DFS Hawaii, which has operated in Hawaii since 1962 and employs 660 people, began taking steps to reduce a quarter of its workforce today in one of the biggest layoffs of the state’s softer tourism cycle.

About 165 layoffs are expected to be spread across three DFS Hawaii locations – T Galleria by DFS, Hawaii; the Daniel K. Inouye International Airport; and the Ellison Onizuka Kona International Airport at Keahole. They include employees from management, sales, operations, clerical, and virtually all DFS Hawaii departments.

Eligible workers will receive severance packages based on their years of service to the company, which has strong ties to Hawaii going back decades.

DFS’s airport concessions at the then-named Honolulu International Airport was the company’s first duty free shop in the United States. The company’s flagship store in Waikiki, now named T Galleria by DFS, Hawaii, first opened in 1975 and is now the chain’s sixth largest galleria store in the world.

Jay Frame, vice president of corporate communications for Hong-Kong headquartered DFS Group, said the steep decline in visitor spending and diminishing travel demand from key international markets, coupled with the cost of doing business in Hawaii, led to the layoffs. Another major factor was the significant spread of the retail sector statewide, which has increased the competitive environment for retailers.

Tim DeLessio, president of global store operations for Hong Kong-based DFS Group, who was in town today to assist DFS Hawaii with breaking the news to local employees, said while the layoffs were still somewhat fluid, the bulk of them will take place today and would be effective immediately. DFS is making on-site counselors available to employees to begin assisting them with the transition, he said.

“For many months, we have been signaling an alarming confluence of factors that have had an increasing impact on our business,” DeLessio said in a statement. “A marked drop in visitor expenditures and an overall softening in consumer sentiment, combined with the high costs that we are paying to remain in Hawaii, meant we could not delay the inevitable any longer. This was a difficult decision, forced by a difficult environment.”