The Transformation of Tourism

Hawai‘i Tourism Authority

January 10, 2014

2014 Hawai‘i Thought Leaders Conference

2

Adjusting our sails

3

Three Levels of Tourism

$ and Jobs

Access to the World

Purpose

4

$Money: State Tax Revenue

2007 2009 2013$400

$600

$800

$1,000

$1,200

$1,400

$1,600

$1,800

$1,221

$932

$1,681

State government tax revenue generated(direct, indirect, and induced)

$mill

ion

Note: Calendar Year2002-2012 Actual2013-2014 Estimation

5

$Money: Jobs

2007 2009 2013100,000

110,000

120,000

130,000

140,000

150,000

160,000

170,000

180,000

190,000

172,416

133,618

177,466

Jobs supported(direct, indirect, and induced)

Num

ber

of Jo

bs

Note: Calendar Year2002-2012 Actual2013-2014 Estimation

6

Cyclical Pattern of Our Industry2006/2007

ATA & Aloha Airlines

Bankruptcy

Oil $150/barrel

Wall St. Financial Crisis

Housing Foreclosures

Stay 5 Nights get 2 Free

Airline Consolidations

JAL Downsize

Tsunami

New routes from various markets

New carriers start flying to Hawai‘i, Asiana, Air

Australia

New origination pts incr arrivals

Increase of Seat

Inventory

Arrivals start to increase

R/T off East Coast $500

Allegiant starts to Hawai‘i

More Routes Added

MCI Backlog give false sense of continued

demand

Arrivals hit record high

2012Record arrivals &

expenditures

Hitting Consumer Threshold

2013MCI Backlog

16, 17, 18 remains in ?

787 grounded

Adjustments in seat inventory

Reduction in flights

Increases in airfare

Arrivals flattening outEfforts to

recapture market share

Stay 5 Nights get 4 Free

3 for 1 attraction offer

Further airseat adjustments

Other industries affected

StifledEconomy

Meet Hawai‘i organized

7

Visitor Industry Weathers Crises

0.0

1.0

2.0

3.0

4.0

5.0

6.0

7.0

8.0

9.0

1970 1975 1980 1985 1990 1995 2000 2005 2010

Num

ber o

f Vis

itor A

rriv

als M

illio

ns

Year

‘09 H1N1

’73-’74 U.S. Recession

’81-’82 U.S. Recession & Hurricane Iwa

‘85 UAL Pilot Strike

‘87 Stock Market Crash

‘90-’91 U.S. Recession & Gulf War

‘92 Hurricane Iniki

‘95 Kobe Earthquake & Oklahoma Bombing

Y2K

‘01-’02 U.S. Recession &

9/11

‘03 SARS

‘07-’09 Recession ‘11 Japan

Tsunami

‘08 Loss of Aloha/ATA,Loss of 2 NCL Cruise Ships,

Leman Brothers& Oil at $150

2012: HTA Target

Visitor Arrivals: 2007- Sept 2013

2007M01

2007M04

2007M07

2007M10

2008M01

2008M04

2008M07

2008M10

2009M01

2009M04

2009M07

2009M10

2010M01

2010M04

2010M07

2010M10

2011M01

2011M04

2011M07

2011M10

2012M01

2012M04

2012M07

2012M10

2013M01

2013M04

2013M07

400,000

450,000

500,000

550,000

600,000

650,000

700,000

750,000

800,000

Visitor Arrival Seasonally Adjusted (Census X12)

Tapering off of visitors since the Summer of 2013.

9

Hotel Occupancy by Island

Jan-1

1

Mar-

11

May

-11

Jul-1

1

Sep-1

1

Nov-11

Jan-1

2

Mar-

12

May

-12

Jul-1

2

Sep-1

2

Nov-12

Jan-1

3

Mar-

13

May

-13

Jul-1

3

Sep-1

340%

50%

60%

70%

80%

90%

100%Hotel Occupancy by Island

State

O‘ahu

Maui

Kaua‘i

Hawai‘i Island

Occ

upan

cy R

ate

10

Visitor Plant Inventory by type of visitor unit

2012

Apt/B&B

/ Hos-tel/Other2%

Condo

16%

Hotel58%

IVU10%

Times-

hare13%

2006

Apt/B&B

/ Hos-tel/

Other

3%

Condo 24%

Hotel 60%

IVU 3%

Timeshar

e 10%

11

Visitor Units by Island (2012)

