Oil plays supporting role in tourism crunch

There was no hustle and bustle yesterday morning at Anchor Cove. Instead, employees tidied merchandise, stocked shelves and tended to the customers trickling in.

Just six months ago, a steady stream of cruise ship passengers along with a healthy dose of hotel guests filled the shopping center.

It was a “madhouse,” Thomas Awong, area manager for Kaua‘i ABC Stores, said of years past.

Now, with visitor arrivals down, business for many Nawiliwili merchants is waning. By far the biggest blow has been the loss of two cruise ships to foreign waters: the Pride of Hawaii in February followed by the Pride of Aloha in May. Together the vessels comprised two-thirds of Kaua‘i’s cruise capacity.

“We’re feeling it big time,” Awong said. “This mall relies on the ships.”

The numbers

Across the state, the visitor industry slowdown has shifted from residual to noticeable — aggravated by this year’s swift shutdown of both ATA and Aloha airlines, NCL’s departures and the dramatic rise in oil prices.

Oil’s impact on Hawai‘i’s visitor industry is both direct and indirect, says state Tourism Liaison Marsha Wienert.

“We see it as fuel charges for airlines and increased ticket prices,” Wienert said. “At the same time, because the price of oil is driving up potential visitors’ budgets, they’re thinking twice about taking that vacation.”

The price of oil is affecting the U.S. and worldwide economies, and that has a “trickle-down effect,” she said.

The University of Hawai‘i Economic Research Organization said it expects the state’s visitor industry to contract 4.6 percent in 2008. The June Quarterly Hawai‘i Forecast Update cautioned that “a deeper slowdown could occur if oil prices remain at their current record levels or if the national housing slump worsens more than expected.”

On Kaua‘i, net losses in visitor numbers are also expected for 2008. Arrivals growth will be down more than 11 percent and visitor days will fall 4 percent, states UH’s recent economic forecast for Kaua‘i County.

According to economist Byron Gangnes, one of the report’s three authors, Kaua‘i’s economy is going to contract and remain flat for a few years. We’re in for a shallow, albeit lengthy, downturn, he said.

The state’s most recent data show that May visitor arrivals declined 7.4 percent compared to the previous year. Visitor expenditures and total visitor days were down 6.9 percent and 2.9 percent, respectively, this May over last.

On Kaua‘i, May 2008 arrivals decreased 16.8 percent, the second worst in the state. Expenditures and visitor days were also in the negative double-digits for May, with 11.4 and 18.4 percent declines, respectively.

Slowdown not waiting until fall

Sue Kanoho, executive director of the Kaua‘i Visitor Bureau, said the island hasn’t seen tough times like these since 9/11. The biggest challenges, she said, are global and national factors such as oil prices and the Mainland housing market.

Kanoho said an influx of calls and visits to her office about the slowdown began, to her surprise, about a month ago — she thought Kaua‘i would make it through the summer without feeling the pinch.

“That was a red alert to me,” she said. “Summer is not pulling through the way we had hoped. Fall is a huge concern to everyone.

“Everyone is aware of how this could be not just a fall 2008 issue.”

According to Awong, the average sale per customer is down 10 percent in the last four months at Kaua‘i ABC Stores. While he plans to diversify and cater more to the local clientele, Awong said the “dramatic drop-off” in business is hard to swallow.

At the Anchor Cove Shell Vacations Club kiosk, employee Mele Mahuiki said bookings are down by half in the last six months. Likewise, the neighboring Maui Divers Jewelry has seen a 50 percent drop in business.

“We feel such a pain,” Sachie Elliott, Nawiliwili store manager, said. “We need the cruise ships.”

Beyond Nawiliwili, Kamika Smith, general manager of Smith’s Kauai in Wailua, said the company’s lu‘aus and boat tours have seen between 600 and 800 fewer customers a week since the NCL cruise ships left the Hawai‘i market. The business, which has been serving visitors for more than 50 years, has survived many economic fluctuations over the years. But, Smith said, “It’s tougher this time.”

Time to talk

Industry leaders across the state are talking and brainstorming about ways to support Hawai‘i businesses, according to Wienert. In the short-term, the $3 million in Hawai‘i Tourism Authority emergency funds spent in May on marketing to Mainland visitors seems to have paid off this summer, she said.

On Kaua‘i, the business council will convene in August to discuss local efforts to keep the island’s visitor industry buoyant. In the meantime, the Kaua‘i Visitors Bureau is planning its own marketing efforts targeting travel in the final quarter of 2008 and the first quarter in 2009. E-mail blasts, which are sent to the bureau’s database of 225,000 consumers, will include price-based offers that Kanoho will solicit from member businesses. She said the e-mails have good open and click-through rates, and hopefully they’ll encourage visitors who are on the fence about traveling to take the leap.

Kanoho and Wienert agree that the state’s biggest advantage is the singular experience Hawai‘i offers to visitors.

“As we move forward, we will continue these kinds of campaigns to increase demand and brand our image so that Hawai‘i is top of the mind as we come out of the soft market,” Wienert said.

She acknowledged there’s not much businesses can do to combat the global and national factors driving Hawai‘i’s economic downturn, but said now is a good time for businesses to reinvest in their product as well as their employees.

Kanoho, too, is cognizant that much of the visitor industry malaise is out of Kaua‘i Visitors Bureau’s purview to fix — but that’s not stopping her from trying.

“We’re very much aware of that, and yet there’s still a little more we can do,” Kanoho said. “Until we pull out all the stops, we’ll keep going.”

• Blake Jones, business writer/assistant editor, can be reached at 245-3681 (ext. 251) or bjones@kauaipubco.com

Editor’s note: This is the fourth and final article examining how rising oil prices are affecting life on Kaua‘i, appearing in the Thursday edition throughout July. To see parts one through three, go to kauaiworld.com

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