Deferral of HTA bill could leave agency without funding

The Hawaii Tourism Authority got a reprieve from being repealed this year, but it was likely left without state funding when lawmakers failed to come to terms Friday on a bill that sought to replace the agency with a new tourism governance model.

House Bill 1375, introduced by state Rep. Sean Quinlan (D, Waialua-­Kahuku-Waiahole) along with other House members, could have repealed the HTA in favor of establishing an Office of Tourism and Destination Management within the state Department of Business, Economic Development and Tourism. The change could have taken place as early as July 1, and the new agency would have been governed by a nine-member board and an executive director.

The deferral, however, still is likely to result in significant changes to HTA and could put millions of dollars in funding for community programs and contracts at risk.

“It’s very unfortunate that HTA didn’t get funded (Friday), but there are a few days left in the session to see if the legislature can resolve this impasse. This was a harsh, but very real message that the legislature has lost confidence in HTA,” Gov. Josh Green said in a statement emailed to the Honolulu Star-Advertiser. “Let’s be clear, tourism is critical to our survival in Hawaii. In the meantime, I have instructed DBEDT to begin work on a plan to keep scaled-down basic operations and marketing at HTA going through the end of the year. In the end, we will work hard to find a collaborative way to balance destination and visitor management with marketing.”

Lawmakers put $64 million into the state budget measure, House Bill 300 CDI, to fix the leaky roof at the Hawai‘i Convention Center. However, they kept HTA out of the measure, which left HB 1375 as the most viable vehicle to fund HTA. Its failure to pass also affects the operating budget of the convention center, which typically gets an annual allotment of $4 million to $4.5 million from HTA’s $60 million budget.

HTA had requested a $75 million budget for this year and a $60 million budget for 2024.

State Sen. Lynn DeCoite (D, Hana-East and Upcountry Maui- Molokai-Lanai-Kahoolawe), chair of the Senate Committee on Energy, Economic Development and Tourism, said in a statement, “Unfortunately, we could not reach a consensus on HB 1375. I am eager to have further discussions on this crucial issue with HTA and our legislative colleagues in the next legislative session.”

DeCoite said that during negotiations the Senate proposed that the HTA continue to exist with a reduced governing board consisting of only nine members and a primary focus on marketing and promoting tourism.

“As part of our proposal, we also recommended establishing the Office of Destination Management under the Department of Business, Economic Development, and Tourism (DBEDT),” she said. “The primary objective of this new agency would be to engage and involve local communities in destination management planning, which would provide valuable insight and feedback to help guide the state’s overall tourism strategy.”

DeCoite said she is confident that HTA can continue to operate since it has roughly $30 million of unspent American Rescue Plan Act (ARPA) funds.

Quinlan told the Star- Advertiser, “HTA still has funds available to continue our destination management efforts and, I think, a lot of cultural support. I don’t think that there is going to be much more money left over for marketing, though, as those are much more expensive items.”

Quinlan said HTA’s funding for this year is dependent on a lot of factors, including “whether they continue with all of their current contracts and whether or not the governor’s office has sufficient ARPA funds in reserve to deploy.”

Quinlan said he is “assured that there is enough money to at least continue some of the core functions and ensure that we do continue the important work of destination management.”

He added that HTA has sufficient funding to complete its ongoing solicitation for a Hawaii tourism destination brand management and marketing services contract for the U.S. market, and for another contract for support services for destination stewardship across all markets.

Quinlan said he and other lawmakers will continue to work on making changes to HTA and that a bill will come up again in 2024.

“We will be working on this all summer,” he said. “For me the goal is — and I can’t stress this enough — Hawaii needs destination management. It is absolutely critical to our future as a livable society.”

HTA President and CEO John De Fries said, “We appreciate the Legislature’s appropriation to repair the Hawai‘i Convention Center roof, and with adjustments to current contracts, we will have funds to keep the lights on and retain our staff of 22. Our leadership team and board of directors will be making tough decisions in the coming days about cancelling active procurements, existing contracts, and ongoing community work.”

He added that HTA’s work in holistic, integrated destination management, visitor education and brand marketing is in jeopardy.