Hawai‘i

Kaua‘i

Maui

O‘ahu

State

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Apt/B&B/Other Condo Hotel IVU Timeshare

“Supply Side” Implications:

• Need to develop capacity where feasible

• Also longer term: “capacity” may mean new infrastructure and not just new accommodations

• Additional cruise product could support more arrivals within existing visitor plant

Existing Resort-Zoned Future Development Sites

• Ko‘Olina• Kaua‘i Lagoons• Mākena• Princeville• Turtle Bay• Various Kohala Coast Resorts• Banyan Drive• Various Single Property Development Sites

13

Source: Hospitality Advisors LLC

14

“Demand-Side” Implications:

• Need to increase dispersion to the Neighbor Islands

• Improve ease of access• Developing experiences (festivals,

events, sports activities) especially in the off- shoulder seasons and at higher service levels

• Utilization of technology

15

Managing the Hawai‘i Brand

Arrivals from Major Market Areas: Relative Size (2013)

What are other destinations doing to compete with the

Hawaiian Islands?

18

Hawai‘i Logo

• Competitor Logo Exercise – HTA believed that the rainbow brushstroke logo, while it had been unique and

fresh when first introduced, had become lost among the competitor logos. It was believed that other destinations had copied Hawai‘i’s look and feel.

– September 2010: MVNP gathered other rainbow destination logos to verify that this was indeed the case and developed the existing bamboo font logo.

19

Competitive Environment• Mexico

– Mexico is Hawai‘i’s strongest competitor, with two out of every 10 U.S. visitors to Hawai‘i in 2011 also visiting Mexico within the previous three years.

– Mexico welcomed 2.8 million U.S. visitors (by air) in the first five months of 2013 – an increase of +7.2% YOY.

– Mexico promotes itself along similar marketing messages as Hawaii. Mexico’s current campaign, “Mexico, the Place You Thought You Knew” aims to show the diversity of the destination through unique experiences.

• US City Destinations– Hawai‘i also faces competition from US city destinations such as Las

Vegas, a destination with an advertising and marketing budget of nearly $115 million in FY2011-12. They target leisure travelers in the same domestic and international geographic source markets as Hawai‘i.

20

Mexico• Los Cabos Tourism Board’s “Flip for Cabo” Consumer Blitz

– June 26, 2013 from 11am – 7pm at The Grove Los Angeles– Through a partnership with popular luxury flip-flop brand, Havianas,

the event aimed to drive consumer traffic to The Grove's central park area with live entertainment, cooking demos, trip giveaways and a series of authentic Cabo experiences.

21

Mexico• Mexico Taxi Project

– In 2011, the Mexico Tourism Board launched a $25 million campaign designed to overcome Americans’ perception that the country is unsafe.

– An element of the campaign were testimonials shot in a style similar to the TV show “Taxicab Confessions” where visitors were given a transfer home from the airport to discuss their Mexican vacation on camera.

– These testimonials can be found on www.visitmexico.com.

www.youtube.com/watch?feature=player_embedded&v=LN15Q4kCJxw

$43.3 million by the Mexico Tourism Board

+ $10 million rebranding of Vallarta Nayarit

22

Caribbean• In March 2013, Jimmy Buffet announced his partnership with

Wyndham to open a 262-unit timeshare resort in St. Thomas.

23

Hawai‘i could fall into a deeper hole

• No one leader for change we have to do it together

• Fighting for our piece of the pie bake new pies

• Create a shared vision; come up with solutions; commit to execute; see it through

24

Future - Transition Management• Tourism must embrace Hawai‘i and its people –

balance• Sustain tourism while fostering diversification of

our economy – how to leverage existing strengths and infrastructure

• Must assess the global environment: investments, hotel, competition

• Succeed globally, but still be who we are• What policies and incentives are needed?• Execution is key

“The world will turn to Hawai‘i as they search for world peace because Hawai‘i has the key…

and that key is Aloha.”— Auntie Pilahi Paki

ALOHA

MAHALO

The Hawaiian Islands is our Hōkūle‘a