to offer more value."

Churchill agrees that Hawaii will have to pay careful attention to its product, visitor distribution and pricing.

"Our hotel rates have increased substantially," she said. "I’m hoping that we don’t begin to see a backlash from visitors who may chose alternate destinations because of price. Everyone has to realize that the kind of growth that we’ve had may not be sustainable because we don’t have the inventory to keep it in place."