Column: Align Hawaii’s community values with right visitors, flat tax

The pandemic has Hawaii suffering without tourism. We’re facing a large budget deficit, high unemployment, and reliance on food distribution generosity. Given the few COVID-19 cases, Hawaii is on the lists of places to go as travel opens up.

With 2020 hindsight, we were already talking about over-tourism and diversifying the economy. Truth is, we have had a long time to do something and haven’t. Rather than talking about diversifying the economy, we should diversify our tourism model, create a visitor industry that aligns with community values, puts community first and reduces tourism impact.

What we’ve done is create a tourism industry with the lowest tourism wages in the country in one of the most expensive places to live. Despite the fact that hotel salaries here are generally higher than on the mainland, the even higher cost of living more than offsets them. If there’s a “price to live in paradise,” shouldn’t there be an equal “price to visit paradise”?

Hawaii needs to respect its value. To understand our value, we only need to look at tourism demand. Topping 10 million visitors without a drive market indicates huge demand. In tourism, this is enviable for a long-haul destination, but we can’t support volume, as evidenced in our traffic congestion and degradation of trails and beaches.

By comparison, Bhutan respects its value. This tiny Himalayan country with under 1 million inhabitants is similar to Hawaii: both are former kingdoms, have profoundly unique cultures, stunning landscapes, diverse endemic flora, isolated, and while we’re both invested in tourism, our approaches dramatically differ. Bhutan engages low volume, high cost to entry, while Hawaii uses high volume, low cost. One result: Hawaii arrivals are over 10 million and Bhutan’s are just 300,000.

We could begin to decrease volume by increasing the cost to entry by revisiting our transient accommodations tax (TAT). The Hawaii Tourism Authority states the TAT helps “strengthen the state’s economy while also supporting public services … that enhance the quality of life for residents statewide.” This tax of 10.25% is tied to hotel room rates. Room rates are dynamic like rental car rates; they go up and down.

As we face a post-pandemic budget deficit, replacing our percentage-based TAT on fluctuating room rates with a flat rate would build a more reliable tax base, particularly during recovery when we’ll likely see hotels lowering rates to buy market share. Bhutan charges a flat rate of $250 per day per guest in high season.

According to the state Department of Business, Economic Development and Tourism, in 2019 we collected $637,375,000 in TAT from 10,424,995 visitors who stayed an average of 8.99 days — meaning on a daily basis, each visitor contributed $6.80 in TAT. If we charged each visitor a daily flat TAT of just $15, the result would have been $1,405,810,576. This may decrease arrivals, but it would also aid in attracting the right visitors.

And speaking of the right visitor: We need to be more targeted. In hotels, groups fill the base business that keep the lights on. Generally, these come from the SMERF market: Social, Military, Education, Religious and Fraternal interest groups. They pay the lowest room rates because they pay their own way; they don’t have an expense account. These groups are more suitable for drive markets, or secondary and tertiary destinations.

Hawaii is experiencing a decreasing average daily spend per guest; it’s in our best interest to focus on higher-end groups with more spending power. According to AFAR magazine, even in a devastated global economy and with all of the uncertainty created by the pandemic, wealthy travelers can still afford to travel and consider it an acceptable risk.

Now is the time for Hawaii to diversify its tourism model by recognizing its pre- and post-COVID global value, change the way visitors are taxed, and target the right guests so we can improve the life of residents today and into the future.

Oahu resident Debbie Misajon is a consultant in international sales and marketing hospitality working with luxury groups such as AMAN in Bhutan for six years.