HTA is also gearing up for next year’s legislative session. On Thursday the HTA board gave staff a green light to prepare for a governance study with the goal of putting out a request for proposals by July. The study, which is expected to cost between $10,000 and $250,000, would target a November completion.

In many ways Friday’s decision by lawmakers was deja vu. In 2022 lawmakers also left HTA out of the budget and then failed to reach agreement on a bill that had an appropriation to fund it.

But in that case, lawmakers tried at the eleventh hour to amend a capital improvements bill to include HTA’s budget. Gov. David Ige vetoed that bill for using so-called “gut and replace” but funded HTA with $35 million in federal ARPA funds. It’s unclear whether lawmakers have other options, or the will, to provide HTA with funding this year.

It’s a sign of the times that Senate and House conferees left funding for HTA out of state budget measure House Bill 300 and HTA made it to the end of the session. While there was some eleventh- hour pushback from the visitor industry and community and Native Hawaiian groups, the agency had much less support than in previous years when its importance was championed by Ige and former DBEDT Director Mike McCartney.

Even with that backing, lawmakers trimmed HTA’s budget in 2018. Then, in 2021, HTA experienced major changes after legislators overrode Ige’s veto of House Bill 862, which took away the tourism agency’s dedicated funding source and cut its annual budget to $60 million from $79 million.

This time around, Green and DBEDT Director Chris Sadayasu, whose job is coming to an end after he was not confirmed by the Legislature, took neutral positions.

HTA also lost support from the industry as well as the Native Hawaiian community during its procurement process for the U.S. tourism contract, which is in its third round. McCartney rescinded two awards, leaving protests from previous awardees, the Hawaii Visitors and Convention Bureau and the Council for Native Hawaiian Advancement, unresolved.

Hawaii Lodging and Tourism Association President and CEO Mufi Hannemann said, “The heat and the pressure is really going to be on HTA and the HTA board to respond to all of the concerns that the Legislature has directed at them during this session. Hopefully, this wake-up call will put them in a better position to be more prepared next session.”

Hannemann said the good news from the session is that the Hawai’i Convention Center will finally be able to fix its leaking roof. And, while no funding was appropriated for HTA this year, Hannemann said that “the fact that money has been encumbered indicates that there still will be opportunities to go forward with many of their programs and priorities such as the awarding of the two (U.S. tourism and destination management support) contracts and there should also be money to fund other important programs that they have done in previous years.”

However, other Hawaii visitor industry key leaders expressed strong concern about the potential shortfall in HTA funding.

Keith Vieira, principal of KV and Associates, Hospitality Consulting, who was on the first HTA board, said, “On one hand it was good that it didn’t pass any of the new bills that would create a new HTA under a government agency, as we certainly didn’t want that. On the other hand, operating with minimum destination marketing and minimum partnership marketing with key distribution players such as airlines, wholesalers and others, as we have really for the last three years, is certainly going to hurt our goal of driving higher-spending visitors.”

Jerry Gibson, president of the Hawaii Hotel Association, said he hoped the governor would consider appropriating funding to HTA or that the Legislature might consider going back into session. Gibson expressed concern that HTA’s funding shortfall comes as Hawaii is seeing a decline in the pace of travelers for summer, which is the peak season.

“I would definitely think that we need some marketing,” he said. “We are starting to feel the effects right now of the fall-off on the booking pace. It’s an unfortunate outcome — it’s unfortunate for the economic well-being of Hawaii, the many lives that are being touched directly or indirectly.”

Gibson said he appreciated the many people who worked hard to try to find a legislative solution, and hoped that those efforts would continue.

“This is a difficult outcome,” he said. “We need to still work together to find solutions. I don’t think it can just be dropped.”

Keli‘i Akina, president and CEO of the Grassroot Institute of Hawaii, said while tourism is an essential part of Hawaii’s economy, he is thankful that lawmakers have pulled back from using state funds to promote it.

“The private tourism sector already spends millions of dollars on its own to market Hawaii to the world — and probably more efficiently than the HTA — so there is no need to use state funds in this manner,” Akina said. “If anybody is worried that this action could affect tourism arrivals, then perhaps lawmakers should also consider reducing the state transient accommodations tax, which would make Hawaii less expensive for tourists.”